CMG Homes Pty Ltd v Queensland Building and Construction Commission [2019] QCAT 294

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: CMG Homes Pty Ltd v Queensland Building and Construction Commission [2019] QCAT 294 PARTIES: CMG HOMES PTY LTD (applicant) v QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION (respondent) APPLICATION NO/S: GAR 171-18 MATTER TYPE: General administrative review matters DELIVERED ON: 30 September 2019 HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Susan Burke ORDERS: 1. The Respondent pay the Applicant’s costs of and incidental to the proceedings from 28 May 2018 to 11 September 2018 on a standard basis on the District Court Scale as agreed, or failing agreement as assessed. 2. The Respondent pay the Applicant’s reasonable costs on an indemnity basis of conducting the proceedings from 11 September 2018 as agreed, or failing agreement as assessed. 3. The Applicant’s costs will be assessed as follows: (a) the Applicant will deliver to the Respondent an itemised claim for costs referring to the relevant items contained in the scale; and (b) if within 14 days of that delivery, the parties have not agreed to an amount for costs, the costs shall be assessed by Mr Jeff Peterson of Legal Costs Qld; (c) the Respondent will pay the Applicant’s costs (as agreed or assessed) within fourteen (14) days of such agreement or assessment by Mr Peterson of Legal Costs Qld. CATCHWORDS: ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND -- 1 of 13 -- 2 ADMINISTRATIVE TRIBUNAL – general administrative review – direction to rectify – any relevant change of circumstances between two directions to rectify PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – OTHER MATTERS – building dispute – exercise of discretion to award costs to be exercised judicially – open offer to settle – whether rejection of offer unreasonable – whether result more favourable – right to costs on indemnity basis Queensland Building and Construction Commission Act 1991 (Qld), s 77 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 100, s 102, s 103, s 105 Queensland Civil and Administrative Tribunal Rules 2009 (Qld), r 86 Ascot v Nursing and Midwifery Board of Australia [2010] QCAT 364 Fenwick v Queensland Building Services Authority [2011] QCAT 262 Fick v Groves (No 2) [2010] QSC 182 Fuge v Queensland Building and Construction Commission [2014] QCAT 383 Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 Peat v Payne [2006] QCCTB 127 State of Queensland v Hayes (No 2) [2013] QSC 80 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No2) [2010] QCAT 412 REPRESENTATION: Applicant: Crouch & Lyndon Solicitors Respondent: S Tabaiwalu, in-house solicitor for the Queensland Building and Construction Commission APPEARANCES: This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). -- 2 of 13 -- 3 REASONS FOR DECISION [1] Reasons for the Decision in this matter were delivered on 28 June 2019. [2] The tribunal ordered that direction to rectify no 0103352 dated 1 May 2019 (‘the second DTR’) issued by the Queensland Building and Construction Commission (‘QBCC’) to the Applicant, CMG Homes Pty Ltd (‘CMG’), be set aside. [3] CMG applies for its costs arising out of the application for a review of the decision by QBCC on 1 May 2018 to issue a direction to rectify. [4] CMG seeks the following orders: (a) the QBCC shall pay CMG’s costs of an incidental to the proceedings from 28 May 2019 to 11 September 2018 on a standard basis on the District Court Scale of Costs as agreed, or, failing agreement, as assessed; and (b) the QBCC shall pay all reasonable costs incurred by CMG on an indemnity basis on and from 11 September 2018 on the District Court Scale of Costs, as agreed or, failing agreement, as assessed. [5] CMG requests the costs to be assessed as follows: (a) CMG will deliver an itemised claim for costs referring to the relevant items contained in the District Court Scale of Costs; (b) if within 14 days the parties have not agreed to an amount of the costs, the costs will be assessed by Mr Jeff Peterson of Legal Costs Qld; and (c) the QBCC shall pay the costs assessed by Mr Peterson of Legal Costs within 14 days of such agreement or assessment. Background [6] On or about 25 March 2011, CMG entered into a contract with David and Jill Van Dorssen and Carl and Kylie Houlihan (‘the homeowners’) for the construction of a low-set brick dwelling at 18 Haigh Crescent Samford Valley Queensland (‘the property’). [7] On 20 July 2012, the homeowners made a complaint to the QBCC regarding alleged defective works (‘the first complaint’). [8] A direction to rectify was issued by the QBCC on 7 October 2012 (‘the first DTR’) with regard to certain items in the homeowners’ complaint. CMG purported to attend to those works. It was subsequently decided by the QBCC that it would not issue a direction to rectify regarding some outstanding issues including the complaint regarding brick efflorescence. [9] On 24 October 2013, the tribunal delivered a decision in relation to the homeowners’ application to review the QBCC’s decision not to issue a direction to rectify in relation to the outstanding issues. -- 3 of 13 -- 4 [10] The tribunal’s decision in Van Dorssen and Ors v Queensland Building and Construction Commission [2014] QCAT 594 confirmed the QBCC’s decision not to issue a direction to rectify. [11] On 5 February 2018, the homeowners made a further complaint (‘the second complaint’) regarding alleged defects in the works including the issue of excessive slab moisture and efflorescence of the bricks which formed part of the first complaint. [12] It is the subsequent DTR dated 1 May 2019 (‘the second DTR’) from the QBCC to CMG which was the subject of the decision of the tribunal dated 28 June 2019 as a result of an application for review dated 28 May 2018 of the QBCC’s second DTR. Offer to Settle Proceedings [13] On 16 May 2018, CMG’s solicitor forwarded a letter to the QBCC1 raising concerns about the second DTR and requested the QBCC to withdraw the second DTR. [14] On 28 May 2019, as a result of the QBCC’s failure to withdraw the second DTR, CMG filed an application to review the QBCC’s decision to issue the second DTR. [15] By letter dated 11 September 2018,2 CMG’s solicitor reiterated their concerns about the second DTR and made an offer to settle the review proceedings on the basis that the QBCC withdraw the second DTR and pay CMG’s costs in the sum of $5,000 within 7 days of the order. [16] The offer dated 11 September 2019 was an open offer made in accordance with Part 8, Division 3 of the Queensland Civil and Administrative Tribunal Rules 2009 (Qld) (‘the QCAT Rules’) remaining open until 26 September 2019. Legislation relating to Costs of Proceedings [17] Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) provides: 100 Each party usually bears own costs Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding. [18] Section 102(1) of the QCAT Act provides that the tribunal may make an order requiring a party to a proceeding to pay all or a stated part of the costs of another party to a proceeding if the tribunal considers the interests of justice require it to make the order. [19] Section 102(3) of the QCAT Act states that in deciding whether to award costs, the following factors may be considered by the tribunal: 1 Annexure MC-2 to the affidavit of Mardee Campbell affirmed 16 July 2019. 2 Annexure MC-8 to the affidavit of Mardee Campbell affirmed 16 July 2019. -- 4 of 13 -- 5 (a) whether a party to a proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding including not complying with a tribunal order or direction without reasonable excuse; (b) the nature and complexity of the dispute the subject of the proceeding; (c) the relative strengths of the claims made by each of the parties to the proceeding; (d) for a proceeding for the review of a reviewable decision – (i) whether the applicant was afforded natural justice by the decision-maker for the decision; and (ii) whether the applicant genuinely attempted to enable and help the decision-maker to make the decision on the merits; (e) the financial circumstances of the parties to the proceeding; and (f) anything else the tribunal considers relevant. [20] Further, s 105 of the QCAT Act provides that the QCAT Rules may authorise the tribunal to award costs in other circumstances, including, for example, the payment of costs in a proceeding if an offer to settle the dispute the subject of the proceeding has been made but not accepted. [21] Section 107(1) of the QCAT Act provides that if the tribunal makes a costs order under the QCAT Act, then it must fix costs if possible. In the event that it is not possible to fix the costs, then the tribunal may make an order requiring the costs to be assessed under the QCAT Rules by reference to a scale applying to a court.3 [22] Relevantly, r 86 of the QCAT Rules provides: 86 Additional power to award costs if particular offers to settle rejected (1) This rule applies if – (i) a party to a proceeding, other than a proceeding for a minor civil dispute, makes another party to the proceeding a written offer to settle the dispute the subject of the proceeding; and (ii) the other party does not accept the offer within the time the offer is open; and (iii) in the opinion of the tribunal, the decision of the tribunal in the proceeding is not more favourable to the other party than the offer. (2) The tribunal may award the party who made the offer all reasonable costs incurred by that party in conducting the proceeding after the offer was made. 3 Sections 107(2) and 107(3) of the QCAT Act. -- 5 of 13 -- 6 (3) If a proceeding involves more than 2 parties, this rule only applies if the acceptance of the offer would have resulted in the settlement of the matters in dispute between the parties. (4) In deciding whether a decision is or is not more favourable to a party than an offer, the tribunal must – (a) take into account any costs it would have awarded on the date the offer was given to the other party; and (b) disregard any interest or costs if awarded relating to any period after the date the offer was given to the other party. CMG’s Submissions on Costs [23] CMG submits that the interests of justice in this particular case warrant the exercise of the discretion to award its costs of the proceedings.4 [24] CMG relies upon the following matters by reference to the consideration of the factors outlined in s 102(3) of the QCAT Act:- (a) The conduct of the QBCC in responding to the homeowners’ second complaint and during review proceedings disadvantaged CMG in that: (i) the QBCC’s response dated 22 May 2018 to the concerns raised by CMG regarding the second DTR did not respond to the concerns or many of the issues raised by CMG regarding the alleged defective work;5 (ii) the QBCC dismissed, ignored and disregarded CMG’s concerns about the second DTR and the cause of the presence of water around and under the house; (iii) the QBCC’s action in concentrating on issuing a second DTR before the expiration of the time limit under s 72A(4) of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) rather than properly assessing the second complaint from the homeowners indicates that the conduct of QBCC was a disadvantage to CMG; (iv) the QBCC failed to properly respond to CMG’s concerns in a letter dated 24 July 2018 regarding the statement of reasons delivered by the QBCC; (v) at a directions hearing before the tribunal on 27 February 2019 the QBCC disclosed for the first time that it had commissioned an engineer’s report in August 2018 and gave no explanation for withholding the report; (vi) the QBCC ignored a direction of the tribunal to deliver further material on 13 March 2019 and did not provide the material until 20 March 2019 without any explanation for the delay; 4 Applicant’s written submissions filed 17 July 2019. 5 Annexures MC-2, MC-3 and MC-4 to the affidavit of Mardee Campbell affirmed on 16 July 2019. -- 6 of 13 -- 7 (vii) the later material provided by the QBCC on 20 March 2019 contained reports obtained on 15 August 2018 and 28 August 2018; (viii) further material which was ordered to be delivered by 13 March 2019 was not delivered by the QBCC until 18 April 2019 and 24 April 2019, despite being in the possession of the QBCC since August 2018; and (ix) the QBCC provided no explanation for its disregard for the tribunal’s directions for delivery of material. (b) The nature and complexity of the dispute resulted from: (i) the long history of the construction of the house including a previous review of the QBCC’s first DTR and the present second DTR; (ii) the complexity of identifying the source and cause of the presence of moisture at the property and the fact that the QBCC did not properly investigate and identify or explain the defects which were alleged to be the responsibility of CMG. (c) The proceedings were sufficiently complex to require legal representation which was granted by the tribunal by leave. (d) CMG contends that the QBCC should have withdrawn the second DTR because of the strength of CMG’s claim that: (i) it could not be identified or explained how the building work undertaken by CMG was defective; (ii) it could not be ruled out that the cause of the defects was insufficient drainage and it was accepted that CMG was not responsible for the landscaping and drainage works carried out following practical completion; (iii) CMG always maintained that the second DTR should not have been issued. (e) CMG submits that it genuinely attempted to assist the QBCC in understanding its position regarding its opposition to the second DTR. (f) CMG relies upon other relevant factors such as the fact that: (i) CMG has consistently and openly disputed the issue of the second DTR; (ii) CMG has consistently been open about its reasons for disagreeing with the QBCC’s decision to issue the second DTR; (iii) the QBCC brought a preliminary application in the review proceedings which should not have been made; (iv) CMG has consistently notified the QBCC that it would be seeking the costs of the review proceedings in the event that the QBCC did not withdraw the second DTR. -- 7 of 13 -- 8 [25] CMG submits that in the event that the tribunal is satisfied that in the interests of justice costs should be awarded in its favour then in the exercise of its discretion the tribunal should award indemnity costs at least for part of the review proceedings if not the whole. QBCC’s Submissions on Costs [26] The QBCC submits that there is no basis for awarding costs, as this is not a matter where the interests of justice require the tribunal to override the strong statutory mandate that each party must bear their own costs. [27] The QBCC has addressed the considerations which this tribunal may address in considering whether costs may be ordered in the interests of justice.6 To this extent the QBCC has addressed each of the factors set out in s 102(3) of the QCAT Act submitting that: (a) the QBCC’s conduct did not bring about any unnecessary disadvantage to CMG and therefore there is no reason to depart from the general rule on this basis; (b) the QBCC’s position was always arguable and therefore the conduct of the QBCC was acceptable; (c) the QBCC has at all times complied with the directions of the tribunal or in instances of non-compliance has communicated its reasons for non-compliance to CMG and complied soon after; (d) the nature and complexity of a proceeding does not of itself justify an order for costs and the circumstances of the present proceedings do not point so compellingly to an award of costs.7 The nature and complexity of the proceeding must be a neutral factor; (e) the relative strength of the parties’ claims is not a factor that supports an award of costs by the tribunal and at no time was the QBCC’s position untenable; (f) CMG was afforded natural justice by the QBCC prior to the time the decision of the tribunal was made; (g) any attempt by CMG to assist the QBCC as the decision-maker is a “small” factor and not one that should be given any weight by the tribunal in determining the costs of the application; and (h) the financial circumstances of the parties do not require an award of costs be made in the interests of justice. [28] Further, the QBCC relies upon the findings of Senior Member Oliver in Fuge v Queensland Building and Construction Commission [2014] QCAT 383 at [28]: I reiterate that under the QBCC Act, the Commission has a dual function in administering the Act. That is, to protect the public interest and also the interests of building contractors. In doing so it must not be reticent in discharging its 6 Respondent’s written submissions filed 18 July 2019. 7 Fuge v Queensland Building and Construction Commission [2014] QCAT 383. -- 8 of 13 -- 9 obligations for fear of adverse costs orders against it if it is unsuccessful in responding to an application for review of its decisions unless it can be demonstrated, there is some specific conduct on the pat of the Commission, that would ‘so compellingly’ overcome the strong contra-indication against costs orders in s100 of the QCAT Act. I am not satisfied that this is the case here. [29] The QBCC submits that there is no basis on the present circumstances for awarding costs to overcome the strong contra-indication against costs orders in s 100 of the QCAT Act. Discussion [30] Any discretion to award costs in this matter is constrained by the factors outlined in s 102 of the QCAT Act which is an extension of the usual order that parties bear their own costs in circumstances where the tribunal considers the interests of justice require a departure from that usual order. [31] Section 102 of the QCAT Act sets out particular factors which may be considered with the final catch-all being ‘any other relevant factors’. [32] The starting point in the QCAT Act is that each party bear their own costs.8 There may be a departure from this starting point where the interests of justice require otherwise.9 [33] The factors set out in s 102(3) of the QCAT Act are not grounds for awarding costs but rather factors which may be taken into account in determining whether the interests of justice require the tribunal to make a costs order. [34] In addition to accepting the relevance of the matters raised in the written submissions on behalf of CMG regarding the factors outlined in s 102(3) of the QCAT Act, there are a number of significant factors which are unique to this case which have influenced the exercise of my discretion to depart from the usual course that each party bear their own costs. [35] Those factors are as follows:- (a) The QBCC had made a previous determination, the first DTR, not to issue a direction to rectify certain works alleged to be defective. This decision was upheld by the tribunal. (b) Between the first DTR and the second DTR, which reversed in essence the first DTR, there had been no change in the evidence attributing the cause of the defective work to CMG. (c) Between the first DTR and the second DTR, there has been no definitive conclusion that the cause of the defective work was CMG. (d) Between the first DTR and the second DTR, there was no definitive conclusion contradicting CMG’s position that the subsequent landscaping works carried out 8 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No2) [2010] QCAT 412. 9 Ascot v Nursing and Midwifery Board of Australia [2010] QCAT 364. -- 9 of 13 -- 10 by the homeowners was the cause of or had contributed to the alleged defective work. (e) Despite extensive investigation by the QBCC experts, the QBCC was unable to identify the source or cause of the soil moisture which was the primary cause of the alleged defects. (f) CMG was not afforded any explanation by the QBCC for its changed position between the first DTR and the second DTR. [36] Taking into account the relevant factors outlined in s 102(3) and the significant factors which I have addressed above, I am satisfied in this particular case there are sufficient and substantiated reasons for departing from the usual rule that each party bear their own costs. [37] I have been persuaded that the QBCC’s management of this matter is a significant factor in the exercise of the tribunal’s discretion to determine that it is in the interests of justice that CMG be awarded its costs of the proceeding. Costs on an Indemnity Basis [38] Section 105 of the QCAT Act specifically provides that the QCAT Rules may authorise the tribunal to award costs in other circumstances, for example the payment of costs in proceedings if an offer to settle has been made and not accepted. [39] In this regard, r 86 of the QCAT Rules is applicable. In circumstances where an offer is made and not accepted, the tribunal has a discretion to award the party who made the offer all reasonable costs incurred by the party in conducting the proceeding after the offer was made. [40] The precursor to an award of costs on an indemnity basis upon the rejection of an offer is that the decision of the tribunal is, in the opinion of the tribunal, not more favourable to the other party than the offer. [41] The public policy and private interest considerations in encouraging offers of compromise so as to settle legal proceedings have been addressed by Philippedes J in State of Queensland v Hayes (No 2) [2013] QSC 80, in which Her Honour further stated:10 [11] The fact that a Calderbank offer to settle is not accepted and the offeree ends up worse off than if the offer had been accepted is a matter which the court may have regard to in deciding whether to exercise the costs discretion to depart from the usual order, but it does not automatically bring a different order as to costs: see SMEC Testing Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] per Giles J; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]. Ultimately, the court is required to determine whether the offeree’s failure to accept the offer warrants departure from the ordinary rule as to costs having regard to all the circumstances in the case. [12] In considering whether the discretion ought to be exercised other than in the usual manner, regard will be had as to whether the offer made must be shown 10 State of Queensland v Hayes (No 2) [2013] QSC 80, [11]-[14]. -- 10 of 13 -- 11 to be a genuine one: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [21[[24], [36]… [13] Further, the offeree ought to be provided with an appropriate opportunity to consider and deal with the offer: Elite Protective Personnel v Salmon [2007] NSWCA 322 at [99]. [14] It will be relevant to consider whether it can be shown that the rejection of the offer was unreasonable in the circumstances of the case. In that regard, it was observed in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 that the competing considerations which the court has regard to could … “[23]...be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test as ‘manifestly’ or ‘plainly’ unreasonable. [24] Of course deciding whether conduct is ‘reasonable’ or ‘unreasonable’ will always involve matters of judgement and impression. These are questions about which different judges might properly arrive at different conclusions. As Gleeson CJ said recently, ‘unreasonableness’ is a protean concept’. But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this.” [42] In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (‘Hazeldene’s case’)11 the court considered the factors relevant to assessing reasonableness:12 [25] The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree’s prospects of success, assessed at the date of the offer; (e) the clarity with which the terms of the offer were expressed; (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it. 11 (2005) 13 VR 435. 12 Applegarth J in Fick v Groves (No 2) [2010] QSC 182, [32] adopted the consideration of the matters referred to in Hazeldene’s case. -- 11 of 13 -- 12 [43] The QCAT Rules do not refer to these basic principles but they are factors to take into account when considering the discretion afforded the tribunal under r 86 of the QCAT Act. [44] The offer made by CMG to the QBCC by letter dated 11 September 2018 was to have the second DTR set aside and that an amount of $5,000 in costs be paid to CMG. [45] The tribunal’s decision dated 28 June 2019 was to set aside the second DTR. [46] To that extent the decision of the tribunal was not more favourable to the QBCC. [47] Further r 86(4) specifically states that in deciding whether a decision is or is not more favourable to a party than an offer, the tribunal must take into account any costs it would have awarded on the date the offer was given to the other party and disregard any costs if awarded relating to any period after the date the offer was given to the other party. [48] Accordingly, I have taken into account that the offer by CMG has included an estimate of costs to the date of the offer as $5,000.00. [49] I have no evidence to dispute that the costs to the date of the offer would have been less than the amount claimed and thus have formed the view that the decision of the tribunal was not more favourable than the offer made to the QBCC. [50] I have therefore formed the view that CMG is entitled to all reasonable costs incurred in the conduct of the proceeding after the offer was made and not accepted.13 [51] In making this determination I have taken into account the following factors:- (a) Given the history of the dispute it would appear unreasonable for the QBCC to reject or not accept the offer made by CMG. (b) At all times, CMG sought clarification from the QBCC regarding the second DTR and was given little feedback. (c) The circumstances between the first DTR (not to issue a direction to rectify) and the second DTR (to issue a direction to rectify) had not changed and no reason had been provided by the QBCC for its change in position. (d) The factors relevant at the time of the second DTR existed at the time of the first DTR, namely that the probable cause of the soil moisture (and related problems) was the landscaping undertaken by the homeowners. Orders [52] Given the matters determined by the tribunal above, the following orders will be made: 13 Peat v Payne [2006] QCCTB 127; Malay Industries Pty Ltd v Queensland Building Services Authority [2010] QCAT 310; Bottoms v Reser [2000] QSC 413; Marshall, K.H and Ken & Daryl Marshall Pty Ltd Seckhold, D.G & G [2005] QCCTR 60. -- 12 of 13 -- 13 (a) the QBCC shall pay CMG’s costs of an incidental to the proceedings from 28 May 2019 to 11 September 2018 on a standard basis on the District Court Scale of Costs as agreed, or, failing agreement, as assessed; and (b) the QBCC shall pay all reasonable costs incurred by CMG on an indemnity basis on and from 11 September 2018 on the District Court Scale of Costs, as agreed or, failing agreement, as assessed. -- 13 of 13 --