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Seirlis v Queensland Building and Construction Commission[2018] QCAT 291

Seirlis v Queensland Building and Construction Commission[2018] QCAT 291

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Seirlis & Ors v Queensland Building and Construction Commission [2018] QCAT 291

PARTIES:

TERRY SEIRLIS

(first applicant)

TIES GROUP PTY LTD (ACN 130 450 341)

(second applicant)

UKL PTY LTD (ACN 123 360 823)

(third applicant)

v

QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION

(respondent)

APPLICATION NO/S:

QR162-07; QR164-07

MATTER TYPE:

General administrative review matters

DELIVERED ON:

31 August 2018

HEARING DATES:

7 December 2015; 8 December 2015; 9 December 2015; 10 December 2015; 11 December 2015; 14 December 2015; 15 December 2015; 29 April 2016

HEARD AT:

Brisbane

DECISION OF:

Member McLean Williams

ORDERS:

The Applications to Review are Dismissed.

CATCHWORDS:

PROFESSIONS AND TRADES – BUILDERS – STATUTORY INSURANCE SCHEME – applications to review – claims under statutory insurance scheme under QBSA Act for allegedly defective building work – where subject properties sold prior to determination of the claims – where insured a corporate trustee for family trust holding rights of Insured on behalf the trust – where Liquidator of Insured purports to assign interests of the Insured to the Second Applicant – where Third Applicant claims rights of insured as successor trustee in the event that assignment to Second Applicant ineffective – questions as to nature of the right of an Insured under statutory policy of insurance and whether these rights now assignable as a chose in action – whether rights of original Insured may be passed as trust property to Third Applicant in circumstances where insured property previously sold to a third party – questions regarding the assessment of quantum on a claim under the statutory policy if assessed on a theoretical basis where defects not rectified prior to sale – issues relating to assessment of claim calculated on the basis of loss in value upon a sale of the impacted property – sufficiency of evidence in proof of claim

Queensland Building Services Authority Act 1991 (Qld), Reprint 7, s 68, s 69, s 70, s 86

Queensland Building Services Authority Regulation 1992 (Qld), Reprint 7D

Queensland Commercial and Consumer Tribunal Act 2003 (Qld)

Queensland Building and Construction Commission Act 1991 (Qld), Schedule 1, s 41, s 48

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 19, s 20

Domestic Building Contracts Act 2000 (Qld), s 67

Acts Interpretation Act 1954 (Qld)

Corporations Act 2001 (Cth), s 9, s 477, s 477(2B).

Trade Practices Act 1974 (Cth), s 82

Seirlis v Queensland Building Services Authority [2011] QDC 107

Lang v Queensland Building Services Authority [2012] 2 Qd R 457

C & E Pty Ltd v CMC Brisbane Pty Ltd (Administrators Appointed) [2004] 2 Qd R 244

Boston Commercial Services Pty Ltd v GE Finance Australasia Pty Ltd (2006) 236 ALR 720

TNT Australia Pty Ltd v Horne (1995) 36 NSWLR 630

United Collieries Ltd v Simpson [1909] AC 383

Fisher v Hebburn Ltd (1960) 105 CLR 188

Insurance Commission (WA) v Container Handlers Pty Ltd (2004) 218 CLR 89

Owners of Strata Plan Number 5290 v CGS & Co Pty Ltd (2011) 281 ALR 575

Barclays Bank Limited v Quistclose Investments Limited [1970] AC 567

In Re Australian Home Finance Pty Ltd [1956] VLR 1

Re Crest Realty Pty Ltd [1977] 1 NSWLR 664

Vagrand Pty Ltd v Fielding (1993) 41 FCR 550

In Re Suco Gold Pty Ltd (1983) 7 ACLR 873

Apostolou v VA Corporation Aust Pty Ltd [2010] FCA 64

Searle v Queensland Building Services Authority [2007] QCCTB 182

Seirlis v Queensland Building and Construction Commission [2014] QCAT 118

Kern Corporation Limited v Walter Reid Trading Pty Ltd (1987) 163 CLR 164

UI International v Interworks Architects Pty Ltd [2008] 2 Qd R 158; [2007] QCA 402

APPEARANCES & REPRESENTATION:

 

Applicant:

M Steele, instructed by Hillhouse, Burrough, McKeown Solicitors

Respondent:

G Thomson, instructed by the respondent

REASONS FOR DECISION

Introduction

  1. [1]
    Matters QR162-07 and QR 164-07, which were heard together, are each Applications seeking to review decisions by the Queensland Building Services Authority (‘QBSA’), the predecessor of the Queensland Building and Construction Commission (‘the Respondent’). The decisions now under review were to disallow two claims, under separate certificates of insurance issued by the QBSA under the statutory insurance scheme, relating to defective residential construction work in two freestanding townhouses, each built at 53 Paragon Street, Yeronga.
  2. [2]
    QR162-07 relates to Lot 5 on SP 143758, Parish of Yeerongpilly, County of Stanley. QR164-07 relates to Lot 2 on that property. These are ancient matters, inherited by QCAT from the former Queensland Commercial and Consumer Tribunal (‘QCCT’). When these proceedings were commenced on 18 September 2007, the relevant legislation was the Queensland Building Services Authority Act 1991 (‘The QBSA Act’).[1] Given the age of these matters references herein will be to the QBSA, and to the QBSA Act.
  3. [3]
    Originally, the matters came on for hearing in the QCCT on 2 September 2008 before Member Lohrisch, who summarily dismissed them, pursuant to sections 48 and 104 of the Commercial and Consumer Tribunal Act 2003 (Qld). An application to appeal that decision was then filed in the District Court, on 3 October 2008.
  4. [4]
    Eventually, the District Court appeal was heard before Jones DCJ, on 6 June 2011. In a decision dated 15 June 2011, his Honour upheld the appeal, holding that there had been a denial of natural justice by Member Lohrisch having disposed the case summarily.[2] His Honour then made orders requiring that matters be remitted to the QCCT for rehearing.
  5. [5]
    Given that the QCCT had, by the date of his Honour’s order, already been amalgamated into QCAT (this occurred on 1 December 2009), the matter was required to be reheard by this Tribunal. Under s 86(1)(h) of the QBSA Act, QCAT has jurisdiction to review QBSA decisions to disallow an insurance claim.[3]
  6. [6]
    Schedule 1, section 48 of the now current Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) provides:

48 References to former entities

In an Act or document –

  1. (a)
    a reference to the former authority may, if the context permits, be taken to be a reference to the commission; and
  2. (b)
    a reference to the former board may, if the context permits, be taken to be a reference to the board, and
  3. (c)
    a reference to the general manager under the QBSA Act may, if the context permits, be taken to be a reference to the commissioner.
  1. [7]
    Schedule 1, section 41 of the QBCC Act provides:

41 Unresolved applications

  1. (1)
    On the transfer day, the commission stands in the place of the former authority[4] for any unresolved application made –
  1. (a)
    under the QBSA Act to the former authority; or
  1. (b)
    by the former authority to the tribunal
  1. (2)
    For subsection 1(a), the commission may be satisfied about a matter merely because the former authority was satisfied about the matter under the relevant provisions of the QBSA Act.
  1. (3)
    In this section –

 unresolved application means an application made, but not finally decided or withdrawn, before the transfer day.

Nature of these Proceedings

  1. [8]
    As indicated, these are review proceedings. A decision by the QBSA ‘to disallow a claim under the statutory insurance scheme wholly or in part’ is a ‘reviewable decision’ under s 86(1)(h) of the QBSA Act. Equally, clause 8.2 of the statutory policy[5] provided that if an Insured was affected by a reviewable decision, the Insured could:

…apply to the Tribunal for a review of the decision in accordance with sections 104 and 105 of the Queensland Building Tribunal Act.

  1. [9]
    Pursuant to s 19 of the QCAT Act, when exercising its review jurisdiction, the Tribunal must decide the review in accordance with the QCAT Act and the enabling Act under which the decision being reviewed was made. In this instance, the enabling Act is the QBSA Act,[6] together with the QBSA Regulation 1992 (Qld).[7] The Tribunal may perform the functions conferred on it by the QCAT Act, or the QBSA Act, and now has all of the functions of the original decision-maker for the decision under review.
  2. [10]
    The purpose of the review is specified in the QCAT Act as being to produce the ‘correct and preferable’ decision, after conducting a fresh hearing, on the merits.[8]

Parties to the Proceedings, together with some Factual Background

  1. [11]
    The First Applicant, Mr Terry Seirlis, is a property developer and is the controlling mind of each of the Second and Third Applicants. Mr Seirlis does not claim any personal entitlement to indemnity under either certificate of insurance, yet was responsible for lodging both Applications for Review before the QCCT. Mr Seirlis clearly also has a vested interest in the claimed entitlements of each of the Second and Third Applicants.
  2. [12]
    On 2 April 2001, Terry Seirlis Constructions Pty Ltd[9] in its capacity as the then corporate trustee for the Terry Seirlis Family Trust became the owner of land at 53 Paragon Street Yeronga, more properly described as SP 143758, Parish of Yeerongpilly, County of Stanley. 53 Paragon Street was divided into ten lots, with each lot having its own certificate of title. Among those lots are Lot 2 and Lot 5, which are now the subject of these proceedings (‘the subject lots’).
  3. [13]
    On 21 September 2001, Terry Seirlis Constructions Pty Ltd entered into a building contract with CMC Brisbane Pty Ltd (‘CMC’), for the construction of ten townhouses. These included freestanding townhouses on the subject lots.
  4. [14]
    On 4 October 2001, the QBSA issued ten separate certificates of insurance pursuant to the statutory insurance scheme established pursuant to Part 5 of the Queensland Building Services Authority Act 1991 (‘QBSA Act’).[10] The contract value notified to the QBSA at that time was $402,000.00 in the case of each townhouse, including those on the subject lots.
  5. [15]
    On 22 July 2003, Terry Seirlis Constructions Pty Ltd changed its name, and became C & E Pty Ltd,[11] (‘C & E’). C & E also became the corporate trustee of the Terry Seirlis Family Trust, and remained as the trustee until 27 October 2005, when that role was taken over by yet another Seirlis entity, TSPD Pty Ltd.
  6. [16]
    Mr Terry Seirlis was a director of C & E up until 14 July 2010, when he was disqualified by ASIC from further involvement in the management of corporations. Mr Seirlis did however remain as the sole shareholder of C & E, up until C & E was deregistered.
  7. [17]
    On 23 January 2004, C & E submitted an unsigned insurance claim form to the QBSA in relation to defective residential construction work on each of the subject lots. These were later replaced by signed versions, on 10 February 2004.
  8. [18]
    On 30 January 2005, and prior to the insurance claims referred to in the preceding paragraph having been determined, C & E sold the townhouse on Lot 2 to a third party, Mr John Taylor. Mr Taylor has taken no part in these proceedings.
  9. [19]
    On 4 February 2005, and again before the insurance claims referred in paragraph [17] had been determined, C & E sold the Townhouse on Lot 5 to Mitchcos Pty Ltd. Mitchcos Pty Ltd is a company controlled by Mr David (Benjamin) Smith, who is a real estate agent. Mr Smith was involved in the marketing and sale of some of the townhouses at 53 Paragon Street, on behalf of the vendor, C & E. Mr Smith was also called in these proceedings as a witness, by the Applicants. I will return to an examination of Mr Smith’s evidence, later in these reasons.
  10. [20]
    On 31 July 2006, C & E was ordered to be wound up by the Queensland Supreme Court. Mr Nick Combis of Vincent’s Chartered Accountants was appointed by the court, as liquidator. C & E has since been wound up, and deregistered.
  11. [21]
    By letters dated 31 July 2007 (although these were not received by Mr Seirlis until 21 August 2007), the Respondent refused the insurance claims made by C & E in respect of the subject lots. The refusal letter in each instance was addressed to Mr Seirlis personally, and each made reference to ‘your claim’.
  12. [22]
    On 18 September 2007, Mr Seirlis commenced Applications for Review before the QCCT. Mr Seirlis says that he did so on the basis that he was the person to whom the Respondent had addressed the decisions, refusing each claim.

The Second Applicant – Ties Group

  1. [23]
    On or about 2 June 2008, the Second Applicant Ties Group Pty Ltd (‘Ties Group’) entered into a deed of assignment,[12] by which it purported to take from C & E (in liquidation) the benefit of any rights under the certificates of insurance for the subject lots, as well as the entitlement to pursue those rights by means of litigation. The deed of assignment was signed on behalf the assignor by the liquidator, Mr Combis. The deed was then signed on behalf of the assignee Ties Group, by Mr Seirlis. At that time Mr Seirlis was both a shareholder and the sole director of Ties Group. Mrs Imogen Elise Seirlis (‘Mrs Seirlis’) took over as the sole director of Ties Group, when Mr Seirlis was disqualified by ASIC, on 14 July 2010. All of the issued capital (comprising two one dollar shares) is now held by Mrs Seirlis. Mrs Seirlis has taken no part in these proceedings.

The Third Applicant - UKL

  1. [24]
    On or about 16 October 2007, the Third Applicant UKL Pty Ltd (‘UKL’) entered into a deed of appointment by which it became the trustee of the Terry Seirlis Family Trust, in lieu of the then outgoing trustee, TSPD Pty Ltd. As noted in paragraph [15] of these reasons, TSPD Pty Ltd had itself taken over as the trustee from C & E, on or about 27 October 2005.[13]
  2. [25]
    UKL was joined to these proceedings late in the piece, after UKL belatedly asserted rights under the statutory insurance scheme, on the basis that the rights previously assigned by the C & E liquidator to Ties Group on 2 June 2008 were now claimed as residual trust property. By this juncture it had emerged as at least quite likely that
    Mr Combis did not have the requisite authority to make an assignment to Ties Group, in the manner attempted on 2 June 2008.

Witnesses

  1. [26]
    The Architectural firm Cottee Parker had been appointed by C & E as the contract administrators and supervising architects for the construction project at 53 Paragon Street.
  2. [27]
    On 24 October 2002, Cottee Parker issued a purported[14] certificate of practical completion for Lot 2. On 7 January 2003 Cottee Parker issued another purported practical completion certificate, this time for Lot 5.
  3. [28]
    Mr Douglas Hutton, and Mr David Stonely, each employed architects at Cottee Parker, as well as Mr Robert Cottee, the managing director of Cottee Parker were called by the Respondent to give evidence. For the main part, their evidence was in relation to the certificates of practical completion.
  4. [29]
    The Applicants called the following witnesses:
    1. (a)
      Mr Terry Seirlis.
    2. (b)
      Mr David (Benjamin) Smith. Mr Smith was, via his corporate entity Mitchcos Pty Ltd, the purchaser of Lot 5. Mr Smith’s evidence related primarily to quantum issues. His evidence was also relied on by the Applicants in relation to the question of practical completion.
    3. (c)
      Mr Edwin Helmold, an architect and builder. Mr Helmold’s evidence related to the question of practical completion.
    4. (d)
      Mr George Englert, an expert painter and decorator. Mr Englert’s evidence concerned various painting issues.
    5. (e)
      Mr Paul Cosker, quantity surveyor. Mr Cosker gave expert evidence in relation to the cost of rectifying alleged defects.
    6. (f)
      Mr Lionel Johnson, registered valuer. Mr Johnson was the Applicants’ primary expert in relation to quantum, to be relied on by the Applicants in the event that the Tribunal determined that any compensable loss should be determined on a diminution in value basis.
    7. (g)
      Mr Michael Galvin, registered valuer. Mr Galvin gave evidence in relation to a valuation on the project at 53 Paragon Street that had been undertaken in 2002.
  5. [30]
    As well as the three representatives of Cottee Parker already identified in paragraph [28], the Respondent called:
    1. (a)
      Mr Gary Cragg. Mr Cragg is a former QBSA building inspector. It was Mr Cragg who originally inspected the alleged defects in each of the subject lots, on behalf the QBSA.
    2. (b)
      Mr Andrew Corrigan. Mr Corrigan is a director of the builder, CMC.
    3. (c)
      Mr David Brunner, a registered builder and building inspector. Mr Brunner gave evidence in relation to the cost of rectifying the alleged defects.
    4. (d)
      Mr Brian Cox, registered valuer. Mr Cox gave expert evidence in relation to quantum, for use as part of the Respondents’ case in the event that the Tribunal determined that loss should be determined on a diminution in value basis.

The Statutory Insurance Scheme

  1. [31]
    Part 5 of the QBSA Act enacted the statutory insurance scheme, administered at the relevant time by the QBSA, and now by the Respondent.
  2. [32]
    The scheme has been noted as one having ‘consumer protection’ objects[15] and enables consumers who have contracted with builders to recover the cost of rectifying defective residential construction work, albeit subject to limitations, and some exclusions.
  3. [33]
    Pursuant to s 68 of the QBSA Act, a building contractor was prohibited from commencing residential construction work until such time as the appropriate insurance premium for the work had been paid to the QBSA.
  4. [34]
    Next, Section 69 of the QBSA Act provided:

69 Insurance of building work

  1. (1)
    When the authority accepts the appropriate insurance premium in respect of residential construction work, the authority must issue a certificate of insurance in respect of the residential construction work.
  1. (2)
    A policy of insurance comes into force in the terms prescribed by regulation if a consumer enters into a contract for the performance of residential construction work, and-
  1. (a)
    the contract bears the licence number of a licensed contractor and, under the licensed contractor’s licence, the licensed contractor may enter into contracts with consumers to carry out residential construction work covered by the statutory insurance scheme; or
  1. (b)
    the contract is with a licenced contractor and, under the licensed contractor’s licence, the licensed contractor may enter into contracts with consumers to carry out residential construction work covered by the statutory insurance scheme; or
  1. (c)
    the contract is with a person fraudulently claiming to hold a licence under which the person may enter into contracts with consumers to carry out residential construction work covered by the statutory insurance scheme.
  1. (3)
    Subsection (2) applies whether or not an insurance premium has been paid or a certificate of insurance has been issued.
  1. (4)
    The certificate of insurance given to a consumer need not state the terms of the policy of insurance, but a copy of the policy must be given to the consumer when the certificate of insurance is given to the consumer and the certificate of insurance must include a clear reference to the policy.
  1. (5)
    To remove doubt, it is declared that a policy of insurance under this section has effect according to its terms and a consumer cannot avoid the consequences of a breach of a provision of the policy of insurance only because the policy of insurance forms part of a statutory insurance scheme.
  1. [35]
    In relation to reviews of decisions to refuse claims under the statutory insurance scheme, at the relevant time s 70 of the QBSA Act provided:

70 Insurance claims

  1. (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.
  1. (2)
    If a claimant is dissatisfied with the authority’s decision on the claim, the claimant may apply to the tribunal for a review of the authority’s decision.
  1. (3)
    On an application under this section the tribunal may confirm, vary or reverse the authority’s decision and make consequential orders and directions.

Policy Terms and Conditions

  1. [36]
    The relevant terms and conditions applicable to the certificates of insurance issued in relation to the subject lots are contained in Edition 5 of the statutory insurance policy. Those terms and conditions that are now extracted below are those that are of most relevance in these proceedings:

2.1 Payment for Defective Construction

  1. (a)
    Subject to the terms of this policy, BSA agrees to pay the cost of rectifying defects in the residential construction work, other than for defects from subsidence or settlement referred to in Part 3 of this policy.
  1. (b)
    For the purposes of this Part the residential construction work does not include associated works.

2.2 Amount of payment

  1. (a)
    Subject to clause 2.2(c) and Parts 4, 5, and 6 of this policy, the amount of the payment under this Part will be limited to the reasonable cost, as determined by BSA, of undertaking those works necessary to rectify the defects, less, where the Insured contracted with the contractor for the undertaking of the residential construction work which is defective, the owner’s remaining liability under the contract.

  1. (c)
    Where, in the opinion of the BSA, the undertaking of remedial works is unnecessary or unreasonable, the payment will be limited to the loss in value, if any, in the residential construction work, produced by the departure from the plans or specifications or by the defective workmanship or materials.

2.5 Time Limit for Making a Claim

The Insured is NOT ENTITLED to payment for loss under this Part unless:

  1. (a)
    In the case of a category 1 defect, the claim is made within three months of that defect first becoming evident (in the opinion of BSA); or
  2. (b)
    In the case of a category 2 defect, the claim is made within seven months of the date of practical completion.

Or within such further time as BSA may allow.

5.1 Completion or Rectification Without Approval

BSA may refuse to make a payment for loss under this policy where residential construction work or associated works have been completed or rectified (as applicable) without the prior written approval of BSA.

9.1 Definitions

In this policy –

category 1 defect” means a defect which may:

  1. (a)
    allow water penetration into a building; 
  1. (b)
    adversely affect the health and/or safety of the occupants;
  2. (c)
    adversely affect the structural adequacy of the building; or
  3. (d)
    adversely affect the serviceability, performance or functional use of the building.

category 2 defect” means a defect which is not a defect of another category and which:

  1. (a)
    results from failure of the contractor to meet reasonable standards of construction and finish; or
  1. (b)
    is of a kind which commonly occurs during the “settling in” period of a new building.

“Insured” means:

  1. (a)
    the owner of land; or
  1. (b)
    a consumer who has entered into a contract with the contractor to have residential construction work carried out in Queensland.

owner” of land means:

  1. (a)
    for freehold land – the registered owner of the land under the Land Title Act 1994; or

practical completion”, unless the context suggests otherwise, is that stage, in the opinion of BSA, when the residential construction work becomes fit for intended use or occupation”.

The Applicant’s Case

  1. [37]
    Although C & E was the ‘Insured’ under the two certificates of insurance; and although the subject lots were sold to third party purchasers prior to the insurance claims having been determined; and despite the claims for category two defects having been submitted to the QBSA more than seven months after the issue of the certificates of practical completion, the Applicants contend that either of Ties Group, or UKL is now entitled to indemnity under the statutory policy.
  2. [38]
    The Applicants submit that C & E (as trustee for the Terry Seirlis Family Trust) was the registered owner of the freehold in the subject lots at the time when the policies of insurance were taken out, and that C & E’s right to indemnity as the Insured at the time was able to be assigned, in the manner purported by the liquidator, Mr Combis. If, with hindsight, there are now found to be reasons why the assignment to Ties Group by Mr Combis was ineffective, then the result must be that the benefit of the Insured under the statutory policy still remains with the Terry Seirlis Family Trust; such that UKL as the present trustee for the time being may now claim the right of indemnity under the policy.
  3. [39]
    All of the defects for which the Applicants now seek recompense under the policy are ‘category 2’ defects, as defined. The insurance claims submitted by C & E on
    23 January 2004 and 10 February 2004 were submitted more than seven months after the certificates of practical completion issued by Cottee Parker. On a simple reading of clause 2.5(b), the Insured is not entitled to payment, because the claims have been commenced out of time.
  4. [40]
    The Applicants surmount this apparent difficulty by contending that practical completion did not take place when certified by Cottee Parker. They do so by positing that the references to practical completion in clause 2.5(b) and in clause 9.1 of the statutory policy need to be harmonised with the definition of practical completion contained in s 67(6) of the Domestic Building Contracts Act 2000 (Qld) (‘the DBCA’). The Applicants submit that this becomes necessary because the construction contract between Terry Seirlis Constructions Pty Ltd and CMC was for work that is regulated by the DBCA.[16]
  5. [41]
    Relevantly, section 67 of the DBCA (which deals with completion payments), provides:
  1. (6)
    In this section—

completion payment, for a regulated contract, means a payment required to be made under the contract by the building owner to the building contractor for the practical completion stage.

practical completion stage, for a regulated contract, means the stage when—

  1. (a)
    the subject work has been completed in accordance with the contract and all relevant statutory requirements, either—
  1. (i)
    without any omissions or defects; or
  1. (ii)
    apart from minor omissions or minor defects; and
  1. (b)
    the detached dwelling or home is reasonably suitable for habitation.
  1. [42]
    The Applicants say that the evidence heard before the Tribunal shows that neither of the subject lots had attained practical completion – at least not in the sense contemplated by s 67(6) – as at the dates when Cottee Parker certified practical completion; and, particularly in light of Mr Helmold’s evidence (which the Applicants submit should now be accepted by the Tribunal), neither of the subject lots had attained practical completion as at 27 September 2003; such that the insurance claims for the subject lots lodged with the Respondent by C & E on 23 January 2004[17] and 10 February 2004[18] were made comfortably within the seven month period specified in clause 2.5(b) of the statutory policy.
  2. [43]
    Having thus overcome the first hurdle, the Applicants proceed to explain why either of Ties Group, or UKL may now claim the entitlement of the Insured:

Applicants’ position regarding Ties Group

  1. [44]
    The Applicants submit that Ties Group’s entitlement arises by reason that the benefit of the Insured under the statutory policy of insurance is an ordinary chose in action, capable of being assigned. This they say is what occurred on 2 June 2008, when Ties Group entered into the deed of assignment,[19] by which it took the benefit of the statutory policy from C & E (in liquidation).

Applicants’ position regarding UKL:

  1. [45]
    UKLs entitlement is expressed by the Applicants in the alternate, in the event that the claim by Ties Group is now rejected by the Tribunal.
  2. [46]
    Ultimately, the Applicants submit[20] that the better view is that UKL has the greater entitlement to indemnity under the statutory policy. Here, it is submitted that should the Tribunal find that the assignment to Ties Group was ineffective,[21] then the property in the chose in action must still be trust property; not dealt with by the C & E liquidator; and thus still able to come under the control of UKL, who may now lay claim to the right of indemnity as the Insured because it is the current trustee for the Terry Seirlis Family Trust.

Applicants’ position regarding quantum:

  1. [47]
    The Applicants note that clause 2.2 the policy provides two alternate methods by which to calculate the relevant indemnity amount, either:
    1. (a)
      the reasonable cost of rectification work; or,
    2. (b)
      in the event that remedial works are unnecessary or unreasonable, by reference to ‘the loss in value (if any) in the residential construction work produced by the departure from the plans or specifications or by the defective workmanship or materials’.
  2. [48]
    The Applicants submit that in the particular circumstances of these claims, the latter approach, (b), is now the more appropriate, and submit they can show a loss in value of more than $200,000[22] in the case of Lot 5, and at least $160,000 in the case of Lot 2, such that these amounts should be ordered to be paid by the Respondent, once the Applications for Review have been upheld by the Tribunal.

The Respondent’s Case:

  1. [49]
    Although the countervailing arguments will be addressed in greater detail later in these reasons, by way of overview, the Respondent submits as follows:
    1. (a)
      The nature of the right to indemnity under the statutory policy is such that it is inherently personal to the Insured, as defined. For this reason alone, the claims by the Applicants must fail.
    2. (b)
      The date of practical completion should be determined on the basis of the certificates of practical completion issued by Cottee Parker. For this reason the claims are out of time, and they must be rejected.
    3. (c)
      For a number of further reasons, beyond the fact of (a) above, the purported deed of assignment to Ties Group is of no effect.
    4. (d)
      For reasons that can be demonstrated, the Third Applicant has no valid claim.
    5. (e)
      In the event that the Applicants are found to have valid claims, then it is to be observed that rectification works were undertaken at the subject lots without the prior written approval of the QBSA; such that both claims should in all events be refused on discretionary grounds, consistent with clause 5.1 of the statutory policy.
    6. (f)
      The Applicants have failed, as a matter of evidence, to establish any loss.

Analysis

What is the nature of the right of an ‘Insured’ under the statutory policy of insurance?

  1. [50]
    The Applicants submit that the rights of an Insured under the statutory policy should be treated as ‘just an ordinary chose in action’,[23] capable of being assigned. In the event that the 2 June 2008 assignment is found by the Tribunal to have been of no effect, then the benefit of the Insured under the policy still remains an ordinary chose in action, and is now able to be enforced by the current trustee for the Terry Seirlis Family Trust, UKL.
  2. [51]
    However, the Respondent submits that the nature of the rights of an Insured under the statutory policy of insurance are inherently different to those of an insured under an ordinary insurance contract; such that neither Ties Group, nor UKL may now claim the rights of the Insured. Ultimately, if the Respondent is correct on this point, it becomes determinative of these Applications for Review. I am of the view that the Respondent is undoubtedly correct in this regard, for all of the reasons that will now be explained.
  3. [52]
    Clause 9.1 of the statutory policy defines ‘Insured’ to mean:
    1. (a)
      the owner of the land; or
    2. (b)
      a consumer who has entered into a contract with the contractor to have residential construction work carried out in Queensland.
  4. [53]
    At the material time, consumer was defined in Schedule 2 of the QBSA Act to mean ‘A person for whom building work is carried out, but does not include a building contractor for whom building work is carried out by a subcontractor’.
  5. [54]
    Under these definitions, C & E as the original owner of the subject lots was the Insured as defined, and qualified as such under both limbs of the definition. Neither of Ties Group or UKL qualify under either limb of the definition of an Insured, for at no time were either of these entities the owner of the subject lots, or a consumer who had entered into a residential construction contract, with the contractor, CMC.
  6. [55]
    At the relevant time, s 70 of the QBSA Act provided:

70  Insurance claims

  1. (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.
  1. (2)
    If a claimant is dissatisfied with the authority’s decision on the claim, the claimant may apply to the tribunal for a review of the authority’s decision.
  1. (3)
    On an application under this section the tribunal may confirm, vary or reverse the authority’s decision and make consequential orders and directions.
  1. [56]
    It seems to me tolerably clear that the reference in s 70(2)[24] to a dissatisfied claimant – one who may apply to the Tribunal for a review of the unsatisfactory decision – must be read as a reference to a ‘person claiming’ to be entitled to indemnity under the insurance scheme. This is the same expression as used in the immediately preceding s 70(1) of the QBSA Act. Such a person is, in effect, the same as an Insured as defined in clause 9.1 of the policy, for it is only a person who is an Insured under the policy who may make a claim under it. My conclusion in that regard is also supported by clause 8.2 of the policy, which provides that, if an Insured was affected by a reviewable decision (including as here a refusal of a claim under the policy), then the Insured may ‘apply to the Tribunal for a review of the decision, in accordance with sections 104 and 105 of the Queensland Building Tribunal Act 2000.’
  2. [57]
    Furthermore, the policy is expressed in terms that indicate that liability under the statutory insurance scheme cannot exceed the quantum of any loss suffered by the Insured, caused by defective residential construction work, such that it becomes sufficiently clear that causation for any loss must also be established.
  3. [58]
    In the present case, neither of Ties Group, nor UKL have shown that they have suffered any loss compensable under the statutory insurance scheme. Any loss that may have been suffered was suffered by C & E, which is now a deregistered entity, and is not a party to these proceedings. Even then, there is only very scant evidence before the Tribunal of expenditure by CMC to remedy any of the alleged defects. In this regard, the only evidence that is before the Tribunal are two invoices from a Mr John Carmody (Builder), dated 1 April 2004, and 22 April 2004, each addressed to Terry Seirlis Property Developments, totalling $3,201.25. Mr Seirlis asserts that these were directed to C & E.[25]There is then one other quote for balcony sealing, in the amount of $2,850.00, addressed to Mr Seirlis, personally.[26]Other than the word of Mr Seirlis, there is no evidence before the Tribunal to show that any of these invoices were actually paid by C & E.[27] In the absence of evidence to corroborate Mr Seirlis, I am not prepared to accept his assertion.
  4. [59]
    Even if it were supposed for the moment that C & E did pay defect remediation costs totalling $6,051.25 as identified in the immediately preceding paragraph, that would still be a loss suffered by the Insured (C & E), and neither Ties Group nor UKL can now claim it as a loss in their hands.
  5. [60]
    I conclude that the rights of indemnity arising under the statutory insurance scheme are personal to the Insured as defined, and these are not now accessible by either Ties Group, or UKL. My conclusion to that end is, I think, further supported by Part 7 of the statutory policy, entitled ‘Payment’. Part 7 provides that when an insurance claim is accepted for payment, the QBSA has some discretion as to how payment is to be made, yet the only payees envisaged under Part 7 are:
    1. (a)
      a licensed contractor appointed to remedy the defects;
    2. (b)
      the Insured;
    3. (c)
      in the particular case of a body corporate, particular lot owners, or the body corporate.
  6. [61]
    Neither Ties Group, nor UKL fall within the category of payees listed in Part 7.
  7. [62]
    The Respondent submits, and I agree, that there is a close analogy between rights of an Insured under the statutory insurance scheme and the rights that arise under s 82 of the Trade Practices Act 1974 (Cth) (‘the TPA’). In Boston Commercial Services Pty Ltd v GE Finance Australasia Pty Ltd (‘Boston’),[28] it was held that s 82 of the TPA authorised recovery of loss or damage at the suit of the person who suffered it, and that this was a personal right of that person, and thus incapable of assignment.[29] In Boston, Rares J said in part that: ‘it is difficult to see how the Court could award a third party that which the statute only authorises the claimant to recover’.[30]
  8. [63]
    At a policy level, there is a further consideration that also militates against the conclusion now urged on me by the Applicants. Allowing the assignment of rights under the statutory insurance scheme appears inconsistent with the purpose of the statutory scheme, which is to provide a consumer protection regime to provide for the rectification of defects caused to homeowners by defective residential construction work. There appears to be no good reason to allow for the assignment of these rights, particularly when the scheme as enacted already contemplates that a subsequent owner of the subject property qualifies as an Insured, and may[31] take advantage of the statutory insurance scheme, without first needing to take an assignment of the rights of the previous Insured. If rights under the scheme were assignable in the manner now contended, then this would risk the diminution of funds available under the scheme for claims made by subsequent owners.
  9. [64]
    Ultimately, it is to be observed that the Applicants approach this case as if what was being discussed were a claim under a private contract of insurance.[32] To proceed on that basis is to misconceive the nature of these insurance claims. By reason that the policy of insurance is enacted under Part 5 of the QBSA Act it is a statutory instrument, to which the Acts Interpretation Act 1954 (Qld) applies.[33] The rights in question are purely statutory. Although set out in the form of a policy of insurance, it is a statutory policy, and the rights created under it bear no other resemblance to private contract rights. When construing a statutory policy of insurance the exercise must be approached from a different perspective to that when construing an insurance policy arising under a private contract of insurance:

“In construing a policy issued in terms adopted by a Parliament to achieve legislative objectives, the interpreter enters into a different realm of discourse. The object there is not, as such, to uphold a bargain fairly defined between private parties. Ultimately, it is to uphold the purpose of the legislature in enacting that form of policy”.[34]

  1. [65]
    In his final submissions,[35] Mr Steele for the Applicants seeks to rely on TNT Australia Pty Ltd v Horne[36] and Fisher v Hebburn Ltd[37] as authority for the proposition that there should be no reason in principle as to why the rights of an Insured to indemnity under a statutory policy should not be regarded as assignable, in the same manner as any other right to indemnity under any other contract of insurance. In my view however, these authorities are of little assistance to the Applicants. Each involved workers’ compensation entitlements, wherein it is established[38] that there is a long line of authority[39] to support the principle of survival of accrued rights in favour of the estate of a deceased worker. These are therefore a special category of claim, from which it is not possible to attempt to now generalise some wider principle in support of the Applicants’ contention.
  2. [66]
    Finally, it must be remembered that these proceedings are in the nature of merits review. The Tribunal does no more than to ‘step into the shoes’ of the original decision-maker to exercise the same powers as those which were previously exercised when making the original decisions, now under review. When making a fresh decision the Tribunal still remains obliged to comply with the terms of the statutory insurance policy, and can do no more than what is contemplated by the words of the policy.

When was Practical Completion?

  1. [67]
    The certificates of practical completion issued by Cottee Parker were dated 24 October 2002 in the case of Lot 2, and 7 January 2003 in the case of Lot 5. In consequence, conventional thinking would hold that any claim under the policy in respect of category 2 defects would need to have been submitted to the QBSA by 24 May 2003 in the case of Lot 2, and 7 August 2003 in the case of Lot 5. Neither claim was submitted within those deadlines.
  2. [68]
    The Applicants however submit that practical completion did not occur when certified by Cottee Parker, and did not occur until 27 September 2003[40] (at the very earliest); such that the claims are asserted to be within the time limit[41]in clause 2.5(b).
  3. [69]
    Practical completion is defined in clause 9.1 of the policy as follows:

Practical completion unless the context suggests otherwise, is that stage, in the opinion of the BSA, when the residential construction work becomes fit for intended use or occupation. (emphasis added)

  1. [70]
    The Applicants submit that the inclusion of the words ‘unless the context suggests otherwise’ in clause 9.1 requires that the fact that this was a regulated contract governed by the Domestic Building Contracts Act 2000 (Qld) (‘DBCA’) to now be considered as a part of the context.[42]
  2. [71]
    Section 67(6) of the DBCA then includes a further definition of practical completion:

Practical completion stage”, for a regulated contract, means the stage when -

  1. (a)
    the subject work has been completed in accordance with the contract and all relevant statutory requirements, either -
  1. (i)
    without any omission or defects; or
  1. (ii)
    apart from minor omissions or minor defects; and
  1. (b)
    the detached dwelling or home is reasonably suitable for habitation.
  1. [72]
    The Applicants submit that sections 67(6)(a) thus imposes an additional requirement, that the subject works cannot be regarded as practically complete until such time as they are also complete in accordance with all of the requirements of the contract, as well as any relevant statutory requirements, apart from only minor omissions, or minor defects.
  2. [73]
    When viewed through the lens of this enlarged meaning, the Applicants submit that the extent of the defects and omissions in the subject lots as at the dates when they were certified by Cottee Parker as practically complete has the effect that the certificates issued by Cottee Parker are meaningless, for these did not comply with the requirements of the meaning of practical completion under s 67(6) of the DBCA.
  3. [74]
    Ultimately, I do not accept that the meaning of practical completion in the statutory policy needs to be read as subject to s 67(6) of the DBCA, even notwithstanding that I do accept that the building contract between C & E and CMC was a regulated contract, thus subject in other respects to the requirements of the DBCA.
  4. [75]
    The definition of practical completion in the statutory policy and that as contained in section 67(6) of the DBCA are aimed at quite different purposes. Because the purposes are different, there is no need to reconcile these two quite different definitions. Section 67(6) deals with the specific issue of completion payments, and the definition of practical completion contained in s 67 relates to regulation of the timing of the ‘completion payment’, as referred to therein. Meanwhile, the definition of practical completion in clause 9.1 of the Policy affords a mechanism to determine whether time limits in the policy have expired, in terms of providing suitable delimitation dates for the acceptance of claims under the statutory policy. If the definition of practical completion in s.67(6) is necessarily to be imported into the terms of the statutory policy, then it would have been a simple enough thing for the statutory policy to include express words requiring that. There are no such words.
  5. [76]
    In my view, the expression ‘unless the context suggests otherwise’, as used in Clause 9.1 should be construed so as to mean: ‘unless the context in which those words have been used in the policy suggests otherwise’. In support of that conclusion, examination of the policy does reveal instances where the context in which the expression ‘practical completion’ - as used elsewhere in the policy - does require for a different meaning to be given to the expression than that as used in clause 9.1. For example, in Clause 1.4(b), wherein that clause refers to practical completion as being ‘the date nominated or stated in the contract for practical completion’.
  6. [77]
    Ultimately, I agree with the Respondent that the time limits for clause 2.5(b) of the policy should commence to run from the date of practical completion as were certified by Cottee Parker. Here, it is to be observed that Clause 9.1 provides that practical completion is attained at the stage when ‘in the opinion of the BSA’, the residential construction work becomes fit for its intended use or occupation. It seems to me that the QBSA (and now the Tribunal) is perfectly entitled to determine that it will rely on the certificates of practical completion as certifying that the subject lots were fit for their intended use or occupation, even no matter that there may still have been defects or omissions from the contract specification. It is sensible and practical to measure the commencement of ‘time running’ for the purposes of clause 2.5(b) from the date of the certificate of practical completion. On this point it is also worthwhile to note the evidence of the QBSA Inspector Mr Cragg, who said, in part: ‘A house can reach practical – or a property can reach practical completion and have millions of minor defects. It doesn’t prevent it from reaching practical completion’.[43] Although the reference to ‘millions’ should I think be understood as an instance of hyperbole, I still agree with the essential point: a house can be assessed to be ‘practically complete’, notwithstanding the fact of a long list of minor defects, and/or omissions.
  7. [78]
    I determine that the claims made by the Applicants pursuant to the policy for category 2 defects were made outside the seven-month time period allowed by clause 2.5(b) of the policy. This affords reason enough to reject the claims.

Evidence of Mr Helmond

  1. [79]
    Mr Helmond, an architect and builder, was called by the Applicants as an expert witness in relation to the question of practical completion. Mr Helmold provided a report dated 14 November 2012.
  2. [80]
    In that report, Mr Helmold considered the definition of ‘practical completion’ pursuant to the terms of the contract; the provisions of the policy; and pursuant to section 67 of the DBCA. Ultimately Mr Helmond concluded that practical completion had not been achieved by the subject lots as at 27 September 2003.
  3. [81]
    The Respondent submits that Mr Helmold should not be accepted. In particular, the Respondent submits that Mr Helmold failed to address the question as to why the defects in the town houses on the subject lots made them unfit for their intended use or occupation. I agree that Mr Helmold’s opinion suffers from this key deficiency, as Mr Helmold appears to assume the properties to be uninhabitable by very dint of the list of defects, without sufficient explanation as to why that is so. The Respondent also says that there is another complication that diminishes the weight that can now be attached to Mr Helmold’s opinion. Prior to the preparation of his report, Mr Helmold was requested to take into account both the DBCA and contractual definitions of ‘practical completion’; as well as the definition contained in the statutory policy. The Respondent submits that this has gone on to influence Mr Helmold’s conclusions, as it has caused Mr Helmold to take into account irrelevant considerations.
  4. [82]
    I have now determined that the definition of practical completion in clause 9.1 the statutory policy is to be construed as a ‘stand alone’ definition, one that does not need to import any of the words used in s.67(6) of the DBCA as part of its meaning. Given that Mr Helmold had been asked to assume a meaning of practical completion that is based on an amalgam of sources, including s 67(6) of the DBCA, there is now substance to what the Respondent submits regarding Mr Helmold’s evidence. I conclude therefore that Mr Helmold has been asked to take into account irrelevant considerations, such that his opinion has not been directed at the correct question.
  5. [83]
    The Respondent also points to the fact that, whilst under cross-examination, Mr Helmold conceded that he did not inspect every defect, and could not now remember which defects he had inspected, and those which he had not inspected.[44] This in turn focused attention on the schedule of defects referred to in paragraph 2.1(a)(iv) of Mr Helmold’s report. In relation to that schedule, Mr Helmold said, during his evidence:
    1. (a)
      Initially that he was unsure whether he had relied upon the document in the preparation of his report;[45]
    2. (b)
      Later said that he ‘probably would have’ relied on the document;[46]
    3. (c)
      Then as to whether he had checked on whether the schedule had been relied upon by him, said ‘I did not turn my mind to it’;[47]
    4. (d)
      Later agreed that the matter set out in the schedule concerning the subject lots formed the basis of the opinion expressed in his report;[48]
    5. (e)
      Said variously in relation to the preparation of the schedule ‘I did not prepare that’, ‘I don’t think I did’, ‘I-I-I don’t think I-I don’t know. I can’t remember’, ‘I may have. I may have’;[49]
    6. (f)
      When first asked whether he had assisted in the preparation of the schedule said: ‘I don’t think so. I’m not sure, but I don’t think so’,[50] but later said that he had ‘probably’ assisted in the preparation of the schedule, but he was not sure who had prepared it, yet thought it might have been the architect, Mr Dawson.[51]
  6. [84]
    In light of the foregoing, I additionally conclude that the factual basis for Mr Helmold’s opinion has not been satisfactorily established. Mr Helmold was unsure as to the provenance of the schedule attached to his report, and could not be sure whether he had, in fact, even relied on it.

Did Ties Group Take a valid assignment from C & E?

  1. [85]
    As is recorded in paragraph [23] of these reasons, the Second Applicant entered into a deed of assignment with C & E (in liquidation) on or about 2 June 2008, by which it purported to take from Mr Combis the benefit of any rights under the certificates of insurance, as well as the entitlement to pursue those rights, by means of litigation.
  2. [86]
    In the end however, it seems to me that this assignment was totally ineffective. My reasons for so concluding are fivefold. Any one of these reasons (as now set out under items (i)–(v) below), are sufficient to defeat the assignment to Ties Group:

(i) The terms of the Deed are incapable of effecting the assignment

  1. [87]
    The deed of assignment was executed on 2 June 2008. Pursuant to clause 2.1 of the deed, the Assignor sought to assign certain claims to Ties Group, as set out in Schedule ‘A’ to the deed. The claims listed in schedule ‘A’ included these claims (QR164-07 & QR162-07). The consideration provided by Ties Group included an initial assignment fee of $1,500, together with 7.5% of the first $100,000 payable by way of net proceeds recovered from the claims, and then 15% of the balance.
  2. [88]
    Of particular note are the recitals to the deed of assignment, which record that, as at
    2 June 2008:

The assignor is the former trustee of the Terry Seirlis Family Trust (“the Trust”);

The Assignor in its capacity as trustee of the Trust has certain claims (“the Claims”) against third parties, more particularly set out in Schedules A, B and C hereto which the Assignor due to its insolvency is unable to purse notwithstanding they are a species of property of the Trust.

The Assignor has agreed to assign the Claims to the Assignee pursuant to the terms of this Deed.

(emphasis added)

  1. [89]
    As can be seen, the recitals to the deed indicate that C & E (in Liquidation) was no longer even the trustee. I conclude therefore that C & E no longer had the necessary capacity to effect the assignment on the date when it was attempted.

(ii) The rights in question are inherently incapable of assignment

  1. [90]
    Elsewhere in these reasons for decision I have explained my conclusion that rights under the statutory policy of insurance are personal to the Insured, as defined in Part 9.1 of the Policy.
  2. [91]
    Mr Combis, as the liquidator, purported to assign the benefit of the Insured under the two certificates of insurance on the basis that the Insured was C & E, then in liquidation. The powers of a liquidator were, at the time, governed by s 477(2)(c) of the Corporations Act 2001 (Cth) (‘Corporations Act’), which provided that a liquidator of a company may ‘sell or otherwise dispose of, in any manner, all or any part of the property of the company’.
  3. [92]
    Section 9 of the Corporations Act at the time defined property to mean ‘any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action.’ Although it appears therefore that a liquidator in the position of Mr Combis is possessed of a power to assign the benefit of the Insured as a “thing in action”, I am of the view that “the thing” first needs to be inherently capable of assignment.
  4. [93]
    For reasons already explained, I am of the view that these rights are by nature incapable of assignment. Viewed in that light, to now allow an assignment purely by force of describing these rights as a thing in action would be to condone the transformation of the essential nature of the right.[52] These rights are thus probably better understood as being a ‘thing in action’, yet one that exists only in the hands of the Insured, as defined.

(iii) No evidence before the Tribunal in relation to the state of accounts as between the corporate trustee and the trust

  1. [94]
    In the ordinary course, where a corporate trustee is placed into liquidation, the assets of the trust remain clothed with the trust, and are not available to satisfy the claims of creditors in the same manner as are the other assets of the corporate trustee.[53]That general position may be displaced to the extent that a trustee, (here including a corporate trustee), has a right of indemnity out of trust assets, in respect of liabilities incurred by the trustee in conducting the activities of the trust. In those circumstances, property of the trust may become beneficially available to the trustee and, on a liquidation of the corporate trustee, may in turn become available to creditors, if it can be shown that the liquidator has first made resort to trust property in order to indemnify the corporate trustee, and then has used the power of sale conferred by s 477(2)(c) of the Corporations Act so as to satisfy the demands of creditors.[54]
  2. [95]
    Although in paragraph 6(b) of their Reply the Applicants assert that the rights of C & E as the Insured under the statutory policy of insurance were ‘property of the company’, the initial presumption must always be that these rights were held by C & E, on trust. There would really need to be some kind of evidence before the Tribunal to displace the presumption of trust and to enable an assessment of the state of accounts as between the corporate trustee and the trust, in order to show that trust property had lost the mantle of trust, and had been “called in” by the liquidator, to make good the corporate trustee’s right of indemnity from trust property, in the manner that I have described in the immediately preceding paragraph. In the absence of such evidence (and here there isn’t any), the Tribunal has not been given any basis from which to conclude that the liquidator was permitted to have access to trust assets.

(iv) No court approval under s 477(2B) of the Corporations Act for the assignment

  1. [96]
    As a fourth matter further negating the putative right of Ties Group to take the benefit of the Insured under the statutory policy, it is to be observed that, at the relevant time, s 477(2B) of the Corporations Act provided:

(2B) [where liquidator may enter agreement]

Except with the approval of the Court, of the committee of inspection or of a resolution of creditors, a liquidator of a company must not enter into an agreement on the company’s behalf (for example, but without limitation, a lease or a charge) if:

  1. (a)
    without limiting paragraph (b), the terms of the agreement may end; or
  1. (b)
    obligations of a party to the agreement may, according to the terms of the agreement, be discharged by performance;

more than 3 months after the agreement is entered into, even if the term may end, or the obligations may be discharged, within those three months.

  1. [97]
    The deed of assignment between Mr Combis and Ties Group gives rise (in part) to a contingent assignment fee, not fully payable until such time as Ties Group makes a successful recovery on the claims. As such, the deed represents an agreement that gives rise to obligations to be discharged by performance more than three months after the date of the deed. Given that C & E has long since been deregistered, nor could the purported assignor now receive the remaining contingent portion of the consideration under the deed, even in the theoretical event that it could be recovered.
  2. [98]
    Exhibit 14 in these proceedings is a letter from Mr Combis dated 8 December 2015. This records that none of the approvals contemplated in s 477(2B) were obtained in respect of the purported assignment of the rights under the statutory policy of insurance to Ties Group. I conclude therefore that the deed of assignment is also of no effect by reason of no consent having been obtained pursuant to s 477(2B) of the Corporations Act.

(v) Maintenance and champerty

  1. [99]
    As one final matter also defeating the entitlement of Ties Group (a matter which I do note to have been raised by the Respondent over the objection of the Applicants, who complain that to raise it now is unfair, because the Respondent failed to plead the point), it is to be observed that a bare right of action cannot be assigned without offending the rule against maintenance and champerty.
  2. [100]
    I am of the view that this submission is correct. Because the rule against maintenance and champerty raises important public policy considerations, I am also of the view that the point may be raised by the Respondent in final submissions, notwithstanding prior failure to plead it. Nor can it now be claimed to be procedurally unfair for the Respondent to have raised the issue on 29 April 2016, in circumstances where the Applicants were given a subsequent opportunity to respond to that submission in their further written submissions in reply, those dated 27 May 2016. In the written submission no contrary arguments, (other than the ‘failure to plead’ point), were raised by the Applicants.

Entitlement of UKL

  1. [101]
    UKL is the current corporate trustee of the Terry Seirlis Family Trust, and claims the rights of the Insured under the statutory policy in the event that the Tribunal determines that Ties Group is ineligible to lay claim to those rights. I have now determined that the putative assignment to Ties Group was ineffective. However, there are also a number of reasons that preclude me from finding that UKL can show that it has a legitimate alternate claim to the rights of the Insured.
  2. [102]
    Even if for the moment it were to be assumed that the benefit of these claims were not inalienable personal rights of the Insured as defined, the evidence would still need to show that the benefit of these claims were held at the relevant time on trust by C & E, and that these then did ultimately pass, via the intervening trustee TPSD Pty Ltd, to UKL. It seems to me on the basis of the evidence that is now before the Tribunal that this necessary pre-condition cannot be met.
  3. [103]
    Whilst under cross-examination Mr Seirlis accepted that his case (in the sense that his own interests are aligned with those of UKL), was that the rights in relation to the insurance claims were:
    1. (a)
      originally held on trust by C & E;
    2. (b)
      were passed by C & E to the successor corporate trustee TPSD, which was the trustee between 27 October 2005 and 16 October 2007; and
    3. (c)
      were then passed by TPSD, to UKL.
  4. [104]
    At this juncture in the analysis an important fact to know is that during the period during which TPSD was the intermediate trustee, receivers and managers were appointed to TSPD, on 11 October 2007, by a financier, Abacus Finance Pty Ltd.[55] The receivers and managers were appointed pursuant to a registered fixed and floating charge, made on 21 November 2005;[56] as well as pursuant to a mortgage, entered on 22 November 2005.[57]
  5. [105]
    According to the evidence given by Mr Seirlis, the trust deed for the Terry Seirlis Family Trust expressly empowers the trustee to charge trust assets.[58] It is apparent from the mortgage instrument,[59] and as was confirmed by Mr Seirlis during his cross-examination,[60] that the existence of the family trust of which TPSD was then trustee was disclosed to the chargee, Abacus Finance Pty Ltd. As such, the family trust falls within the definition of ‘Trust’ in the fixed and floating charge, being ‘the trust (if any) in respect of which the chargor is trustee, which has been disclosed to the chargee’.[61]
  6. [106]
    Under the fixed and floating charge, ‘charged property’ was defined as:

…All of the chargor’s present and future undertaking, property, assets and rights which the chargor owns in its personal capacity and/or as trustee for the Trust, including but not limited to any right of indemnity out of the assets of the Trust;

  1. [107]
    Appointment of receivers to TPSD Pty Ltd under the deed was in respect of the ‘charged property’, under clause 9 of the Charge. Amongst other things, clause 9.2 empowered the receivers to sell the charged property, or to do anything that the chargor could have done in respect of the charged property, and in doing so, act as agent of the chargor, under clause 9.3.
  2. [108]
    In these proceedings the Applicants have not sought to adduce any evidence to show to the Tribunal that the appointment of receivers and managers to TPSD Pty Ltd was not in respect of the trust property (particularly the rights in relation to the statutory insurance claims here under examination), notwithstanding that the trust property formed part of the ‘charged property’ as defined. Nor have the Applicants demonstrated how any of the items of trust property that the receivers became seized of were dealt with. In the absence of evidence of this kind it is now impossible for the Tribunal to proceed with any confidence that the rights of the Insured under the statutory policy even remain as part of the holdings of the trust, such that these could then, in theory be claimed by UKL.
  3. [109]
    I conclude that the state of the evidence is thus insufficient to show any entitlement to the rights of the Insured by UKL. In all events, the claimed entitlement by UKL is a matter already defeated by my previously expressed conclusion that the rights of an Insured under the statutory policy are inalienable personal rights of the Insured as defined, thus incapable of passing in the manner now contended.

Rectification without approval

  1. [110]
    Clause 5.1 of the policy provides that the QBSA ‘may’ refuse to make a payment for loss under the policy where residential construction work or associated works have been completed or rectified without prior written approval. In this case, rectification works were undertaken without the prior written approval of the QBSA. The Respondent submits that any claim that is initially allowed by the Tribunal should nonetheless be refused on discretionary grounds, because of a breach of clause 5.1.
  2. [111]
    Mr Seirlis said that he had discussions about the defects with the QBSA building inspector, Mr Cragg, and that Mr Cragg had told him that he could go ahead and have any urgent issues rectified.
  3. [112]
    In his evidence before the Tribunal, Mr Cragg said that this was not the type of comment that he would make: ‘I would never – I wouldn’t do that,’[62] yet conceded that: ‘I might have said, if I was in the same spot, I’d probably do the same thing, possible. I said a lot of things’.[63] Mr Cragg also said:

I mean at the end of the day it’s their property. I can’t prevent them from doing something to it to prevent further damage. I can only advise them what the authority sees and what they want. But, as a builder I would then ask them to - you know, I would try to help them.[64]

  1. [113]
    The Applicants submit that although clause 5.1 the policy confers a discretion to reject the claim for conducting rectification works prior to obtaining written approval from the Respondent, that does not mean that the Respondent (and now the Tribunal) has an unrestricted entitlement to reject a claim. In accordance with principles recognised in Searle v QBSA[65] the Applicants submit that to exercise the discretion to refuse a claim the Respondent must first show that it has suffered some relevant prejudice caused by it not being able to inspect the defects, prior to these being rectified. Now, so the Applicants submit, the Tribunal as the fresh decision-maker would need to be equally satisfied that there is relevant evidence of prejudice to the Respondent, before the Tribunal would rely on the discretion in clause 5.1 to refuse the claim. I agree that the question of prejudice does become relevant to any exercise of the discretion in clause 5.1 of the policy.
  2. [114]
    The Applicants submit that there is no prejudice to the Respondent, as Mr Cragg was afforded an opportunity to inspect the defects, as is evidenced by the fact that Mr Cragg developed lists of defects; and that it was Mr Cragg who had informed Mr Seirlis, (albeit admittedly only orally), that the defects could be rectified.
  3. [115]
    In relation to the question of prejudice the Respondent points to correspondence sent by the QBSA on 25 June 2004 to Mr Seirlis raising the fact of clause 5.1, and seeking information from Mr Seirlis about the rectification works that had already been completed.[66] The Respondent says that no satisfactory answer was ever given in response to the QBSA letter of that date.
  4. [116]
    The Respondent also points to a memorandum prepared by Mr Cragg dated 23 July 2004, when, during his assessment of the alleged defects, Mr Cragg had noted:

…authority is unable to establish beyond reasonable doubt and/or apportion total liability of the contractor for all defects inspected. Owner has been using this dwelling as a display; is cleaned on a regular basis sence [sic, ‘since’] being [sic, ‘beginning’] of this year; some damage may have been caused by others after completion?… he paid other contractors to rectify some defective building work to make house presentable for sale; he couldn’t wait for BSA to arrange rectification; everything is taking too long.

  1. [117]
    The Respondent also notes the evidence from Mr Cragg that, at the time of his inspections of the subject lots ‘there was blokes running around everywhere’,[67] such that it is at least likely that some of the category 2 defects in the lists of defects were caused by other contractors, other than the builder whose work was covered by the statutory policy, and that prejudice flows from the impossibility of now determining which contractor caused which defects. On this point I further note that in Mr Cragg’s inspection report it is also recorded that:

More than likely, some of the category two defects listed have been made by the owner or other people who have inspected, visited the property or done work for the owner after practical completion.[68]

  1. [118]
    Although Mr Seirlis claims that he was given oral approval to proceed and rectify any urgent defects by Mr Cragg, I conclude on the basis of the evidence given by Mr Cragg that no such authority was given. In light of the concessions made by Mr Cragg that I have recorded in paragraph [112] (above) Mr Seirlis may have assumed that he had the right to go ahead and rectify defects, but that is not the same as having obtained the prior written approval of the QBSA, as is required by clause 5.1 of the policy.
  2. [119]
    Given the state of the properties at the time when Mr Cragg conducted his inspections the situation arose where it was not then (or now) possible to discern which of the alleged category 2 defects had been caused by the builder CMC, and which of these arose in consequence of works conducted by other contractors also working on the site. In my view, this difficulty affords a prime instance in which the discretion in clause 5.1 of the policy should be invoked to refuse to make a payment for loss under the policy. Accordingly, I determine that even if the claims were otherwise allowable, these should be refused pursuant to clause 5.1 of the policy on grounds of rectification work having been undertaken prior to written approval having been obtained from the QBSA.

Quantum

  1. [120]
    In light of my negative determinations regarding the entitlement of the Applicants to claim the rights of the Insured under the statutory policy, an assessment of the amount of any entitlement on a successful claim becomes strictly unnecessary.
  2. [121]
    However, there was a preliminary determination[69] by the Tribunal that quantum evidence should be adduced as part of these proceedings, and a considerable portion of the hearing was taken up by quantum evidence. For completeness, I need to deal with that evidence.
  3. [122]
    Relevantly, clause 2.2 of the policy provides:

2.2 Amount of payment

  1. (a)
    Subject to clause 2.2(c) and Parts 4, 5, and 6 of this policy, the amount of the payment under this Part will be limited to the reasonable cost, as determined by BSA, of undertaking those works necessary to rectify the defects, less, where the Insured contracted with the contractor for the undertaking of the residential construction work which is defective, the owner’s remaining liability under the contract.

  1. (c)
    Where, in the opinion of the BSA, the undertaking of remedial works is unnecessary or unreasonable, the payment will be limited to the loss in value, if any, in the residential construction work, produced by the departure from the plans or specifications or by the defective workmanship of materials.
  1. [123]
    In the ordinary course, the amount of any payment under the policy is assessed under clause 2.2(a), and is to be assessed by reference to the reasonable cost of rectifying defects, less the amount (if any) of the Insured’s remaining liability to the contractor.
  2. [124]
    There is very little evidence before the Tribunal regarding any actual expenditure incurred by C & E rectifying defects. In total, only potentially $6,052.25 was spent on defects. There is no sufficient evidence that any of this was expended by C & E. Terry Seirlis Property Developments was invoiced $3,201.25 by the builder Mr Carmody, and Mr Seirlis personally received a quote[70] for $2,850 from Megaseal bathrooms. As already indicated, at paragraph [58], I am not prepared to rely on the uncorroborated assertion of Mr Seirlis that payment was in fact made by by C & E.
  3. [125]
    In the absence of reliable direct evidence, the Applicants approach the task created by clause 2.2(a) of the policy on the basis of the theoretical cost of rectifying the defects. Whether this approach is even available is very much doubtful. In Kern Corporation Limited v Walter Reid Trading Pty Ltd,[71] Mason J (as he then was), observed that:

…it is not so much a matter of identifying a relevant insurable interest, as ascertaining whether the insured has sustained loss or damage. And if it emerges that the vendor is not, or will not be, out of pocket then he suffers no recoverable loss. Where no expense has been incurred on reinstatement, payment of the purchase price by the purchaser extinguishes the vendor’s property loss and any claim he might otherwise have against the insurer in respect of such loss.

  1. [126]
    None of the Applicants were the vendor in the sense referred by Mason J in the quote just excerpted. Nonetheless, the principle therein still seems applicable. Even if I am wrong in that regard, there are other evidential difficulties that militate against an assessment for purposes of clause 2.2(a) being approached on the basis of the theoretical cost of rectification. Here, it is to be observed that the Applicants - and their valuation witnesses - have aggregated together a very large number of exceedingly minor defects and rely, for the main part, on two internal QBSA memoranda,[72] as prepared by Mr Cragg to then prove the existence of those defects. These memoranda are each dated 23 July 2004, although each record the results of inspections conducted by Mr Cragg after that date.
  2. [127]
    I have considerable difficulty with the provenance of the lists of defects in the memoranda prepared by Mr Cragg. The Applicants would have it that these lists should be received and uncritically accepted by the Tribunal, on the basis that Mr Cragg was an employee of the Respondent, charged with responsibility for inspecting defective building work and generating lists of defects. However, the sufficiency of the lists of defects - and the manner in which these were created - takes on a particular importance in this case, and is not a matter that can now be glossed over. This is because the lists have formed the basis for other important evidence before the Tribunal, going towards the assessment of quantum. To the extent that the defects lists are assailable, then all of the consequential evidence built up in reliance on the presumed reliability of Mr Cragg’s lists of defects also becomes questionable.
  3. [128]
    In my assessment, the evidence heard before the Tribunal does not support Mr Cragg having considered and examined each and every defect. In his testimony Mr Cragg observed that the original list of defects reported to the QBSA was for 496 defects, yet by the time that he was able to arrange to attend the site in order to inspect them, this number had been enlarged by Mr Seirlis and his staff up to 7,630,[73] It was this greatly enlarged list that was on-forwarded to Mr Cragg at the QBSA, whereupon it was put into Mr Cragg’s defects memoranda.[74] The evidence does not support Mr Cragg having approved the lists as confirmed defects. Rather, these were treated by Mr Cragg as a ‘log of claims’ by C & E, still subject to the need for verification.
  4. [129]
    When Mr Cragg came to site to inspect the defects, he did not bother to photograph[75] most of the category two defects:

…because it would’ve taken too much time. The owner was wanting to get it done and into insurance as soon as possible and – so there was – this – this was the best format that I could come up with.[76]

  1. [130]
    The manner in which Mr Cragg conducted his defects assessment also takes on particular significance. The following passage, taken from page 97 of the Day Three Transcript, is illustrative of the problem:

MR THOMSON: Yeah. It’s the end - almost at the end. And you see there’s a bullet point, “owner’s comment,” just under where the table ends?---Yes.

Owner’s assistant, Joanne, took a copy of my notes made on their defects lists.

Is that the lady you’re talking about?---Yes, that’s right.

All right. And what was her role? What did she do when you and she went and did defects inspections together? What was her role?---She - she - from memory, she did most of the - all the defects list, and she assisted with either pointing out where they were - because a lot of the time I couldn’t find them, or couldn’t see they were so small. And it was also - it was her wording. So who better to have with me than the person that wrote it so that we could find these as quick as possible, basically.

And when you say “a lot of the time I couldn’t find them”, why was that?---Oh, well it was - they’re, you know - it’s - there were small - small little marks. I mean, the couple of photos - normal person may - may not see them, or - or whatever. You know it’s - you know, I - you know, we could go up to that wall there, and if 10 of us looked at it we’d probably have 10 different lists. So it’s not - not my role as the authority’s inspector to, you know, try and find minor defects. However, it is my role if I see something that’s - that’s of a - that’s of a category 1 defect, then I would - I would address it whether the owner had or not.

And was it part of Joanne’s role to - - -

MR STEELE: Well, it shouldn’t be a leading question.

MEMBER: I’m going to allow it.

MR THOMSON: Did Joanne assist you in finding the defects?---Yes.

Thank you. Did she accompany you on all inspects [sic] or only some of them?---I’d say most, from memory.

And did I understand you to say, in respect to a question from my learned friend, that - this was the note I took - that there was an agreement between you and the owner - or you and the owner’s assistant - that you would embark on the process of greatly increasing the lists. Did you say something like that?---Oh, I didn’t - I didn’t want the owner to increase the list, because it made more work for me. But it was - that’s how, basically, I guess it came about. As - as in, conversations for the first inspections as to what - getting a better understanding as to what the BSA’s process was, and what was - what they could and couldn’t do, I guess.

I don’t have any further questions. May Mr Craig [sic] be excused?[77]

  1. [131]
    The manner in which the lists of defects were generated causes significant doubt to my mind regarding the reliability of the lists. It seems clear from the evidence of Mr Cragg that, when he received the lists, he never intended for these to be used for an assessment of the costs of rectification, but only as a starting point for the assessment process. Mr Cragg said that assessment of the cost of rectification would require further site work, a more detailed explanation of the nature of the defects, plus reference to copies of the plans.[78] It also bears again emphasising that the Tribunal has not been shown photographs of the majority of the claimed defects, and Mr Cragg said that he could not even see many of these. On the basis of the evidence heard before the Tribunal it is not even clear whether the QBSA actually completed the task of assessing the claimed defects, at either of the subject lots. Indeed, I gained the distinct impression that the task was commenced, but not ever finished. If that be the case, then there may have been a failure by the QBSA. Ultimately however, the point becomes only moot, because the claims for category 2 defects were in all events lodged with the QBSA outside the time limit specified in clause 2.5(b) of the policy.
  2. [132]
    For all of the reasons that I have just described, I do not accept the lists of defects in Mr Cragg’s memoranda as now providing a reliable basis for costing the rectification of category 2 defects on either of the subject lots.

Cost of Rectification Evidence of Mr Cosker

  1. [133]
    Mr Paul Cosker, quantity surveyor in the employ of Napier and Blakeley was called by the Applicants. The Tribunal is asked by the Applicants to accept the evidence of Mr Cosker in the event that the Tribunal determines that quantum should be assessed on the basis of the cost of rectification. Mr Cosker opined that the rectification costs for Lot 2 would be $53,078.37, and those for Lot 5 would be $77,343.75.
  2. [134]
    I do accept that, in conventional circumstances, the amount to be paid to an Insured under the statutory policy of insurance should be assessed by reference to clause 2.2(a) of the policy. However, in this instance, I do not find myself able to now accept any of Mr Cosker’s evidence. In my assessment it is patently unreliable, and thus unsuitable to form the basis for determining the amount of indemnity to be paid under clause 2.2(a).
  3. [135]
    My conclusion to this end arises because Mr Cosker’s reports are based on Mr Cragg’s lists of defects, which I have already determined are of doubtful provenance. Mr Cosker also prepared his reports without having undertaken any site visits, and without the benefit of either plans, or photographs.[79] In these circumstances his understanding of the nature of the defects enters the realm of speculation. Mr Cosker also set the labour rates for rectification work on the basis of the Rawlinson’s Guide and, for reasons that are altogether unclear, then set an absolute minimum time - 14.4 minutes - for every rectification task, no matter how trivial or insignificant many of these would be.[80]
  4. [136]
    Other evidence heard before the Tribunal shows that the labour rates in the Rawlinson’s Guide are far higher than were the trades and labour rates being paid on this site, at around the time of construction. In addition, questions asked of Mr Cosker, both under cross-examination by Mr Thomson for the Respondent, and on occasion also by me, revealed that, in numerous instances, Mr Cosker either allowed too much time for minor rectification tasks, or failed to recognise economies of effort (and thus cost) that could be obtained if groups of co-located minor defects were dealt with at the same time. When challenged on these types of issues, Mr Cosker readily gave ground in many instances. The net result being that Mr Cosker has produced what I assess to be grossly inflated, demonstrably indefensible (and thus unrealistic) estimates, based on a speculative understanding of the scope of works he was being asked to cost.

Cost of Rectification Evidence of Mr Brunner

  1. [137]
    Mr David Alexander Brunner is a building inspector. He was called by the Respondent to give contrary evidence to that of Mr Cosker regarding the cost of rectification of the defects in the subject lots.
  2. [138]
    As was the case with Mr Cosker, Mr Brunner has not been inside either of the town houses on the subject lots. In fact, Mr Brunner admitted to his having never got beyond the locked front gate on the internal road at 53 Paragon Street.[81]
  3. [139]
    As was the case with Mr Cosker, Mr Brunner approached the task of quantifying the rectification tasks primarily on the basis of the lists of defects prepared by Mr Cragg,[82] although now armed with the further benefit of at least a copy of the plans.[83]
  4. [140]
    In the end, Mr Brunner produced estimates of the cost of defect rectification that were very considerably lower than those produced by Mr Cosker. Mr Brunner opined that the rectification costs for Lot 2 would be only $13,493.08 and those for Lot 5 would be only $22,059.72.
  5. [141]
    Other than for this significant difference, there was nothing compelling or even remotely persuasive about the estimates given by Mr Brunner either. Indeed, it is to be observed that Mr Brunner’s evidence suffers from most of the same problems as those that I have already described as confounding the reports prepared by Mr Cosker. Mr Brunner’s reports were similarly a ‘desk top’ exercise, wherein the costs estimates created were substantially based on the most unsatisfactory lists of defects generated by Mr Cragg, and then costed solely on the basis of the descriptions contained in the Cragg lists, without the advantages of either photographs, or site visits.
  6. [142]
    I find that Mr Brunner’s evidence was equally unsatisfactory in terms of it providing an alternate basis to determine the costs of rectification. Accordingly, I determine that Mr Brunner’s reports cannot be used by the Tribunal for quantum assessment purposes either.

Clause 2.2(c) of the Policy

  1. [143]
    As set out in paragraph [122] of these reasons, clause 2.2 of the statutory policy affords two alternate bases upon which to calculate the quantum of any accepted claim. The second of these, contained in clause 2.2(c), provides that in circumstances where, ‘in the opinion of the QBSA’, it is unnecessary and unreasonable to carry out remediation, then the quantum of any accepted claim should be calculated on a loss in value basis, instead.
  2. [144]
    The Applicants submit that remediation of the defects in the subject lots is now unnecessary and unreasonable, principally because the subject lots were sold to new owners in 2005;[84] such that quantum should be approached on the basis of a loss in value on the subject lots, caused by the defective building works.
  3. [145]
    The Respondent submits that the Applicants are alleging a loss in value that is several orders in magnitude greater than are the theoretical costs of rectification as nominated by either Mr Brunner or Mr Cosker; and in circumstances where the words ‘limited to the loss in value, if any’ as used in clause 2.2(c), should be recognised as words of limitation: such that any award for diminution in value should not be permitted to exceed the proven cost of works necessary to remedy any defects. I am not sure that I can accept this submission. Firstly, no category two defect rectification costs have been satisfactorily proved before the Tribunal. Equally, the words ‘limited to the loss in value, if any’ as used in clause 2.2(c) appear only to require that a loss in value be adequately demonstrated by the Applicants. Conceivably, circumstances could arise wherein loss of value might be greater than is the cost of defect rectification, yet rectification is nonetheless still deemed to be unnecessary or unreasonable, on other grounds, other than simply those of cost.
  4. [146]
    I propose therefore to approach clause 2.2(c) on the basis that there must be evidence that undertaking remedial works is ‘unnecessary or unreasonable’, and that any loss in value must be adequately proved by the claimant to have been caused by the defects. I will also approach the task on the premise that remediation works are now unnecessary, or that it would be unreasonable to undertake rectification because of the passage of time and because the subject lots have since been sold; such that all that is presently required is for the Applicants to prove a loss in value caused by the defects.

The deeds of variation regarding the sale of the subject lots:

  1. [147]
    Before examining the competing valuation evidence produced by Mr Lionel Johnson (for the Applicants) and Mr Brian Cox (for the Respondent) going to the question of loss in value on the subject lots attributable to the existence of defects, it is necessary to consider deeds of variation entered between C & E and the purchasers of many of the lots at 53 Paragon Street (including the subject lots), when these were sold in 2005.
  2. [148]
    In his evidence, Mr Seirlis admitted that the confidential deeds of variation were his idea.[85] Pursuant to the deeds of variation,[86] which co-existed alongside the contracts for the purchase of the lots, and which were entered simultaneously with the contracts of sale, the purchasers agreed with the vendor that the transfer documentation lodged with the State Titles Office would nominate the list price for the subject lot as the purchase price on the contract, and that stamp duty would then be assessed on the list price. At the same time, the accompanying confidential deed (not of course revealed to the Titles Office) would record the considerably lower actual price, as paid by the purchasers to C & E.
  3. [149]
    In his 2015 statement, Mr Seirlis asserts that the reduced price recorded in the deeds of variation record a discount price that was:

…a product of negotiations with the purchasers and primarily reflected the poor condition of the properties having regard to the defects in the building works. The discount also could have included a small amount for the additional stamp duty the purchaser would pay on the difference between the discounted sale price and the sale price set out in the contract.[87]

  1. [150]
    When faced with the quite obvious proposition that the higher sale prices were fictional, and that the deeds of variation devised by him were designed to preserve secrecy in the true arrangement, Mr Seirlis refused to concede the point. His various explanations were to my assessment most unconvincing.[88] The following passage excerpted from the transcript illustrates the tenor of Mr Seirlis’ evidence:

MR THOMSON: Thank you.

The deed of variation in fact provides, doesn’t it, in order to preserve the fiction that the real sale price if $1,740,000 that the purchaser will pay - - -

MR STEELE: Well, I object to that term, the fiction.

MEMBER: Well, it is a fiction. Keep going.

MR THOMSON: That the purchaser will pay stamp duty not on the reduced amount, but on the full amount? --- That’s right.

And your purpose - because you were the originator of this arrangement your purpose in doing that was to maintain the fiction that the real sale price was $1.74 million?---Like I explained just before, the intent at the time was that we were trying to maintain a certain standard and ultimately the discount was there to allow the purchaser to improve the dwelling to that standard as that $1.74 million.

The contract, TS8, is a sham. Do you know what that means?---It’s not a sham.

It is a sham contract?---It’s not a sham.

Because the price it provides for is not, was not and was never payable by the purchaser, correct? You disagree with that?---No. I can’t take it any further than my previous two explanations on that.

And to preserve the appearance that the false price was the real price, you included provisions about confidentiality and about the purchaser paying stamp duty on the higher amount, didn’t you?---I don’t believe it was, I guess, any secret. It’s ---

Sorry. You don’t believe it was a secret? You created a document that expressly so provided. Of course it was a secret?---Well, that wasn’t my intent.

Well, you intent is expressed in this document signed by you, isn’t it?---Yeah.

  1. [151]
    In relation to the evidence of Mr Seirlis concerning the contract for the sale of Lot 2,[89] it became apparent from the deed of variation dated 30 January 2005 that, in the course of negotiations for the purchase of Lot 2, the price as reflected in the deed of variation was not negotiated downwards by way of discount, but rather was negotiated up from the original typewritten figure of $800,000.00 to the eventual handwritten figure of $850,000.00. When this was drawn to Mr Seirlis’ attention during cross-examination, Mr Seirlis sought to deflect blame onto the agent, by saying that he did not know ‘why it started at 800’.[90]
  2. [152]
    When further cross-examined about the transfer document for Lot 5,[91] and the Form 24 document that had accompanied the transfer,[92] Mr Seirlis was in my view quite evasive, and unconvincing.[93] The consideration expressed in the transfer document of $1,740,000 cannot, despite Mr Seirlis’ insistence to the contrary, be described as the true consideration because the contract was signed contemporaneously with the deed of variation that lowered the consideration to $1,364,550.[94] In the course of this cross-examination, when asked if he would have checked the amount of the consideration in the transfer before signing, Mr Seirlis refused to concede this obvious proposition, stating ‘I guess I probably did’ and ‘I may have’.[95]
  3. [153]
    The Form 24 also described the consideration as $1,740,000 (‘cash’), consistent with the transfer.[96] Mr Seirlis sought to evade the proposition that the declaration in item 6 of the transfer (about the consideration referred to in the Form 24) was false. He did so by referring to clause 2 of the deed of variation which said that the discount was ‘in consideration of the buyer complying with all obligations contained in the contract, and effecting settlement of the contract on the 28.2 - 2005’. In my assessment this is an evasive answer, because the deed of variation did not impose any further obligations over and above those in the contract, and the settlement date of 28 February 2005 was common to both the deed of variation and the REIQ contract.

Evidence of Benjamin Smith

  1. [154]
    Mr David Benjamin Smith was involved in the marketing and sale of some of the town houses developed by C & E at 53 Paragon Street. His corporate entity, Mitchcos Pty Ltd, was also the purchaser of Lot 5. The Applicants rely on the evidence of Mr Smith to support the valuation evidence from Mr Johnston going to diminution in value.
  2. [155]
    I was unimpressed with Mr Smith’s testimony.[97] I conclude that Mr Smith was a willing participant in Mr Seirlis’ effort to mislead the State Titles Office, in relation to the true sale price for Lot 5. Nor does Mr Smith’s evidence sufficiently establish the proposition that the full amount of the $375,450 difference between the sale price for Lot 5 as advised to the State Titles Office and the sum recorded in the Lot 5 deed of variation as the price actually paid by Mitchcos Pty Ltd was solely in consequence of the claimed defects in Lot 5.[98]
  3. [156]
    By the time that Mr Cragg had conducted his own inspection, Lots 2 and 5 were each being used as display units,[99] a fact that was confirmed by Mr Seirlis during his evidence.[100] Mitchcos Pty Ltd purchased Lot 5 after it had been used as a display unit. The very fact that the units were open for inspection to prospective purchasers as display units tends to underscore the exceedingly minor nature of these defects, and suggests that these were unlikely to have had any true impact on the saleability of the townhouses, despite what has been sworn to by each of Mr Seirlis, and Mr Smith.
  4. [157]
    I reject the evidence of Mr Seirlis and Mr Benjamin Smith regarding the alleged purpose for the reduction in price recorded in the deed of variation. I formed an unfavourable view of both Mr Seirlis and Mr Smith, and do not accept their evidence in the absence of corroboration. I conclude that the price recorded in the deed of variation was the actual and only price paid for the subject lots, and the deeds of variation and fake sale prices lodged with the titles office were part of an artifice, devised by Mr Seirlis, in order to create an impression of buoyant sales for the development at 53 Paragon Street. The following factors are influential in my determination:
    1. (a)
      The deeds of variation do not recite that any component of the reduced consideration embodied in the deed was in account of the defects in the property. The only consideration expressed in the deed was for the purchaser agreeing to this unusual arrangement.
    2. (b)
      Diminution in the value of the subject lots has been an issue in these proceedings since at least 2013. The statement made by Mr Seirlis in these proceedings on 17 October 2014 annexed the sale contracts for the subject lots. Yet, the first time that it was asserted that the discounts reflected the fact of defects in the lots was not until 30 April 2015.
    3. (c)
      The deeds of variation expressly refer to ‘list prices’. These merely reflect the developer’s asking price, and are not reflective of actual market value.
    4. (d)
      Mr Smith’s evidence did not support the sole reason of the discount being in consequence of any defects in Lot 5.[101]
    5. (e)
      The claimed discounts are entirely disproportionate to the costs of rectification.
    6. (f)
      There is contemporaneous evidence, in the form of a letter by Mr Cottee dated 19 August 2003 to the registrar of the Board of Architects, that ‘the client has been unable to sell many of the town houses due to unrealistic sales prices for the type of product’.[102]

Valuation Evidence by Mr Lionel Johnston

  1. [158]
    Mr Johnston was the expert valuer called by the Applicants in relation to the question of diminution in value for the subject lots. Mr Johnstone has provided two statements appending his valuations, each dated 30 April 2015.
  2. [159]
    I am unable to accept Mr Johnson’s valuations of the subject lots in their allegedly impacted state. Examination of Mr Johnston’s evidence reveals that his opinions are substantially influenced by an uncritical acceptance that the discounted prices recorded in the deeds of variation for the subject lots being solely attributable to the presence of defects. The evidence heard before the Tribunal does not now support that assumption as having been valid. Equally, Mr Johnston conceded during cross examination, that there were some other factors such as ‘blighting’, external cracking in parts of the complex, and the poor presentation of the gardens, that had also influenced his opinion as to value. None of these are matters that are included in the indemnity cover of the policy. That these factors had any bearing on Mr Johnston’s opinions regarding impacted value also means that it is not the case that any reduction in value is solely attributable to the defects.
  3. [160]
    At a fundamental level, I have considerable difficulty with the contention that category 2 defects which, at worst,[103] have been assessed as costing $77,343.75 to rectify (in Lot 5), could ever become the sole basis for a rebate on the Lot 5 sale price of as much as $375,450. I think the suggestion incredulous, and I reject it.
  4. [161]
    Mr Johnston has also attempted to engage in comparative analysis of sales within the complex at 53 Paragon Street to look at sales that were not rebated due to defects, and to then compare these with others sales that were rebated, due to defects. In so doing, Mr Johnston acknowledged that part of his methodology included his making assumptions about the levels of defects in Lots 7, 8 and 10, and to then use this as part of his evaluation of the extent of defects, particularly in Lot 5.[104] I have difficulty with this approach, particularly due to the complete absence of any evidence to show that the nature and extent of defects in Lots 7, 8 and 10 were consistent with those claimed to exist in Lot 5.

Valuation Evidence of Mr Cox

  1. [162]
    Mr Brian William Cox, registered valuer, was called to give valuation evidence by the Respondent. Mr Cox provided a valuation report annexed to his statement dated
    25 May 2016. Mr Cox valued Lot 5 at $1.7 million in pristine condition and at $1.675 million with defects.[105] Mr Cox then valued Lot 2 at $900,000 in pristine condition and at $885,000 with defects.[106]
  2. [163]
    Several criticisms are made by the Applicants of Mr Cox’s approach.[107] Central to that criticism is the contention that Mr Cox fails to explain why the deeds of variation do not now reflect a true loss in value caused by the existence of the defects.[108] I cannot accept these criticisms as in any way warranted. It is not for Mr Cox to prove the reason for the deeds of variation, for that is a matter for the Applicants to establish. The Applicants have not established to the satisfaction of the Tribunal that the discounted prices recorded in the deeds of variation only reflect the impact on value of the alleged defects.
  3. [164]
    Ultimately, I prefer the valuation evidence of Mr Cox over that of Mr Johnston in regards pristine value. However, pristine value is not the matter in issue. Evidence is required to show that the alleged loss in value (if any) has been produced by the defects that are claimed to exist in the subject lots. The only basis upon which Mr Cox could take this into account would be for Mr Cox to have had access to sufficiently reliable evidence of the extent of the defects and/or the cost of rectifying these. Such evidence is not available, such that it is very difficult to accept Mr Cox’s opinion in relation to the value of the subject lots in an impacted condition as being any more than a guess.

Conclusion & Orders:

  1. [165]
    For reasons expressed elsewhere in these reasons, none of the Applicants can lay any legitimate claim to the rights of an Insured under the statutory policy of insurance.  Even if they could, their claims should still be refused, under clause 5.1 of the policy.
  2. [166]
    In relation to the question of quantum, the Tribunal ultimately arrives at a point at which there is just no acceptable evidence that can be used to determine the quantum of any claim, irrespective of whether it is to be assessed under clause 2.2(a), or clause 2.2(c) of the policy.
  3. [167]
    The order of the Tribunal is that the Applications for Review in matters QR162-07 and QR164-07 are dismissed.

Footnotes

[1] The relevant reprint of the QBSA Act is Reprint 7 and Reprint 7D of the QBSA Regulation 1992.

[2] Seirlis v Queensland Building Services Authority [2011] QDC 107, [27], [42].

[3] This jurisdiction persists under s 86(1)(h) of the current Act, the Queensland Building and Construction Commission Act 1991 (Qld).

[4] The meaning of ‘former authority’ is defined in Schedule 1 of the QBCC Act to mean the QBSA.

[5] Edition 5.

[6] Reprint 7.

[7] Reprint 7D.

[8] Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’), s 20.

[9] ACN 086 452 840.

[10] Given that the building contract was dated 21 September 2001, Reprint 7 of the QBSA Act (as in force from 7 July 2000) is the applicable version of the legislation.

[11] ACN 086 482 840.

[12] A Copy of the Deed of Assignment is annexure ‘TS-8’ to the affidavit of Mr Terry Seirlis, sworn on 29 September 2011 in support of an application to join Ties Group Pty Ltd as a further applicant in these review proceedings.

[13] Affidavit of Terry Seirlis, dated 5 September 2013, paragraphs 3, 5.

[14] ‘Purported’ because the Applicants now challenge the validity of the certificates of practical completion.

[15] Lang v QBSA [2012] 2 Qd R 457, [30] (Margaret Wilson AJA).

[16] C & E Pty Ltd v CMC Brisbane Pty Ltd (Administrators Appointed) [2004] 2 Qd R 244.

[17] Unsigned insurance claims, see paragraph [17].

[18] Signed insurance claims, see paragraph [17].

[19] A Copy of the Deed of Assignment is annexure ‘TS-8’ to the affidavit of Mr Terry Seirlis, sworn on 29 September 2011 in support of an application to join Ties Group Pty Ltd as a further applicant in these review proceedings.

[20] Applicants’ final submissions (filed 15 February 2016), paragraph 173.

[21] The point is not conceded by the Applicants, notwithstanding the inconsistent fact of the supposedly better claim by UKL.

[22] The maximum amount payable on a claim under the statutory insurance scheme is capped at $200,000.

[23] Consider, for example, Applicants’ Final Submissions, Transcript, 1-9, lines 02-03 (29 April 2016).

[24] Section 70(2) was removed on 21 December 2007 by s.48 of Act No. 47 of 2007. The provision was however part of s 70 at the time when these proceedings were commenced in the QCCT.

[25] Transcript, Day One, page 82, lines 5-15.

[26] Annexure ‘TS-5’ to the affidavit of Mr Seirlis dated 17 October 2014.

[27] To the extent that the Applicants say that C & E performed rectification works orally authorised by Mr Cragg, they plead [Reply at paragraph 27(d)], that such works form no part of the claim in these proceedings.

[28] (2006) 236 ALR 720.

[29] Ibid [50] and following.

[30] Boston Commercial Services Pty Ltd v GE Finance Australasia Pty Ltd (2006) 236 ALR 720, [55].

[31] Subject of course to a subsequent owner bringing a claim within the time limits specified in the statutory policy.

[32] Consider, Applicants’ final submissions (filed 15 February 2016), paragraph [157].

[33] Lange v QBSA [2012] 2 Qd R 457, [26] (Margaret Wilson AJA.)

[34] Insurance Commission (WA) v Container Handlers Pty Ltd (2004) 218 CLR 89, 122-23 (Kirby J); consider also Lange v QBSA [2012] 2 Qd R 457, [30].

[35] Submissions in Reply, filed 27 May 2016, paragraph 37 and following. See also the Applicants’ primary submissions (filed 15 February 2016), paragraph 159.

[36] (1995) 36 NSWLR 630.

[37] (1960) 105 CLR 188.

[38] TNT Australia Pty Ltd v Horne [1995] 36 NSWLR 630, 636.

[39] The nature of these rights is said to have been authoritatively determined by the House of Lords as long ago as in United Collieries Ltd v Simpson [1909] AC 383, note 38.

[40] The date is taken from paragraphs 6.3–6.6 of the report of Mr Helmold. See Applicants’ Final Submissions (filed 15 February 2016), paragraphs 122, 125.

[41] Here, it is to be remembered that the unsigned claims were lodged with the QBSA on
23 January 2004.

[42] C & E Pty Ltd v CMC Brisbane Pty Ltd (Administrators Appointed) [2004] 2 Qd R 244.

[43] Transcript, day 3, page 91, lines 43–45.

[44] Transcript, Day 2, page 45, lines 45-47, and Transcript, Day 2, page 45, lines 1-5.

[45] Transcript, Day 2, page 40, lines 10-15.

[46] Transcript, Day 2, page 40, line 17.

[47] Transcript, Day 2, page 40, line 35.

[48] Transcript, Day 2, page 41, lines 35-40.

[49] Transcript, Day 2, page 42, lines 9-23.

[50] Transcript, Day 2, page 38, lines 30-35.

[51] Transcript, Day 2, page 47, lines 34-38.

[52] Owners of Strata Plan Number 5290 v CGS & Co Pty Ltd (2011) 281 ALR 575, 589 and following (Sackville AJA).

[53] Barclays Bank Limited v Quistclose Investments Limited [1970] AC 567, 580; In Re Australian Home Finance Pty Ltd [1956] VLR 1; Re Crest Realty Pty Ltd [1977] 1 NSWLR 664, 671 (Needham J); Vagrand Pty Ltd v Fielding (1993) 41 FCR 550, 552.

[54] In Re Suco Gold Pty Ltd (1983) 7 ACLR 873, 881; Apostolou v VA Corporation Aust Pty Ltd [2010] FCA 64, [48] (Finkelstein J).

[55] Exhibit 2, page 2, paragraph 1. See also Transcript, day 7 lines 73–80.

[56] ASIC Charge Number 1237447, Page 2 of Exhibit 2 and Exhibit 22.

[57] Registration number 709238435, Page 2 of Exhibit 2 and Exhibit 21.

[58] Affidavit of Terry Seirlis dated 5 September 2013, Annexure ‘TS1’, see clause 12.4(a), and also 12.4(i), (ii).

[59] Exhibit 21.

[60] Transcript, day 7 page 74, lines 25-30.

[61] Page 4 of the Charge (clause 1.1), part of Exhibit 22.

[62] Transcript, Day 3, page 87, line 23-24. See also page 88, line 40 and following.

[63] Transcript, Day 3, page 87, lines 27-28.

[64] Transcript, Day 3, page 89, lines 41-44.

[65] [2007] QCCTB 182, [76].

[66] QR164-07, SOR-31.

[67] Transcript, day 3, page 94, line 17.

[68] Transcript, day 3, page 91, line 25.

[69] Decision of Member Favell, delivered on 28 March 2014: Seirlis v QBCC [2014] QCAT 118.

[70] Annexures ‘TS5’ to the statement of Mr Seirlis, dated 17 October 2014.

[71] (1987) 163 CLR 164, 174.

[72] For Lot 2 file reference 872-04 (SOR-37 to Lot 2 ASOR p. 657. For Lot 5, file reference 875-04 appearing at SOR-33 to the Lot 5 ASOR, page 677.)

[73] Transcript, day 3 page 72, line 36.

[74] Transcript, day 3 page 72, line 43.

[75] A fact confirmed by my later question: Transcript day 3, page 77, line 40.

[76] Transcript, day 3 page 73, lines 18–22.

[77] Transcript, day 3, page 97, lines 01–44.

[78] Transcript, day three, page 96, lines 25-35.

[79] Affidavit of Mr Cosker dated 30 September 2013, paragraph 7(c).

[80] Transcript, day 4, page 89, lines 1–17.

[81] Transcript, day 6 page 42, line 25; page 43, line 11.

[82] Transcript, day 6, page 45, line 19.

[83] Transcript, day 6, page 46, line 8. Transcript, day 6, page 46, line 8.

[84] UI International v Interworks Architects Pty Ltd [2008] 2 Qd R 158, [106]–[107]; [2007] QCA 402.

[85] Transcript, day 1, page 86, lines 5–15.

[86] See for example the contracts and the accompanying deeds for Lot 2 and Lot 5, now annexures ‘TS-8’ and ‘TS-9’ to the statement of Mr Seirlis dated 17 October 2014.

[87] Paragraph 4 of the statement of Mr Seirlis dated 30 April 2015.

[88] Transcript, day One, page 88, line 1; page 90, line 15.

[89] Annexure ‘TS9’ to the Statement of Mr Seirlis 17 October 2014.

[90] Transcript day 1, page 92; Lines 40-45, see also Transcript day 1, pages 1-93 generally.

[91] Annexure ‘DBS2’ to the Statement of Mr Smith dated 10 October 2014.

[92] Exhibit 23.

[93] Transcript day 7, pages 80-88.

[94] Transcript day 7, pages 81-84.

[95] Transcript day 7, page 85, Lines 30-40.

[96] Exhibits 23.

[97] Consider, for example, Transcript day 2, page 7 commencing at Line 15, and continuing to page 10, line 20. The evidence given by Mr Smith in re-examination (Transcript day 2, page 13 lines 25–40) is not in my assessment sufficient to remediate the problem.

[98] Consider paragraph 5 of Mr Smith’s statement dated 10 October 2014.

[99] Lot 5 SOR-33 page 718; Lot 2 SOR-37, page 673.

[100] Transcript day 1, page 63, lines 10-15.

[101] Paragraph 5 of the Statement of Mr Smith dated 10 October 2014.

[102] Annexure ‘RC-13’ to the Affidavit of Mr Cottee dated 18 November 2013.

[103] The figure is taken from the rectification cost estimate in the Napier Bakeley Report produced by
Mr Cosker on behalf the Applicants.

[104] Transcript day 5, lines 01–30.

[105] Cox report, paragraphs 19.1.5, 19.1.7

[106] Cox report, paragraphs 19.2.3, 19.2.5

[107] Applicants’ written submissions filed 15 February 2016, see paragraphs 201–214.

[108] Ibid note 107, at paragraphs 206(b), 211.

Close

Editorial Notes

  • Published Case Name:

    Seirlis & Ors v Queensland Building and Construction Commission

  • Shortened Case Name:

    Seirlis v Queensland Building and Construction Commission

  • MNC:

    [2018] QCAT 291

  • Court:

    QCAT

  • Judge(s):

    McLean Williams

  • Date:

    31 Aug 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
Apostolou v VA Corporation Aust Pty Ltd [2010] FCA 64
2 citations
Barclays Bank Ltd. v Quistclose Investments Pty. Ltd. (1970) AC 567
2 citations
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720
4 citations
C & E Pty Ltd v CMC Brisbane Pty Ltd (Administrators Appointed)[2004] 2 Qd R 244; [2004] QCA 60
3 citations
Fisher v Hebburn Ltd (1960) 105 CLR 188
2 citations
In Re Australian Home Finance Pty Ltd [1956] VLR 1
2 citations
Insurance Commission of Western Australia v Container Handlers Pty Ltd (2004) 218 CLR 89
2 citations
Kern Corporation v Walter Reid (1987) 163 CLR 164
2 citations
Lange v Queensland Building Services Authority[2012] 2 Qd R 457; [2011] QCA 58
4 citations
Re Crest Realty Pty Ltd (No 2) (in liq) [1977] 1 NSWLR 664
2 citations
Searle v Queensland Building Services Authority [2007] QCCTB 182
2 citations
Seirlis & Ors v Queensland Building and Construction Commission [2014] QCAT 118
2 citations
Seirlis v Queensland Building Services Authority [2011] QDC 107
2 citations
Strata Plan Number 5290 v CGS & Co Pty Ltd (2011) 281 ALR 575
2 citations
Suco Gold Pty Ltd (in liq), In re (1983) 7 ACLR 873
2 citations
TNT Australia Pty Ltd v Horne, as executrix of the estate of the late Douglas Horne (1995) 36 NSWLR 630
3 citations
UI International Pty Ltd v Interworks Architects Pty Ltd[2008] 2 Qd R 158; [2007] QCA 402
4 citations
United Collieries Ltd. v Simpson (1909) AC 383
2 citations
Vagrand Pty Ltd (in liquidation) v Fielding (1993) 41 FCR 550
2 citations

Cases Citing

Case NameFull CitationFrequency
Seirlis v Queensland Building and Construction Commission [2020] QCATA 3718 citations
Seirlis v Queensland Building and Construction Commission [2020] QCA 2831 citation
1

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