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Body Corporate for Rosegum Villas CTS 37755 v Queensland Building and Construction Commission (No. 3)[2018] QCAT 240

Body Corporate for Rosegum Villas CTS 37755 v Queensland Building and Construction Commission (No. 3)[2018] QCAT 240

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Body Corporate for Rosegum Villas CTS 37755 v Queensland Building and Construction Commission (No. 3) [2018] QCAT 240

PARTIES:

BODY CORPORATE FOR ROSEGUM VILLAS CTS 37755

(applicant)

v

QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION

(respondent)

APPLICATION NO/S:

GAR319-11

DELIVERED ON:

24 July 2018

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Member Paratz

ORDERS:

The application made by the Body Corporate for Rosegum Villas CTS 37755 for an order for indemnity costs for the period from 17 October 2011 to 18 August 2014 is dismissed.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – where the Applicant sought indemnity costs on the basis that the Respondent had unnecessarily disadvantaged it prior to the hearing of a proceeding – where it was alleged that the Respondent had unnecessarily prolonged the proceedings

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 100

Kiernan v Commissioner of Police, New South Wales Police (No. 3) (GD) [2010] NSWADTAP 32

REPRESENTATION:

 

Applicant:

Piper Alderman

Respondent:

Holding Redlich

APPEARANCES:

 

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld).

REASONS FOR DECISION

  1. [1]
    This is a costs decision.
  2. [2]
    This matter has a long history in the Tribunal. There have been four previous decisions leading to this decision:
    1. (a)
      I first made a decision on 18 November 2014,[1] confirming the decision of the Queensland Building and Construction Commission (‘the QBCC’) made on 19 September 2011 to disallow a claim under the statutory insurance scheme in relation to subsidence or settlement of blocks 2, 3, 7, 12 and 14 at 8 Rosegum Place, Redbank Plains.

In that decision I ordered that the application was to be set down for a Directions Hearing at a date to be advised by the Registry after receipt of those reasons, to enable the parties to make submissions as to a timetable for submissions on, and process as to determination of, Costs (whether by an on the papers hearing or by an oral hearing).

An appeal was filed against that decision.

  1. (b)
    The Appeal Tribunal then made a decision on 25 August 2017,[2] allowing the appeal, setting aside my decision of 18 November 2014, and returning the proceeding for re-hearing.
  2. (c)
    I then made a further decision (the re-hearing decision), having regard to the comments of the Appeal Tribunal, on 23 December 2015, again confirming the decision of the QBCC.

An appeal was then filed against my re-hearing decision.

  1. (d)
    The Appeal Tribunal then made a further decision on 25 November 2016,[3] dismissing the appeal against my re-hearing decision.
  1. [3]
    The effect of this chain of proceedings was to confirm my original decision of 18 November 2014.
  2. [4]
    In my re-hearing decision I made the following comments as to costs:[4]

[123]  The parties have indicated that they may wish to make costs applications after consideration of this decision. Those issues may be complex.

[124]  If either party wishes to make an application as to costs, they should file an application in that regard.

  1. [5]
    The Body Corporate for Rosegum Villas CTS 37755 (‘the Body Corporate’) filed an Application for Miscellaneous Matters on 18 August 2017 seeking the following direction:

That the (QBCC) pay the (Body Corporate’s) costs of and incidental to commencing and conducting the proceedings, from 17 October 2011 until 18 August 2014, on the indemnity basis.

  1. [6]
    I gave Directions on 25 October 2017 for the filing of submissions in support of the Application, in Response, and in Reply. Submissions were filed as follows:
    1. (a)
      Amended Submissions of the Body Corporate – 17 November 2017
    2. (b)
      Submissions in response of QBCC – 8 December 2017
    3. (c)
      Submissions in reply of the Body Corporate – 9 January 2018

The Villas

  1. [7]
    Rosegum Villas is a large complex located at 8 Rosegum Place, Redbank Plains in Queensland. Redbank Plains is a suburb approximately 30 kilometres from the Brisbane CBD, and is in the City of Ipswich.
  2. [8]
    The complex is built around both sides, and the end, of a cul-de-sac in a ‘U’ configuration. It comprises 16 blocks of single storey residential buildings. Each block contains 3 to 5 individual villas. There are 54 villas in total.
  3. [9]
    These proceedings relate to 5 of the blocks.

Submissions of the Body Corporate

  1. [10]
    The Body Corporate is seeking costs in relation to the period between 17 October 2011 and up to, and including, 18 August 2014.
  2. [11]
    The initial oral hearing of the matter was first scheduled for 19 February 2014, but was relisted, on the application of the QBCC, to 18 August 2014.
  3. [12]
    A timeline of critical events as disclosed by the submissions of the Body Corporate is as follows:
    1. (a)
      27 November 2007 – Practical completion of building works
    2. (b)
      6 August 2009 – Body corporate first becomes aware of structural cracking to both internal walls and external brickwork to various blocks
    3. (c)
      12 October 2009 - Initial insurance claim for subsidence lodged by the Body Corporate with QBCC.
    4. (d)
      19 September 2011 – QBCC refuses insurance claims (‘the First Decision’).
    5. (e)
      17 October 2011 – Body Corporate files Application to Review in the Tribunal as to the First Decision
    6. (f)
      March 2012 – QBCC reinvestigates the insurance claims and changes its expert
    7. (g)
      26 November 2012 – QBCC affirms the First Decision to refuse the insurance claims (‘the Revised Decision’)
    8. (h)
      21 August 2013 – QBCC acknowledges Block 5 is subject to subsidence outside acceptable tolerances
    9. (i)
      25 September 2013 – QBCC issues Builder with Direction to Rectify Block 5
    10. (j)
      28 November 2013 – QBCC withdraws Direction to Rectify Block 5
    11. (k)
      28 November 2013 – Block 5 claim accepted
    12. (l)
      19 February 2014 – QBCC accepts claims for Blocks 4, 8, 9, 10, 11, 13, 15 and 16
    13. (m)
      17 March 2014 – QBCC issues a ‘Letter of Comfort’ in relation to Blocks 2, 3, 7, 12 and 14
    14. (n)
      27 March 2014 – Joint Engineering Experts Report filed
    15. (o)
      16 April 2014 – QBCC accepts claims for Blocks 1 and 6
    16. (p)
      20 May 2014 – QBCC files ‘Statement of Position’ in respect of blocks 2, 3, 7, 12 and 14, and abandons reliance on ‘Owner Maintenance Exclusion’.
  4. [13]
    The Body Corporate is therefore seeking indemnity costs for the period from the filing of the Application to Review until the first day of the oral hearing.
  5. [14]
    Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) provides for each party to usually bear their own costs.  That provision is however subject to section 102(1) which allows the tribunal to award costs ‘in the interests of justice’. Section 102(3) provides for matters the Tribunal may have regard to in deciding whether to award costs:
  1. (3)
    In deciding whether to award costs under subsection (1) or (2) the tribunal may have regard to the following—
  1. (a)
    whether a party to a proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding, including as mentioned in section 48(1)(a) to (g);
  1. (b)
    the nature and complexity of the dispute the subject of the proceeding;
  1. (c)
    the relative strengths of the claims made by each of the parties to the proceeding;
  1. (d)
    for a proceeding for the review of a reviewable decision—
  1. (i)
    whether the applicant was afforded natural justice by the decision-maker for the decision; and
  1. (ii)
    whether the applicant genuinely attempted to enable and help the decision-maker to make the decision on the merits;
  1. (e)
    the financial circumstances of the parties to the proceeding;
  1. (f)
    anything else the tribunal considers relevant.
  1. [15]
    The Body Corporate addresses each of these considerations in its submissions.

Conduct – s 102(3)(a)

  1. [16]
    The Body Corporate submits that the conduct of the QBCC unnecessarily disadvantaged the Body Corporate in several ways.
  2. [17]
    The first alleged disadvantage is as to the Owner Maintenance exclusion:[5]

(8.1) The Owner maintenance exclusion was maintained by the Respondent up until it filed its statement of position on 20 May 2014 in respect of blocks 2, 3, 7, 12 and 14.

The Owner Maintenance Exclusion constituted a large portion of the Applicant’s attention during the proceeding and preparation for trial.

Therefore, a large majority of the Applicant’s expense in progressing the proceeding and preparing for trial was wholly unnecessary, given that the respondent did not press the Owner Maintenance Exclusion at trial.

Up until 20 May 2014, about 50% of all time spent on this matter was related to owner maintenance exclusion, amounting to approximately $75,000 in unnecessary costs.

  1. [18]
    Further alleged disadvantage is submitted as to:[6]
    1. (a)
      The ‘delay of over 4 years for the acceptance of the insurance claim’. The Body Corporate submits that if the QBCC had engaged a non-conflicted expert initially, this would have led to the blocks being accepted without the need for the proceedings, as the QBCC accepted most of the blocks after changing its expert.
    2. (b)
      The QBCC refusal to confirm a scope of works for the maintenance works referred to in the Letter of Comfort, which ‘prohibited the Applicant from assessing the prospects of its ability to rely on the Letter of Comfort and settle the proceedings prior to trial’.
    3. (c)
      The subjection of the owners and their tenants to the ‘invasive and excessive ‘ number of inspections by the QBCC
    4. (d)
      ‘The unnecessary and overall protraction and complication of the proceedings’, when the Body Corporate was ready to proceed, arising from wrongful allegations by the QBCC that:
      1. the Body Corporate had not filed its submissions in time by 31 January 2013, when it had applied for an extension of time to submit them on 30 January 2013.
      2. the Body Corporate had not allowed access to the complex from 15 May 2013 - when a further 10 inspections were allowed between 3 July 2013 and 27 November 2013.
      3. It made the First Decision based on the wrong plans where ‘in fact the reasons for the First Decision... make no reference to the plans’.
    5. (e)
      The general delays as to delivery of evidence by the QBCC, and its extension application which meant the hearing was not heard for a further 6 months.
    6. (f)
      The ‘significant cost and financial implications’ that arose because of these actions of the QBCC.

The nature and complexity of the dispute: s 102(3)(b)

  1. [19]
    The Body Corporate says the proceedings were complicated and involved voluminous technical evidence, which is shown by both parties engaging an expert witness; the proceeding ultimately turning on the expert evidence; and the QBCC engaging legal representation for the proceeding.

Relative strength of the parties claims: s 102(3)(c)

  1. [20]
    The Body Corporate submits that its insurance claims were strong, as evidenced by indemnity being accepted for 11 of 16 blocks; and by the QBCC abandoning the Owner Maintenance Exclusion prior to trial.

Matters under s 102(3)(d)(i) and (ii)

  1. [21]
    The Body Corporate submits that prior to commencing the proceedings, it genuinely attempted to enable and assist the QBCC to make the First Decision.

Financial circumstances of the Body Corporate: s 102(3)(e)

  1. [22]
    The Body Corporate submits that it was placed under financial stress by the proceedings:
    1. (a)
      It was required to raise special levies from the owners of the Villas to fund the proceedings.
    2. (b)
      Not all owners were able to meet the special levies and to date, it still has unsatisfied special levies.
    3. (c)
      It still has unpaid legal invoices which were incurred in progressing the proceedings, and are being satisfied under a deferred payment plan.
    4. (d)
      The QBCC was made aware of the Body Corporate’s impecuniosity from 12 July 2012, but:
      1. Remained uncooperative as to clarifying the maintenance works required to rely on the Letter of Comfort; and
      2. Unnecessarily and unreasonably protracting the proceedings by issuing the Direction to Rectify, and making the extension application.

Other factors the Tribunal should consider – s 102(3)(f)

Legal Representation

  1. [23]
    The Body Corporate submits that it was required to retain legal representation by virtue of the nature and complexity of the dispute, and that the QBCC was itself represented by Solicitors and Counsel and raised no objection to the Body Corporate’s application for representation.

Expense

  1. [24]
    The Body Corporate submits that its legal costs up to 18 August 2014 (the first day of the hearing) were $370,227 for Solicitors, and $51,920 for Counsel; and that it engaged an expert witness at a cost of $55,825 – a total of $477,972.
  2. [25]
    It further submits that additionally, with respect to the accepted blocks, that had the QBCC ‘conducted itself appropriately’, then those costs would have been unnecessary.

Allegations which ought not to have been made

  1. [26]
    The Body Corporate submits that that the QBCC’s experts should have known well before the Joint Experts Report on 6 May 2013 that all of the blocks were constructed using the PDE plans, and that had the footings that were used in the PDE plans been equivalent to deemed to comply designs given in AS2870-1996 the distress and damage would have been much less severe.

The model litigant principles

  1. [27]
    The Body Corporate submits that the QBCC failed to act as a model litigant as a state agency subject to ministerial direction, and that this should give rise to a costs order in accordance with the decision in Kiernan v Commissioner of Police, New South Wales Police (No. 3) (GD).[7]
  2. [28]
    It submits that the QBCC failed to comply with the model litigant principles by:[8]
    1. (1)
      Dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation
    2. (2)
      Endeavouring to avoid, prevent and limit the scope of legal proceedings wherever possible
    3. (3)
      Where it is not possible to avoid litigation, keeping the costs of litigation to a minimum
    4. (4)
      Paying legitimate claims without litigation, including making partial settlements of claims, or interim payments, where liability has been established and it is clear that the State’s liability is at least as much as the amount to be paid; and
    5. (5)
      Not seeking to take advantage of an impecunious opponent

Indemnity Costs

  1. [29]
    The Body Corporate refers to the decision of Justice Wilson in Ralacom Pty Ltd v Applicant for Paradise Island Apartments (No 2) [2010] QCAT 412 where his Honour considered what types of matters warrant the Tribunal awarding costs on the indemnity basis, and said:

(58) The watershed case for awarding costs on an indemnity basis is the judgment in Colgate-Palmolive Co v Cussons Pty Ltd. Following a comprehensive review of the authorities, Sheppard J sets out a number of factors at 257 which may warrant the exercise of discretion, including:

(i) the fact that proceedings were commenced or continued in wilful disregard of known facts;

(ii) the making of allegations which ought never to have been made;

(iii) the undue prolongation of a case by groundless contentions;

(iv) evidence of particular misconduct that causes loss of time to the Court and to other parties;

(v) any imprudent refusal of an offer to compromise.

  1. [30]
    It submits that instances of these behaviours by the QBCC occurred in these proceedings.

Submissions of the QBCC

  1. [31]
    The overall position of the QBCC is as follows:[9]

The commission opposes the Costs Application on the grounds that there is no basis for awarding indemnity costs and, further it is not a matter where the interests of justice require the Tribunal to override the strong statutory mandate that each party to a tribunal proceeding bears its own costs.

  1. [32]
    The QBCC notes that:

…the Commission’s conduct is now seeking to be examined by the (Body Corporate) well after the event, with the benefit of hindsight, in a matter in which the Commission was successful.[10]

  1. [33]
    The QBCC submits that its decision of 19 September 2011 was based upon the findings of 5 reports prepared by Bennatt Ground Technologies Pty Ltd received in June 2011, and that the application to Review identified an alleged conflict.
  2. [34]
    It submits that it obtained further clarification from the Body Corporate on 17 October 2011, and then advised the Body Corporate and the builder that it would reconsider its decision and would obtain expert opinion from Hughes, Beal and Wright, and have regard to a policy change to refer to the requirements of Appendix C of AS2870-1996 as to the performance of footing systems.
  3. [35]
    It notes that Mr Wright performed inspections of each of the blocks, and between 10 June 2012 and 8 August 2012 provided structural and geotechnical reports to the Commission in respect of each of the 16 blocks, and the 54 individual units.
  4. [36]
    The Commission recounts the history of the matter thereafter in its submissions indicating that it made further decisions as to specific blocks based upon the advice of Mr Wright, and upon further inspections that were conducted, leading to the acceptance of block 5 on 28 November 2013, the filing of the report of Mr Wright on 31 January 2014, and the decision of 19 February 2014 accepting the claims for another 8 blocks.
  5. [37]
    The QBCC notes as to the ‘letter of comfort’ that:[11]

(31) On 17 March 2014, the Commission wrote to the Applicant to advise that, provided the owner maintenance works identified by Mr Wright’s reports were addressed at the remaining blocks, the Commission would not apply clause 2.5 of the Commission’s Insurance policy conditions (Insurance Policy) to exclude any future claim made by the (Body Corporate) should the blocks cease performing.

  1. [38]
    It notes that after a joint experts’ report was produced on 28 March 2014 with respect to the performance of the remaining 7 blocks, in which the experts agreed that some units in blocks 1 and 6 were not performing in accordance with AS2870-1996, it accepted claims for both those blocks on 16 April 2014.

Owner maintenance exclusion

  1. [39]
    The QBCC submits that its position with respect to the exclusion was supported by the findings of the experts, and that following Mr Wright’s further investigations and report filed 31 January 2014, it amended its position and allowed some claims. It noted that maintenance remained a relevant issue, and was provided for by the letter of comfort:[12]

(49) Importantly, Mr Wright’s expert report supported his previous findings regarding the impact of owner maintenance issues on the footing and slab movement. The Commission decided to no longer press the exclusion, in light of Mr Wright’s unequivocal evidence that the remaining five blocks were performing in accordance with AS2870-1996, and instead issued the Letter of Comfort to the (Body Corporate) addressing the owner  maintenance issues, in an effort to resolve the proceeding.

  1. [40]
    It submits that there was no disadvantage to the Body Corporate above that experienced in the usual course of litigation that was caused by it seeking to narrow the legal issues in dispute.

Delay in accepting the claims

  1. [41]
    The QBCC rejects the submission of the Body Corporate that had it ‘engaged a non-conflicted expert initially’ that the blocks would have been accepted without the proceedings. It notes that it was not aware of the conflict of Bennatt Ground Technologies Pty Ltd (‘BGT’), and that the matter was not brought to its attention by the Body Corporate until the Application to review was filed.
  2. [42]
    It submits that ‘on the evidence’, an insurance claim for the blocks could not have been accepted prior to the receipt of Mr Wright’s further findings. It denies that it prolonged the proceedings and notes:[13]

To the contrary, the commission was at all times actively progressing the proceeding, and the resolution of the (Body Corporate’s) claim, and extensively corresponded with the (Body Corporate) as to the steps being taken, and the rationale for same. Indeed, the many engineering inspections complained about by the (Body Corporate) demonstrate the active steps being taken by the Commission to progress this matter.

Letter of Comfort

  1. [43]
    The QBCC says that it provided a timely response to the Body Corporate as to the letter of comfort, identifying the portions of Mr Wright’s report dated 31 January 2014 that addressed the recommendations, and clarifying the commission’s internal policy as to not providing specialist advice to homeowners as to how to maintain individual properties.
  2. [44]
    In relation to the letter of comfort generally, the QBCC submits:[14]

(61) Contrary to the Applicant’s Submissions, it is unclear how some greater level of cooperation from the Commission was required or would have affected the outcome of the proceeding, and alleviated the need for trial, in circumstances where the Applicant wholly disagreed that the maintenance works proposed by Mr Wright should be the responsibility of the Applicant and/or unit owners.

(62) Importantly, there was no obligation cast on the Commission to provide the Letter of Comfort. The Commission did so in a real effort to assist in the resolution of the proceeding, provided clarification to the Applicant in respect of same, and acted in accordance with its internal policies in doing so. There is nothing in the circumstances described by the Applicant capable of sounding in costs.

Necessary inspections

  1. [45]
    The QBCC submits that the number of inspections conducted at the property were not excessive, and points out that the movement of the blocks worsened or stabilised over the course of the proceedings, and that even in light of those inspections the elements of performance of the differing blocks were still unable to be comprehensively understood.
  2. [46]
    The QBCC also notes that  the inspections assisted the Body Corporate:

(67) The cost of the investigations at the property conducted by Mr Wright were borne by the Commission, and were not shared by the Applicant. Further, the extensive investigation and reporting commissioned by the Commission assisted the Applicant in reducing its own costs of expert investigation, in circumstances where Mr Bishop’s evidence was in part based upon desktop reviews of Mr Wright’s investigation findings.

Proceedings not unnecessarily protracted

  1. [47]
    The QBCC submits that it did not protract the proceedings, and promptly allowed claims under the statutory insurance claim upon receipt of Mr Wright’s further expert opinion. It submits that any delay arose from actions of the Body Corporate:[15]

(73) Any overall prolongation of the proceeding was in fact caused, or contributed to by the (Body Corporate). The (Body Corporate) imposed lengthy conditions on any access to the property, repeatedly requested clarification of matters previously advised by the Commission, refused access to the Commission, then later changed its position, and failed to cooperate with the Commission in identifying mutually convenient inspection dates. Such conduct meant that, on each occasion, the Commission requested access to the property, Mr Wright was not granted access until, at least, a full two months after each request.

Body Corporate incurred costs

  1. [48]
    The QBCC submits that the Body Corporate incurred the substantial costs in preparing for a trial which it elected to proceed with, and that the QBCC took all steps available to it in seeking to resolve the proceeding prior to that hearing.[16]

No unnecessary disadvantage

  1. [49]
    The QBCC submits that it is required by its Act to achieve a reasonable balance between the interests of building contractors and consumers, and was required to gather and act upon relevant expert advice.
  2. [50]
    It submits that the Body Corporate’s submissions employ hindsight to be highly critical of the conduct of the QBCC, but that it was not unreasonable for the QBCC to continue to seek expert opinions, and to alter its decision when presented with expert findings.

Complexity

  1. [51]
    The QBCC submit that the mere fact that the proceeding was a complex proceeding is not, of itself, a sufficient basis to conclude that the interests of justice warrant the exercise of the discretion to award costs.

Strength of the claims

  1. [52]
    The QBCC submits that its position was strong at all times, based upon the expert evidence, and that it altered its position as new opinion was obtained, and ‘reframed the Exclusion, and issued the Letter of Comfort in an effort to resolve the proceeding’.

Assisting decision maker

  1. [53]
    The QBCC submits that this is not a matter where any attempts by the Body Corporate to assist the decision maker is a ‘small factor’ and do not point to a costs award.

Financial circumstances of the parties

  1. [54]
    The QBCC submits that the financial circumstances of the Body corporate are not a basis in themselves for a costs order, and that the QBCC:

… did not act to take advantage of the (Body Corporate) as an impecunious opponent, but rather sought to work with the (Body Corporate) to obtain the requisite evidence and, ultimately, to change its decision to the (Body Corporate’s) advantage and attempt to resolve the proceeding.[17]

Discussion

  1. [55]
    This matter revolved around expert engineering evidence. The QBCC initially commissioned BGT to investigate and report.
  2. [56]
    BGT conducted investigations between 22 November 2010 and 1 April 2011, and produced a report in June 2011.
  3. [57]
    In its application to review the decision of the QBCC which was filed on 17 October 2011, the Body Corporate said that the reports of BGT ‘should not have been relied upon due to a potential conflict’.[18]
  4. [58]
    The QBCC says that it was previously unaware of any alleged conflict. It then determined that BGT had been involved in the original construction, and proceeded to engage a new and independent engineer, Mr Wright, to report on the matters.
  5. [59]
    There is no suggestion that the QBCC should have been aware of the alleged conflict, or that it was alerted to it, prior to the filing of the Application to Review. The need to obtain a second expert obviously extended the investigation and report time.
  6. [60]
    The entire circumstances of the construction appear to be uncertain, even to the extent that it was not until well into the course of the proceedings, that it was determined which plans were even used for the construction of the footings.
  7. [61]
    To this day, the exact causes of the subsidence to the affected blocks, and why there has been such different performance between different blocks of the same complex, has not been fully understood or explained.
  8. [62]
    Mr Wright, whose evidence I accepted, said that he had puzzled at length over what had occurred on this site, but has been unable to reconcile the varying performances.
  9. [63]
    The reports of Mr Wright reveal that a variety of factors are at play which may affect the performance of the blocks, including ground conditions, and flow of water within and below the blocks.
  10. [64]
    Ultimately, the conclusion which Mr Wright reached, which was adopted by the QBCC, was that if appropriate maintenance steps to control the flow of water on the site, were taken and maintained, that the blocks would stabilise, and should not move further.
  11. [65]
    I accepted that the subject blocks were currently performing within the requisite standard, and that a claim was not made out within the terms of the insurance policy.
  12. [66]
    I am not aware of any further claim which has been made to the QBCC since the initial hearing of the matter in August 2014, which would lend credence to the opinion of Mr Wright that the blocks have stabilised.
  13. [67]
    The basic issue in this Costs application is whether the QBCC unnecessarily disadvantaged the Body Corporate in the way in which it has handled this matter and conducted the proceedings.
  14. [68]
    As I have noted, this matter has had a long history, and has now extended over a period of almost nine years since the Body Corporate first became aware of structural cracking.
  15. [69]
    The proceedings and the maintenance work has placed great financial imposition on the owners of the Villas. The total costs of the legal proceedings to the Body Corporate are not disclosed, but they were effectively half a million dollars before the initial hearing,[19] and there has been a hearing, a rehearing, two appeals, and this application since then, so the current total must be significantly more than that. The cost of the maintenance works has not been quantified in evidence, but indications were that it would be a very significant amount, at least in the hundreds of thousands of dollars, and perhaps in the millions of dollars.
  16. [70]
    Great sympathy has to be felt for the owners of the Villas. They bought into the complex thinking that they were buying a stable product for a fixed amount.  Unfortunately, for many of them, this will have turned into a financial and emotional nightmare. The Body Corporate Manager, Mr Arnold, described the situation as follows:[20]

(9) The complex is located in Redbank Plains. Based on conversations with owners, my knowledge of this area and my experience as a body corporate manager, I do not consider this to be an affluent suburb and I understand the market value of the units in the complex themselves to be approximately $350,000.

(10) The majority of the unit owners are what I would call small family investors and I would not expect they would have a significant property portfolio. Some of the unit owners struggled to pay special levies ranging from $1,000 to $2,000 each when they were raised to fund the proceeding.

  1. [71]
    Mr Arnold described how special levies have had to be raised to fund the proceedings on several occasions, and notes that a number of the lot owners were unable to meet the special levies, and had to enter into deferred payment plans. He noted the particular effect on some owners:[21]

[17] Enforcement proceedings were also commenced against some of the lot owners for these levies. It is noted that the owners of Unit 28 have been in debt recovery since 2011 or thereabouts which has finally resulted in bankruptcy and the pending sale of the unit and there has been a mortgagee in possession of Lot 17 since January 2016.

  1. [72]
    The QBCC however is bound to act within the terms of the Insurance Policy, and is not able to make ex gratia payments. It must of course act promptly and reasonably, and have regard to the interests of consumers.
  2. [73]
    The critical questions as to costs are as to whether the QBCC unduly prolonged the matter, the handling of the maintenance exclusion provision, and the provision of the letter of comfort.
  3. [74]
    The Body Corporate has raised queries as to the number of inspections undertaken by the QBCC. A schedule attached to its submissions lists 37 separate inspections conducted by various inspectors and engineers for the QBCC between 17 April 2007 and 27 November 2013.
  4. [75]
    On the one hand, such an extraordinarily high number of inspections may been seen as oppressive; but on the other hand it may be seen as diligent and reflecting the highly complex nature of these issues.
  5. [76]
    It is apparent that the QBCC has invested a great deal of resources in attempting to decide whether the insurance policy has been enlivened. It has changed its position when presented with further experts evidence, and has accepted claims on various blocks as the matter progressed. It cannot be said that the QBCC has simply ‘sat on its hands’ or displayed a rejectionist attitude in considering the claims.
  6. [77]
    The QBCC maintained an argument that an exclusion as to owner maintenance applied, until shortly before the hearing. The Body Corporate say that this stance caused it significant wasted cost in preparing for the hearing. The submissions of the Body Corporate put that as high as half the preparation costs.
  7. [78]
    It is hard to appreciate how having to deal with the maintenance exclusion argument significantly increased the Body Corporate’s costs.
  8. [79]
    If the concession as to a failure of owner maintenance not being a cause of the initial subsidence, and thereby an exclusion under the policy, had been made early in the proceedings, or not raised at all, the same investigations would still have had to be made as to the performance of the footings and conformance with the Australian Standard. The legal preparation would have been very similar, as the same experts would still need to have been arranged for the hearing, and the difference in legal argument is not marked, as they are related topics. Issues as to owner maintenance were still canvassed at the hearing, and are central to the issue of potential future liability by the QBCC.
  9. [80]
    The letter of comfort assumes an important role in assessing the conduct of the parties in the proceedings. The QBCC says that the letter was issued in an attempt to resolve the matter. It was issued about eight months before the initial hearing.
  10. [81]
    The letter of comfort is an unusual document. The QBCC was not required to issue it, as they submit.
  11. [82]
    The issuing of the letter can be seen as a recognition of the complexities in this matter. The QBCC was effectively saying that upon the basis of the best expert evidence available to it, the blocks were then performing within the required standard, and if proper maintenance was conducted, would not further deteriorate, however, recognising that the actual mechanisms in play had not been determined, and allowing for the possibility that the expert opinion may be wrong, that if in fact further failure of performance occurred, then the QBCC would at that future time not raise limitations of time objections and would then reconsider the claims. It is in effect a ‘wait and see’ approach.
  12. [83]
    The adopting of this ‘wait and see’ approach can be seen as a practical way to address a complex and uncertain situation.
  13. [84]
    The QBCC says that the letter of offer was made to attempt to resolve the matter. I accept that proposition. I consider that a similarity can be drawn with a formal offer to settle. The QBCC was saying – we wish to avoid the uncertainty and cost of a hearing, so this is a genuine proposal we are putting to you. The Body Corporate then elected to not accept that proposal, and to proceed with the hearing.
  14. [85]
    The Body Corporate says that the letter of comfort was uncertain, and that the QBCC did not assist to clarify it. What the Body Corporate was seeking was essentially a scope of works and quantification from the QBCC for the maintenance works.
  15. [86]
    A simile can be drawn to the practice of the QBCC in giving a builder a Direction to Rectify, when the QBCC will only outline the problem, and will require the builder to adopt and effect a proper solution.
  16. [87]
    In engineering and construction practice, it is basic that there may be numerous different solutions to a particular engineering or construction problem. It becomes a matter of judgment, skill, availability of labour and materials, and cost, as to which is seen as the most appropriate in each situation, and to implement it. It is for this reason that the QBCC leaves it up to the builder to determine the actual rectification method in each case.
  17. [88]
    By requiring the QBCC to outline a specific method of maintenance implementation, the Body Corporate was seeking to commit the QBCC to a set method of effecting the works. Presumably this would the leave an avenue open to the Body Corporate to say, if further performance of the structure was below standard, that “we did what the QBCC said”, when in reality the method of implementation of maintenance may have required modification as the work progressed, and as actual surface and sub-surface conditions were encountered and accommodated.
  18. [89]
    The Solicitor for the Body Corporate wrote to the Solicitors for the QBCC on 3 April 2014 indicating that without the quantum of the maintenance works being established, it could not know whether they were excessive, and whether it would be preferable to strengthen the existing footing system as canvassed by Mr Wright:[22]

Our client is unable to identify, with any accuracy, the ‘maintenance works’ referred to in the QBCC letter. None of Mr Wright’s reports served to date provide a detailed list of what is required to rectify the subsoil moisture issues for each block, with reference to each individual unit.

Further, our client considers that a list of ‘maintenances works’ required should be provided in a level of detail; that would enable a quantity surveyor to provide an estimate of costs. This is because our client considers that it will be necessary to ascertain the cost of any subsoil rectification works prior to any works being undertaken.

Several of Mr Wright’s reports state that (for example, see clause 7.4 of Mr Wright’s report for block 7 dated 9 January 2014):

“If the cost of the moisture control work is considered excessive or the risk of underperformance too great then our recommendation would be to strengthen the existing footing system”.

If the costs of subsoil moisture maintenance works are excessive, our client considers that the rejection of its claim in respect of the relevant blocks should be re-considered. Please confirm your client’s position is in relation to this issue.

  1. [90]
    The quantification of the maintenance works, and the making of an election as to how to proceed, was a matter for the Body Corporate. If the Body Corporate considered it more cost-effective to repair or replace the footing system, rather than to implement maintenance works, then it could have proceeded to effect its preferred works. That practical economic cost-benefit analysis, and election, does not affect liability under the policy of insurance which is interpreted on a legal basis.
  2. [91]
    I consider that the Body Corporate could have accepted the letter of comfort, and then the need for a hearing would have been averted. I do not consider that it was unreasonable for the QBCC to not precisely define the maintenance works; and consider that the Body Corporate was seeking to commit the QBCC to a set engineering and construction solution, which was an unreasonable approach.
  3. [92]
    The Body Corporate did not accept the letter of comfort, and elected to pursue the option of proceeding to hearing, and seeking to obtain a possible ruling in its favour as to acceptance of the claims under the insurance policy. That was a decision the Body Corporate made with the assistance of legal advice.
  4. [93]
    The letter of comfort remains in force. As I noted in my rehearing  decision, the QBCC is most likely, by its conduct, to not be able to later claim a limitation of time exclusion:[23]

[108] Whether the letter of comfort is sufficient to achieve its intended purpose or not, the QBCC have indicated in their submissions to this Tribunal that any future application would be considered with the clear implication that no point would be taken as to such an application being time-barred by a limitation period. If the QBCC were to take a point in the future as to time, then it would be strongly arguable by the Body Corporate that the QBCC is estopped from doing so by its conduct and representations in these proceedings.

[109] That argument should give the Body Corporate comfort in law that future applications can be made if the need arises, irrespective of any deficiency in the ‘letter of comfort’. Having said that, such comfort is predicated upon the Body Corporate taking the preventative measures that Mr Wright outlines.

  1. [94]
    Whilst I acknowledge the significant expense incurred by the Body Corporate, and have great sympathy for the owners for the position they find themselves in, this remains a complex geo-technical puzzle that has not been conclusively explained, and whilst the owners have suffered damage, that damage has not been shown to be within the provisions of the insurance policy.
  2. [95]
    The proceedings have continued over a very long time, but I am not satisfied that it has been shown that the QBCC acted in an unfair or dilatory way, or that the actions of the QBCC unnecessarily disadvantaged the Body Corporate.
  3. [96]
    The basic premise in the Tribunal is that each party should bear their own costs. In this matter the QBCC has been successful in its arguments as to the provisions of the insurance policy, but it has not sought costs. The Body Corporate has not shown that the QBCC caused it to unnecessarily incur costs, or unnecessarily caused the costs of the proceeding to escalate.
  4. [97]
    I am also mindful that an opportunity existed for the Body Corporate to accept the letter of comfort on the basis that it was offered, and to avoid the need for preparation for a hearing altogether.
  5. [98]
    Having regard to all these considerations I do not consider that the basis for an order for costs is made out by the Body Corporate against the QBCC. Consequentially there is no need to consider the issue of indemnity costs as being an appropriate scale.
  6. [99]
    I dismiss the application for costs made by the Body Corporate on 18 August 2017.

Footnotes

[1] [2014] QCAT 588.

[2] [2015] QCATA 125.

[3] [2016] QCATA.

[4] Decision 23 December 2015, [123].

[5] Amended Submissions of the Applicant, filed 17 November 2017, para 8.1.

[6] Ibid para 8.2-8.7.

[7] [2010] NSWADTAP 32.

[8] Amended Submissions of the Applicant, filed 17 November 2017, para 15.7.

[9] Respondent’s submissions in response on costs, para 4.

[10] Ibid para 7.

[11] Ibid para 31.

[12] Ibid para 49.

[13] Ibid para 58.

[14] Ibid paras 61, 62.

[15] Ibid para 73.

[16] Ibid para 83.

[17] Ibid para 104.

[18] Application filed 17 October 2011, Part C, page 5.

[19] Affidavit of Gregory Whyte, sworn 17 November 2017, [64].

[20] Affidavit of Anthony Arnold, sworn 17 November 2017, [9], [10].

[21] Ibid [17].

[22] Letter Piper Alderman to Holding Redlich - 3 April 2014.

[23] [2015] QCAT, [108], [109].

Close

Editorial Notes

  • Published Case Name:

    Body Corporate for Rosegum Villas CTS 37755 v Queensland Building and Construction Commission (No. 3)

  • Shortened Case Name:

    Body Corporate for Rosegum Villas CTS 37755 v Queensland Building and Construction Commission (No. 3)

  • MNC:

    [2018] QCAT 240

  • Court:

    QCAT

  • Judge(s):

    Member Paratz

  • Date:

    24 Jul 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Body Corporate for Rosegum Villas CTS 37755 v Queensland Building and Construction Commission [2014] QCAT 588
1 citation
Jump To
Cite 1 - [2014] QCAT 588
Body Corporate for Rosegum Villas v Queensland Building and Construction Commission [2015] QCATA 125
1 citation
Jump To
Cite 1 - [2015] QCATA 125
Kiernan v Commissioner of Police, New South Wales Police (No. 3) (GD) [2010] NSWADTAP 32
2 citations
Jump To
Cite 1 - [2010] NSWADTAP 32
Cite 2 - [2010] NSWADTAP 32
Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412
1 citation
Jump To
Cite 1 - [2010] QCAT 412

Cases Citing

Case NameFull CitationFrequency
Brisbane Marine Pilots Pty Ltd (in liquidation) v General Manager of Maritime Safety Queensland, Department of Transport and Main Roads and Ors (costs) [2022] QCAT 2251 citation
1

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