CMG Homes Pty Ltd v Queensland Building and Construction Commission [2019] QCAT 191

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: CMG Homes Pty Ltd v Queensland Building and Construction Commission [2019] QCAT 191 PARTIES: CMG HOMES PTY LTD (applicant) v QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION (respondent) APPLICATION NO/S: GAR171-18 MATTER TYPE: General administrative review matters DELIVERED ON: 28 June 2019 HEARING DATE: 27 May 2019 HEARD AT: Brisbane DECISION OF: Member Susan Burke ORDERS: 1. The Direction to Rectify No 0103352 issued by the Queensland Building and Construction Commission on 1 May 2019 is set aside. 2. Costs to be determined on the papers upon each party delivering submissions to the tribunal in relation to costs on or before 18 July 2019. CATCHWORDS: GENERAL ADMINISTRATIVE REVIEW – DIRECTION TO RECTIFY – where complaint by homeowners that building work defective – whether it is unfair in the circumstances to require rectification. Queensland Building and Construction Commission Act 1991 (Qld), s72, s86, s87, Schedule 2 Chew v QBSA [2010] QCAT 501 Dixon Projects Pty Ltd v QBSA [2009] QCCTB 2 Glen Williams Pty Ltd v QBSA [2012] QCAT 127 Imperial Homes (Queensland) Pty Ltd v QBSA [2014] QCAT 42 JM Kelly (Project Builders) Pty Ltd v QBSA [2013] QCAT 502 Kehl v Board of Professional Engineers of Queensland [2010] QCATA 58 Laidlaw v QBSA [2010] QCAT 70 QBSA v O’Brien & Ors [2002] QDC 329 -- 1 of 13 -- 2 R v His Honour Judge Miller and the Builder’s Registration Board of Queensland, exparte Graham Evans & Co (Qld) Pty Ltd [1987] 2 Qd R 446 Stephenson v QBSA [2005] QCCTB 59; Mackay v QBSA [2011] QCAT 346 APPEARANCES & REPRESENTATION: Applicant: S Taylor, Counsel, instructed by Crouch & Lyndon Solicitors Respondent: S Tabai Walu, in-house solicitor for the Queensland Building Construction Commission REASONS FOR DECISION [1] On 1 May 2019, the Queensland Building Construction Commission (“the QBCC”) made a decision to issue a direction to rectify (“the DTR”) in relation to alleged defective work performed by CMG Homes Pty Ltd (“CMG”) at 18 Haigh Crescent Samford Valley Queensland (“the property”).1 [2] CMG seeks a review of the DTR pursuant to sections 86(1)(e), 86E(a) and 87 of the Queensland Building and Construction Commission Act 1991 (Qld) (“QBCC Act”) and seeks to set aside the decision of the QBCC to issue a direction to rectify. Jurisdiction of Tribunal to review a Decision of the QBCC [3] Section 87 of the QBCC Act provides that a person affected by a reviewable decision of the QBCC may apply to the tribunal for a review of the decision. [4] Section 86(1)(e) of the QBCC Act relevantly provides that a decision of the QBCC to give a direction to rectify or remedy, or not to give a direction, is a reviewable decision. [5] Section 20(1) of the Queensland Civil and Administrative Tribunal Act (“QCAT Act”) provides that the purpose of a review is to produce a correct and preferable decision. The QCAT Act provides that the tribunal must hear and decide a review of a reviewable decision by way of a fresh hearing on the merits.2 [6] Section 24 of the QCAT Act provides that in a proceeding for a review of a reviewable decision, the tribunal may: (a) confirm or amend the decision; or (b) set aside the decision and substitute its own decision; or (c) set aside the decision and return the matter for reconsideration to the decision- maker for the decision, with directions that the tribunal considers appropriate. 1 Exhibit 1 – Statement of Ian Chaplin at annexure “IC-2” 2 Kehl v Board of Professional Engineers of Queensland [2010] QCATA 58 at [9] -- 2 of 13 -- 3 Power to Direct Rectification [7] Part 6 of the QBCC Act sets out the QBCC’s power to require rectification of defective building work. [8] Section 72 of the QBCC Act relevantly provides: “72 Power to require rectification of building work (1) This section applies if the commission is of the opinion that – (a) building work is defective or incomplete; or (b) consequential damage has been caused by, or as a consequence of, carrying out building work. (2) The commission may direct the person who carried out the building work to do the following within the period stated in the direction – (a) for building work that is defective or incomplete – rectify the building work; (b) for consequential damage – remedy the damage. (3) In deciding whether to give the direction, the commission may take into consideration all the circumstances it considers are reasonably relevant and, in particular, is not limited to a consideration of the terms of the contract for carrying out the building work (including the terms of any warranties included in the contract). (4) ………. (5) The commission is not required to give the direction if the commission is satisfied that, in the circumstances, it would be unfair to the person to give the direction. Example for subsection (5) – The commission might decide not to give a direction for the rectification of building work because an owner refuses to allow a building contractor to return to the owner’s hoe or because an owner’s failure to properly maintain a home has exacerbated the extent of defective building work carried out on the home.” [9] Schedule 2 of the QBCC Act defines the terms “building work” and “defective” for the purpose of assisting the commission in its deliberation as whether a direction to rectify should issue. [10] The exercise of the discretion of the tribunal must be exercised in accordance with the objects of the QBCC Act which are clearly defined in section 3 of the QBCC Act. -- 3 of 13 -- 4 Policy Considerations [11] In addition to the requirements of the QBCC Act, the tribunal, standing in the shoes of the QBCC, is required to exercise its discretion in considering whether a direction to rectify should issue by taking into account relevant policies.3 [12] The applicable version of the policy in force at the time of the DTR under review is that in force effective from 10 October 20144 which relevantly provides: “(i) Rectification of Defective Work (1) It is a policy of the Queensland Building Services Board that a building contractor who carries out defective work should be required to rectify that work. (2) To remove any doubt, subsection (1) applies despite the building contractor failing to comply with the contracted plans and specifications for the work.” [13] Under the Rectification Policy, defects are categorised as to whether they are structural defects or non-structural defects and each of those terms are expressly defined in the Rectification Policy. Issues for Determination [14] In an application for review of a decision to issue or not issue a direction to rectify under section 72 of the QBCC Act, the following matters must be determined by the tribunal:- (a) Is the building work defective? (b) Is the builder responsible for the building work” (c) Is it fair, in all the circumstances, for the tribunal standing in the shoes of the QBCC to exercise the discretion to issue the direction to rectify to the builder? Factual Background [15] 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 the property.5 [16] The works commenced on 2 April 2011 and were completed to Practical Completion on 30 November 2011. [17] Sometime after Practical Completion, the homeowners undertook further works to the property including landscaping works which included: 3 Chew v QBSA [2010] QAT 501 at [28]; Imperial Homes (Queensland) Pty Ltd v QBSA [2014] QCAT 42 at [15]; Ramke Constructions Pty Ltd v QBSA (No 2) [2103] 575 4 Rectification of Building Work Policy being annexure SOR-1 of the Statement of Reasons filed 11 July 2018 – Exhibit “7” 5 Exhibit 1 – Statement of Ian Chaplin dated 10 August 2018 – annexure “IC-3” -- 4 of 13 -- 5 (a) installation of raised garden beds within the courtyard area (Drawing number J180462-01 at “LOC2”); (b) planting of vegetation within the above mentioned garden bed area; (c) laying of gravel and stepping stones throughout the courtyard area, such placement being over the existing above-ground drainage system; (d) various landscaping works including placement of a retaining wall at the front left hand side of the property (Drawing number J180462-01 at “LOC1”) and the placement of a swimming pool and other landscaping works at the front right hand side of the property (Drawing number J180462-01 at “LOC3”).6 [18] On 20 July 2012, the homeowners made a complaint to the QBCC regarding purported defective works (“the first complaint”).7 [19] On 14 September 2012, after consulting the builder, the QBCC undertook an inspection of the property. [20] On 7 October 2012, the QBCC produced an initial inspection report addressing the main complaint being efflorescence in the bricks concluding that the works were not defective and that the matters of complaint did not affect the structural integrity of the brickwork.8 [21] On 17 October 2012, the QBCC issued a direction to rectify to the builder with respect to 23 items of work but no direction was given in relation to the issue of brick efflorescence.9 [22] During November and December 2012, CMG attended to the scope of works identified in the direction to rectify dated 17 October 2012. In the end result, it was determined by the QBCC that it would not be issuing a direction to rectify with regard to the brick efflorescence. [23] Subsequently. the homeowners filed an application with the Queensland Commercial Civil and Administrative Tribunal (“the tribunal”) seeking to review the decision of the QBCC not to issue a direction to rectify with respect to a number of the 23 items the subject of complaint, namely those related to soil moisture, the operation of the slab and brick efflorescence. [24] 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. That decision is reported in Van Dorssen and Ors v Queensland Building and Construction Commission [2014] QCAT 594. [25] The tribunal relevantly concluded at [56] to [58] in relation to the issue of the defective brickwork: 6 Exhibit 1 - Statement of Ian Chaplin dated 10 August 2018 – see photo of works performed by CMG at annexure “IC-21” and photo of works performed by the homeowners at annexure “IC-22”. 7 Exhibit 1 – annexure “IC-6” 8 Exhibit 1 – annexure “IC-8” 9 Exhibit 1- annexure “IC-9” -- 5 of 13 -- 6 “[56] I am not satisfied that the evidence presented establishes on the balance of probabilities that the brick efflorescence and minor decay constitutes defective building work. Once the water and/or salts dissipate, it is expected to cease. I am not satisfied that the affected brickwork is either faulty or unsatisfactory. It has not been established that as a result of the efflorescence and minor decay that it fails to meet the applicable standards and the Building Code of Australia. [57] I make the observation that even if I had been satisfied that it was defective, that I would in any event have been satisfied that it is unfair to give a direction to rectify at this point in time. This is because the experts agree that it would be premature to commence any rectification measure until the source of the moisture is identified. [58] Therefore, I make the further observation that to issue a direction at this point would appear to require the builder to take steps to rectify an issue which may well resolve naturally with the effluxion of time over the next couple of years.” [26] Further, in relation to the allegation that the edges of the slab had honeycombed because the concrete was poorly compacted and not in compliance with the BCA and AS3600, the tribunal commented that it was uncontroversial that the slab did not conform. The tribunal accepted the evidence of experts who concluded that the honeycomb was confined to the edges of the slab and at the time did not impair the structural capacity of the residence. [27] The tribunal concluded, in relation to the slab, that the structural capacity of the residence was unlikely to be affected for its lifetime and stated: “[71] Having regard to the facts as found by me concerning the slab, I am satisfied that the slab is defective to the extent that the honeycombing and poor compaction and its non-compliance with the BCA and AS3600. [72] However, in view of my findings that the structural capacity of the slab is unaffected and is not likely to be affected for the life expectancy of the building, I am satisfied that it would be unfair to issue a direction to the builder to rectify the defect.” [28] On 5 February 2018, the QBCC received a further complaint (“the second complaint”) from the homeowners in relation to excessive slab moisture and efflorescence of the bricks including fretting, spalling and mould on the bricks. Further complaints related to lifting of the vinyl plank flooring in the pantry and a white flaky substance under the planks. [29] On 30 April 2018, the QBCC produced an initial inspection report as a result of an inspection of the property on 24 April 2018. The QBCC considered that the occurrence of moisture absorption and the appearance of dampness and efflorescence was contrary to P2.2.3 of the BCA 2011 Vol.2 and issued a direction to rectify on 1 May 2018. It is this direction to rectify (“DTR”) which is the subject of these review proceedings. [30] The DTR was couched in the following terms: -- 6 of 13 -- 7 “The QBCC finds the licensee responsible in that the building envelope & ground slab are not performing in accordance with the BCA 2011 Vol 2 P2.2.3: Dampness, resulting in loss of amenity to the occupants, undue dampness and deterioration of building elements – Pertains to item 1 of the QBCC complaint form.” [31] On 16 May 2018, the solicitors for CMG notified the QBCC the reasons held by CMG for not complying with the DTR10: (a) the initial inspection report notes that moisture has not risen above the damp proof course and thus the damp proof course was functioning as intended; (b) the presence of efflorescence and leeching from the brickwork did not of itself conclude that CMG had carried out defective work; (c) the complaint is one previously made and investigated and determined; (d) no evidence of defective brickwork; (e) CMG could not be held accountable for environmental factors; (f) the wording of the DTR was vague and not clear as to what “building work” was required; (g) no manner of rectification would resolve the issue of soil moisture until the source of the moisture was identified and corrected; (h) requiring CMG to rectify the defect was premature until the source of the moisture was identified and corrected. [32] On or about 28 May 2018, CMG applied for a review of the subject DTR. [33] On 11 July 2018, the QBCC provided its Statement of Reasons (Exhibit “7”). [34] On 20 March 2019, an expert engaged by the QBCC, provided a report addressing, amongst many issues, the potential sources of soil moisture.11 Mr van de Hoef identifies the most fundamental issues contributing to moisture as follows: (a) the modification to the courtyard, in that the garden beds have been installed up against the side of the residence which act to trap water; and (b) lack of drainage in the area by the placement of gravel. [35] CMG has responded to the expert evidence provided by Mr van de Hoef by way of Schedule “A” attached to submissions provided to the tribunal at the hearing on behalf of CMG. [36] CMG has requested a review of the DTR on the basis that: 10 Exhibit 1 – annexure “IC-17” 11 Statement of John van de Hoef dated 20 March 2019 Exhibit “2” and statement dated 24 April 2019 Exhibit “3” -- 7 of 13 -- 8 (a) the items the subject of the DTR under review are the same items which formed part of the homeowners’ first complaint which were determined by the tribunal as not being defective building work; (b) nothing has changed at the property since the first complaint by the homeowners; (c) the experts in the previous tribunal hearing agreed that it would be premature to commence any rectification work until the source of the water is identified and corrected; (d) the source of the water remains unknown; (e) the source of the water has not been corrected; (f) the QBCC has not properly investigated or determined where the water is coming from or the cause of efflorescence; (g) the tribunal has already determined that the presence of efflorescence does not make the brickwork defective; (h) the damp proof course has been properly constructed and is functioning as intended; (i) there is no evidence that the building work performed by CMG is defective; (j) even if the building work were defective, the direction is not capable of being complied with as it is too vague and does not identify what is to be rectified by CMG; (k) it would be unfair in all the circumstances to exercise the discretion to issue a direction to CMG. Evidence of CMG [37] Mr Ian Chaplin, a director of CMG, gave evidence on behalf of CMG.12 [38] In particular, with regard to the allegation that water or moisture in the pantry area has been caused by CMG, Mr Chaplin disagrees with the view taken by the QBCC that the cause is the failure of the damp proof course. Mr Chaplin states that given the walls of the pantry are Weathertex cladded walls, and not brick, a damp proof course is not required. In any event, the damp proof course constructed on site has been installed correctly. [39] Further, Mr Chaplin states that the QBCC has failed to identify the source of water or moisture in the pantry given that there could be a number of sources including a roof leak, a plumbing leak or a leak from an appliance. [40] According to Mr Chaplin, photographic evidence supports the conclusion that the garden beds installed by the homeowners outside or near the pantry have resulted in 12 Exhibit “1” – Statement of Mr Ian Chaplin dated 10 August 2018 -- 8 of 13 -- 9 poor drainage in the area.13 Drainage pits installed by CMG for the purpose of subsequent concreting of the area would have ensured the correct fall in the concrete slab and proper drainage. Landcaping carried out by the homeowners did not take advantage of the raised drainage pits.14 Expert Evidence [41] Slab relative humidity testing was undertaken at the property to identify the extent of slab edge dampness, efflorescence and other relevant factors on 10 August 2018. An inspection report dated 15 August 2018 was prepared by a senior structural engineer, Mr Martin Illsley, engaged by NJA Consulting.15 [42] A very comprehensive report was prepared by Mr John van de Hoef, senior structural engineer and director of NJA Consulting, after an inspection of the property on 14 June 2018. Mr van de Hoef produced a report dated 28 August 2018 and a supplementary statement dated 24 April 2019 which annexed documents referred to but omitted from the report dated 28 August 2018.16 [43] Mr van de Hoef undertook, as part of his scope of works, the tasks of determining the severity of any slab edge dampness and rising damp problems including: (a) carrying out a general inspection of the dwelling with particular emphasis on the signs of rising damp around the perimeter of the residence in a number of locations; (b) carrying out an inspection of the pantry to the left hand side of the residence to determine if there is slab edge dampness problems in this location; (c) attempting to determine the cause of moisture related problems. [44] In relation to slab edge dampness, Mr van de Hoef concluded that the fundamental problem occurring on site is that the perimeter footings are effectively sitting in wet soils and the polythene membrane that extends under the footing system is most likely not terminated at the external ground surface adjacent to the perimeter footing. The result is that soil moisture is migrating through the edge footing via capillary action and is evaporating at the internal surface of the slab at the perimeter. It was noted that the slab edge dampness is presently limited to the pantry of the residence. [45] Mr van de Hoef noted that the problem would be more severe if not for the site drainage conditions present around the residence. [46] Mr van de Heof pointed to the following causes: (a) adopted termination point for the polythene membrane being at the inside edge of the perimeter footing (contrary to AS2870 which indicates that the normal 13 Exhibit “5” – photographs of courtyard area 14 Annexures “IC21” and “IC22” to Exhibit 1; See also photgtaphs forming part of Exhibit “5” 15 Exhibit 6 – Statement of Mr Martin Illsley dated 18 April 2018 - annexure “MJI-2” 16 Exhibit “2” dated 20 March 2019 being a statement of Mr John van de Hoef with report dated 28 August 2018 at annexure “JVH-2” and Exhibit “3” being the supplementary statement of Mr John van de Hoef -- 9 of 13 -- 10 termination point for the polythene membrane is at the external ground surface to the perimeter footings); (b) the site drainage conditions are not satisfactory and the presence of significant depths of gravel mulch around the perimeter of the residence creates conditions where evaporation and transpiration may not occur and therefore elevated moisture levels around the footing system would occur; (c) the sorptivity of the concrete footing system as a result of insufficient vibration and compaction of the concrete during construction.17 [47] Mr van de Hoef concluded that the presence of slab edge dampness in the pantry area was a significant health and amenity issue for the homeowners. [48] The second significant issue addressed by Mr van de Hoef is the rising damp problem which is concluded to be caused by a number of factors including:18 (a) marginal site drainage, particularly in the courtyard area, causing soil moisture; (b) presence of significant depth of granular material allowing penetration into the founding soils but no allowance for evaporation and transpiration; (c) non-compliant falls of the concrete pavements away from the dwelling; (d) the porosity of the brickwork; (e) presence of weathered rock at relatively shallow depths overlying permeable soils creating seepage of sub-surface moisture that would not otherwise occur; [49] Mr van de Hoef did not conclude that any of the issues the subject of the DTR could be considered a structural defect19 and concluded that no guarantee could be given that any rectification works would be completely successful in eliminating the problems. Recommendations were provided for appropriate solutions Discussion [50] In considering the present application for a review of the decision of the QBCC, it is the obligation of this tribunal to: (a) exercise its discretion pursuant to section 72 of the QBCC Act standing in the position of the QBCC; (b) consider the competing interests of the parties involved and factors such as blameworthiness of the homeowners and the cause of the defective works; (c) have consideration, in exercising its discretion, to the circumstances mentioned in the QBCC’s policies; (d) take into account all the evidence including the circumstances raised at the tribunal hearing; 17 Exhibit “2” at pages 23 and 24 18 Exhibit “2” at pages 25 to 27 19 Exhibit “2” at page 27 -- 10 of 13 -- 11 (e) determine if there was defective building work; (f) determine whether in all the circumstances the notice to rectify should be issued.20 [51] It must be taken into account that a finding that the building work is either ‘defective’ or “incomplete” does not automatically or of itself impose liability on the builder but merely enlivens the discretion of the tribunal.21 Is the building work defective? [52] As admitted by Mr van de Hoef, there is no evidence that the footing system has not been constructed in accordance with the design documentation. [53] The main thrust of Mr van de Hoef’s report concentrated on the marginal site drainage and the termination point of the damp proof course membrane potentially not being in accordance with AS2870. [54] There is no evidence that the damp proof course is not compliant with the Australian Standard or any relevant Building Code but rather it has been assumed that the polythene membrane has been terminated at the edge of the footing and had it been continued and terminated at the finished ground surface of the external edge of the perimeter footing the current problems in the pantry would be less significant. [55] I am unable to conclude that the installation of the damp proof course is defective. [56] With regard to the alleged defective work which has contributed to the rising damp on site, the non-compliant falls of the external pavements combined with the gravel material installed as part of the landscaping seem to be the main causes of concern. [57] I am not satisfied that CMG is responsible for any defective work contributing to the rising damp. [58] I accept the submissions of Counsel on behalf of CMG, that the most fundamental issues contributing to the moisture on site (as identified by Mr van de Hoef) are as follows: (a) the modification to the courtyard, in that the garden beds have been installed up against the side of the residence and thus trap water; (b) lack of drainage is evidence as a result of the placement of gravel. [59] I have taken into account the document produced by CMG and annexed as Schedule A to the written submissions provided by Counsel for CMG. Schedule A adequately provides the response of the builder to issues raised in Mr van de Hoef’s report. I accept the responses provided by CMG in Schedule A. 20 Dixon Projects Pty Ltd v QBSA [2009] QCCTB 2 at [26] – [27]; Stephenson v QBSA [2005] QCCTB 59 at [40]; Mackay v QBSA [2011] QCAT 346 at [23] 21 R v His Honour Judge Miller and the Builder’s Registration Board of Queensland, expert Graham Evans & Co (Qld) Pty Ltd [1987] 2 Qd R 446 -- 11 of 13 -- 12 Did the Homeowners cause or contribute to the defective work? [60] In the decision of Stephenson v QBSA [2005] QCCTB 59 at paragraph [40], Member Moon identifies that in exercising its discretion the tribunal must consider the competing interests of the parties. In this exercise, the tribunal must take into account the innocence or blamelessness of the homeowners in considering whether the builder is at fault. The converse side of this exercise is of course to look carefully at whether the homeowner has been the main cause or a contributing cause of the circumstances the subject of the DTR. [61] I am satisfied in the present circumstances that the subsequent landscaping undertaken by the homeowners has been a significant factor in affecting the inadequate drainage at the site. I am further satisfied that the homeowners have failed to maintain or address the problems with the landscaping in the intervening period between their first complaint to the QBCC and the present complaint the subject of these proceedings. [62] I am satisfied that had the courtyard and other areas been finished in the manner contemplated at the time CMG carried out the works under the contract, namely with concrete pavements, it is likely the present problems with the moisture in the pantry may have been contained or eliminated. Are there circumstances which exist resulting in unfair circumstances if a DTR were given? [63] In considering whether to issue a DTR, the tribunal must consider the competing interests of the parties involved.22 The balancing of interests is dictated by the objectives in section 3 of the QBCC Act. [64] The tribunal is required to address the comparative disadvantage to the homeowners and determine whether it outweighs any competing disadvantage or unfairness to the builder. [65] The issue of soil moisture problems has been an issue for many years. There is no evidence that the homeowners have taken any steps to address the alleged problems, particularly in re-addressing the landscaping which has been known to have been a major cause or contributing factor. [66] On balance, there is little support that any defective building work has been the cause of the soil moisture problems and yet there is significant support for the conclusion that the landscaping has been a relevant cause. [67] I have formed the view that in the present circumstances it would be unfair to issue a DTR to the builder in circumstances where the homeowners have caused or contributed significantly to the problems on site. [68] No evidence has been provided by the homeowners or the QBCC identifying any steps taken by the homeowner to address the problems encountered or to maintain the property to reduce any of the symptoms of rising damp or slab edge moisture. 22 Dixon Projects Pty Ltd v QBSA [2009] QCCTB 2 at [26] -- 12 of 13 -- 13 Orders [69] Given my findings above, I am satisfied that the correct and preferable result is that the direction to rectify issued by the QBCC dated 1 May 2018 be set aside. [70] In the event that either party seeks costs of the proceedings, it is ordered that submissions be provided to the tribunal on or before 19 July 2019 and the issue of costs be determined on the papers. -- 13 of 13 --