Keinath v Fleming[2024] QCAT 81

REASONS FOR DECISION

1. [1]
   Christa Keinath, an owner-builder, had an informal agreement with Jeffrey Fleming, then a licensed builder, to construct a concrete slab and conduct associated earthworks (‘the building work’) at her residential property. Upon Ms Keinath paying a deposit, Mr Fleming commenced the building work. At completion, the price of the work was varied, and full payment was made by Ms Keinath to Mr Fleming. Ms Keinath then noticed certain defects, which she notified Mr Fleming of. She arranged for third party advice and reported the matter to the Queensland Building and Construction Commission (‘QBCC’).
2. [2]
   The QBCC inspected the work and found a number of defects and issued a Direction to Rectify and/or Complete to Mr Fleming. The Direction was not complied with, and subsequently Ms Keinath commenced an application for a domestic building dispute in the Queensland Civil and Administrative Tribunal (‘QCAT’) with respect to the defective work.

Background

3. [3]
   On 15 March 2021 Mr Fleming provided a quote in respect of the building work, noting that it was open to variations, and headed ‘concrete/earthworks’. Prices were quoted in relation to prepping and laying a concrete slab and associated costs. The total cost of the building work was listed as $15,164 plus extras, to be determined, of earthworks and cracker dust.^[1] This quote was dated and signed by Mr Fleming. It was not signed by Ms Keinath.
4. [4]
   Ms Keinath says Mr Fleming did not supply her with a written contract, only a quote plus a variation. Ms Keinath says she accepted this “on a handshake” and Mr Fleming asked for deposit to be paid as the acceptance.^[2]
5. [5]
   Ms Keinath paid the $3,000 deposit on 25 March 2021.^[3]
6. [6]
   Ms Keinath made further payments of $3,000 on 26 March 2021^[4] and $5,000 on 13 May 2021.^[5]
7. [7]
   The building work commenced on 16 April 2021.^[6]
8. [8]
   A Form 1 Commencement Notice was signed by Mr Fleming and dated 25 March 2021, noting the date on which work commenced under the Contract was 25 March 2021, and the date for Practical Completion was 20 April 2021.^[7]
9. [9]
   Ms Keinath states the building work was completed on 21 May 2021.^[8] On the same date, Mr Fleming signed a Form 16 – Inspection Certificate which at the back included a sketch plan of ‘architectural drawings’ for the slab, and gave a copy to Ms Keinath.^[9]
10. [10]
    At the conclusion of the work on 21 May 2021, Mr Fleming provided a tax invoice to Ms Keinath for the varied amount of $19,610.^[10]
11. [11]
    There is no dispute by Ms Keinath as to the variations to the building work. Ms Keinath says the variation occurred on completion on 21 May 2021, which was to change the price from $15,164 to $19,610.^[11]
12. [12]
    Whilst no specific evidence was provided, there are four items marked with an asterisk symbol on the tax invoice, and it appears that each of those items had an increased price since the original quote was provided.^[12]
13. [13]
    Ms Keinath paid the balance owing on the tax invoice, namely $8,610, to Mr Fleming on 21 May 2021.
14. [14]
    Ms Keinath noticed some defects in the building work on 21 May 2021, and on further dates in 2021.^[13]
15. [15]
    Ms Keinath obtained a report from Precision Concrete Scanning Co on 9 November 2021 (‘PCS Report’), in which reference was made to incorrect steel reinforcing concrete coverage, insufficient slab depth and beam depth not in compliance with the engineering details for the site.
16. [16]
    Mr Basem Armanious, Engineer, reviewed the PCS Report and provided his opinion to Ms Keinath on 9 November 2021. Mr Armanious says the PCS Report shows five defects in the slab and footings, and provides the opinion that the slab and footings are not adequate and could not be practically repaired.^[14]
17. [17]
    Ms Keinath made a complaint to the QBCC on 20 August 2021.^[15]
18. [18]
    The QBCC inspected the building work on 21 December 2021, and provided an Initial Inspection Report on 10 January 2022 as to 14 complaints made by Ms Keinath with respect to alleged defects of the pier and beam concrete slab constructed by Mr Fleming.
19. [19]
    Of these complaints, the following were substantiated by the QBCC:^[16]

3. (a)
   Item 4 (structural) – The installation of footing system does not comply with the requirements of Australian Standard (‘AS’) 2870-2011 “Residential Slabs and Footings”, clause 3.2.1, in that there is an absence of the required strip footing under the external wall between the dining room and carport and bedroom, thereby compromising the structural integrity of the wall and slab;

3. (b)
   Item 5 (non-structural) – The finished surface of the carport slab is not satisfactory and not to a standard reasonably expected of a competent holder of a QBCC licence for the relevant class and has resulted in an unsightly finish;

3. (c)
   Item 6 (structural) – The concrete coverage of the reinforcing steel in the bathroom does not comply with the requirements of AS 2870-2011, clause 5.3.1, in that there is insufficient coverage of the steel which therefore undermines the ability of the steel to effectively perform as designed;

3. (d)
   Item 8 (structural) – The surface of the bathroom concrete slab is not in a suitable state to accept floor finishes, in that the applied levelling compound is drummy and has delaminated in a number of areas and does not provide an intact surface for the application of floor finishes;

3. (e)
   Item 10 (structural) – The modifications to the bathroom floor concrete slab have compromised the integrity of the chemically treated material termite collars around drainage pipes and has thereby created the risk of termite entry into the dwelling at the point of the pipe penetrations through the slab and consequently does not comply with the requirements of AS 3660.1,2000, “Termite management Part 1: New building work” clause 4.3.3.5;

3. (f)
   Item 13 (non-structural) – The finished surface of the slab is not satisfactory and not to a standard expected of a competent holder of a QBCC licence for the relevant class;

3. (g)
   Item 14 (non-structural) – The finished surface of the slab is not satisfactory and is of an unsightly finish and not to a standard expected of a competent holder of a QBCC licence for the relevant class.

20. [20]
    The QBCC provided the PCS Report and opinion of Mr Armanious to Mr Rob Hughes, a QBCC structural engineer. Mr Hughes says the PCS Report shows many structural defects, but recommends that only the complaint items should be addressed, and that the most significant complaint items in his view were 4, 6 and 10.^[17]
21. [21]
    In relation to item 4, Mr Hughes states that a lack of footing under the external wall at the dining room means that a reconsideration of support for the roof deck is required as there is to be a spa pool there and a very heavy load, and engineering input is required.
22. [22]
    In relation to item 6, Mr Hughes states that the exposed slab reinforcement is a concern and it is possible to rectify this by cutting around it, depressing it, and plastering with a rich sand-cement mix.
23. [23]
    In relation to item 10, Mr Hughes states a breach of termite protection must be addressed, and that the general vicinity seems to be well covered with native trees which is a termite risk.
24. [24]
    QBCC wrote to Ms Keinath on 23 February 2022, stating that Mr Fleming has not complied with Direction to Rectify and/or Complete No 0108766 issued on 17 January 2022 for the building work as to seven Direction items.^[18] The correspondence states that Ms Keinath has participated in the QBCC’s dispute resolution as prescribed by legislation and her case has  now been finalised, and that if she wishes to pursue the matter further, she may apply to QCAT.^[19]
25. [25]
    Ms Keinath commenced the QCAT proceedings on 15 March 2022. In her Application, Ms Keinath claims a refund in full of all monies paid to Mr Fleming, namely $19,610, plus costs, on the basis that the slab is unusable and she would need to pay to remove and repair the building work, with a then-estimated cost of $62,000.^[20]
26. [26]
    Ms Keinath raises the following defects in QCAT:

    1. Footings non-compliant – 28 May 2021;^[21]
    2. Surface slab carport –21 May 2021;^[22]
    3. Concrete coverage in all of house and bathroom – 21 May 2021;^[23]
    4. Bathroom rectification – 29 July 2021;^[24]
    5. Bathroom chemical collars compromised – 29 July 2021;^[25]
    6. Form 16 illegally given to her – 20 August 2021.
27. [27]
    The only defect which was not raised before the QBCC was that the Form 16 was illegally given to her.
28. [28]
    Upon QCAT’s direction,^[26] Ms Keinath filed a copy of a QBCC Licence Search for Mr Fleming.^[27]
29. [29]
    The Licence Search is undated. However, the details within show that:

    1. Mr Fleming was the holder of a Trade Contractor Licence between 26 October 2018 to 22 November 2021;
    2. Mr Fleming’s QBCC licence was cancelled on 15 March 2022, and had been previously suspended between 26 October 2018 and 22 November 2021. The suspension was on the basis of failure to comply with the imposed annual reporting licence condition;
    3. Mr Fleming was given one QBCC direction to rectify defective work (structural) in 2022, which he had not complied with;
    4. Mr Fleming was given one QBCC direction to rectify defective work or remedy consequential damage (non-structural) in 2018, which he had not complied with; and
    5. Mr Fleming was not currently licensed.
30. [30]
    I find that:

    1. based upon the Licence Search, Mr Fleming was the holder of a licence at the time of carrying out the building work in April to May 2021. However, he became subsequently unlicensed; and
    2. The QBCC Direction in 2022 pertains to the building work for Ms Keinath.
31. [31]
    The particulars of the earlier QBCC Direction in 2018 are unknown, and I therefore can not draw any inferences or make findings pertaining to that Direction.
32. [32]
    Upon QCAT Direction,^[28] Ms Keinath filed a statement attaching quotes and invoices with respect to further work completed to repair/amend the slab.^[29]
33. [33]
    Although Ms Keinath does not provide a total of the amount incurred in her Statement, the quotes of LevelMaster and East Coast Frames & Trusses and tax invoice of Jeff Egan CCS amount to a total of $22,495.47. Ms Keinath states that this work has been paid for and completed. 
34. [34]
    This is a significant difference in Ms Keinath’s earlier estimation of $65,000,^[30] although Ms Keinath does say the amount excludes labour, concrete and other items. It is also unclear on the face of the quotes and tax invoice as to when those items were paid for, and whether the amounts remained the same, as no receipts have been provided for the repairs.
35. [35]
    In any event, Ms Keinath at no stage has sought to amend her Application to include those rectification costs.

Issues

36. [36]
    The issues which arise in this matter include:

    1. What are the consequences of the informal contract for building work? Is Ms Keinath entitled to a claim in contract or negligence?
    2. What measure of damages, if any, is Ms Keinath entitled to for the defective building work?
    3. Is Ms Keinath entitled to be paid costs?

Statutory framework – building disputes

37. [37]
    The relevant enabling Act is the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’).
38. [38]
    The Tribunal, QCAT, has jurisdiction to hear and decide building disputes, pursuant to s 77 of the QBCC Act. This section contains a requirement that an applicant must first comply with a process established by the QBCC to attempt to resolve the dispute.^[31]
39. [39]
    A building dispute includes a domestic building dispute, which is defined to include a dispute between a building owner and a building contractor relating to the performance of reviewable domestic work or a contract for the performance of reviewable domestic work.^[32]
40. [40]
    The terms “building owner” and “building contractor” are also defined in the QBCC Act.^[33]
41. [41]
    Reviewable domestic work means domestic building work under Schedule 1B, s 4 of the QBCC Act. Domestic building work includes the renovation, alteration, extension, improvement or repair of a home.^[34] A home is a building or portion of a building that is designed, constructed or adapted for use as a residence.^[35]
42. [42]
    Pursuant to Schedule 2 of the QBCC Act, a domestic building dispute also includes a claim or dispute in negligence, nuisance or trespass related to the performance of reviewable domestic work, other than a claim for personal injuries.
43. [43]
    Pursuant to s 77(3) of the QBCC Act, in deciding a building dispute the Tribunal may award damages, interest, restitution, rectification or completion of defective or incomplete work, and costs.
44. [44]
    Section 48 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) provides that where the Tribunal considers a respondent in a proceeding is acting in a way that unnecessarily disadvantages the applicant by not complying with a Tribunal order or direction without reasonable excuse, the Tribunal may make its final decision in the proceeding in the applicant’s favour.^[36] The Tribunal may also make an order against the respondent, to compensate the applicant for any reasonable costs incurred unnecessarily.^[37]

Consideration

45. [45]
    I am satisfied that QCAT has jurisdiction to decide the dispute under s 77(1) of the QBCC Act, and that the process established by the QBCC to attempt to resolve the dispute has been complied with^[38] because Ms Keinath filed a letter from QBCC to that effect.^[39]
46. [46]
    I am satisfied that at all material times, Ms Keinath was the owner of the residential property where building work was to be completed, and that Mr Fleming was a building contractor who carried on a business that consisted of or included carrying out building work.
47. [47]
    On the basis of the Affidavit of Service filed by Ms Keinath on 25 March 2022, I am satisfied and find that the service of the application for domestic building disputes has been properly effected on Mr Fleming.
48. [48]
    Mr Fleming has failed to comply with all QCAT Directions, including failing to file and serve a response.^[40]
49. [49]
    I am satisfied that Ms Keinath has materially complied with the QCAT Directions.
50. [50]
    I am satisfied and find that in failing to comply with all QCAT Directions, Mr Fleming has unnecessarily disadvantaged Ms Keinath, primarily in having the matter heard and finally determined. In accordance with direction 2 of the QCAT Directions made 10 October 2022, it is appropriate to exercise my discretion and make a final decision in this proceeding in favour of Ms Keinath.^[41]
51. [51]
    I now turn to consideration of Ms Keinath’s claim.

Nature of the claim

52. [52]
    Whilst not clearly articulated on the face of Ms Keinath’s application or evidence, it appears that the basis of Ms Keinath’s claim for a “refund in full” of all monies paid to Mr Fleming is one based in breach of contract or negligence. Ms Keinath claims that the building work performed by Mr Fleming was defective, and that these defects were not rectified despite a QBCC direction.
53. [53]
    Ms Keinath refers in her Application to Mr Fleming failing to comply with the “Direction to Rectify”.^[42] The letter from the QBCC dated 23 February 2022^[43] referred to Mr Fleming not complying with Direction to Rectify and/or Complete No. 0108766 issued on 17 January 2022 for the building work. This is therefore clearly the Direction to Rectify that Ms Keinath refers to as the basis of her claim.
54. [54]
    A home owner who enters into an agreement with a building contractor for the performance of building work and who sustains loss arising from the performance of the work in a defective manner may make a claim against the building contractor for breach of contract.^[44] Where the breach of contract is established, the homeowner is, as far as money can do so, entitled to be placed in the same situation with respect to damages as if the contract had been performed.^[45]
55. [55]
    A domestic building contract, where the contract price is more than $3,300 and less than $20,000 is a level 1 regulated contract. A level 1 regulated contract, in order to have effect, must be in writing, must be dated and must be signed by the parties.^[46]

Consideration – what are the consequences of the informal contract?

Breach of contract?

56. [56]
    I am satisfied that the parties had an informal agreement for Mr Fleming to perform domestic building work for Ms Keinath, on the basis of the quote provided by Mr Fleming in March 2021 which Ms Keinath accepted “on a handshake” and by payment of a deposit.
57. [57]
    However, the agreement was not a ‘level 1 regulated contract’ as required by s 13, Schedule 1B of the QBCC Act. Although Mr Fleming’s quote was in writing and dated, it was only signed by him, and it did not comply with the other requirements of a level 1 regulated contract.^[47]
58. [58]
    Under the QBCC Act, a failure by a building contractor to comply with a requirement in relation to a domestic building contract does not necessarily render the contract illegal, void or unenforceable.^[48]
59. [59]
    However, s 13(5)^[49] makes it clear that the failure to meet the minimum requirements of s 13(2)^[50] – namely, for the contract to be in writing, dated and signed by both parties – has the result that a contract without those requirements is of no effect.^[51] The implied warranty provisions in the QBCC Act also do not apply where there is no regulated contract.^[52]
60. [60]
    Therefore, the agreement between Mr Fleming and Ms Keinath is of no effect.^[53] It follows that Ms Keinath has no entitlement to a claim against Mr Fleming for breach of contract.

Negligence?

61. [61]
    As referred to above, a domestic building dispute may include a claim or dispute in negligence relating to the performance of reviewable domestic work.^[54]
62. [62]
    The Tribunal has recognised in previous decisions that it may still consider an informal agreement in any claim for negligence,^[55] finding that in agreeing to perform the work and performing the work, the building contractor owed the home owner a duty to take reasonable care in performing the work.^[56]
63. [63]
    To establish a claim in negligence, Ms Keinath must prove that Mr Fleming owed her a duty of care, that Mr Fleming breached the duty, and as a result of the breach, Ms Keinath has suffered loss.^[57]
64. [64]
    I find that Ms Keinath relied upon Mr Fleming to perform the building work with appropriate care and skill. Notwithstanding that Ms Keinath referred to herself as an “owner builder”,^[58] there is no evidence that Ms Keinath had expert knowledge of the type of building work performed by Mr Fleming. Ms Keinath arranged for third parties to assess the building work for defects. Therefore, I find that Ms Keinath was in that regard ‘vulnerable’ in her dealings with Mr Fleming.^[59]
65. [65]
    I find that it was reasonably foreseeable that if Mr Fleming failed to exercise appropriate care and skill in performing the building work that Ms Keinath may suffer loss and that Mr Fleming owed to Ms Keinath a duty of care to perform the building work in an appropriately skilled and competent manner.
66. [66]
    Ms Keinath has alleged defects in the building work performed by Mr Fleming, as set out in the Alleged Defective Work Schedule^[60] and referred to above.
67. [67]
    Prior to filing the QCAT proceedings, Ms Keinath obtained a report from Precision Concrete Scanning Co and an opinion from Basem Armanious, Structural Engineer. Based on the PCS report, Mr Armanious’ opinion was that the slab and footing were not adequate and could not practically be repaired.
68. [68]
    Ms Keinath referred her complaints as to the defective work to the QBCC, who found a total of seven complaints were substantiated – four of these were structural defects, and three of these were non-structural defects. The QBCC issued Direction to Rectify No. 0108766 on 17 January 2022 in relation to those seven defects.
69. [69]
    The QBCC noted on 23 February 2022 that Mr Fleming had not satisfactorily complied with any items in that Direction. I find the evidence supports that at no stage did Mr Fleming take any steps to rectify any of those defects.
70. [70]
    On that basis, I find that Mr Fleming has failed to perform the building work in a proper and workmanlike manner in breach of the duty owed to Ms Keinath, and that Mr Fleming is liable to Ms Keinath for damages as a result of this breach of duty.

Damages

71. [71]
    The measure of damages for a breach of duty in tort is essentially to place Ms Keinath in the same position as she would have been in had there been no breach of duty by Mr Fleming.^[61] Usually this is done by calculating the pecuniary sum which will make good to Ms Keinath, so far as money can, the loss which she has suffered.^[62] Damages may include the cost of rectification work.^[63]
72. [72]
    For damages for negligence to be recoverable they must not be too remote from the negligent conduct. That is, the damages must be of a kind that a reasonable person could have foreseen.^[64]
73. [73]
    Ms Keinath has already paid Mr Fleming in full for the building work, the total amount being $19,610. Her claim in QCAT is focused on the failure of Mr Fleming to rectify the defects found by the QBCC and the subject of their Direction to Rectify, and as such she seeks for the full amount she paid to Mr Fleming to be refunded to her.
74. [74]
    Ms Keinath has since incurred costs in having the building work rectified, in the vicinity of $22,495 excluding labour and concrete costs, although she does not seek damages for this rectification work.
75. [75]
    Mr Fleming has not made any claim for reasonable remuneration in performing the work, having not filed any response whatsoever to Ms Keinath’s application.
76. [76]
    The damages sought by Ms Keinath are of a kind that a reasonable person could have foreseen would be sought to be recovered in these circumstances. I also note the rectification costs Ms Keinath has further incurred are in excess of the amount paid for the original building work. I therefore consider it is appropriate to award damages to Ms Keinath for the amount she paid Mr Fleming, namely $19,610.

Costs

77. [77]
    Ms Keinath claims costs in her application, which she states are the amount of “$19,610”.^[65] It is apparent from the face of the application that this is the amount also claimed for damages, being the refund of the monies paid to Mr Fleming. Ms Keinath does not particularise what costs she claims.
78. [78]
    The Tribunal may award costs in a building dispute.^[66]
79. [79]
    It is clear from Ms Keinath’s application that she paid a filing fee of $358 in QCAT, however there are no other costs apparent from the material filed by Ms Keinath.
80. [80]
    The amount of the filing fee is reasonable and was necessarily incurred by Ms Keinath in pursuing her claim. I therefore consider it is in the interests of justice to award the filing fee, and I fix the total costs payable in the amount of $358.

Orders

81. [81]
    There will be a final decision for Ms Keinath as follows:

3. (a)
   Damages of $19,610; plus

3. (b)
   Costs of $358.