Benson v Legg [2020] QCAT 270

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Benson v Legg [2020] QCAT 270 PARTIES: MARK ANDREW BENSON (applicant) v ROBERT JOHNATHAN LEGG (respondent) APPLICATION NO/S: BDL063-19 MATTER TYPE: Building matters DELIVERED ON: 22 July 2020 HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Kanowski ORDERS: Robert Johnathan Legg must pay Mark Andrew Benson $7,765.92 in damages, and $330 in costs, by 19 August 2020. CATCHWORDS: TORTS – NEGLIGENCE – DAMAGE AND CAUSATION – GENERALLY – where deck unfit for purpose – whether builder liable BANKRUPTCY – PROCEEDINGS IN CONNECTION WITH SEQUESTRATION – PETITION AND SEQUESTRATION ORDER – EFFECT OF BANKRUPTCY ON PROPERTY AND PROCEEDINGS – ACTIONS BY AND AGAINST BANKRUPT – STAY OF PROCEEDINGS AGAINST BANKRUPT AFTER PRESENTATION OF PETITION – IN RESPECT OF PROVABLE DEBT – where builder became bankrupt after work performed – whether action for damages for negligence is a provable debt – whether action can be pursued against bankrupt builder Bankruptcy Act 1966 (Cth), s 58(3), s 82 Queensland Building and Construction Commission Act 1991 (Qld), s 77 Atkinson and Anor v Van Uden [2020] QCAT 259 Bryan v Maloney (1995) 182 CLR 609 McNulty & Ralph v Sel [2017] QCAT 10 -- 1 of 7 -- 2 REPRESENTATION: Applicant: Self-represented Respondent: Self-represented APPEARANCES: This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) REASONS FOR DECISION Introduction Mr Legg designed and built a timber deck at Mr Benson’s house in late 2017. Mr Benson says the deck was poorly built. He seeks damages and costs from Mr Legg. Mr Benson commenced the proceeding in the Tribunal, by way of an application for a domestic building dispute, on 20 February 2019. By then, Mr Legg was bankrupt. He became bankrupt on 18 July 2018. On 6 March 2019, the Tribunal directed Mr Legg to file a response to Mr Benson’s application by 5 April 2019. On 21 March 2019 Mr Legg filed an email saying ‘My bankrupt my paperwork has past on to trustees’ and attaching screen shots of correspondence sent to him about the bankruptcy. On 21 March 2019 the Tribunal directed Mr Legg to provide further information about his bankruptcy by 5 April 2019. Mr Legg did so. On 23 May 2019 the Tribunal directed Mr Legg to file a response to Mr Benson’s application by 31 May 2019. The Tribunal further directed that if Mr Legg failed to do so, Mr Benson would be entitled to a final decision, which would be made on the papers. Mr Legg sent to the Tribunal a couple of short emails which seem to be to the effect that his bankruptcy extinguished any debt. He did not file a formal response. He also did not attend a directions hearing on 26 September 2019. On 7 June 2019 the Tribunal’s registry had received an email from Ms Mel Purcell, Operations Manager at S V Partners, accountants, Brisbane, noting that two persons from that firm are the trustees in bankruptcy of Mr Legg; contending that Mr Benson is unable to pursue a claim through the Tribunal; and instead Mr Benson would need to lodge a claim in the bankruptcy. Ms Purcell noted section 58(3) of the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’) and that the building work in question was done before Mr Legg became bankrupt. The effect of section 58(3) of the Bankruptcy Act is that, except as provided for in the Bankruptcy Act, or with the leave of a Court, it is not competent for a creditor to commence any proceeding against a bankrupt person in respect of a provable debt. The issues to be determined are: (a) can Mr Benson pursue this claim against Mr Legg despite Mr Legg’s bankruptcy? (b) if so, has Mr Benson established entitlement to the sum sought? -- 2 of 7 -- 3 Can Mr Benson pursue this claim against Mr Legg despite Mr Legg’s bankruptcy? Mr Benson’s claim is for: (a) $6,471.60 in damages; (b) interest on the damages; and (c) $330 in costs for the Tribunal filing fee (which was actually $338.20). Mr Benson’s application asserts that the basis for entitlement to damages is that Mr Legg owed Mr Benson a duty to take reasonable care in performing the construction work, and that this duty was breached. This is a claim in negligence. The principal authority cited in Mr Benson’s application is Bryan v Maloney,1 which is a leading High Court case on the liability of builders in negligence. In the Bankruptcy Act, ‘provable debt’ is defined as a debt or liability that is, under the Bankruptcy Act, provable in bankruptcy.2 Section 82 of the Bankruptcy Act explains which debts are provable in bankruptcy. It casts a very wide net in subsection (1), encompassing (subject to following exceptions): … all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of bankruptcy … However, one of the exceptions that follows is in section 82(2): Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy. Mr Legg’s claim for damages is a demand for unliquidated damages: unlike liquidated damages, which would arise if there was an agreed amount for damages in a contract. Although there would have been a contract, albeit an informal one, between Mr Benson and Mr Legg for the construction work, the demand made by Mr Benson is not one made by reason of the contract. Nor is it one made by reason of a promise or a breach of trust. Accordingly, Mr Benson’s claim for damages is a demand that is not provable in the bankruptcy. There is no ‘provable debt’. Mr Benson is able to pursue the claim against Mr Legg despite Mr Legg’s bankruptcy. I will discuss separately the question of whether Mr Benson can be awarded interest and costs. Has Mr Benson established entitlement to the sum sought? Tribunal’s jurisdiction The Tribunal has jurisdiction to resolve a building dispute, where the applicant has first attempted to resolve the dispute through a process in the Queensland Building 1 (1995) 182 CLR 609. 2 Bankruptcy Act, s 5. -- 3 of 7 -- 4 and Construction Commission (‘QBCC’).3 Mr Benson has provided satisfactory documentary evidence that he engaged in such a process in 2018. ‘Building dispute’ includes a ‘domestic building dispute’,4 which in turn is defined as including a claim or dispute between a building owner and a building contractor relating to the performance of ‘reviewable domestic building work’.5 ‘Reviewable domestic building work’ is defined, essentially, as domestic building work under Schedule 1B to the QBCC Act.6 ‘Domestic building work’ is defined as including the improvement of a home.7 ‘Building contractor’ is defined widely for the purposes of domestic building work: it includes a person who carries out domestic building work.8 The definition extends, therefore, to a person such as Mr Legg who did not hold a building licence at the time. The work involved was the construction of a deck to Mr Benson’s home. This constituted an improvement to Mr Benson’s home. So the dispute is a building dispute under section 77 of the QBCC Act, and the Tribunal has jurisdiction. The orders that the Tribunal can make include the awarding of damages, interest, and costs.9 Elements of a negligence claim The elements of a negligence claim have been explained in previous cases including McNulty & Ralph v Sel10 and Atkinson and Anor v Van Uden.11 Those cases include references to the Civil Liability Act 2003 (Qld) and relevant High Court and other cases, and it is not necessary for me to repeat them here. The elements, in summary and in a building context, are: (a) a duty of care owed by the builder to the homeowner; (b) breach of that duty; (c) damage which is not too remote having been suffered by the homeowner as a consequence; and (d) the rebuttal of any defence to the claim. In relation to whether a duty will be owed, it has been observed that: The relationship of professional licensed builder to a homeowner client is an established category of relationship where a duty of care is owed. That is because it is reasonably foreseeable that if care is not taken by the builder the client is likely to suffer loss and damage. The owner of a house, in the absence of evidence to the contrary, may be assumed to rely on a professional builder to carry out the work with care and skill and the builder generally accepts the responsibility arising from that reliance.12 3 Queensland Building and Construction Commission Act 1991 (Qld), s 77 (‘QBCC Act’). 4 Ibid, Schedule 2 (definition of ‘building dispute’). 5 Ibid (definition of ‘domestic building dispute’). 6 Ibid (definition of ‘reviewable domestic building work’). 7 Ibid, Schedule 1B s 4. 8 Ibid, Schedule 1B s 1 (definition of ‘building contractor’). 9 Ibid, s 77(3). 10 [2017] QCAT 10. 11 [2020] QCAT 259. 12 Ibid, [52]. -- 4 of 7 -- 5 Was a duty of care owed by Mr Legg to Mr Benson? The facts described below are drawn from Mr Benson’s uncontested evidence, which is detailed and well-supported by photographs and documents. I accept Mr Benson’s evidence. Mr Legg was not a licensed builder. His licence had been cancelled by QBCC in 2017. However, Mr Legg at the relevant time still displayed his licence number within a sign on his utility. The sign included: Rob Legg Specialising in Wooden Buildings All Things Timber New and Used Homes Deckings Studios Carports Garages Mr Benson met Mr Legg when he was doing work at Mr Benson’s workplace. Mr Legg became aware that Mr Benson wanted a deck built. Mr Legg said he could build one for him. Mr Benson asked if Mr Legg was licensed, and Mr Legg pointed to the licence number on the sign. Mr Legg told Mr Benson he had over 30 years of building experience and that he had built dozens of decks. Mr Benson then engaged Mr Legg to build the deck. Mr Legg provided a quotation. There was no signed contract, but Mr Benson accepted the quotation and paid the full price of $6,471.60 up front so that Mr Legg could purchase materials. Mr Legg then proceeded to build the deck. Mr Benson did not conduct a licence search, and he did not find out until after the deck had been built that Mr Legg was not licensed. It is clear, however, that Mr Legg presented himself as a licensed builder, and that Mr Benson reasonably placed reliance in him to do a professional job. Mr Legg implicitly accepted responsibility to exercise reasonable care in carrying out the construction. I find that Mr Legg owed Mr Benson a duty to exercise reasonable care in designing and constructing the deck. Was the duty breached? The firm ‘Detailed Building Inspections’ inspected the deck on 2 July 2018 and found numerous problems, including the boards running along the short rather than the long side, inadequate termite protection, drainage problems, inadequate fixing, and tenting. The overall conclusions were that the deck was well below industry standards, was not fit for purpose, and presented a health and safety risk. On 21 September 2018, QBCC issued 13 directions to rectify to Mr Legg, requiring rectification by a licensed contractor. The directions identified a myriad of structural problems which involved non-compliance with the Building Code of Australia and Australian Standards. These directions were not complied with. -- 5 of 7 -- 6 Mr Benson also made several independent efforts to have Mr Legg fix up the deck, ultimately to no avail. Mr Benson ended up dismantling and removing the deck. He does not plan at this stage to replace it, for financial reasons. It appears from the photographs that Mr Benson would have been able to get use out of the deck initially, though increasing caution would have required as time went on as boards began to buckle, in times of rain because of ponding, and so on. Overall, I am satisfied that by July 2018, at least, the deck had reached the point where it was not fit for purpose, and it presented a health and safety risk. This was due to a combination of faulty design and faulty construction methods. I accept that Mr Benson had no real alternative but to dismantle the deck. Clearly, Mr Legg breached his duty to exercise reasonable care in designing and constructing the deck. Damages The purpose of damages is to restore the homeowner to the position he would have been in had the breach of duty not occurred.13 Had Mr Legg met his duty of care, Mr Benson would have ended up with a functional deck with a standard life expectancy. As the duty was breached, he ended up with a worthless deck which needed to be removed. In these circumstances, I broadly accept Mr Benson’s argument that his loss should be measured at the price he paid to Mr Legg. I treat the claim for interest as an additional component of the loss suffered. For that reason, it is not to be treated as a separate item requiring consideration of whether Mr Legg’s bankruptcy precludes a claim. In the absence of any agreed or contractual rate of interest, the appropriate rate is 10% per year.14 Bearing in mind that the deck was probably reasonably usable initially, but was found to be risky as at July 2018, I consider that two years’ worth of interest is the appropriate award. This relates to the period July 2018 to July 2020, and reflects the fact that Mr Benson had neither a usable deck nor the benefit of the money he had spent on it during a two year period. I therefore assess damages at $7,765.92, comprising the amount of the price paid, namely $6,471.60, and 10% per year interest on that amount over two years. Has any defence been rebutted? The only defence to the action raised by Mr Legg is that he is bankrupt. I have already explained why that argument fails. Costs Mr Benson seeks $330 in costs, for the Tribunal filing fee. The power to award costs in a building matter under section 77 of the QBCC Act is discretionary, without the constraints against costs found in the QCAT Act.15 13 McNulty & Ralph v Sel [2017] QCAT 10, [10]. 14 Queensland Building and Construction Commission Regulation 2018 (Qld), s 54. 15 See QCAT Act, s 100. -- 6 of 7 -- 7 Further, the potential liability for costs post-dated the bankruptcy, as the proceeding was commenced after Mr Legg entered bankruptcy. So Mr Benson is not barred from seeking a costs order on account of the bankruptcy. Mr Benson made thorough efforts to have Mr Legg fix the deck, to no avail, before he had to resort to bringing the current proceeding. It is entirely fair that he be awarded the costs sought. Conclusion The appropriate orders are for Mr Legg to pay Mr Benson $7,765.92 in damages, and $330 in costs, within four weeks. -- 7 of 7 --