Queensland Building Services Authority v Progressive Enterprises Pty Ltd
[1996] QDC 361
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- Unreported Judgment
- Queensland Building Services Authority v Progressive Enterprises Pty Ltd[1996] QDC 361
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Queensland Building Services Authority v Progressive Enterprises Pty Ltd[1996] QDC 361
Queensland Building Services Authority v Progressive Enterprises Pty Ltd[1996] QDC 361
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No. 246 of 1995 |
QUEENSLAND BUILDING SERVICES AUTHORITY | Applicant |
AND
PROGRESSIVE ENTERPRISES PTY LTD | Respondent |
REASONS FOR JUDGMENT - BRABAZON Q.C., D.C.J.
Delivered the Tenth day of January, 1996
The Appeal
This is an application for leave to appeal against a determination made by the Queensland Building Tribunal. It is made according to s. 94 of the Queensland Building Services Authority Act.
It was common ground that the appeal was not a rehearing. I adopt that approach. Several judges of this court have held that an appeal from the Tribunal is not a rehearing. See Ashmore Constructions Pty Ltd v Queensland Building Services Authority (unreported, Kimmins DCJ, Appeal No. 8 of 1993, delivered February 1993), and Appeal No. 288 of 1993 (re Poiner, unreported, Boulton DCJ, March 1994) where other unreported decisions are mentioned.
The authorities which lay down the principles to be applied are Hocking v. Bell (1945) 71 CLR 430 (H.C.) and (1949) 75 CLR 116 (P.C.); Clark v. Trevilyan (1963) QWN 11; Aspasia v. Huntress [1985] 2 Qd.R. 241; Callinan v. Boyne Smelters Limited [1985] 2 Qd.R. 501; Aitken Transport v. Voysey [1990] 1 Qd.R. 510.
Those authorities show that the findings of the Tribunal are to be equated to the verdict of a jury. They will be disregarded only if they can be shown to be manifestly wrong in the sense explained in Hocking v. Bell. As Kelly SPJ put it in Aitken Transport v. Voysey:
“the function of the appeal court is limited to see first whether there is any evidence in support of the findings, secondly whether the findings can be set aside as being against the weight of evidence and unreasonable and that, even the finding is supported by the evidence and is not unreasonable, it may be set aside if it appears that the judge has misdirected himself, and that the misdirection has influenced the result. ... the appeal court cannot set aside the verdict as being against the weight of evidence merely because the court does not agree with it. The question is not whether the verdict appears to the appeal court to be right, but whether it is such as to show that the jury has failed to perform its duty; and that the appeal court must always be on guard against the tendency to set aside a verdict because it feels it would have come to a different conclusion.”
As the Aspasia decision demonstrates, a judge sitting alone, and giving reasons, may show such a misapprehension of the facts that the appeal court should interfere.
Leave to Appeal
The appellant requires leave to appeal. As it happened, I thought it appropriate to listen to full argument on the merits of the appeal, and each party acquiesced in that course. It is a course which is often adopted by courts when there is uncertainty whether or not leave to appeal should be granted. That is the practice often adopted by the High Court of Australia, in considering applications for special leave. It was also the course adopted in an appeal from arbitrators, Qantas Airways v. Joseland and Gilling (1986) 6 NSWLR 327 at 333. There, the decision to grant or refuse leave was postponed until the substantive issues had been discussed.
In that case, it was also held that the issue of leave depended upon the exercise of a discretion, to be exercised after considering all of the circumstances of the case. In Queensland, it may be that a somewhat different approach should be taken. As was pointed out by Judge Wylie QC in Trewin v. Clemitson (Appeal No. 7 of 1994, unreported, delivered 28 January 1994), s. 94(1) of this Act resembles the appeal procedures from a master to a judge, under the Rules of the Supreme Court. In that case, the considerations are to be found in Glenwood Properties Pty Ltd v. Delmoss Pty Ltd [1986] 2 Qd.R. 388 and McIver Bulk Liquid Haulage Pty Ltd v. Fruehauf Australia Pty Ltd [1989] 2 Qd.R. 577. There, various criteria are discussed, which might persuade the Supreme Court to grant leave to appeal.
In this case, bearing in mind the substantial amount of money involved, the complexity of the issues, and the importance of those issues to the parties, it is my opinion that leave to appeal should be granted. That is so, no matter what test is to be applied. However, the appellant does make out a prima facie case.
The Background
The appellant is a company called Progressive Enterprises Pty Ltd (“Progressive”). The respondent is the Queensland Building Services Authority (“the Authority”). The basic facts can be shortly stated. Progressive was the developer of nine duplexes in the Brisbane area. The duplexes contained eighteen separate apartments. It is common ground that each duplex is a “multiple dwelling” as defined in the Q.B.S.A. Regulations - it means a building comprising two or more residential units. It is also common ground that the work done was “residential construction work” within the meaning of Regulation 4, and that Progressive was a “consumer” within the meaning of the Act.
When Progressive got to the stage of having its plans approved by the Brisbane City Council, it was told by the Council that an insurance premium had to be paid. That was on 1 March 1994. On 18 March a B.C.C. letter indicated that a copy of the insurance receipt was to be provided before the building application could be approved. A statutory insurance premium of $262 was required for each of the 18 units (see Schedule 1 to the Regulations). It was duly paid.
At the time, there was a written form of insurance policy issued by the Authority. Sections 68 and 69 of the Act deal with any forms of insurance. They are to be “in the terms prescribed by regulation” (69(2)). Regulation 24(1) speaks of “a policy of insurance in the terms set out in the Board's policies ....”. Here, the form of policy is not itself contained in any regulation - it was simply adopted by the Board and promulgated as a matter of policy. There was no suggestion before me that such a procedure was irregular.
The insurance policy conditions give cover in three circumstances:
- (a)non completion of the work;
- (b)defective construction; and
- (d)subsidence or settlement.
Section 2 of the policy deals with non-completion. It contains Clause 2.4, which is an exclusion clause. The owner is not entitled to compensation in three cases. The third case is where the residential construction work comprises or relates to a “multiple dwelling”. That expression is defined in the policy - it means a building compromising two or more residential units of not more than three storeys in height. That is this case.
In the case of a multiple dwelling, no amount is payable under the policy in respect of claims for non-completion of the work, except where the owner occupies, or proposes to occupy, a residential unit in that multiple dwelling as his or her place of residence.
It is common ground that the exception applied to some of the work being done by Progressive. As it was accepted that the principals of Progressive, Mr and Mrs Rushton, intended to occupy one unit themselves, only one of the duplexes was covered for non-completion of the work.
Progressive entered into building contracts with a man called Cunningham. He started the work, but was unable to complete it. A claim was made under the policy. It was rejected by the Authority, relying on Clause 2.4(c) - except to the extent of the one duplex. It is common ground between the parties that Progressive has been paid under the policy for those two units. Otherwise, its claim has been refused for the other 16 residential units.
Progressive challenged the Authority, by making application to the Tribunal. The Tribunal recognised the legal force of the exclusion in Clause 2.4(c). However, it went on to find that Progressive was entitled to rely upon the principles of estoppel, or waiver, so that the Authority was obliged to indemnify Progressive with respect to its losses suffered with respect to the other 16 duplexes.
The Authority now wishes to appeal against the decision of the Tribunal.
It is necessary to examine in detail the proceedings, the events that were said to give rise to equitable relief, overcoming the strict legal position that Progressive was not entitled to a full indemnity under the terms of the policy, and the arguments of counsel.
The Issues between the Parties
The Tribunal does not rely on strict pleadings. In this case, Progressive made an application, requiring a review of the Authority's decision of 16 March 1995, rejecting the claim for insurance covering 16 units. Progressive then delivered Amended Points for Determination. The main contention was that the duplexes were not “multiple dwellings”. The Points also raised issues of estoppel and waiver, asking if the Authority was estopped from relying on Clause 2.4(c) of the policy, by denying an indemnity for all 18 units.
In its Statement of Reasons, the Authority relied on Clause 2.4(c), as the duplexes were “multiple dwellings”.
It seems that no particulars of the alleged estoppel were asked for, or given. The certificates of insurance, which later assumed great importance, are briefly mentioned in the Application. They are dealt with at length in Mr Rushton's statement which was admitted into evidence. But that was in a different context - there is no mention, in the statement, of anything which would give rise to an estoppel founded on the certificates. However, the issue of estoppel was mentioned at the opening of the hearing. Mr Holt SC for the Authority, said that he was ready to deal with that issue, even though there were no agreed facts about it (T.4). The inquiry into the facts then began.
The Decision Challenged
The Tribunal's decision recounts the facts, from page 1 to page 5.3. It appears to me that those findings are accurate, and solidly based on the evidence. As those findings make clear, by the time Mr Rushton embarked on this project, he had an understanding that the Authority's insurance would provide cover for a developer if the builder “went broke” or caused a major defect. His conversations with the builder, Cunningham, are set out. It is also useful to add a reference to Mr Rushton's evidence, to the effect that he gathered that basic understanding from conversations with his brothers, who were builders, and other builders. See 63-64.
The controversial aspects of its decision are found under the title “Estoppel”, from page 8.8 to page 12.5. It is apparent that great significance was attached to the form of the 18 certificates of insurance, issued by the Authority on 15 July 1994. The Tribunal concluded that the certificates formed the basis of an estoppel, which Progressive was entitled to assert against the Authority. That conclusion was at the centre of the Authority's appeal, and needs to be considered with care.
The Certificates
The Tribunal observed that the introduction of the insurance scheme was the subject of significant publicity in the community. It was thought to be a matter of community knowledge, that the purpose of its scheme was to cover, among other things, loss in the event of non-completion by a builder. It is difficult to see the relevance of that observation, even if true. First, it seems that there was no evidence to support the assertion. Secondly, there was no evidence to show that Mr Rushton was influenced by such publicity.
The Tribunal then went on to make some significant findings, regarding the responsibility of the Authority for Mr Rushton's expectations. It was rightly found (the findings are clearly supported by the evidence) that Mr Rushton did not act upon any express representation by the Authority concerning the terms of cover of the policy; Mr Rushton never inquired of the terms of the policy at any time; that representations made to him were addressed only to the issue of broad cover and the certificates, rather than the terms of that cover; no representations were made to him except those that might be found on the face of the certificates of insurance; that the premium to be collected necessarily remained unchanged, despite variations in the level of cover; and that Progressive, through Mr Rushton, presumed that a certain legal relationship existed between itself and the Authority, concerning the extent of cover.
It is with that background in mind, that one can turn to consider the critical issue in this appeal - the impact of the certificates of insurance. It was the practice of the Authority to send out certificates a considerable time after payment of the insurance premium. That premium would usually be paid by the builder. In the result, the first detailed description of the insurance cover would usually be given to an employer well after work started. That was so in this case. Work on Stage 2 started in about the first week of June 1994. The certificates were sent out about six weeks later. A fair bit of the work had been done by then - probably all the slabs were down and some walls up.
It seems that there was a good deal of delay and difficulty in the Authority sending out appropriate and accurate certificates, in relation to both Stages 1 and 2. The first certificates for Stage 1 were sent on 18 June 1994. Later certificates arrived in the following months.
The certificates of 15 July 1994 contained two features, relied upon by Progressive. (Indeed, all certificates contained the same features.) The “Date of Expiry” was connected to “(non completion, defective construction, subsidence and settlement)” (emphasis added). Then, further down, the heading “Policy Sections Excluded Under the Certificate” had a blank beside it, where a response might have been inserted.
The certificates were accompanied by letters of the same date. They contained the Insurance Policy Conditions, set out in a small booklet. The letter asserted that the certificate was “evidence that residential construction work is covered by a policy of insurance under the statutory insurance scheme”.... “it is in your interests to be aware of the protection afforded by the policy and understand the ‘procedure for claims’ under Section 7. ... any inquiries concerning the certificate or policy should be directed to the Authority's Insurance Services Section ...”
Mr Rushton did not read the booklet. He only read the certificate. He thought the booklet was “just standard info guff that they send to everybody. It was the certificate I was looking at to see what I was covered for”.
As the Tribunal found, the Authority acted most imprudently in issuing a “clean” insurance certificates, accompanied by a copy of the policy conditions, when the exemption under the policy should have been disclosed. It can easily be accepted that the Authority did act imprudently. The form of the certificates was careless and potentially dangerous. They could well be taken to mean that non-completion was part of the cover, expiring on a certain date, and that no policy sections were excluded. As the Tribunal found, the role played by the Authority meant that it must have known that the development was made up of multiple dwellings, and that the form of the certificates was inappropriate. Indeed, the certificates on their face refer to “Duplex Constructions”. The question was, though, what did they mean to Progressive in this case?
Mr Rushton's evidence-in-chief is contained in his statement. There is nothing in that statement to support thed idea that he was influenced at all by the form of the certificates of insurance. The first mention of it is to be found in his re-examination - see 141-143. He said there that parts of the certificate, which I have mentioned above, meant to him that the policy covered non-completion by the builder - which was the same as his earlier understanding of such insurance.
There is no evidence to suggest that the Authority knew of Mr Rushton's expectations about the extent of its insurance cover. Indeed, there was no finding that it did know about his expectations. Silence will support an equitable estoppel where, to the knowledge of the silent party, it would be inequitable to assert a different legal relationship - cf. Brennan J in Walton Stores (Interstate) v Maher (1987) 164 CLR 387 at 428. However, in that case, Gaudron J at 463 thought that there was no need for knowledge about the other parties state of mind, where imprudence was a proximate cause of the adoption and acting upon the faith of an assumption.
Was the form of the certificates the proximate cause of Progressive's assumptions and actions? It is impossible to see that it was, for two reasons. By the time he received the certificates, Mr Rushton already had a clear view of what he believed to be the extent of the insurance cover. Because of that clear view, he had caused the company to embark first on Stage 1, and then on Stage 2. The company had entered into contracts with Cunnigham. Mr Rushton did not take a lot of notice of the policy booklet because “... as I said, in my mind I had sort of fixated in my brain that it was covered. ... and remember that you don't get these (certificates) until a couple of months after you've paid your premium anyhow. So by that stage you get your certificate, you read your certificate and you've asked the builder and he's said ‘yes you're covered’. So in your mind you know you're covered and you are busy with a project and admittedly to sit down and read it in a lot of detail, well I probably didn't do that, that policy condition book slipped my mind.” (Transcript 73, 76 and 77).
There was also his failure to look at the enclosed booklet. (It is true that, despite Regulation 24(2), the certificates did not set out the terms of the policy. But it is difficult to see that there is any practical difference, when the policy booklet was enclosed, with an encouragement to read it.) The effect of that failure was for the Tribunal to consider. The effect of the representation made to Progressive was essentially a question of fact. The Tribunal apparently, answered that question in favour of Progressive, and there is no reason why it was not entitled to do so.
In my opinion, there are certain facts here which make it impossible to conclude that Progressive is entitled to rely on an estoppel induced by the Authority's conduct. In principle, the approach is that described by Deane J in The Commonwealth v Verwayen (1990) 170 CLR 394 at 445-5.
“1. While the ordinary operation of estoppel by conduct is between parties to litigation, it is a doctrine of substantive law the factual ingredients of which fall to be pleaded and resolved like other factual issues in a case. The persons who may be bound by or who may take the benefit of such an estoppel extend beyond the immediate parties to it, to their privies, whether by blood, by estate or by contract. That being so, an estoppel by conduct can be the origin of primary rights of property and of contract.
- The central principle of the doctrine is that the law will not permit an unconscionable - or, more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation.
- Since an estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted, the resolution of an issue of estoppel by conduct will involve an examination of the relevant belief, actions and position of that party.
- The question whether such a departure would be unconscionable relates to the conduct of the allegedly estopped party in all the circumstances. That party must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppressive conduct if he were now to depart from it. The cases indicate four main, but not exhaustive, categories in which an affirmative answer to that question may be justified, namely, where that party: (a) has induced the assumption by express or implied representation; (b) has entered into contractual or other material relations with the other party on the conventional basis of the assumption; (c) has exercised against the other party rights which would exist only if the assumption were correct; (d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so. Ultimately, however, the question whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted. In cases falling within category (a), a critical consideration will commonly be that the allegedly estopped party knew or intended or clearly ought to have known that the other party would be induced by his conduct to adopt, and act on the basis of, the assumption. Particularly in cases falling within category (b), actual belief in the correctness of the fact or state of affairs assumed may not be necessary. Obviously, the facts of a particular case may be such that it falls within more than one of the above categories.”
The facts here show that Progressive's difficulties were really caused by a mistake as to the extent of the insurance cover, made by itself and the builder, Cunningham. The Authority played no part in the formation of that mistake. The die was cast by the time the Certificates of Insurance were sent on 15 July. The proximate cause of the mistake was Mr Rushton's erroneous assumptions about the extent of the policy cover.
Any opportunity to have the builder provide a bank guarantee would have passed, once the building contracts were signed. Any possibility of not undertaking the development at all also passed at the time those contracts were entered into. Mr Rushton also thought that he might have sought alternative insurance through a commercial insurer, such as Suncorp (Statement Para. 36). However, there was no evidence that such alternative insurance was available, especially at that stage of the project. Paragraph 36 itself is framed in such a way that it refers to what might have been done had Mr Rushton relaised the true position before being committed to the development of Stage 2.
Therefore, it can be seen that there is no evidence that any detriment was suffered by Progressive on account of the certificates of insurance. The detriment was alleged to have been caused by earlier events but, as I have recounted, those allegations were rightly dismissed by the Tribunal. And a reference to looking for other commercial insurance to cover non-completion, once the work was under way, could not possibly be evidence that such insurance could have been obtained. Indeed, the transcript shows that counsel for Progressive only faintly suggested otherwise - T. 238-240 - and no further submission could have been made about it.
That is sufficient to dispose of this appeal. However, it is helpful to consider other aspects of the decision.
The Tribunal says that Progressive assumed a certain legal relationship with the Authority, and that the assumption was “fortified” by the Authority, in issuing a clean certificate of insurance. There was evidence to support that limited finding. However, the Tribunal did not consider the degree to which the Authority had contributed to the situation in which Progressive found itself by about the end of 1994 - that is, having a builder who was not going to complete the work.
In its judgment, the Tribunal sets out the criteria summarized by Brennan J. in Waltons Stores. The second, third and fourth of those criteria did not exist, at least up until the delivery of the certificates - the Authority had not induced Progressive to adopt any expectation, Progressive up to then had not acted or abstained from acting in reliance on any expectation induced by the Authority, and the Authority did not know Progressive was going to act in that fashion, and did not intend it to do so. Therefore, the answers to three of the tests proposed by Brennan J, at least up until 15 July 1994, had to be resolved against Progressive.
Insofar as Brennan J was relied upon, with regard to silence, then it was important to identify the knowledge of the Authority. That could not be done, as there was no evidence that the Authority knew about Progressive's assumptions. Rather, it was said that the Authority should reasonably have expected Progressive to have held such beliefs. It is not clear why that was reasonable, except, perhaps, on the assumption that a certain form of policy was always available from the Authority. There was no evidence about that.
Other parts of the judgment of Brennan J in Waltons Stores show the importance of examining the conduct of a defendant, to see whether or not its conduct is unconscionable in occasioning the adoption of an expectation by the other party. See his reasons at p. 414. On the evidence here, it is impossible to reach the conclusions that the Authority's conduct was a proximate cause of Progressive's belief at the relevant time, and that it suffered any detriment after 15 July.
An analysis of the issues involving unconscientious conduct, the possibility of detriment, and the role played by each side in the formation of assumptions or beliefs, can only result in the conclusion that there was no estoppel.
In my opinion, it follows that the determination of the Tribunal cannot be sustained, where it is said that “Forwarding out an insurance certificate with no exclusions identified and accompanied by the policy document conveyed a clear representation concerning coverage ... it is clear that by reason of the Authority's inaction that the developer failed to obtain further insurance and was left with a significant detriment.”
This court has power to reverse the Tribunal's determination, or remit the case for further hearing. In the circumstances, the only result is that there is no estoppel. There is no reason to have a further hearing.
I order that:
- (a)the Authority have leave to appeal against the determination of the Tribunal;
- (b)the Tribunal's determination of 27 September 1995 be reversed, insofar as it finds that the Authority is estopped from denying that the developer is entitled to indemnity under each of the 18 policies of insurance in respect of each of the 18 homes, or finds that the Authority waived the benefit of Clause 2.4(c) of the policy.