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Interlink Developments Pty Ltd v Kruger QCAT 219
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Interlink Developments Pty Ltd v Mark Kruger and Melinda Kruger  QCAT 219
INTERLINK DEVELOPMENTS PTY LTD ACN 095 093 208)
7 August 2019
On the papers
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – PROCEDURE – where the Queensland Civil and Administrative Tribunal may make an order for security for costs – where s 109 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) considered –where the Tribunal considers the financial circumstances of the parties – where the Tribunal considers the prospects of success or merits of the proceeding – where the Tribunal considers the genuineness of the proceeding – where the company has a paid up capital of $8.00 and no other apparent assets – where the company shows a significant decline in the number and value of houses built over the preceding 3 years and its principal suffering deteriorating health – where the Tribunal finds that the respondent fails to put evidence of the current state of the financial state of the company – that an order for security for costs should be made
Building and Construction Industry Payments Act 2014 (Qld)
Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (Qld)
Queensland Building and Construction Commission Act 1991 (Qld), s 77
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 109
Uniform Civil Procedure Rules 1999 (Qld), rule 671(a)
Greg Black Constructions Pty Ltd v Brodie and Anor  QCAT 671
Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550  QCAT 424
McInnes Wilson Lawyers
McCarthy Durie Lawyers
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld).
REASONS FOR DECISION
- Interlink Developments Pty Ltd (‘Interlink’) formerly known as Urban Homes Pty Ltd agreed to construct a house for the respondents Mark and Melinda Kruger (who, hereafter, and meaning no disrespect, I will refer to as ‘the Krugers’) for $298,544.10.
- The parties signed a Master Builders Residential Contract-Level 2 on 10 March 2016. They are now in dispute. The contract has been terminated, and on 20 July 2018, Interlink commenced proceedings in the Tribunal claiming damages comprising the Practical Completion stage payment of $27,989 and interest thereon at 15% per annum. The Krugers have cross applied for damages $26,286.01 (inclusive of GST) for breach of contract for defective and incomplete work and liquidated damages of $43,200.00.
- The Krugers, on 4 October 2018, filed an application for miscellaneous matters claiming $11,506 by way of security for costs. Interlink has filed an application on 10 June 2019 seeking a direction that the Krugers comply with previous directions to submit their statement of evidence and should they not do so, by the time directed, that Interlink be at liberty to apply for judgement on the papers.
- The matter has progressed to a stage where the parties have filed and exchanged submissions in writing and Interlink has filed a detailed statement of evidence. Despite a number of directions made by the Tribunal the Krugers have not, at this stage, filed their statement of evidence.
Application for security for costs
- Under the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) the starting position when considering costs is that each party bears its own costs. That is, unless otherwise provided by the QCAT Act or an enabling Act. Section 77 of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) empowers the tribunal to award costs and, in building disputes, it is not unusual for the tribunal to do so.
- Section 109 of the QCAT Act provides:
- (1)This section applies if, under this Act or an enabling Act, the tribunal may award a party’s costs for a proceeding.
- (2)On the application of a party (applicant party) to the proceeding against whom a claim is made or an outcome or decision sought in a proceeding, the tribunal may make an order—
- (a)requiring another party to the proceeding to give security for the applicant party’s costs within the period stated in the order; and
- (b)staying the proceeding, or the part of the proceeding against the applicant party, until the security is given.
- (3)If the security is not given within the period stated in the order, the tribunal may make an order dismissing the proceeding, or the part of the proceeding against the applicant party.
- (4)In deciding whether to make an order under subsection (1), the tribunal may have regard to any of the following matters—
- (a)the financial circumstances of the parties to the proceeding;
- (b)the prospects of success or merits of the proceeding or the part of the proceeding against the applicant party;
- (c)the genuineness of the proceeding or the part of the proceeding against the applicant party;
- (d)anything else the tribunal considers relevant.
- The difference between the approach of this Tribunal to a Court is best explained by what Member Stilgoe (as she then was) said in Greg Black Constructions Pty Ltd v Brodie and Anor:
Section 109(4)(a) of the QCAT Act is very different in terms from rule 671(a) of the Uniform Civil Procedure Rules and for good reason. The tribunal is not a court. It has a specific statutory obligation to deal with matters in a way that is accessible, fair, just, economical, informal and quick. It must encourage the early and economical resolution of disputes. It must ensure that proceedings are conducted in an informal way that minimises costs to parties and is as quick as is consistent with achieving justice. It must act with as little informality and technicality and with as much speed as proper consideration of the matter before it permits. Those imperatives are not met by applying a requirement, as does rule 671(a), that impecunious corporate plaintiffs will have to provide security for costs before they can seek the assistance of the tribunal.
- There is no threshold to be established by a party seeking security for costs under the QCAT Act as is found in the Uniform Civil Procedure Rules 1999 (Qld). The Tribunal’s discretion to order security for costs is a broad one but it must be exercised judicially.
- In their application the Krugers set out a number of propositions which Interlink, in its response, do not dispute. Relevantly they are: –
- (a)in order to respond to the matters raised in the application, the respondent will need to obtain expert evidence from:
- a valuer in respect of the achievable rent and likely losses from any delay to deal with the allegations that the liquidated damages are a penalty;
- a building consultant to determine the impact of the alleged defects on the completion of the works the subject of the domestic building contract by the applicant; and
- a quantity surveyor to determine the value of any amount which may otherwise have been payable to the applicant in respect of any alleged defects identified by the building consultant.
- (b)The respondent will be required to engage the experts from the above field to provide an expert report, attend any joint experts’ conclave, prepare any joint report and provide the required oral evidence.
- The solicitors for the respondent obtained estimates of fees that would be incurred in engaging each of the experts as well as their own fees for the first and subsequent days of hearing. Those costs are estimated to be nearly $40,000.00. They seek security of $11,506.00.
Financial position of Interlink
- The company has a paid-up share capital of $8.00. It does not own any real property, according to searches conducted by the solicitors for the Krugers. In correspondence with Interlink’s solicitors the Krugers’ solicitors requested evidence of Interlink’s capacity to satisfy any adverse costs order. The request did not elicit any further information.
- In the application, Interlink responded by referring to its position as a currently licensed Building Contractor Category 2 (maximum revenue range of $3 million to $12 million). The category requires a minimum requirement of net tangible assets of between $156,001 and $480,000. This requirement arises as a result of a recent amendment to the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (Qld) which commenced on 1 January 2019. I note that the financial information as to the net tangible assets does not have to be reported until 31 December 2019.
- The prior requirement was that the net tangible assets be $0.00 or better. Therefore, at the time of its last renewal of registration it can be assumed that Interlink had a net tangible assets ratio of $0.00 or better.
- Interlink also relies upon the ASIC current and historical organisation extract of 2 October 2018 reproduced in the Krugers’ submissions which records a credit score of 717 which is above the average for an Australian company and is considered a low risk level so far as credit worthiness is concerned.
- The Krugers’ response is that the information from the QBCC is over 9 months old. They submit that no attempt has been made to provide a profit and loss statement or other current information as to the financial health of the company such as its current assets, work in progress and debts and liabilities.
- In their submissions in response, the Krugers refer to Interlink's residential construction record for the last 3 to 4 years which shows a substantial decline in the value of work performed. In the financial year 2015/2016 it undertook 22 jobs at a value of $9,868,199. In the 2016/2017 financial year it undertook jobs to the value of $1,831,434 and in the most recent period 2018/2019 it has undertaken only one job valued at $330,000.
- Their immediate concern is that the principal of Interlink Mr Brian Maloney is suffering from a serious and debilitating illness that affects his ability to properly manage the company. Mr Maloney has filed an affidavit in the principal application deposing to his deteriorating health. The information so far suggests that the business is being wound down. The Krugers also note advice their solicitors have received that Mr Maloney was to execute a Power of Attorney in favour of his wife. They also observe that there appears to be no succession plan for continuation of trade.
- Interlink could have assuaged any concern by providing the information sought, but has not done so.
Financial position of the Krugers
- The tribunal must look at the financial position of both parties. The Krugers have not placed before the Tribunal any evidence of their ability to absorb the costs of the dispute. I do not know what impact that an unsatisfied costs order may have on their position.
Prospects of success
- The Krugers submit that, whilst Interlink’s claims in the proceedings may not be wholly fanciful, its prospects of success are slim given that:
- (a)Interlink was unsuccessful in its adjudication under Building and Construction Industry Payments Act 2014 (Qld) in relation to its payment claim and did not proceed to judicially review the decision; and
- (b)The Krugers’ counter-application for delay damages and defective and incomplete work significantly outweighs the Interlink claim and raises a genuine argument against Interlink’s entitlement to any payments.
- Having presided over many building disputes I am reluctant to prejudge the outcome in this case. There is no reason to doubt the genuineness of the proceedings.
Other relevant matters
- There has been no delay in bringing this application for security for costs. Unfortunately, there has been delay in having the application determined. There has also been non-compliance by both parties with directions that have been made in the past, more so by the Krugers who, as yet, are to file their statements of evidence.
- The amount claimed by way of security for costs is not excessive in view of the potential overall costs involved.
- I have reservations about Interlink’s ability to meet a costs order for the following reasons:
- (a)There is reasonable evidence that its financial position has changed in recent times which is apparent by the decline in the work performed and value of work performed;
- (b)The declining health of Interlink’s principal Mr Brian Maloney which obviously is linked with the change in the performance of the company;
- (c)The evidence provided by Interlink of its financial position being that it has satisfied the financial requirements of its builder’s licence and the results of the ASIC search is dated and insufficient to allay concerns raised by the declining performance of the company and Mr Maloney’s health.
- (d)The suspected lack of succession planning for the company;
- (e)The failure of Interlink to rebut the concerns expressed by the solicitors for the Krugers by submitting more current financial information.
- In the exercise of my discretion I intend to direct Interlink to pay to the QCAT Trust Account the sum of $11,506.00 by way of security for costs by 4.00pm on 30 August 2019. I further direct that the proceedings be stayed until the payment is made.
- In respect of the claim by Interlink that the Krugers comply with the directions to file their Statements of evidence, I adjourn the application for consideration at a Directions Hearing to be listed at a date after 30 August 2019. I reserve the costs of the two applications.
  QCAT 671.
 Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550  QCAT 424.
 Greg Black Constructions Pty Ltd v Brodie and Anor  QCAT 671, . Also, Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550  QCAT 424, .
- Published Case Name:
Interlink Developments Pty Ltd v Mark Kruger and Melinda Kruger
- Shortened Case Name:
Interlink Developments Pty Ltd v Kruger
 QCAT 219
07 Aug 2019