Chau’s & Sons Pty Ltd t/as Holiday Air Conditioning and Refrigeration Qld v Karam [2024] QCAT 476

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Chau’s & Sons Pty Ltd t/as Holiday Air Conditioning and Refrigeration Qld v Karam [2024] QCAT 476 PARTIES: CHAU’S & SONS PTY LTD TRADING AS HOLIDAY AIR CONDITIONING AND REFRIGERATION QLD (applicant) (respondent in counter-application) v ANTHONY KARAM (respondent) (applicant in counter-application) APPLICATION NO/S: BDL101-22 MATTER TYPE: Building matters DELIVERED ON: 31 October 2024 HEARING DATE: 31 January 2024 HEARD AT: Brisbane DECISION OF: Senior Member Brown ORDERS: Proceeding dismissed. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – where counter-applicant had retained services of counter-respondent to undertake the supply and installation of an air conditioning unit pursuant to an oral contract –– questions as to standard of workmanship by the counter- respondent – circumstances where counter-respondent attributes incomplete items to be outside the scope of the oral agreement – whether performance of works regulated by the Queensland Building and Construction Commission Act 1991 (Qld) LIMITATION OF ACTIONS – CONTRACTS, TORTS AND PERSONAL ACTIONS – where works the subject of the dispute were undertaken more than 6 years before the application was filed – where extension of limitation period not asserted in reasons for application – whether assertion required – whether proceedings maintainable Civil Liability Act 2003 (Qld) s 4, s 9, sched 2 Limitation of Actions Act 1974 (Qld) s 10 Queensland Building and Construction Commission Act 1991 (Qld) s 77, sch 1B -- 1 of 17 -- 2 Queensland Civil and Administrative Tribunal 2009 (Qld) s 28, Blackman v M & DJ Bossie Pty Ltd [1968] WAR 97 Brookfield Multiplex v Owners Corporation Strata Plan No 61288 [2014] HCA 36 Bryan v Maloney [1995] HCA 17 Caltex Oil (Aust) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 Cerda v Jacob [2020] QCATA 57 McSwan & Anor v Weaver [2023] QCAT 148 Mikita v Kontek Constructions Pty Ltd [2024] QCAT 315 Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 APPEARANCES & REPRESENTATION: Applicant: Self represented Respondent: Self represented REASONS FOR DECISION [1] In 2013 Chau’s installed an air-conditioning system (the system) in Mr Karam’s residence. Mr Karam says that the system is defective. [2] Proceedings relating to the dispute were first commenced by Chau’s as a minor civil dispute in 2018 (Chau’s proceeding). Chau’s claimed that Mr Karam had not paid the balance of the contract price. An adjudicator ordered Mr Karam to pay Chau’s $8,846.60.1 [3] Mr Karam appealed the decision. [4] On 3 June 2020 Mr Karam commenced a minor civil dispute proceeding against Chau’s claiming damages for breach of contract (Mr Karam’s proceeding). The proceeding was commenced by Mr Karam before the determination of his appeal. In 2021 Mr Karam’s proceeding was transferred to the building list. [5] In 2022 the QCAT Appeal Tribunal set aside the adjudicator’s decision and remitted Chau’s proceeding to the QCAT building list.2 [6] Chau’s proceeding and Mr Karam’s proceedings were subsequently consolidated with Chau’s proceeding as the application and Mr Karam’s proceeding as the counter- application. [7] On 5 August 2022 Chau’s proceeding was dismissed for non-compliance by Chau’s with the requirements of s 77(2) of the Queensland Building and Construction Commission Act 1991 (Qld). The remaining proceeding is Mr Karam’s counter- application which now falls to be determined. 1 MCD 60618/18, 23 April 2020. 2 Anthony Karam v Chau’s & Son Pty Ltd t/as Holiday Air Conditioning and Refrigeration Engineering Qld (unreported), APL169-20, 30 March 2022. -- 2 of 17 -- 3 Mr Karam’s claim [8] In the minor civil dispute application Mr Karam claimed the amount of $18,104.45 to repair the system and a further amount of $28,316.20 for the cost of repairing damage to his residence as a result of water leakage from the system. As is often the case in Tribunal proceedings, the legal basis for the claim is not particularised. [9] Mr Karam’s position is clarified to some extent in his statement of evidence.3 Mr Karam says that the parties entered into a contract for the supply and installation of the system and that Chau’s breached the contract ‘by failing to provide services to the standard expected under the contract, notwithstanding the manufacture’s (sic) installation guidelines and specifications, The Australian Standards and the QBCC (Best Practice) and Contractor Licence.’ [10] In his statement Mr Karam particularises his claim as: (a) Repairs to air-conditioning system $18,104.45 (b) Repairs to dwelling caused by water leaking $27,951.00 (c) Emergency service costs $ 550.00 (d) Repairs to dwelling and insurance excess $ 3,590.91 [11] Mr Karam also claims costs in the amount of $1,265.00. Jurisdiction [12] I am satisfied that Mr Karam is a building owner and that Chau’s was, at the relevant time, a building contractor.4 I am satisfied that the work undertaken by Chau’s was domestic building work5 and that the dispute between the parties is a domestic building dispute.6 I am satisfied that before commencing the proceeding, Mr Karam satisfied the requirements of s 77(2) of the QBCC Act. Was there a contract between the parties? [13] It is first necessary to determine whether the parties entered into an enforceable contract. [14] The building work, the subject of the dispute, was domestic building work. As the contract price was more than $3,300 and less than $20,000 any contract between the parties would be a level 1 regulated contract. By s 13(2) of schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act), a level 1 regulated contract must be in writing, dated and signed by the parties. If the contract does not meet these minimum requirements, the contract is of no effect with the result that the contract cannot be enforced by either party. 3 Statement of Anthony Karam filed 29 November 2022. 4 QBCC Act, schedule 2; It is noted that Chau’s QBCC licence was cancelled on 6 October 2020. 5 Ibid, schedule 1B, s 4(6). 6 Ibid. -- 3 of 17 -- 4 [15] At the conclusion of the hearing, the parties were directed to file submissions addressing whether a contract complying with the requirements of s 13(2) of schedule 1B had been entered into. [16] Mr Karam says that the parties did not enter into a complying contract. Mr Chau agrees. [17] The parties were also directed to file submissions addressing the application of the Electronic Transactions (Queensland) Act 2001 (Qld). Section 14 of the ET Act provides: 14 Requirement for signature (1) If, under a State law, a person’s signature is required, the requirement is taken to have been met for an electronic communication if— (a) a method is used to identify the person and to indicate the person’s intention in relation to the information communicated; and (b) the method used was either— (i) as reliable as appropriate for the purposes for which the electronic communication was generated or communicated, having regard to all the circumstances, including any relevant agreement; or (ii) proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence; and (c) the person to whom the signature is required to be given consents to the requirement being met by using the method mentioned in paragraph (a). (2) The reference in subsection (1) to a law that requires a signature includes a reference to a law that provides consequences for the absence of a signature. [18] Mr Karam’s submissions do not address the application of the ET Act. Mr Chau says that the parties did not consent to the use of electronic communications between the parties satisfying the requirements for the contract to be signed by the parties electronically. [19] I find that on 21 December 2012 Mr Karam forwarded to Chau’s by email a copy of a quote Mr Karam had obtained from another contractor for the installation of the air- conditioning system. That quote, from Energy Air dated 19 December 2012, detailed two options, the first at a cost of $15,600.00 and the second for $16,500.00 (both inclusive of GST). [20] I find that on 21 December 2012, Chau’s responded by email advising Mr Karam that it could match the quote provided by Energy Air and would forward a quotation to Mr Karam. [21] I find that on 21 December 2012, Mr Karam emailed Chau’s and instructed Chau’s to proceed to install the air-conditioning system. Although not entirely clear from the evidence it seems both parties understood that the scope of works was to be in accordance with option 2 set out in the Energy Air quote. I find that when Mr Karam emailed Chau’s on 21 December 2012 instructing the respondent to proceed with the -- 4 of 17 -- 5 installation of the air-conditioning system, Chau’s had not formalised a written quote reflecting the earlier communications between the parties. I find that on 27 December 2021 Chau’s forwarded to Mr Karam a written quote bearing the same date. The written quote: (a) Was for an amount of $16,000 inclusive of GST; (b) Provided for the following scope of works: Supply and install 1 x Daikin FDYQ250, 25kW ducted system, including 2 controllers and 2 zones touch pad; 12 outlets; Constant zone: living/kitchen with 2 outlets Zone 1: Bed 1 with 1 outlet Zone 2: Bed 2, 3 and 4 with 3 outlets Zone 3: Study with 1 outlet Zone 4: Guest with 1 outlet Zone 3: Kitchen, dining, living and meals with 4 outlets Warranty as follows: Equipment: 5 years parts and labour Zone motor: 5 year Refrigerant: half year Labour: 1 year Ducting and outlets: 1 year Rest of parts: eg copper, cable, 1 year [22] It is unclear from the evidence why Chau’s quote was for an amount less than option 2 in the Energy Air quote when Chau’s had earlier advised Mr Karam that it would match, as opposed to better, the Energy Air quote. In the end result, it is unnecessary to determine the issue. I find that Mr Karam did not, in electronic form, communicate acceptance of the quote to Chau’s. [23] It follows from the foregoing that there was no written, dated and signed contract entered into by the parties satisfying s 13(2) of schedule 1B of the QBCC Act. The consequence of this finding is that there are no warranties implied by operation of the QBCC Act. That leaves the issue of whether Mr Karam has a claim in negligence against Chau’s. Does Mr Karam have a claim in negligence? [24] A domestic building dispute means, inter alia, a claim or dispute arising 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.7 A domestic building dispute also means a claim or dispute in negligence, nuisance or trespass related to the performance of reviewable domestic work other than a claim for personal injuries.8 The definition of ‘domestic building dispute’ as meaning, inter alia, a ‘claim or dispute arising between a building owner and a building contractor relating to the performance of reviewable domestic work’ is couched in sufficiently broad language to capture a claim in negligence by a building owner against a building contractor who would, but for the operation of schedule 1B, have an enforceable 7 QBCC Act, schedule 2, definition of ‘domestic building dispute’. 8 Ibid. -- 5 of 17 -- 6 contractual relationship. And there is no doubt that such a claim is captured by ‘a claim or dispute in negligence, nuisance or trespass related to the performance of reviewable domestic work other than a claim for personal injuries.’ [25] The law of negligence in Australia as it relates to claims for pure economic loss arising out of building work has developed over the past several decades since the decision of the High Court in Bryan v Maloney.9 I do not propose to embark upon a detailed exposition of the relevant authorities. Rather, I will confine consideration of the issue principally to two recent decisions of the Tribunal: McSwan & Anor v Weaver10 and Mikita v Kontek Constructions Pty Ltd.11 In each of these matters, the Tribunal considered whether, in the absence of an enforceable building contract, a building owner was entitled to bring a claim in negligence against a building contractor. In both matters, the Tribunal undertook a detailed analysis of the development of the law of negligence in the context of building disputes. [26] Prior to the decisions in McSwan and Mikita, the Appeal Tribunal in Cerda v Jacob12 held that a homeowner was entitled to bring a claim in negligence against a building contractor for damages for defective building work. The Appeal Tribunal did not undertake a detailed consideration of the decisions of the High Court in Bryan v Maloney13, Woolcock Street Investments Pty Ltd v CDG Pty Ltd14 and Brookfield Multiplex v Owners Corporation Strata Plan No 6128815 and specifically whether the homeowner was ‘vulnerable’, neither party having made submissions on the issue of whether and to what extent the builder owed a duty of care to the homeowner. McSwan & Anor v Weaver [27] The McSwans engaged Mr Weaver to construct a carport at their residence. The parties did not enter into a contract satisfying the requirements of schedule 1B of the QBCC Act. The McSwans said that the colour of the as constructed carport roof was incorrect. The carport was otherwise entirely free of defects. [28] The tribunal stated: As I understand it, the current state of the law is that a builder does not owe a duty of care to an original owner of a building which the builder has constructed for the owner. This is because the owner is not vulnerable to loss occasioned by any wrong that might be committed in construction of that building in terms of defective work. The reason being that the home owner is not vulnerable in the sense of loss because the owner is able to protect itself from such loss by the means of a building contract.16 [29] Central to the reasoning of the tribunal were the decisions of the High Court of Australia in Woolcock Street Investments Pty Ltd v CDG Pty Ltd17 and Brookfield Multiplex v Owners Corporation Strata Plan No 61288.18 In those decisions, the High 9 [1995] HCA 17 (‘Bryan’). 10 [2023] QCAT 148. 11 [2024] QCAT 315 (‘Mikita’). 12 [2020] QCATA 57. 13 n 9. 14 [2004] HCA 16 (‘Woolcock’). 15 [2014] HCA 36 (‘Brookfield’). 16 At [61]. 17 Woolcock (n 14). 18 Brookfield (n 15). -- 6 of 17 -- 7 Court decided that proximity was no longer the guiding test for liability in cases where a duty of care was alleged to have been breached in cases involving pure economic loss arising out of the performance of building work. Rather, the question is whether an individual is ‘vulnerable’ in the sense that an individual is unable to protect itself from the consequences of a defendant’s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.19 [30] The tribunal found that the McSwans were able to protect themselves from the consequences of Mr Weaver’s lack of care in undertaking the construction of the carport by entering into a contract meeting the requirements of schedule 1B of the QBCC Act. On this basis, reasoned the tribunal, the McSwans were not ‘vulnerable’ and were therefore not able to pursue a claim in negligence against Mr Weaver. Mikita v Kontek Constructions Pty Ltd [31] Kontek performed concreting work at Mr Mikita’s residence. Mr Mikita claimed that the work was defective. The tribunal found that the requirements of schedule 1B of the QBCC Act had not been met with the consequence that there was no enforceable contract between the parties. [32] The tribunal considered whether Mr Mikita was entitled to bring a claim in negligence against Kontek and considered the various authorities referred to in McSwan. Contrary to the determination in McSwan, the tribunal in Mikita found that a duty of care may, in particular cases, arise between a building contractor and a homeowner despite a failure to comply with the statutory requirements of a regulated contract.20 [33] The tribunal held: (a) None of the relevant authorities relied upon by the tribunal in McSwan involved a case where the parties were in a direct contractual relationship (or would have been but for the restrictions imposed by statute); (b) The law recognises concurrent duties in contract and in tort in circumstances involving the performance of professional work and this would encompass a professional builder or professional trade contractor; (c) A duty of care may exist in the absence of a contractual relationship; (d) The existence of an assumption of responsibility by a builder (or building contractor) and known reliance or dependence by the homeowner is capable of giving rise to a duty of care in tort, at least in cases involving a claim by an owner of residential premises and the absence of a detailed building contract between the parties governing the quality of work (including warranties); (e) Relevant policy considerations included: (i) The QBCC Act permits a claim in negligence in respect of both domestic building disputes and commercial building disputes evidencing a legislative intention that such claims are not confined to the exercise of contractual rights; 19 Woolcock (n 14) at 530. 20 Mikita (n 11) at [26]. -- 7 of 17 -- 8 (ii) While the QBCC Act imposes a penalty on a building contractor who fails to comply with the relevant requirements before commencing work, no such penalty is imposed on a building owner; (iii) A regulated contract will only be denied effect by operation of the QBCC Act in circumstances where the building contractor carries out domestic building work in the absence of a compliant regulated contract; (iv) While a regulated contract has effect only if it complies with the requirements of schedule 1B of the QBCC Act, it is relevant if the contract does not call for the commission of any illegality and the QBCC Act does not prohibit a particular act essential for carrying out the contract. [34] The tribunal considered that while the operation of s 14 of schedule 1B (and by analogy for present purposes, s 13) was relevant to the issue of vulnerability, other relevant matters were: (a) The builder’s statutory obligations under s 30 of schedule 1B of the QBCC Act; (b) Whether or not the homeowner was aware of the statutory requirements of s 14 (and, by analogy, s 13); (c) Any evidence of an assumption of responsibility and reasonable reliance. [35] The tribunal considered that a homeowner would be vulnerable in circumstances where: (a) the homeowner is unaware of the statutory requirements of s 14 (or s 13); (b) the contractor assumes responsibility to perform the agreed work to the standard expected of a reasonably competent professional building contractor undertaking work of that kind; and (c) the homeowner relies on the contractor’s skill or expertise. Consideration [36] The common law generally does not permit the recovery of damages for economic loss that is not a consequence of injury to a claimant’s person or property.21 However in certain cases a person may owe a duty to take reasonable case to avoid causing purely economic loss.22 [37] The common law recognises that, generally speaking, the builder of premises has a duty to take reasonable care to avoid injury, as a result of defects in premises, to those persons or their property who may foreseeably suffer injury if care is not taken.23 [38] In Bryan v Maloney24 the High Court recognised the special relationship between a building contractor and a building owner for whom building work is undertaken: On the other hand, there are strong reasons for acknowledging the existence of a relevant relationship of proximity between a builder such as Mr Bryan and a first owner such as Mrs Manion with respect to the kind of economic loss 21 Caltex Oil (Aust) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529. 22 Caltex Oil (Aust) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529. 23 Blackman v M & DJ Bossie Pty Ltd [1968] WAR 97. 24 Bryan (n 9). -- 8 of 17 -- 9 sustained by Mrs Maloney. In particular, the ordinary relationship between a builder of a house and the first owner with respect to that kind of economic loss is characterized by the kind of assumption of responsibility on the one part (i.e. the builder) and known reliance on the other (i.e. the building owner) which commonly exists in the special categories of case in which a relationship of proximity and a consequent duty of care exists in respect of pure economic loss. There is nothing to suggest that the relationship between Mr Bryan and Mrs Manion was not characterized by such an assumption of responsibility and such reliance.25 (emphasis added) [39] The Court in Bryan v Maloney recognised that, in the context of domestic building work, the duty of care owed by a building contractor to the owner was concurrent in contract and tort: Mr Bryan and Mrs Manion were the parties to a contract in relation to the building of the house. Whatever may have been the position in earlier times, the existence of such a contractual relationship between builder and client did not preclude the existence either of a relationship of proximity between them in relation to that work or of a consequent duty of care under the ordinary law of negligence.26 [40] While the High Court has, since Bryan v Maloney27, made clear that proximity is no longer the guiding principle in determining the existence of a duty of care, the aspect of the judgement dealing with the relationship between a building contractor and a building owner for whom domestic building work has been undertaken has not been overruled. [41] If the particular circumstances of a case fall into one of the established categories of duty of care it is unnecessary for an applicant to prove that the respondent owed a duty.28 This is what the High Court was referring to in Bryan v Maloney and the ‘special categories of case’. Where however a novel set of circumstances arises, it is necessary for an applicant to prove that the respondent owed a duty of care. In Caltex Refineries (Qld) Pty Ltd v Stavar it was stated: This rejection of any particular formula or methodology or test the application of which will yield an answer to the question whether there exists in any given circumstance a duty of care, and if so, its scope or content, has been accompanied by the identification of an approach to be used to assist in drawing the conclusion whether in novel circumstances the law imputes a duty and, if so, in identifying its scope or content. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the “salient features” or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury.29 (emphasis added) 25 Bryan (n 9) [9]. 26 Bryan (n 9) [14]. 27 Bryan (n 9). 28 Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649. 29 Ibid at 677. -- 9 of 17 -- 10 [42] The salient features approach to determining, in novel cases, whether a duty of care is owed by a potential tortfeasor was referred to by the High Court in the recent decision of Mallonland Pty Ltd v Advanta Seeds Pty Ltd 30: In Sullivan v Moody, the Court observed that "[d]ifferent classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care ... The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle." Since Sullivan v Moody, other than in cases involving an assumption of responsibility, determining whether the relationship between the parties gives rise to a duty of care to avoid causing pure economic loss has been understood in Australia to involve such an evaluation. This "salient features" approach, as it is now known, has attracted significant academic and judicial criticism. (footnotes omitted) [43] The ‘salient features’ approach referred to in Mallonland involves a consideration of a range of matters in determining whether a duty of care arises. One of those matters is vulnerability to harm. Where however the relationship between the relevant parties is one involving an assumption of responsibility, the salient features approach to determining the existence of a duty of care does not arise for consideration. [44] In domestic building cases involving the original parties to the building work, as recognised in Bryan v Maloney, there is an assumption of responsibility on the part of the building contractor. Accordingly, consideration of the vulnerability of the building owner in determining the existence of a duty of care is not required. This was recognised by Edelmann J in Mallonland albeit in the context of a subsequent purchaser: It suffices to say that if there were truly an assumption of responsibility in Bryan v Maloney, then any reference to "vulnerability" would be superfluous and confusing at best. [45] Edelemann J’s comment has direct application in circumstances where the building contractor and the building owner are in a direct relationship. Conclusion of duty of care [46] The relationship between Chau’s and Mr Karam was characterized by an assumption of responsibility by Chau’s and known reliance by Mr Karam. The relationship falls within one of the special categories of cases in which a duty of care is owed. I find that Chau’s owed to Mr Karam a duty to undertake the works in an appropriate and skilful way, with reasonable care and skill and free from defects. Did Chau’s breach the duty of care owed to Mr Karam? [47] It is not contentious that by the time Mr Karam and his family moved into the house on 23 December 2013, Chau’s had completed the installation of the air-conditioning system but for the commissioning of the system which Chau’s did not undertake as Mr Karam did not pay the balance of the monies owed to Chau’s. [48] I accept Mr Karam’s evidence that on 25 December 2013 the system repeatedly tripped the main power to the house and logging errors appeared on the system touch 30 [2024] HCA 25. -- 10 of 17 -- 11 panel and that Mr Karam attempted to contact Chau’s to address the issues without success. [49] I accept Mr Karam’s evidence that on 29 December 2013 an alternative contractor, Air Smart Air Conditioning Pty Ltd, attended at the residence to investigate Mr Karam’s complaints. There is no statement of evidence from a representative of Air Smart Air Conditioning Pty Ltd nor was any person called to give evidence at the hearing. I therefore approach with some caution Mr Karam’s evidence about what he was told by the contractor. Mr Karam’s evidence was that on two subsequent occasions, in January and February 2014, the contractor returned to the house to investigate and address the issues raised by Mr Karam. I accept Mr Karam’s evidence in this regard. [50] Mr Karam says that in January 2014 he was told by Air Smart that the system had a major air leak in the ceiling cavity and that the return air ducting was not connected to the return air grill resulting in the indoor unit of the system drawing hot air from the ceiling cavity rather than the air circulating in the house. The result of this, Mr Karam says he was told, was that the system temperature gauge gave a false reading causing the system to constantly operate. Mr Karam says that he was told by the contractor that the installation of the return air grill was not compliant with the manufacturer’s specification and required immediate replacement. Mr Karam’s evidence about what he was told by the contractor is hearsay. The Tribunal is not bound by the rules of evidence other than the extent to which the Tribunal adopts those rules.31 In the present circumstances, the question is not of one admissibility but rather of the weight to be given to the evidence of Mr Karam. Mr Karam’s evidence in relation to the matters to which I have referred was not challenged at the hearing. I found Mr Karam and Mr Chau to both be truthful witnesses who did their best to give an accurate recounting of the relevant events albeit from their respective perspectives. I accept the evidence of Mr Karam about what he was told by the contractor. [51] Mr Karam’s evidence, which I accept, is that the manufacturer of the system attended at the premises in February 2014 to investigate issues relating to what Mr Karam says were outdoor unit error logs. Mr Karam says that this was found to be the result of Chau’s not inputting the correct settings on the outdoor unit. It should be noted that there is no evidence from the manufacturer to support Mr Karam’s assertion. [52] Mr Karam says that in or about January or February 2014 Chau’s returned to the residence to replace the return air ceiling mounting resulting in substantial damage to the surrounding gyprock. Mr Karam says that he told Mr Chau that he was extremely unhappy with the quality of Chau’s work. [53] Following this, Mr Karam says that the system failed to adequately cool the house with the issue remaining an ongoing one. I accept Mr Karam’s evidence in this regard. I find that after February 2014 Mr Karam did not call upon Chau’s to investigate the ongoing issues with the system. [54] Mr Karam engaged an air conditioning specialist company, BNE Air Service Pty Ltd, to investigate the issues with the system. BNE prepared a report.32 The report is undated. The author of the report did not give evidence at the hearing although the principal of BNE did. The report was filed by Mr Karam in the original minor civil 31 QCAT Act, s 28(3)(b). 32 Appendix 14 to exhibit 2. -- 11 of 17 -- 12 dispute proceeding brought by Chau’s. I am therefore satisfied that the report came into existence some time in 2018. [55] The salient findings contained in the report may be summarised as follows: (a) Zone controller on the first floor of the residence not securely fastened; (b) The condition of the piping system was compromised, with the liquid line not being insulated within the ceiling space adjacent to the indoor unit. This resulted in sweating on the pipework which dripped and marked the ceiling; (c) It was not possible to inspect the full extent of the pipework which was predominantly situated within finished ceiling areas, walls and in-slab; (d) The condition of the ducting was compromised. Leakage apparent from air readings indicated that the supply air ducting was either incorrectly joined, damaged, cut and/or severely squashed; (e) The leakage was likely present somewhere between the ground floor and the upper floor however without some demolition work being undertaken this was not able to be verified; (f) The zone controllers and motorised dampers were operating as intended; (g) The first floor airflow readings indicated an acceptable level of air leakage; (h) The ground floor airflow readings indicated an excessive level of leakage; (i) Supply air leakage results in higher volumes of non-air conditioned air being drawn back through the indoor unit resulting in the system working harder to condition the air which in turn results in the supply air not reaching the intended zone in the residence, being wasted in the ceiling void and/or ceiling cavity depending on the site of the leakage; (j) The result of the above would be higher than usual power usage and the system being unable to adequately cool the relevant parts of the residence; [56] The report recommends the following further work: (a) Fasten upper floor zone controller: cost of work $56.00; (b) Insulate liquid line – recover system refrigerant, disconnect pipe, insulate, reconnect pipe, vac out and test, recharge refrigerant: cost of work $807.00; (c) Cut access to inspect the insultation of the remainder of the piping system and the piping system in general, patch and repaint: cost of work $2,160.00 to $3,160.00; (d) Locate and repair air leakage in supply ductwork, remove ceilings and walls for vertical sections of ductwork, locate leakage, repair or replace, re-balance system once complete, patch and repaint: cost of work $5,200.00 to $11,720.00; (e) In addition to the above costings, and allowance for overhead recovery and profit of 15% should be added totalling $1,233.45 to $2,361.45. [57] Mr Paul McTigue gave evidence at the hearing. Mr McTigue is the principal of BNE. Mr McTigue did not inspect the works or prepare the report. His evidence was therefore, at least in large part, a desktop evaluation of the report. -- 12 of 17 -- 13 [58] Mr McTigue’s evidence, which I accept, was that the costings contained in the BNE report were inclusive of both work to be undertaken by an air-conditioning technician and any required building work. Mr McTigue’s evidence, which I accept, was that allowing for increases in costs since the report was prepared, the cost of the recommended work would currently be 30% to 50% more than estimated in the report. [59] It is appropriate to pause here to note that one of Mr Karam’s main complaints regarding the work undertaken by Chau’s was that the unit installed in the ceiling cavity of the house did not have a drip tray positioned beneath it. It was Chau’s position that the agreement between the parties did not require it to install a drip tray. [60] Mr McTigue’s evidence was that the installation of a drip tray was a safety feature to catch condensate. Mr McTigue stated that if the unit could be installed without leakage from the pipework and with a pipe effectively taking the moisture out of the ceiling cavity the need for a drip tray would be obviated. Mr McTigue’s evidence was that if cold air was not getting to areas it was supposed to get to the system was not doing its job. He stated that the system was not capable of self diagnosis and that air flow leakages would not appear as errors on the system control pads. [61] I accept Mr McTigue’s evidence whose expertise as a licensed contractor engaged in the design and installation of air conditioning units was not challenged. While Mr McTigue did not inspect the works it was apparent that he had carefully reviewed the contents of the BNE report and gave truthful and considered evidence. [62] While Ms Chau, who appeared for Chau’s at the hearing, cross-examined Mr McTigue at length, his opinions remained unchanged. [63] The principal of Chau’s, Mr Chau, gave evidence at the hearing. Mr Chau’s evidence was that, but for commissioning the system, the installation of the system had been completed. Mr Chau’s evidence was that commissioning the system involved turning on the system and running it and ensuring that the system was operating correctly. [64] Mr Chau’s evidence at the hearing was that the pipes as installed were insulated. He said the issues with condensation and water staining were the consequence of Mr Karam’s failure to have the system regularly serviced. Mr Chau stated was unable to say what the cause of the water damage in the residence was. [65] A statement by Mr Chau was in evidence.33 Mr Chau stated that the system ‘was not working at all time (sic) as it was not fully commissioned’. This evidence is not consistent with Mr Chau’s oral evidence at the hearing that the physical installation of the system had been fully completed and that the commissioning of the system involved turning it on and monitoring it to ensure that the system was operating correctly. Mr Chau says in his statement that ‘a reasonable person should not and would not use an air conditioning units/system that is not completely installed and should have known that it would not function properly.’ This evidence is, again, inconsistent with the oral evidence given by Mr Chau at the hearing. Mr Chau goes on to say in his statement that Mr Karam was ‘clearly aware that the air conditioning was not completely installed and is not working. As a result (Mr Karam) contracted … Air Smart to complete the installation of the air conditioning units.’ I do not accept this evidence. I accept the evidence of Mr Karam that he only contacted Air Smart to attend at the premises to investigate the system when he became aware of issues with 33 Exhibit 4. -- 13 of 17 -- 14 the operation of the system. On Mr Chau’s own evidence, this was after the system had been fully installed by Chau’s save for the system being commissioned. [66] As to the issues raised in the BNE report, Mr Chau attributes the air flow issues to the system not having been fully installed and therefore ‘air balancing’ could not be undertaken. No explanation is provided by Mr Chau as to what is meant by ‘air balancing’ and, as I have found, the system had been fully installed but for the commissioning. As to the cause of the air flow issues including leakage, I prefer the evidence contained in the BNE report and the oral evidence of Mr McTeague to the evidence of Mr Chau. Mr Chau also says that the issues associated with air balancing and air leakage are attributable to the design of the building. Mr Chau says that the defective design resulted in no available access to service the air conditioning duct works. It is uncontroversial that Chau’s was responsible for the design of the air conditioning system. And it is uncontroversial that at the time the system was designed the residence had not been constructed. There is no evidence from Chau’s that it was not provided with the relevant documentation including plans and specifications for the residence at the time it designed the system. Nor is there any evidence from Chau’s that the plans and/or specifications changed after it had designed the system. Accordingly, any access issues as referred to in Mr Chau’s evidence should have been identified by Chau’s at the time it designed the system and certainly before the system was installed. [67] In order to determine whether Chau’s breached the duty of care it owed to Mr Karam it is necessary to turn to the provisions of the Civil Liability Act 2003 (Qld) (CLA). The CLA applies to any civil claim for damages for harm.34 ‘Harm’ includes economic loss.35 [68] A person does not breach a duty to take precautions against a risk of harm unless: the risk was foreseeable (that is, it is a risk of which the person knew or ought reasonably to have known); the risk was not insignificant; in the circumstances, a reasonable person in the position of the person would have taken the precautions.36 In deciding whether a reasonable person would have taken precautions against a risk of harm, the Tribunal is to consider the following (among other relevant things): the probability that the harm would occur if care were not taken; the likely seriousness of the harm; the burden of taking precautions to avoid the risk of harm; the social utility of the activity that creates the risk of harm.37 [69] In this case the relevant risk is that Mr Karam would suffer loss and damage if Chau’s did not undertake the installation of the air-conditioning system in an appropriate and skilful way and with reasonable care and skill, free from defects. Clearly the risk was not insignificant. [70] It is self evident that if Chau’s failed to take care in undertaking the installation of the system, Mr Karam would suffer loss in being required to have the defects rectified at his cost. Mr Karam was likely to incur significant expense in addressing the consequences of Chau’s failure to exercise reasonable care and skill in installing the system. There was no additional burden imposed upon Chau’s to take precautions to avoid the risk of harm to Mr Karam. Chau’s as a competent and experienced building 34 CLA, s 4(1). 35 CLA, schedule 2. 36 CLA s 9(1). 37 CLA, s 9(2). -- 14 of 17 -- 15 contractor, was required to undertake the installation of the system appropriately and without defects. [71] As is apparent from these reasons, but for the breach of duty by Chau’s, the defects in the system would not have been apparent and Mr Karam would not have suffered loss in being required to expend monies in rectifying the defects.38 The defects were the direct result of the way in which Chau’s undertook the installation of the system.39 [72] In making these findings I accept the evidence contained in the BNE report and the evidence of Mr McTeague. [73] I am therefore satisfied that Chau’s breached the duty of care it owed to Mr Karam in undertaking the installation of the air-conditioning system. The application of the Limitation of Actions Act 1974 (Qld) [74] Chau’s has raised the application of the Limitation of Actions Act 1974 (Qld) (LAA) as a defence to Mr Karam’s claim. [75] I have found that there was no contract between the parties having effect. The consequence of this is that there was no regulated contract between the parties and no implied warranties and therefore Mr Karam has no claim for breach of contract nor for breach of the statutory warranties. [76] That leaves only the claim for breach of duty. [77] By s 10(1)(a) of the LAA an action founded on tort (ie breach of duty) cannot be brought after the expiration of 6 years from the date on which the cause of action arose. The position in Queensland in relation to when the cause of action accrues in cases involving claims for breach of duty resulting in pure economic loss is summarised in the following passage from Melisavon v Springfield Land Development Corporation Pty Limited: Ordinarily, a cause of action for tortious negligence is complete when there is any manifestation of damage which is ultimately found to be connected to the alleged negligence. But it is at least arguable that this is a case of pure economic loss where in Australia that principle has been modified. The incremental development in Pullen of the legal principles established in Hawkins v Clayton has been followed in a number of jurisdictions. Until the High Court says otherwise, the cause of action in the present case was complete when the respondent suffered economic loss, that is, when the respondent had actual knowledge of the appellant's faulty engineering design or when the faulty design itself became manifest or could be discovered by reasonable diligence.40 [78] It is apparent from the evidence that Mr Karam was aware of problems with the air- conditioning system from the time he and his family moved into the residence in December 2013. Unlike the various latent building defect cases including Melisavon and the authorities referred to in that decision, it was known to Mr Karam from 23 December 2013 that the air-conditioning system was not operating as intended. By 9 January 2014 Mr Karam knew, as a result of investigations undertaken by Air Smart Air Conditioning Pty Ltd, that the return air ducting had not been connected to the return air grill and that the installation of the return air grill had not been undertaken 38 CLA, s 11(1)(a). 39 CLA, s 11(1)(b). 40 [2014] QCA 33 per McMurdo P with whom Ann Lyons J agreed. -- 15 of 17 -- 16 in accordance with the manufacturer’s specification and that the work undertaken by Chau’s was ‘dangerous and poor workmanship of the highest order.’41 At this time Mr Karam was also made aware by Air Smart of other leaks in the system including substantial leaks in the ducting penetrations.42 Further, by 12 February 2014 Mr Karam was advised by Air Smart that the copper piping in the system did not have insulation and that major air leaks from the system remained in the ceiling and the penetrations. [79] Accordingly, I find that, at the latest, by 12 February 2014 Mr Karam was aware of the defects in the air-conditioning system and knew, or ought to have known, that these defects were attributable to the work undertaken by Chau’s. Alternatively, I am satisfied that by 12 February 2014 Mr Karam could, by reasonable diligence, have discovered the defective work undertaken by Chau’s. In light of the foregoing I find that the Mr Karam’s cause of action against Chau’s for breach of duty had accrued by 12 February 2014. By operation of s 10(1)(a) of the LAA, proceedings by Mr Karam against Chau’s for breach of duty should have been commenced by 12 February 2020. Mr Karam commenced proceedings against Chau’s by Application for minor civil dispute filed 3 June 2020. Accordingly the proceedings were not commenced within the period of limitation and by operation of s 10(1)(a) of the LAA, the proceeding is statute barred and must be dismissed. Assessment of damages [80] In case I am wrong in concluding that Mr Karam’s claim is barred by operation of the LAA I make the following findings about Mr Karam’s claim for damages: (a) I accept the evidence contained in the BNE report and the evidence of Mr McTeague and find that the following rectification work is required to remediate the defective work undertaken by Chau’s: (i) Fasten upper floor zone controller: cost of work $56.00; (ii) Insulate liquid line – recover system refrigerant, disconnect pipe, insulate, reconnect pipe, vac out and test, recharge refrigerant: cost of work $807.00; (iii) Cut access to inspect the insultation of the remainder of the piping system and the piping system in general, patch and repaint: cost of work $2,160.00 to $3,160.00; (iv) Locate and repair air leakage in supply ductwork, remove ceilings and walls for vertical sections of ductwork, locate leakage, repair or replace, re-balance system once complete, patch and repaint: cost of work $5,200.00 to $11,720.00; (v) In addition to the above costings, and allowance for overhead recovery and profit of 15% should be added totalling $1,233.45 to $2,361.45. (b) I accept the evidence of Mr McTeague that the cost estimates in the BNE report should be increased by 30% to 50% to account for cost increases since the report was prepared. I adopt a mid point of 40%; 41 Statement of evidence of Anthony Karam. 42 Ibid. -- 16 of 17 -- 17 (c) In respect of items (iii), (iv) and (v) above, I also adopt a mid point in the estimates. There is no science to this approach, but rather an attempt to arrive at a fair and equitable outcome in circumstances where a range of figures has been provided. [81] I assess damages as follows using the item numbers referred to above: (i) $56.00 (ii) $807.00 (iii) $2,660.00 (iv) $8,460.00 $11,983.00 add 40% $16,776.20 (v) Add 15% $ 19,292.63 [82] The total assessment of damages is $19,292.63. Conclusion [83] The proceeding is dismissed. -- 17 of 17 --