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Queensland Building Services Authority v Thompson[2012] QDC 285

Queensland Building Services Authority v Thompson[2012] QDC 285

DISTRICT COURT OF QUEENSLAND

CITATION:

Queensland Building Services Authority v Thompson [2012] QDC 285

PARTIES:

QUEENSLAND BUILDING SERVICES AUTHORITY

(plaintiff)

v

KENNETH JOHN THOMPSON

(defendant)

FILE NO:

274/09

DIVISION:

PROCEEDING:

Civil Trial

ORIGINATING COURT:

Brisbane

DELIVERED ON:

17 September 2012

DELIVERED AT:

Brisbane

HEARING DATE:

13 September 2012

JUDGE:

Robin QC DCJ

ORDER:

Judgement for the plaintiff

CATCHWORDS:

Queensland Building Services Authority Act 1991 s 71(1)

Authority seeks recovery from building contractor of payments made in respect of the contractor’s client – defendant contends that the building contract came to an end by frustration when he became ill and could not do the work – contention that the client’s purported determination for “default” was without effect and did not trigger any obligation of the Authority to pay – in Commercial and Consumer Tribunal, where clients successfully applied for review of the Authority’s decision to pay a more modest sum, the defendant was added as a party and took the client’s part – whether “Ashun estoppel” precluded defendant’s now asserting the Authority had no obligation to pay – whether the building contract was capable of being frustrated as contended, given its terms – defendant did not understand that the Authority might seek indemnity from him

COUNSEL:

Ms M. J. Luchich for the plaintiff

SOLICITORS:

Patane Lawyers for the plaintiff

Mr K. J. Thompson is self-represented

  1. [1]
    The plaintiff Authority claims $200,000 plus interest upon a payment in that amount made by it against the defendant pursuant to s 71(1) of the Queensland Building Services Authority Act 1991.  The provision reads:

“If the authority makes any payment on a claim under the insurance scheme, the authority may recover the amount of the payment, as a debt, from the building contractor by whom the relevant residential construction work was, or was to be, carried out or any other person through whose fault the claim arose.”

The defendant is a building contractor who agreed with Mr Brown (or him and Ms Brophy) to carry out a “full house renovation with the addition of an upper level as per plans” for a contract price of $245,000, the works to reach practical completion within 180 days from the contract date, 7 July 2003.  Work commenced, but unfortunately Mr Thompson encountered serious health difficulties.  By letter of 10 October 2003 he advised the plaintiff of the problems and his inability to complete the building contract, adding:

“I intend to fully complete the ground floor to final stage; painting, light fittings, ready to move into.  I am now having to employ tradespeople to complete this work as I am unable to due to ill health.”

  1. [2]
    The intention thus expressed was not realised. Mr Brown’s “Complaint Form Residential and Commercial Construction Work” received by the plaintiff on 14 October 2003 sought its assistance, in part by way of “an independent assessment of the percentage of completion once the lower level is finished [as] the only fair means to calculating the builder’s final payment.”  At page 89 of Exhibit 21, which conveniently collected virtually all of the documents tendered, is Mr Brown’s letter of the same date to Mr Thompson advising “termination of contract by default” and referring to a letter of 10 October 2003 advising inability to complete “as a substantial breach of the contract.”  What had been done, in particular vis a vis the plaintiff Authority, was “cancelled” by a letter of 16 October 2003, given complications anticipated in assessing the application “whilst the builder is still working on site.”
  1. [3]
    Mr Brown and his partner then engaged solicitors and wrote to Mr Thompson on 5 November 2003 referring to clause 28.3 of the contract by giving notice of substantial breach and rectification being required.  The solicitors advised that “this notice is given only for the formal process as required by the Building Services Authority.”  (Mr Thompson acknowledged in writing receipt of the letter of 5 November 2003).  Matters did not proceed as might have been hoped and the solicitors wrote again on 20 November 2003 noting that the building work had not recommenced and advising:

“As far as we are aware, you have not referred to the question of whether our clients have a right to end the contract to the Queensland Building Tribunal for determination.  Accordingly, notice of termination of the contract is now given pursuant to clause 28.4 of the building contract.”

As foreshadowed, a new Complaint Form with some variations went to the plaintiff on 20 November 2003.

  1. [4]
    Mr Thompson represented himself at the trial. He asserted ignorance that s 71 of the Act created liabilities on builders as events unfolded. He was certainly told of it by the plaintiff’s letter to him of 26 May 2006 entitled Notice of Debt which advised approval of an insurance claim in the sum of $200,000 in favour of Mr Brown.  The evidence establishes that that payment, which coincides with the limit at which claims payable by the plaintiff are capped, was duly paid.  On 23 November 2004 the plaintiff had advised Mr Brown of its assessing the claim against quotations received in an amount of $16,546.25.  Mr Brown did not accept that and sought review in the Commercial and Consumer Tribunal with success.  Mr  Thompson was added as a party and participated in the Tribunal process.  The stance he took was one in support of Mr Brown, as he shared the opinion that $16,546.25 was too low.  The Tribunal directed the Authority to consider certain identified quotations, the consequence of which was that it became committed to its maximum exposure.
  1. [5]
    As to Mr Thompson complaining that he had no idea that the Authority could pursue him for every dollar it paid Mr Brown, he said he could not recall receiving Exhibit “A”, a letter of the Authority which would have advised him in time of his potential exposure. There was no denial. He said his memory had been adversely affected by a serious accident he had two years ago. He said he had no recall of the Tribunal member’s having advised him at the hearing of the jeopardy he might place himself in. Ms Luchich, for the plaintiff, was apparently without a transcript of the hearing which might have shed light on the matter.  At the end of the day, it is of no moment whether Mr Thompson knew about s 71 or not.  It represents the law that governs his position.
  1. [6]
    Solicitors filed a defence on his behalf in this proceeding on 11 March 2009. The pleading sets out the relevant provision of the insurance, adding underlining:

“1.2 Termination of Contract

  1. (a)
    BSA is only liable to pay for loss under this Part when the contract is for a fixed price and the Insured has properly terminated the contract with the contractor.
  1. (b)
    In this policy, “properly” means lawfully under the contract or otherwise at law, upon the contractor’s default which extends to, but is not limited to:
  1. (i)
    the cancellation or suspension of the contractor’s licence; or
  1. (ii)
    the death or legal incapacity of the contractor; or
  1. (iii)
    the insolvency of the contractor.”

and offers the following conclusions in paragraph 4(f):

“… the cost to complete the work was not covered by a payment to be made under the statutory insurance scheme as:

  1. (i)
    the Defendant’s incapacity and its duration was sufficient to discharge the Brown Building Contract by frustration prior to 20 November 2003;
  1. (ii)
    by the terms of the Brown Insurance Policy including clause 1.2 thereof, the insured Brown having not terminated the Brown Building Contract and there being an absence of default by the Defendant, the Plaintiff was not obliged to indemnify Brown against any loss caused by non-completion by the Defendant of building works under the Brown Building Contract.”
  1. [7]
    Perhaps grateful for any port in a storm, Mr Thompson embraced the argument that the plaintiff was never obliged to compensate his client (the consequence of which would be that it had no proper claim against him), once the point was explained to him.
  1. [8]
    Unsurprisingly, the plaintiff submitted that Mr Thompson should be held estopped under the principle of Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (at 602).  Ms Luchich for the plaintiff relied on the useful summary in Clout v Klein [2001] QSC 401 at [42]-[47].

“[42] A party may be estopped from raising a claim which it could have litigated in previous proceedings if it was unreasonable for the claim not to have been so litigated. Speaking of a claim which might have been raised as a defence in an earlier action, the High Court in Port of Melbourne Authority v Anshun Pty Ltd[1]said:

‘There will be no estoppel unless it appears that the matter relied upon as the defence [sic] in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding.’

It has been questioned whether it is useful to speak of relevance in the context of a failure to advance a claim (as opposed to a defence) in an earlier proceeding.[2]

[43] Later in the Anshun judgment this was said:

‘The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether an omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding.’[3]

Judgments were conflicting if they appeared ‘to declare rights which are inconsistent in respect of the same transaction.’[4]

[44] There is some doubt as to whether Anshun estoppel has any application where there has been no examination of the merits of the claim in the earlier action.[5]It has been noted that ‘attempts to apply Anshun to bar claims not previously adjudicated upon have had little success’[6]. At the least, it is clear that great care must be exercised in considering whether an Anshun estoppel ought be applied.[7]

[45] The precise content of the Anshun principle is not clear. Plainly, it is a necessary condition that the claim sought to be raised in the second action was capable of being raised in the first. Thereafter, difficulty arises, firstly, in considering how unreasonableness is to be assessed, and secondly, as to whether the existence of special circumstances is a matter to be considered distinct from the question of unreasonableness.

[46] As to the first, a commonly adopted approach has been to ask whether the two proceedings involve the same or substantially the same facts.[8]However, the Victorian Court of Appeal has taken the view that the capacity to raise the claim in the earlier proceeding and the common sub-stratum of facts ‘are necessary but not sufficient conditions’: Gibbs v Kinna[9].In the same case, it is suggested that the potential for conflict between judgments is an indicator of unreasonableness, rather than a pre-requisite[10].

[47] On the other hand, in Tanning Research Laboratories Inc. v O'Brien[11] Brennan and Dawson JJ said this:

‘A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings … cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counter-claimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v Anshun Pty Ltd as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first.’

That passage suggests a requirement of potential inconsistency. In Boles v Esanda[12]and in Bazos v Doman[13]the New South Wales Court of Appeal appears to have regarded the question of the potential for conflicting judgments as critical.”

Her client finds herself in the invidious position of being (effectively) held liable to Mr Brown in the Tribunal (it always acknowledged some liability), but facing an adjudication here that it ought not to have paid Mr Brown at all, a contention Mr Thompson could and should have ventilated in the Tribunal.

  1. [9]
    There may be a good argument that an Anshun estoppel should be applied here, notwithstanding Mr Thompson’s professed ignorance of the law and his being a self-represented lay person - and in addition that he was neither a claimant nor a defendant in the Tribunal. However, it is not necessary to decide against him on that basis as the plaintiff is entitled to succeed on the pleaded defence in any event.
  1. [10]
    The point raised against the plaintiff is that Mr Thompson’s health situation led to a discharge of the building contract by frustration so that there was no contract remaining for his solicitors to determine by notice, as was purported to be done. Ms  Luchich reminded the court of the doctrine that frustration occurs only where “without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract” – per Lord Radcliffe in Davis Contractors Limited v Fareham Urban District Council [1956] AC 696 at 729 (see also British Movietonews Limited v London and District Cinemas Limited [1952] AC 166). 
  1. [11]
    While one can imagine scenarios in some isolated community where the builder was the only builder, in which an inability to carry out a contract on account of genuine health reasons might constitute frustration, that hardly applies here, even though Mr Thompson traded on his own and carried out much or most of the necessary work personally (there being exceptions for work not within his capabilities, such as plastering). The contract defined “contractor” to include his successors and permitted assigns, indeed anyone acting with his express authority (clause 38.1).  Clause 30.2 provides that “the contractor may sub-contract any part of the works but such sub-contracting does not relieve the contractor from the contractor’s obligations under this contract.”
  1. [12]
    The plaintiff’s case claimed much support from Queensland Building Services Authority v Fox [2005] QDC 129, in which, with a view to limiting its exposure as an insurer, it unsuccessfully mounted the argument Mr Thompson presents today – that if a building contract comes to an end otherwise than by determination by the insured consumer/client there is no proper termination to trigger its liability under clause 1.2.  At [32] Judge McGill suggested that the reason behind the provision is concern to ensure that there is no potential double dipping by way of an insurance payout and the builder being possibly obliged to perform further works.
  1. [13]
    The circumstances in Fox (he was the successful claimant) are different from those here.  The builder company had been dissolved; months elapsed with nothing done either by the dissolved builder or by Mr Fox.  Clause 1.2 was held not to constitute a hurdle that had not been surmounted by him:

“[37] It was submitted that the clause required termination by the consumer, rather than by operation of law. But paragraph (b) refers to the contractor’s default which extends to death or legal incapacity of the contractor, which would include events which terminate a contract by frustration rather than by the action of the consumer. The dissolution of the company would be covered by the concept of legal incapacity of the contractor, which the policy expressly included in the scope of operation of the clause within paragraph (b), notwithstanding that this was something which did not require any act of termination on the part of the respondent. Accordingly, if the contract had not earlier been terminated, it was terminated so as to satisfy clause 1.2 by the legal incapacity of the company in the form of its dissolution.

[38] There is no doubt that long before that the contractor was in default so that requirement was satisfied. The work had not been done properly, the contractor had been given every opportunity to rectify it, and had failed to do so. It would have been open to the tribunal to conclude that, from the expiration of the 14 day period identified in the letter of 24 March 2003 (if not indeed earlier) the respondent had a right to terminate the contract for default on the part of the contractor. There was no dispute that the contractor was in default.

[39] In these circumstances, the respondent had a choice either to terminate the contract or to affirm it, at least in theory; in practice affirming the contract would have been of little benefit to him. Those positions are inconsistent, and therefore termination of the contract was effected by an unequivocal act inconsistent with the continued existence of the contract. A mere uncommunicated decision on the part of the respondent to terminate would not have been effective, but it is not necessary for the decision to terminate to be directly communicated to the other party. So in Holland v Wiltshire (1954) 90 CLR 409 an election to terminate a contract to sell land was effected by the vendor’s advertising and reselling the land: pp.416, 424. In Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [155] a repudiation of a lease was treated as having been accepted so as to terminate the lease by closing down a business in the leased premises and vacating them.

[40] In the present case the respondent did two things which were inconsistent with the continued existence of the contract with the contractor. One was obtaining quotes to have the work done by other contractors, which is analogous to offering the land for sale to others. The other was to pursue the claim under the statutory insurance scheme. In circumstances where the availability of a claim under the statutory insurance scheme depends on the termination of the contract, pursuit of that claim was inconsistent with its continued enforcement and therefore manifested an election to terminate for the contractor’s repudiation.

[41] In the circumstances therefore the tribunal was entitled to find that the respondent had lawfully terminated the contract with the contractor for the purposes of clause 1.2 of the contract. Even if there was some deficiency in the expression of the reasons of the tribunal, as submitted by the appellant, the actual finding was justified by the evidence before the tribunal. There was no evidence of affirmation of the contract.

[42] Even apart from this, it is clear that at least after late 2003 neither party did anything to enforce the contract. Even if the contract had not been formally terminated for breach, in my opinion in all the circumstances it was open to the Tribunal to treat the contract as having been abandoned by the parties.[14] Abandonment is one recognised way in which contracts may be terminated, and it is treated in Cheshire and Fifoot as an example of termination by consent. No doubt this is because it is a termination which flows from the voluntary behaviour of both parties to the contract. In that sense it can be seen as termination by the consumer. It is not inconsistent with default on the part of the other party, and the requirement of the contractor’s default in paragraph (b) was satisfied. If the contractor is in default and it and the consumer so act as to abandon the contract, that effects the termination of it which in my opinion would be sufficient termination to satisfy the requirements of clause 1.2. Accordingly even if the respondent had not elected to terminate the contract in response to the repudiation of the contractor, it would have been open to the tribunal to find that the parties had abandoned the contract.

[43] Accordingly clause 1.2 was satisfied because the respondent had elected to terminate the contract in response to the contractor’s repudiation, or had joined in the termination of the contract by abandonment, or the contract had been terminated by the dissolution of the contractor. Any of these was enough to satisfy the clause.”

No more has the present building contract come to an end because frustrated in a way that leaves clause 1.2 unsatisfied.

  1. [14]
    Mr Thompson understandably reminds the court that he has not done anything “wrong” or blameworthy, the implication being that there was no default by him. In this context, however, default is a neutral concept, not importing any requirement of a contractor deliberately doing the wrong thing. This is obvious from the inclusion by way of example of “default” of a contractor’s death. All that is needed is the fact that the contractor has not done something the contract obliged him to do. There may be special circumstances, not reflected here, such as a natural disaster precluding access to the site, which would raise other considerations. Here there is no reason why Mr Thompson could not have had the work done otherwise than through his own personal exertions. It is not a case of his being the only builder available.
  1. [15]
    The circumstances may be seen as analogous to those considered in Foster v Claybourn’s Discount Tiles Pty Ltd [2010] QDC 290 where the insurer’s obligations under the Motor Accident Insurance Act 1995 s 5(1) arose only where an injury occurred attributable to “the wrongful act or omission” of a driver.  That formulation included but did not require a case of negligence.  On the assumption that the driver (who veered to the wrong side of the road) had suffered a seizure, it was determined that there was nevertheless a wrongful act.  At [8] ff authorities were discussed which established how wide is the coverage of expressions such as “wrongful act or default”, which I refer to without repeating here.
  1. [16]
    The clear policy of the Motor Accident Insurance Act to ensure that injured persons get compensation is reflected here in the interests of clients of building contractors who do not properly complete the works they undertake.
  1. [17]
    Mr Thompson’s understanding, he says, is that the insurance provided by the plaintiff (at the expense of Mr Brown and Ms Brophy) was there to protect him as well as his clients. But s 71 is far from standing alone as a provision entitling an insurer who makes a claim to be indemnified by a person whose action or inaction underlies the claim, even the insured. In the Motor Accident Insurance Act, for example, s 58 so provides, in respect of intoxicated drivers, for example.  It may be that an innocent driver who, say, suffered a seizure, escapes liability as in Lafranchi v Transport Accident Commission [2006] 14 VR 359.  There, the insurer which had paid out could not recover in turn against the driver, because it failed to establish on the balance of probabilities that she was negligent, to satisfy the controlling provision.  No-one would expect the injured person to be denied a just compensation on that account, given community expectations of the compulsory third party insurance scheme.  Here, the insurer, which was required by the Tribunal to pay out (in what must be accepted as its obligation, established in a proceeding Mr Thompson was party to), has established entitlement to indemnity under s 71.  There is no requirement in that section of the kind not met by the insurer in Lafranchi that the plaintiff fails to satisfy.
  1. [18]
    Reverting to s 71(1), I do not think that the reference requiring some “fault” underlying the claim, which clearly applies to “any other person” establishes a requirement for the Authority to establish against the building contractor. Even if it did, in present circumstances I consider that “fault” in a “neutral” sense is established, although the term considered on its own arguably has a connotation of blameworthiness that “default” in clause 1.2 lacks.
  1. [19]
    For these reasons, the plaintiff is entitled to the judgment it seeks. Exhibit 24 is the plaintiff’s interest calculation which for part of the period since the demand made by its Notice of Debt claims a more modest rate than did the claim and statement of claim originally.
  1. [20]
    There will be judgment for the plaintiff for $200,000 and costs and for $123,835.96 interest to the date of trial (13 September 2012) and $54.79 further interest daily thereafter, until judgment is pronounced. That will occur at some date in the near future, being deferred to allow the parties an opportunity to make representations should they so desire.

Footnotes

[1]  (1981) 147 CLR 589 at 602.

[2] Boles v Ors v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666 at 674; Gibbs v Kinna (1999) 2 VR 19 at 27.

[3]  At p 603.

[4]  At p 604.

[5] Bazos v Doman[2001] NSWCA 347; KC Park Safe (SA) Pty Ltd v Adelaide Terrace Investments Pty Ltd (unreported decision of Mansfield J 17/9/98).

[6] Australian Granites Limited v Eisenwerk Hensel Bayreuth Dipl.-Ing Burkhrdt GmbH [2001] 1 Qd R 461 at 468.

[7] Linprint Pty Ltd v Hexham Textiles Pty Ltd(1991) 23 NSWLR at p 522; Ling v Commonwealth (1996) 68 FCR 180 at 181.

[8] Bazos v Doman[2001] NSWCA 347 at [39]; Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 AT 297.

[9]  [1999] 2 VR 19 at 27.

[10]  At p 27.

[11]  (1990) 169 CLR 332 at 346.

[12]  (1989) 18 NSWLR 666 at 673.

[13]  [2001] NSWCA 347 at [42] [43].

[14] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423.

Close

Editorial Notes

  • Published Case Name:

    Queensland Building Services Authority v Thompson

  • Shortened Case Name:

    Queensland Building Services Authority v Thompson

  • MNC:

    [2012] QDC 285

  • Court:

    QDC

  • Judge(s):

    Robin DCJ

  • Date:

    17 Sep 2012

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
Australian Granites Ltd v Eisenwerk Hensel Bayreuth Dipl-ING Burkhardt GmbH [2001] 1 Qd R 461
1 citation
Bazos v Doman [2001] NSWCA 347
3 citations
Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666
2 citations
British and Movietonews Ld v London and District Cinemas Ld. [1952] AC 166
1 citation
Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287
1 citation
Clout v Klein [2001] QSC 401
1 citation
Davis Contractors Ltd v Fareham Urban District Council (1956) AC 696
1 citation
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 C.L.R 423
1 citation
Foster v Claybourn's Discount Tiles Pty Ltd [2010] QDC 290
1 citation
Gibbs v Kinna (1999) 2 VR 19
2 citations
Holland v Wiltshire (1954) 90 CLR 409
1 citation
Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313
1 citation
Lafranchi v Transport Accident Commission (2006) 14 VR 359
1 citation
Ling v Commonwealth (1996) 68 FCR 180
1 citation
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
2 citations
Queensland Building Services Authority v Fox [2005] QDC 129
1 citation
Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332
1 citation

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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