Queensland Building and Construction Commission v Ken McKay Homes Pty Ltd
[2024] QMC 8
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- Unreported Judgment
- Queensland Building and Construction Commission v Ken McKay Homes Pty Ltd[2024] QMC 8
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Queensland Building and Construction Commission v Ken McKay Homes Pty Ltd[2024] QMC 8
Queensland Building and Construction Commission v Ken McKay Homes Pty Ltd[2024] QMC 8
MAGISTRATES COURT OF QUEENSLAND
CITATION: | QBCC v Ken McKay Homes Pty Ltd ACN 108 466 404 [2024] QMC 8 |
PARTIES: | QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION (Plaintiff/Applicant) v KEN MCKAY HOMES PTY LTD ACN 108 466 404 (First Defendant/Respondent) AND KENNETH THOMAS KCKAY (Second Defendant/Respondent) AND STRUCTERRE WBA PTY LTD ACN 115 038 429 (First Third Party) AND INSURANCE AUSTRALIA LIMITED ABN 11 000 016 722 (Second Third Party) |
FILE NO/S: | M665/23 |
DIVISION: | Civil |
PROCEEDING: | Interlocutory Application filed 20 March 2024 |
ORIGINATING COURT: | Brisbane |
DELIVERED ON: | 20 June 2024 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 17 May 2024 |
MAGISTRATE: | Magistrate Hay |
ORDER: |
|
COUNSEL: | N M Cooke of Counsel for the Plaintiff/Applicant A J Tindall of Counsel for the Defendants/Respondents |
SOLICITORS: | Gadens Lawyers for the Plaintiff/Applicant Robinson Locke Litigation Lawyers for the Defendants/Respondents |
- [1]The plaintiff applies to strike out the Further Amended Defence, and for summary judgment against the defendants.
- [2]The defendants apply to file a Second Further Amended Defence and resist the summary judgment application on the grounds that the claim approved by the QBCC was not a “payment on a claim under the statutory insurance scheme” within the meaning of phrase as expressed in s. 71 of the Queensland Building and Construction Commission Act 1991 (‘QBCC Act’). The defendants argue that the payment was for subsidence damage arising from design and inspection work performed by an engineer engaged by the consumer, and that was specifically excluded under the relevant policy wording.
- [3]The plaintiff contends that the defendants are precluded from raising these issues as a defence to the plaintiff’s claim due to the operation of s. 71(1) of the QBCC Act.
The Law
- [4]On an application for summary judgment under r. 292 of the UCPR the court must consider two contentions. First, that there is no real prospect of successfully defending the claim. Second, that there is no need for a trial.
- [5]Section 71(1) of the QBCC Act deems payments made by the plaintiff “on a claim under the statutory insurance scheme” to be recoverable as a debt. Section 71(1) gives the plaintiff the option of recovering the debt from the building contractor, “or any other person through whose fault the claim arose.”
- [6]The plaintiff submits that the defendants ought to have sought a merits review of the payment decision in QCAT, the time for which has now passed.
- [7]It is settled law that a payment sought to be recovered as a debt by the QBCC that falls outside the statutory insurance scheme, including the scope of a policy, will give rise to a fact capable of being a defence to the debt claimed.
- [8]In the 2015 unreported Court of Appeal decision in Samimi v QBCC Boddice J, with whom McMurdo P and Morrison JA agreed, observed that the phrase “… ‘on a claim under the insurance scheme’… connotes a requirement the payment made be within the policy.” His Honour concluded that “…it does not follow that no factual error can be the subject of a proper defence to a claim for recovery made pursuant to s. 71(1) of the Act.”[1] Boddice J went on to review the case law and observed that a defence may arise “where there is reason to question whether the payment was made in accordance with the terms of the policy.”[2]
- [9]In the 2017 unreported Court of Appeal decision in in QBCC v Turcinovic,[3] the Court of Appeal was invited to accept that questions as to the reasonableness of the amounts paid by the QBCC was the type of factual issue that could constitute a defence to a debt alleged under s. 71 of the QBCC Act. Relevantly, unlike Samimi, it was not an element of the proposed defence that the amount paid exceeded the liability under the policy. In rejecting the defendant/respondent’s assertion North J, with whom Morrison and Philippides JJA agreed, again reviewed the cases, including Samimi. His Honour observed that “there is limited scope for complaint about the legal quality of the decision-making in making a payment or the decisions anterior to it.”
- [10]Philippides JA, agreeing with North J, observed “The respondent’s defence to the claim … was no more than an attempt to seek a merits review of the payment made by the respondent [sic] under the insurance scheme. Section 71(1)… should not be construed so as to permit a backdoor judicial review or a merits review of the appellant’s decisions to make a payment under the statutory insurance scheme set up under the Act. Such an approach would be contrary to the statutory framework of the Act as interpreted by the authorities referred to by North J, especially Samimi… and would not be consonant with notions of finality of decision making.”
The Policy Wording
- [11]Section 68I of the QBCC Act governs when the policy comes into force, namely on the earliest of the following three events:
- a.when the premium is paid by a licensed contractor;
- b.when the building contract is entered into by the consumer;
- c.when a licensed contractor commences work.
- [12]The plaintiff accepts that Edition 8 of the QBCC insurance policy applied when the building contract was entered into.[4] However, it contends that the policy wording was varied as a consequence of the 2014 legislative amendments. It argues that the removal and replacement of part 5 of the QBCC Act broadened the scope of the cover provided under the policy such that, regardless of who engaged the engineer, both the engineer’s design and inspections together with any related subsidence damage were covered under the policy.
- [13]The defendants contend that the Edition 8 version of the policy:
- a.remains the relevant policy wording as a consequence of the saving provisions found in the amending legislation of 2014 and 2017; and
- b.Clause 4.1 of the policy:
- precludes cover of consequential loss; and
- precludes payment for subsidence damage caused or contributed to by an engineer engaged by the homeowner.
- [14]The effect of the Queensland Building and Construction Commission and Other Legislation Amendment Act 2014 (Qld) (‘2014 Amending Act’) was, amongst other things, to remove and replace part 5 of the QBCC Act so that the cover provided under the statutory insurance scheme was to be no longer expressed in policy documents issued by the board, but rather by way of subordinate legislation.
- [15]Section 59 of the 2014 Amending Act preserved the existing policies of insurance “… in force on the terms stated in the board’s policies for that purpose”.[5]
- [16]Section 65 of the QBCC Act, as amended, expressly preserves rights, privileges or liabilities acquired, accrued or incurred either by the commission or a person under the former part 5. Section 65(3)(e) of the QBCC Act, as amended, relevantly provides that “a proceeding to recover an amount under former section 71 may be started, continued or completed and any defence available under that section may be relied upon.”
- [17]Section 66 of the QBCC Act, as amended, preserves policies of insurance in force under the former part 5, and the former part 5 continues to apply for residential construction work if the contract was entered into before the legislation’s replacement day.
- [18]There is nothing before the court on this application to suggest that optional additional cover was obtained under s. 67Z of the 2014 Amending Act.
- [19]For these reasons, I accept the defendants’ contention that Edition 8 of the policy and the former part 5, i.e. part 5 as it was worded prior to the 2014 Amending Act, continue to apply to the contract for residential construction work that is the subject of this proceeding.
- [20]In evidence on the summary judgment application are the QBCC Policy Conditions as set out in Edition 8 (the ‘Policy’).[6]
- [21]Part 4 of the Policy provides for payment for defects in the ‘residential construction work’ other than subsidence or settlement. Part 5 of the Policy provides for payment for subsidence or settlement damage to the ‘residential construction work’ that is ‘primary building work’.
- [22]It is clear when read together, that the plaintiff board’s intention at the time was to cover subsidence or settlement damage, albeit to limit the scope of subsidence or settlement to ‘primary building work’ and to apply different time limits on the making of such claims.[7]
- [23]The defendants, in their written submissions state; "... both the plaintiff’s and the Defendants’ material supports a view that the subsidence loss was caused or contributed to by the engineer (not being engaged by the builder)[8] and accordingly that the homeowner was not entitled to assistance under clause 7.4 of the Insurance Policy.”[9]
- [24]Clause 7.4 of the Policy relevantly precludes the cover for claims arising from failures by persons other than the building contractor’s agents with the notable exception of engineers but only in so far as the loss relates to defective design,[10] or those other matters set out in Parts 2 and 3 of the Policy (which are not relevant to this proceeding).
Decision
- [25]Having regard to the Court of Appeal’s decisions in Samimi and Turcinovic I find that the defendants have raised a triable issue capable of giving rise to a defence to either whole, or part, of the claim: namely, payments made outside the scope of the insurance scheme due to the exclusion of an engineer’s inspection work under clause 7.4(c) of the Policy.
- [26]On the information presently before the court, the material facts for determination at trial in defence of the claim are:
- a.whether the engineer was the homeowner’s agent or that of the building contractor;
- b.whether the payments were made for loss caused or contributed to by the engineer having engaged in conduct excluded under Pt 7 clause 7.4(c) of the Policy i.e. a failure to undertake reasonable inspections.
- [27]It is notable that any loss or damage arising from defective design by the engineer is covered under Pt 7 clause 7.4 (a)(ii) of the Policy, and therefore any defence on this ground should be struck out.
- [28]For these reasons I refuse the plaintiff’s application for summary judgment and grant the defendants’ application to file a second, further amended defence limited to the defence relating to the conduct as expressed under Pt 7 clause 7.4(c) of the Policy.
Footnotes
[1] Unreported [2015] QCA 106 at [30]–[31].
[2] Samini supra at [36]–[38].
[3] Unreported, [2017] QCA 77 per North J at [27].
[4] Affidavit of Josh Phillips filed 18 July 2023 at [28]. See also Exhibit ‘JP-11”.
[5] Sch 1 s 66 ins 2014 No. 57 s. 59.
[6] Affidavit of Josh Phillips filed 18 July 2023 at Exhibit ‘JP-11”.
[7] Compare Pt 4, cl 4.5 to Pt 5, cl 5.5 of the Policy.
[8] Engaged by the homeowner or their agent as per Respondents’ written submissions filed by leave 17 May 2024 at [18].
[9] Respondents’ written submissions filed by leave 17 May 2024 at [19].
[10] Pt 7, cl 7.4(a)(ii) of the Policy