- Unreported Judgment
- Appeal Determined (QCA)
 QCA 161
SUPREME COURT OF QUEENSLAND
Queensland Building and Construction Commission v Lifetime Securities (Australia) Pty Ltd & Anor  QCA 161
QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION
Appeal No 8192 of 2013
DC No 4046 of 2012
Court of Appeal
Application for Leave s 118 DCA (Civil)
District Court at Brisbane
18 July 2014
18 March 2014
Margaret McMurdo P, Gotterson JA and Ann Lyons J
Separate reasons for judgment of each member of the Court, each concurring as to the orders made
PROFESSIONS & TRADES – BUILDERS – STATUTORY INSURANCE SCHEME – where the respondent was contracted to build a residential property – where the property owner made claims against the respondent under the statutory insurance scheme, pursuant to the Queensland Building and Construction Commission Act 1991 (“the Act”) – where the applicant’s inspection of the property confirmed the defects – where the applicant provided written notice giving the respondent 28 days to rectify the defects – where the respondent did not respond to the written notices – where the applicant invited tenders to carry out the rectification works – where the applicant filed a claim in the District Court seeking costs of the rectification work from the respondent – where the respondent filed an application seeking dismissal of the applicant’s claim in light of McNab Constructions Australia Pty Ltd v QBSA – where the learned District Court judge entered judgment against the applicant on the basis that their case as pleaded had no real prospects of success – whether the applicant’s right to recovery was conditioned by compliance with the Act
Queensland Building and Construction Commission Act 1991 (Qld), s 71, s 72, s 74, s 116C(6)
Uniform Civil Procedure Rules 1999 (Qld), r 293
Camill Constructions Pty Ltd v Queensland Building Services Authority  QSC 275, cited
Mahony v Queensland Building Services Authority QCA 323, followed
Mahony v Queensland Building Services Authority  HCASL 93, followed
McNab Constructions Australia Pty Ltd v Queensland Building Services Authority  QSC 57, cited
P Flanagan QC, with B Codd, for the applicant/appellant
R Perry QC for the respondent
Rostron Carlyle Solicitors for the applicant/appellant
Herbert Geer for the respondent
- MARGARET McMURDO P: I agree with Gotterson JA's reasons for granting leave to appeal and allowing the appeal and with the orders he proposes.
- GOTTERSON JA: On 16 October 2012, the Queensland Building and Construction Commission (“QBCC”), by its then name Queensland Building Services Authority, commenced proceedings in the District Court at Brisbane against Lifetime Securities (Australia) Pty Ltd (“Lifetime Securities”) as first defendant and Ralph Noel Collins, a director of Lifetime Securities, as second defendant, by filing a claim and statement of claim.
- In those proceedings, QBCC claimed the sum of $176,987.50 against Lifetime Securities pursuant to s 71(1) of the Queensland Building Services Authority Act 1991, now named the Queensland Building and Construction Commission Act 1991 (“the Act”), and the same amount against Mr Collins pursuant to s 111C(6) of that Act. Interest at 10 per cent per annum until the date of judgment was also claimed on components of the sum pursuant to s 58 of the Civil Proceedings Act 2011 as well as costs.
- The defendants filed a notice of intention to defend and defence to the statement of claim on 22 November 2012. The solicitors for the defendants challenged QBCC’s right to sue for the amount under the statutory provisions and debate by way of correspondence over that issue ensued between the legal representatives. QBCC ultimately made disclosure of documents on 11 July 2013 and the defendants reciprocated on 29 July 2013.
- On 30 July 2013, the defendants filed an application in the proceedings for orders, two of which were that pursuant to rule 293 of the Uniform Civil Procedure Rules 1999, judgment be entered in their favour dismissing QBCC’s claim and that QBCC pay their costs of the proceedings. The application was heard on 5 August 2013 and, on that date, orders were made substantially in terms of those sought by the defendants.
- QBCC filed an application in this Court on 2 September 2013 by which it has sought leave pursuant to s 118(3) of the District Court of Queensland Act 1967 to appeal those orders. The material filed in support of the application includes a draft notice of appeal. Both the application for leave to appeal and the appeal were heard together. The respondents did not oppose a grant of leave. For reasons which will become apparent in my discussion of the merits of the appeal, I am of the view that leave to appeal should be granted.
Statutory provisions central to the appeal
- Part 5 of the Act (ss 67X-71AA) is headed “The statutory insurance scheme”. This scheme provides insurance cover for those for whom residential construction work is carried out. Insurance cover under the scheme is upon terms stated in QBCC’s policies for the purpose: s 69(2). Pursuant to the then current s 9A of the Act, QBCC adopted a policy setting out Insurance Policy Conditions for a statutory policy of insurance under Part 5. QBCC amended the conditions from time to time.
- The provisions of Part 5 regulate how premiums are to be set, when they are to be paid, and when a policy of insurance under the scheme comes into force for particular residential construction work. Two provisions in Part 5 of immediate relevance to this appeal are ss 70 and 71. Section 70 states:
“(1)A person claiming to be entitled to indemnity under the insurance scheme must give notice of the claim to the authority in accordance with the regulations.
(2)If the regulations do not state the way the notice of claim is to be given, a person who has applied to the authority under section 71A is taken to have given notice under this section.”
- Section 71 is a lengthy provision. It is necessary for present purposes to set out only subsection (1) which provides:
“If the authority makes any payment on a claim under the insurance scheme, the authority may recover the amount of the payment, as a debt, from the building contractor by whom the relevant residential construction work was, or was to be, carried out or any other person through whose fault the claim arose.”
- The authority referred to in both provisions is QBCC. It is common ground that Lifetime Securities was the building contractor by whom the relevant residential construction work was carried out in this case.
- The other part of the Act with which this appeal is concerned is Part 6 (ss 71A-74). It is headed “Rectification of building work”. Part 6 provides a means whereby a consumer may apply to QBCC to consider directing rectification of building work. An application may be made in respect of any category of building work, including residential construction work.
- Section 72(1) authorises QBCC to direct rectification of building work which, in its opinion, is defective or incomplete. The period stated in the direction for carrying out the rectification work must be at least 28 days unless certain circumstances, none of which are said to be relevant here, prevail: s 72(3). A person who fails to rectify building work as required by a direction is guilty of an offence: s 72(10).
- Much of the argument in the appeal was focused upon s 74 which itself is headed “Tenders for rectification work”. It is as follows:
“(1)If rectification work in respect of residential construction work is required under this Act and the person required to carry out the work does not carry it out, or have it carried out, within the time allowed by the direction, the authority must seek tenders for carrying out the work.
- The authority must also seek tenders for carrying out building work if the authority—
- is of the opinion that the building work is defective or incomplete; but
- has decided not to give a direction under section 72 for the rectification of the building work.
- The authority may accept any tender that it considers appropriate, irrespective whether the tender was for the lowest cost.
- Tenders for carrying out the building work must be sought from the number of licensed contractors considered by the authority to be reasonable in the circumstances.
- A licensed contractor from whom a tender may be sought must be—
- a licensed contractor whose name is included on an appropriate panel; or
- a licensed contractor whose name is not included on an appropriate panel, if the authority is satisfied it would be in the best interests of the efficient rectification of the building work if the licensed contractor were to provide a tender.
- The authority may authorise the person for whom the building work requiring rectification was, or was to be, carried out to act for the authority in seeking the necessary tenders.
- The authority may only have work carried out under this section to the extent that the cost of the work is covered by a payment to be made under the statutory insurance scheme in relation to the defective or incomplete work.”
The pleaded claim and the period stated in the directions
- The case pleaded by QBCC alleged that on 19 November 2004, Lifetime Securities entered into a contract with Mr John Drake (“the Owner”) to perform residential construction work involving the demolition of an existing dwelling and the construction of a new dwelling on land at East Brisbane; that the work was carried out between 29 November 2004 and 30 September 2008; and that a policy of insurance under the scheme came into force with respect to the carrying out of the residential construction work upon conditions contained in Edition 6 of the Insurance Policy Conditions: statement of claim paragraphs 2-4. The coming into force of the policy of insurance was admitted: defence paragraph 1(a).
- Paragraph 5 of the statement of claim alleged that on 3 November 2009, the Owner made a claim on his statutory insurance policy on grounds that the residential construction work had defects. Paragraphs 6 to 14 pleaded the identification of defects by QBSS; the direction by it to Lifetime Securities on 21 January 2010 that the defects be rectified; a failure by Lifetime Securities to rectify in accordance with the direction; the seeking of tenders by QBCC for the rectification; the approval by QBCC of the claim in an amount equal to the amount of the lowest tender; and that on 15 June 2011, the Owner engaged a builder to carry out the rectification work. Allegations were made in a similar pattern in respect of additional defects identified in August 2011, the rectification of which was pleaded to have been directed on 9 November 2011: paragraphs 15-26.
- Paragraph 27 of the statement of claim pleaded that between 27 September 2010 and 18 April 2012, QBCC paid the builder who carried out the rectification work some seven separate sums which in aggregate amounted to $176,987.50. In paragraph 28, QBCC claimed that it was entitled to recover this amount from Lifetime Securities pursuant to s 71(1) of the Act. A cognate liability on the part of Mr Collins to pay that amount pursuant to s 111C(6) of the Act was pleaded in paragraph 31. That Mr Collins would be so liable if Lifetime Securities is liable to pay that amount, is not in issue.
- Whilst the statement of claim did not plead the means by which the directions were given, they were particularised as having been given in writing and the documents which constituted the written directions were disclosed. In these reasons it is convenient to refer to a document by which a direction under s 72(1) was sought to be given as “a notice”. Each notice gave Lifetime Securities a period of 28 days from the date thereof within which to rectify. In the case of notices for the defects, the date stated on them was 21 January 2010 and for the additional defects, that date was 9 November 2011. It appears that each notice was posted to Lifetime Securities on the date stated on it.
- Neither the statement of claim nor the defence pleaded the date on which the notices were respectively received by Lifetime Securities. The dates of receipt assumed relevance for the current proceedings by virtue of two factors. One was the publication on 14 March 2013 of the decision of Dalton J in McNab Constructions Australia Pty Ltd v Queensland Building Services Authority in which her Honour held that the date from which the period required by s 72(3) to be stated in a direction for carrying out rectification work, begins on the date of receipt of the notice by the builder.
- The other factor, unaddressed by the pleadings, was that the date of receipt by Lifetime Securities of the notice in each case was after the date stated on the notice. As a consequence, the period stated for carrying out the rectification work in each case was less than the minimum period of 28 days set by s 72(3). This factor and the possible legal consequences of it were first raised by the solicitors for Lifetime Securities in correspondence to the solicitors for QBCC dated 29 May 2013.
The reasons of the learned primary judge
- The learned primary judge delivered reasons for judgment on the date of hearing of the application for summary judgment. Her Honour acted upon the basis that all directions were voidable in light of the failure to give the minimum period of notice for rectification. She cited the decision of Dalton J to which I have referred for authority for that categorisation of the directions.
- Her Honour then observed, correctly in my view, that the Queensland Civil and Administrative Tribunal (“QCAT”) would not have had power within its review jurisdiction under Part 7 of the Act to have declared void the voidable directions.
- The basis for dismissing QBCC’s claim which then followed was briefly stated. Her Honour said:
“However, the claim as pleaded is bound to fail. It has no real prospects of success. Mr Codd submitted that I could strike out the offending parts of the statement of claim, and allow amendment in terms to be seen by me later this week, I suppose. In that respect, he was relying on section 71 again, but subsection (3).
Section 71 subsection (1) allows the Authority, if it makes any payment, to recover the amount as a debt from the contractor. Subsection (3) provides that the Authority is subrogated relevantly, to the extent of any payment made, to the rights of the person to whom or to whose benefit payment has been or is to be made. It seems to me that the purpose of subsection (3) is twofold. Firstly, so there is no double recovery by the owner; secondly, to permit the Authority if later claims arise and are approved and payment is made by the Authority, to claim those too.
However, if the statement of claim or parts are struck out, those parts upon which a valid direction and section 71(1) rely, then there will be nothing much left. He also submitted that they might be faced with the possibility of Anshun estoppel. That may well be the result of any summary judgment application that is successful.”
- This statement did not elaborate upon why it was that the learned primary judge considered that QBCC’s claim had no real prospects of success. A reading of the transcript of the hearing and the written submission received at the hearing would suggest that her Honour accepted a submission made for Lifetime Securities that QBCC’s claim was predicated entirely upon the validity of the directions and then reasoned that because they were voidable, the claim itself lacked validity. Implicit in the reasoning that the claim was invalid on that account is a proposition that the validity of a claim under s 71(1) in Part 5 is dependent upon the validity of steps that QBCC had taken under Part 6. In context, the relevant step was the giving of directions by notices which failed to allow for the minimum period for carrying out rectification work.
The grounds of appeal
- The draft notice of appeal contends that the learned primary judge erred in concluding that QBCC had no real prospects of succeeding on its claim. A principal ground of appeal challenges the implied proposition to which I have referred. This ground contends that her Honour erred in law in holding that as a matter of statutory construction QBCC was precluded from seeking to recover an amount paid under a policy unless it had complied with ss 72 and 74 in Part 6 of the Act.
The submissions for QBCC
- In summary, the argument for QBCC on this ground was that the right to recover conferred on it by s 71(1) is exercisable upon the happening of events to which it is expressly referenced, that is to say, the making of a payment of a claim under the insurance scheme. The argument maintains that that right is not qualified or conditioned by reference to compliance by it with provisions in Part 6.
- In support of its argument, QBCC relied upon the decision of this Court in Mahony v Queensland Building Services Authority. That case concerned two issues. The first was a statutory construction issue arising from the builder’s argument that s 71(1) requires QBCC to prove fault on the builder’s part. The second issue was that, in any event, whether the builder was not at fault is a justiciable issue within recovery proceedings.
- This Court held that the fault issue was not justiciable in recovery proceedings based on s 71(1). The following reasons were given for that:
“Section 71(1) confers a right to recover as a debt from any of the designated persons “any payment on a claim under the insurance scheme”. It is sufficient for recovery under the section that the authority have made a payment on a claim under the insurance scheme. The statutory right to recover is not conditioned upon the legal quality of a determination by the authority to make the indemnity payment or of any anterior step taken by the authority that had led to the decision to pay.
That is not to say that a decision to make an indemnity payment or any anterior step is not reviewable. At the relevant time, Division 3 of Part 7 of the QBSA Act conferred a review jurisdiction on the Commercial and Consumer Tribunal (“the Tribunal”) with respect to the following decisions by the authority: to direct or not direct rectification or completion work on a building; that work undertaken at the direction of the authority was not of a satisfactory standard; about the scope of works to be undertaken under the statutory insurance scheme in order to rectify; and to disallow a claim under the scheme wholly or in part. A decision by the authority to recover an amount under s 71(1) was not reviewable by the Tribunal. However, it was a decision which was judicially reviewable in the Supreme Court of Queensland pursuant to the provisions of the Judicial Review Act 1991. So, too, for other anterior decisions of the authority. The availability of review of those kinds and at those stages provides a sound rationale for a legislative intention that the types of decisions to which I have referred, not be justiciable in s 71(1) debt recovery proceedings. Another indicator of such an intention is that s 71 itself specifies certain defences which may be raised in proceedings under the section. None of these are relevant to the kind of defence that the appellant would wish to agitate in these proceedings.” (Footnotes omitted.)
- I adhere to the principles expressed in those reasons. I am fortified in so doing by the reasons of Bell and Gageler JJ given in the course of refusing special leave to appeal from the decision. Their Honours observed:
“The applicant also submitted that in recovery proceedings under s 71(1) the steps anterior to payment and recovery are justiciable issues. Specifically, the applicant sought to put at issue the competency of the inspector who produced the relevant reports for the respondent. The Court of Appeal held that the availability of merits review of a range of decisions of the Authority provided a sound rationale for a legislative intention that such decisions not be justiciable.”
I note also that this aspect of the decision in Mahony was recently applied by this Court in Namour v QueenslandBuilding Services Authority.
- The decision in Mahony supports the view that the right to recover conferred by s 71(1) is not conditioned upon the legal quality of any step that QBCC may have taken antecedent to a decision to make payments under the scheme.
The submissions for Lifetime Securities
- Notwithstanding, senior counsel for Lifetime Securities presented arguments for the opposing view. He submitted that the observations in Mahony were directed only to circumstances where a builder seeks to put in issue in recovery proceedings, a decision of QBCC which would have been merits-reviewable under Part 7 of the Act. I do not accept that limitation as a valid one. The availability of merits review was regarded, first by this Court and then by Bell and Gageler JJ, as a powerful indication that steps on the part of QBCC antecedent to payment and recovery are not justiciable in such proceedings. It was not described in terms of a frame of reference for distinguishing between antecedent steps that are not justiciable and those that are.
- The other argument advanced was based upon provisions in s 74 of the Act. Reference was made to the provisions in ss 74(1) and (2) which require QBCC to seek tenders for carrying out rectification work. Subsection (1) applies only to rectification work in respect of residential construction work required under the Act which the person required to carry it out has neither carried it out nor had it carried out within the time allowed by the direction which required it. Subsection (2) however, applies to all building work if QBCC is of the opinion that the work is defective or incomplete but has decided not give a direction under s 72 for rectification. Each subsection states that QBCC must seek tenders in the circumstances to which it applies. QBCC may accept any tender that it considers appropriate and is not required to accept the lowest tender: s 74(4). QBCC is restricted by s 74(7) in having work carried out under s 74 in relation to defective or incomplete work to the extent that the cost of it is covered by a payment to be made under the scheme.
- Lifetime Securities submitted that where a direction for rectifying residential construction work is defective for failing to allow the minimum period for rectification, s 74(1) could not be engaged. That is so, it is argued, because the builder was never required to comply with the direction and therefore could never have failed to comply with it. As a consequence, QBCC would never be authorised to seek and accept tenders for the rectification work nor make payments under the scheme in respect of the same which it might then seek to recover under s 71(1).
- Section 71(1) does not, by its express terms, condition the right of recovery thereby conferred by reference to regularity in compliance by QBCC with any of the provisions in Part 6. Neither s 72 nor s 74 expressly refer to the right of recovery under s 71(1). In these circumstances, for this submission to have validity, it would be necessary that such a condition be implied within the text of the Act itself. I am unable to discern such an implication from the provisions of Part 5 or Part 6. Specifically, I do not consider that the provisions of s 74 give rise to an implication of that kind. As noted, that provision is not concerned with when or how a claim made under the scheme may be paid. Subsection 7 is a capping provision which limits the cost of the work which QBCC may have carried out under s 74 by reference to a payment to be made under the scheme, but does not relate directly to the making of payments under the scheme.
- Whilst the right to recover under s 71(1) is not conditioned as Lifetime Securities submits that it is, that is not to say that compliance by QBCC with the provisions of Part 6 might never have potential relevance to a recovery action under s 71(1). For example, such a circumstance might arise in the following way. Under the Insurance Policy Conditions, the amount that QBCC may pay under the insuring clause is limited to the reasonable cost, as determined by QBCC, of undertaking the rectification work: clause 4.2(a). A failure on the part of QBCC to call tenders when it was required to do so under s 74(1) or (2) might give scope for an argument that an amount paid by QBCC in respect of rectification work exceeded reasonable cost and, to that extent, was not a valid payment under the scheme.
- For the reasons given, I accept the arguments of QBCC but not those of Lifetime Securities on the principal ground of appeal. In my view, the learned primary judge acted upon an erroneous proposition of law and further erred in holding that QBCC’s claim was bound to fail. Moreover, sufficient facts were set out in paragraphs 1 to 5 and 27 to 31 of the statement of claim to plead a claim for recovery under s 71(1). It follows that the orders under appeal must be set aside and the application for summary judgment dismissed.
- As to further orders, during the course of argument before the learned primary judge and this Court, it was conceded on behalf of QBCC that its statement of claim had pleaded extensively, but unnecessarily, with respect to the steps taken by it under Part 6. I would not strike out the statement of claim on that account. However, there should be an order that QBCC file and serve an amended statement of claim to address this.
- To a considerable degree, the making of the summary judgment application was encouraged by the way the statement of claim was pleaded. Despite its success on the appeal, QBCC must amend its Statement of Claim. Also, several judgments of relevance to the legal issues raised in both the summary judgment application and the appeal were published after the summary judgment application had been determined and the application for leave to appeal to this Court had been filed. Those factors together have influenced me to the view that the appropriate order with respect to costs here is that each party bear its own costs of both the summary judgment application and of this appeal.
- I would propose the following orders:
- Grant leave to appeal.
- Allow the appeal.
- Set aside Orders 3 and 4 made in the District Court on 5 August 2013.
- Dismiss the application for summary judgment.
- Direct the appellant to file and serve an amended statement of claim within 28 days of the publication of these orders.
- Apart from the costs referred to in Order 2 made in the District Court on 5 August 2013, each party to pay its own costs of the application for summary judgment and of this appeal, including the application for leave to appeal.
- ANN LYONS J: I agree with the reasons of Gotterson JA and the orders proposed.
 Supplementary Appeal Record Book (“SARB”) 39-43.
 The version of the Insurance Policy Conditions contained in the SARB is Edition 8: at 200-223. Amendments made by that edition took effect on 1 July 2009. At the hearing of the appeal, it was not suggested that Edition 8 was relevantly different from Edition 6.
 AB344-348. Defence filed on 22 November 2012.
 AB337 and AB349.
 AB164-168; AB201-223.
  QSC 57.
 Ibid at .
 The actual date of receipt in each case is not stated in the record before this Court. However, the learned primary judge observed during the hearing of the application, and the parties appear to have accepted, that the period stated for rectification of one set of defects was only 21 days and in the case of the other set of defects, only 25 days: AB7 Tr1-7 LL20-23.
 AB369; Tr3 LL20-22.
 In McNab, Dalton J had, in fact, held that the directions were “invalid or void”: at . However, in Camill Constructions Pty Ltd v Queensland Building Services Authority  QSC 275, judgment in which was delivered ex tempore on 21 August 2013 and after the hearing of the summary judgment application in this case, Douglas J, after referring to McNab, concluded that a direction giving a period of 28 days from the date of the notice was not of itself void. If the notice was not received by the builder on the date of the notice, for example, by facsimile, such a direction would become voidable: at . The conclusion of Douglas J is, in my view, to be preferred for the reasons given by his Honour.
 AB370; Tr4 LL2-9.
 AB371; Tr5 LL6-22.
 AB352-354 and AB355-365 respectively.
  QCA 323, judgment in which was delivered on 29 October 2013 and after the determination of the application for summary judgment.
 Per Gotterson JA, McMurdo P and Douglas J concurring.
 Mahony v Queensland Building Services Authority  HCASL 93 (13 May 2014).
 At .
  QCA 72 at -.
- Published Case Name:
Queensland Building and Construction Commission v Lifetime Securities (Australia) Pty Ltd & Anor
- Shortened Case Name:
Queensland Building and Construction Commission v Lifetime Securities (Australia) Pty Ltd
 QCA 161
McMurdo P, Gotterson JA, A Lyons J
18 Jul 2014
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|Appeal Determined (QCA)|| QCA 161||18 Jul 2014||-|