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- Unreported Judgment
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
O’Donnell t/as Ronin Built v Queensland Building and Construction Commission  QCAT 293
morgan james o’Donnell t/as ronin built
Queensland Building and Construction Commission
General administrative review matters
22 July 2020
15 July 2020
PROFESSIONS AND TRADES – BUILDERS – STATUTORY POWER TO REQUIRE RECTIFICATION OF DEFECTIVE OR INCOMPLETE BUILDING WORK – where defective work but outstanding claim for payment against homeowners – whether unfair to issue direction to rectify
Queensland Building and Construction Commission Act 1991 (Qld), s 72
Birrell v Queensland Building Services Authority  QCAT 56
Feodoroff v Queensland Building Services Authority  QCCTB 146
Paul Wayne Townsend v Queensland Building and Construction Commission  QCAT 239
HWL Ebsworth Lawyers
REASONS FOR DECISION
- This is a review of a decision made by Queensland Building and Construction Commission (‘QBCC’) to issue directions to rectify to Mr O'Donnell, who is a licensed builder. Mr O'Donnell contends that directions to rectify should not have been issued. QBCC argues that the directions to rectify were appropriate.
- Mr O'Donnell built a studio extension to a house in late 2018. It is a free-standing structure in the back yard of the property, next to a swimming pool. The contract price for the work was $74,697.65.
- Mr O'Donnell built the studio and considered that it had reached practical completion in December 2018, subject to any minor defects and omissions to be attended to during the defects liability period under the contract. The homeowners had obtained a pre-handover report from a building inspector, and they took a different view. A dispute ensued over payment of the amount still owing under the contract.
- In January 2019 Mr O'Donnell started a proceeding in the Tribunal against the homeowners, seeking payment of $19,286.51. In April 2019, the homeowners paid Mr O'Donnell $11,231.75. The homeowners paid the remainder of the disputed sum, $8,054.76, into the Master Builders Queensland holding account. This was pursuant to a term in the contract which permitted disputed sums to be paid into that account pending resolution. In June 2019 the homeowners agreed to the release of $5,371.26 from the holding account to Mr O'Donnell. This left $2,683.50 in dispute.
- On 12 September 2019 the Tribunal proceeding ended in a final decision under which the $2,683.50 was to be released to the homeowners. I note that the Tribunal’s order indicates that it was made at a directions hearing, rather than after a substantive hearing on the merits. Accordingly, I accept Mr O'Donnell’s evidence that this decision resulted from a settlement agreement between the parties.
- Meanwhile, the homeowners had made two complaints to QBCC of defective work. The complaint which has led to the present proceeding is the earlier one, made in January 2019. It contained 23 complaint items. A QBCC inspector, Mr Brian Bates, conducted inspections in March and April 2019. He came to the view that some of the items were not defective; some had been rectified by Mr O'Donnell by the time of the second inspection at least; and some were defective but it would be unfair to issue a direction to rectify because of the amount outstanding in the ongoing dispute. This last category included complaint item 9 relating to the external shower, and complaint item 17 relating to external cladding.
- On the basis of that assessment, Mr Bates for QBCC decided on 22 May 2019 not to issue directions to rectify to Mr O'Donnell.
- On 3 June 2019, the homeowners authorised the release of the $5,371.26, which has been mentioned above, from the Master Builders Queensland holding account.
- On 10 June 2019 the homeowners applied to QBCC for an internal review of its decision of 22 May 2019, in relation to four complaint items. These included items 9 and 17.
- On 8 July 2019 a QBCC internal reviewer, Mr Leigh Blackman, set aside Mr Bates’ decision in relation to complaint items 9 and 17. Mr Blackman noted that since Mr Bates’ decision, a large portion of the previously-disputed amount had been authorised for release to Mr O'Donnell from the Master Builders Queensland holding account, although Mr O'Donnell had not yet taken the next step of having the money transferred to him. Mr Blackman considered that the remaining disputed sum, $2,683.50, was insufficient to render it unfair to issue directions to rectify. Mr Blackman also observed that Mr O'Donnell had not taken steps since the authorisation of the release of the money to rectify the defective work.
- Accordingly, on 9 July 2019, QBCC issued directions to rectify to Mr O'Donnell in respect of complaint items 9 and 17. He was required to rectify the defects by 11 August 2019. Mr O'Donnell did not do so.
- On 24 July 2019 Mr O'Donnell applied to the Tribunal for a review of the decision to issue directions to rectify. The matter was heard on 15 July 2020. Six bundles of documents were marked as exhibits during the hearing. Mr O'Donnell appeared for himself and gave oral evidence. Ms Stephanie Hedger of HWL Ebsworth Lawyers appeared for QBCC. Mr Steven Noble, a principal technical officer with QBCC who had provided expert advice to Mr Blackman, also gave oral evidence.
- QBCC had informed Mr O'Donnell on 17 September 2019 that it had approved a claim by the homeowners under the statutory insurance scheme that QBCC administers under the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’). This resulted in Mr O'Donnell being liable to reimburse QBCC $15,268.97. Ms Hedger informed the Tribunal at the hearing that the defective work in question has been fixed by another builder under the insurance scheme.
- ‘Defective’ includes faulty or unsatisfactory. QBCC may direct a builder to rectify defective building work. QBCC may take into account all relevant circumstances, and is not limited to the terms of the contract. QBCC is not required to give a direction to rectify if satisfied that, in the circumstances, it would be unfair to do so.
- QBCC has a Rectification of Building Work Policy. It promotes timeliness in complaints by requiring them to be lodged within 12 months of the homeowner becoming aware of the defect. However, the policy does not go on to provide guidance about what situations, if any, might result in a decision being made not to issue a direction to rectify, on the basis of unfairness, when there has been a timely complaint.
- The question of whether there is money owing to the builder is a factor that may be relevant, as can be seen from the present case. Ms Hedger also referred me to a case where this issue had been considered, Birrell v Queensland Building Services Authority, which I will discuss later.
- The Tribunal’s role is to reach the correct and preferable decision as at the date of its decision, and there would be no practical utility for the homeowners in confirming the directions to rectify because the defects have already been rectified. However, Ms Hedger submits that it would be appropriate to confirm Mr Blackman’s decision so that Mr O'Donnell’s licence record, which is searchable by the public including prospective clients, will reflect that he has had directions to rectify issued against him. Ms Hedger noted that in Paul Wayne Townsend v Queensland Building and Construction Commission, the Tribunal considered it fair to confirm a direction to rectify even though the work had since been rectified by another builder. The Tribunal commented:
Should the outcome be that Mr Townsend’s reputation as a builder go forward without a recorded blemish, just because the remediation has occurred and responsibility is no longer his for defective workmanship?
- In this regard, it is relevant to keep in mind that one of the objects of the QBCC Act is to ensure the maintenance of proper standards in the building industry. Accordingly, it has been observed that a direction to rectify is not given solely for the benefit of the homeowner, but ‘rather to ensure proper standards in the industry’.
Was there defective work?
Complaint item 9: external shower penetrations
- As required under the contract, Mr O'Donnell had installed on the outside of the studio a mixer body and capped end for a shower rose, but not the taps and shower rose as these were to be installed by the homeowners subsequently. When that was done, there would be an open-air shower by the pool.
- The QBCC inspector, Mr Bates, noted in his report:
Although this item was at rough in stage, the penetrations through the external Colorbond cladding had not been sealed allowing water to penetrate the cavity which is not in accordance with the Building Code of Australia – P.2.2.2 Weatherproofing, allowing water ingress into the building, damaging building elements.
- Mr Bates then quoted the relevant passage in the Building Code of Australia, which is to the effect, relevantly, that an external wall must prevent the penetration of water that could cause undue dampness or deterioration of building elements.
- At the hearing, Mr O'Donnell conceded that one of his workers may have missed sealing the upper penetration, but he added that it would be a ‘$2 job’ to fix it. He argued that sealing of these penetrations was not critical because a layer beneath the cladding was sealed.
- Mr Noble, however, was of the view that, regardless, the Building Code of Australia requires the external layer to be sealed. Mr Noble also noted that the fact that the unsealed penetrations would be under a shower makes waterproofing particularly important.
- Mr O'Donnell also raised an issue at the hearing about the shower being illegal, in the sense that as a shower with hot water connected, it should have but did not have an enclosure. Mr O'Donnell said the homeowners had insisted on it being open-air, despite his having explained the requirement for an enclosure. Mr O'Donnell told the Tribunal that when QBCC became involved, he ‘dropped’ the shower and arranged for the plumber to disconnect the hot water. Ms Hedger submits, however, and I accept, that whether the shower should have been enclosed is beside the point in determining whether there was a breach of the part of the Building Code of Australia relied on by Mr Bates.
- I accept the opinions of Mr Bates and Mr Noble that the penetrations should have been sealed. I accept that they were not fully sealed when inspected by QBCC. Accordingly, I find that there was defective work in this respect.
Complaint item 17: Colorbond cladding
- BlueScope Steel Colorbond cladding, blue in colour, was used for the external walls of the studio. Mr Bates noted that touch-up paint had been used in areas that had been scratched. He considered that there was a visual defect. He also noted that a technical bulletin issued by BlueScope Steel says that the use of touch-up paint is not recommended. It has a different composition from the paint used in the corrugated sheets, with different weathering characteristics. Over time, variations in appearance will occur.
- Earlier, in December 2018, the private building inspector whom the homeowners had engaged, Mr Bill Wiersma, had commented that the ‘external cladding is marked horizontally with touch-up spray paint along screws lines’. He considered that this caused a ‘significant aesthetical defect’ and that the sheeting ‘may need to be replaced’.
- Mr O'Donnell does not dispute that there was a visual defect. I find that in this respect the work was unsatisfactory, and therefore defective.
Is it unfair to give directions to rectify?
- Mr O'Donnell submits that the Colorbond cladding in question is not a suitable product for walls: it is designed for roofing, and it is too prone to scratching by passing people and pets to be suitable for walls. Mr O'Donnell also points out that the use of the product was not his choice but that of the building designer.
- Even if Mr O'Donnell is correct in his criticism of the product choice, I share the view of QBCC that the scratches in question must have been caused in the installation process. They were found at an early stage, and on several sides, not just the side where foot traffic would be expected. Accordingly, I find that Mr O'Donnell or his workers caused the scratches, no doubt unintentionally. I do not consider the product choice to be a factor that would make a direction to rectify unfair.
- Mr O'Donnell gave evidence that he had been aware that touch-up painting of Colorbond cladding is not advisable, but he did it because the QBCC inspector, Mr Bates, told him that he should give it a try. Mr Bates later suggested cleaning off the touching-up. Mr O'Donnell said he regarded Mr Bates as an authority figure, like a police officer, and so he followed his suggestions. When questioned about when Mr Bates had recommended touching-up, Mr O'Donnell initially indicated that it must have been between Mr Bates’ first inspection, in March 2019, and his second inspection, in April 2019.
- Mr O'Donnell had filed transcripts of several conversations with Mr Bates, which he said were just a small sample, but he was unable to point me to any passages in the filed material which clearly establish that Mr Bates recommended touch-up painting. I have no direct evidence from Mr Bates on the topic. Ms Hedger also pointed out that touch-up painting had been observed by Mr Wiersma in December 2018, which appears to have been before Mr Bates had any involvement. Mr O'Donnell responded that he may have become mixed up about the dates, and also that Mr Bates had involvement prior to carrying out his inspections for his report.
- I note that there are indications from the homeowners and Mr Bates in the documents that Mr O'Donnell or his staff at some point applied a product intended to remove the touch-up paint, but this had merely changed rather than cured the visual defect.
- Overall, while I consider it likely that Mr O'Donnell would have had some conversations with Mr Bates about whether it was desirable to apply or re-apply paint to, or to remove it from, Colorbond, I am not satisfied that any influence from Mr Bates was the originating cause of the visual defect. Accordingly, I do not consider any such advice from Mr Bates to be a factor that would make a direction to rectify unfair.
- As discussed above, QBCC initially declined to issue directions to rectify because there was a dispute over funds unpaid under the contract. By the time of the internal review, however, the homeowners had paid most of the remaining funds. Only $2,683.50 remained in dispute. In the opinion of the internal reviewer, Mr Blackman, that was not a large enough sum to render directions to rectify unfair.
- Ms Hedger submits that Mr Blackman’s approach is correct. The actual cost of rectification, as advised to Mr O'Donnell, was $15,268.97. It was fair to require Mr O'Donnell to carry out rectification when, at best, he may have established entitlement to the payment of a sum of only $2,683.50. Ms Hedger drew my attention to a passage in Birrell v Queensland Building Services Authority:
It is difficult to imagine a scenario in which it would seem reasonable for a homeowner to pay a builder the full contract price when faced with a refusal to rectify alleged defects that are later confirmed as defects by the Authority.
- Of course, it is important to consider the particular circumstances of each case. Each building dispute will be different. There may be just one or two alleged defects, or a large number. One or both parties may have breached the contract. Some homeowners will be reasonable; others not. Similarly, some builders will be cooperative; others obstinate.
- Mr O'Donnell’s view of his matter is that the homeowners were extremely demanding clients who disregarded the contract by withholding payments; showed disrespect by bringing in a private inspector to do a pre-handover inspection before he could even do a walk-around with the clients as part of the practical completion process; and ultimately embarked on insurance fraud. He says that he eventually agreed to settle the case in the Tribunal by allowing the homeowners to have the final disputed sum of $2,683.50 just to be rid of them. He says he thought this sum was more than the homeowners would need to fix the two outstanding defects.
- I do not know to what extent, if any, Mr O'Donnell’s perceptions of the homeowners’ motives, let alone their alleged criminality, are accurate. I have not heard from the homeowners on these matters as they were not parties to the current proceeding. Mr O'Donnell has developed such a sense of injustice about the whole episode, including the amount of legal costs he incurred in bringing the action for payment against the homeowners, that he has probably became overly-suspicious of motives. For example, he perceives the relative speed with which QBCC approved the insurance claim, while he was in the process of challenging the directions to rectify, as evidence of complicity by QBCC in insurance fraud. He does not understand that the statutory scheme is designed to ensure that such a challenge does not hold up a remedy for homeowners.
- It is plain from the documents that the homeowners were exacting clients. That is not a criticism: they wanted to ensure a finished product that was free of defects. Mr O'Donnell was offended by the homeowners’ decision to bring in a private inspector in December 2018, but it is apparent that he did then continue to engage with the homeowners in what I consider was a genuine effort to fix defects even as he was pursuing the case in the Tribunal for monies owing. The homeowners contended in their complaints to QBCC that there were many defects, most of them of a minor nature. In addition to the initial 23 complaint items, there were 12 in the second complaint. QBCC concluded that quite a number of the items were not defective. Of the others, many were fixed by Mr O'Donnell. Ultimately, only complaint items 9 and 17 were the subject of directions to rectify. (There were two others, arising from the second complaint, but those directions were set aside on internal review). The non-sealing of the shower penetrations (complaint item 9), while a structural issue, was something that could have been easily remedied in conjunction with remedying the visual defect in the Colorbond cladding (complaint item 17). How that visual defect could be fixed was contentious. Mr O'Donnell proposed to have the entire structure spray-painted, at a cost of $1,400, whereas QBCC in granting the insurance claim considered that the appropriate remedial work would involve replacing the sheets at a cost of over $15,000.
- Mr O'Donnell has provided some documents about arrangements he was making with Newton Roofing Restoration and Roof Cleaning to have the spray-painting done on 24 July 2020, for $1,400. However, he cancelled that engagement. Mr O'Donnell told the Tribunal that this was because he learned through Mr Bates that the defects would be fixed through insurance. That may be possible, but it is perhaps more likely that it was because he decided to challenge the directions to rectify by starting the present proceeding on 24 July 2019.
- Overall, I do not regard this as a situation such as that envisaged in Birrell v Queensland Building Services Authority of a builder refusing to carry out rectification despite having received full payment under the contract. When QBCC issued the directions to rectify in July 2019, the homeowners had authorised release of $5,371.26 to Mr O'Donnell, but there is nothing to indicate that this was conditional on him attending to complaint items 9 and 17. There was still an amount of more than $2,600 unresolved.
- Mr O'Donnell could have challenged the scope of works developed by QBCC for the rectification under insurance, which involved replacement of the Colorbond sheets. So far as I am aware, he has not done so. On the other hand, there is nothing before me that establishes that spray-painting of the entire structure would have been an unsuccessful form of rectification of the visual defect. It would seem to be a potentially quite viable approach. I therefore infer that as at July 2019 Mr O'Donnell would have reasonably assumed that the cost of rectification would have been less than the amount remaining in dispute.
- In all of these circumstances, I do not consider that Mr O'Donnell was being obstinate or recalcitrant when the directions to rectify were issued. He had been through a difficult process of trying to resolve differences with the homeowners, variously directly and through QBCC and Tribunal intervention. His dispute with the homeowners had not yet been fully resolved. I do not think it can be extrapolated from this situation that Mr O'Donnell is a careless builder from whom the public requires protection by having directions to rectify noted on his licence details. His case is therefore distinguishable from the case of Paul Wayne Townsend v Queensland Building and Construction Commission in which the Tribunal considered that a blemish should appear on the builder’s record.
- There is no practical utility in confirming the directions to rectify. Mr O'Donnell’s failure to rectify the defects in question arose in the difficult circumstances I have described. In these circumstances, it would be unfair to issue directions to rectify. The correct and preferable decision is to set aside the decision under review, and to substitute a decision not to issue directions to rectify.
 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 20.
 Ibid, s 24(1).
 QBCC Act, Schedule 2 (definition of ‘defective’).
 Ibid, s 72.
 Ibid, s 72(3).
 Ibid, s 72(5).
 Effective 10 October 2014.
  QCAT 56.
  QCAT 239.
 Ibid, .
 QBCC Act, s 3(a)(i).
 Feodoroff v Queensland Building Services Authority  QCCTB 146, .
 Exhibit 5, p 235.
 Exhibit 5, p 77.
  QCAT 56, .
 The homeowners were given an opportunity, shortly before the hearing, to apply to be joined to the proceeding. They indicated at a directions hearing on 14 July 2020 that they did not see a need to be joined. At the hearing on 15 July 2020, Ms Hedger advised that the defects had been rectified under the statutory insurance scheme. This would explain why the homeowners did not see any need to be joined.
 See paragraph 38 above.
 See paragraph 19 above.
- Published Case Name:
Morgan James O'Donnell t/as Ronin Built v Queensland Building and Construction Commission
- Shortened Case Name:
O'Donnell v Queensland Building and Construction Commission
 QCAT 293
22 Jul 2020