Body Corporate for Clifton Views v Queensland Building and Construction Commission [2017] QCAT 285

CITATION: Body Corporate for Clifton Views CTS 39725 v Queensland Building and Construction Commission [2017] QCAT 285 PARTIES: Body Corporate for Clifton Views CTS 39725 (Applicant) v Queensland Building and Construction Commission (Respondent) APPLICATION NUMBER: GAR280-16 MATTER TYPE: General administrative review matters HEARING DATE: 27 and 28 July 2017 HEARD AT: Brisbane DECISION OF: Member Olding DELIVERED ON: 23 August 2017 DELIVERED AT: Brisbane ORDERS MADE: 1. Any party wishing to object to evidence contained in a witness statement must file two (2) copies in the Tribunal and give one (1) copy to the other party of written submissions outlining why the evidence should not be admitted, by: 4:00pm on 3 November 2017. 2. The parties must use their best endeavours to agree on a hearing plan and (A) if the parties are able to agree, must file two (2) copies of the agreed hearing plan in the Tribunal; and (B) if unable to agree, each party must file two (2) copies in the Tribunal and give one (1) copy to the other party of their proposed hearing plan, by: 4:00pm on 7 November 2017. CATCHWORDS: ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – where body corporate applied for review of decision to disallow insurance claims made by lot owners – -- 1 of 12 -- 2 whether body corporate has standing to apply for review – where hearing adjourned over objection of party Body Corporate and Community Management Act 1997 (Qld), s 36, s 162, s 312 Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld), s 170 Queensland Building and Construction Commission Act 1991 (Qld), s 87 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 21, s 122(4) Baulderstone Hornibrook Pty Ltd v Queensland Building Services Authority R132-95 [1997] QBT 93 McEvoy & Anor v The Body Corporate for No 9 Port Douglas Road [2013] QCA 168 APPEARANCES: APPLICANT: Body Corporate for Clifton Views CTS 39725 RESPONDENT: Queensland Building and Construction Commission REPRESENTATIVES: APPLICANT: represented by Mr L Campbell of Counsel instructed by Grace Lawyers Pty Ltd RESPONDENT: represented by Ms S Moody of Counsel instructed by the Queensland Building and Construction Commission REASONS FOR DECISION [1] This matter was partly heard on 27 and 28 July 2017, together with Application Number GAR216-15.1 [2] Part way through the second day, I adjourned the proceedings to a directions hearing at a date to be fixed. [3] Before doing so, I indicated to counsel that I was inclined to adjourn the hearing. The Respondent Commission opposed the adjournment. The 1 By direction of the Tribunal dated 13 July 2017, the proceedings, which involve the same parties, are to be heard together, with evidence filed in one proceeding taken to be evidence filed in the other. -- 2 of 12 -- 3 position of Mr Campbell, who appeared for the Applicant,2 was that if the hearing proceeded the Applicant would be taken by surprise by the timing issue outlined below.3 [4] Both parties asked me to provide reasons for the decision to adjourn the proceedings. Although the Tribunal is not required to give reasons for adjournment decisions,4 I agreed to do so. [5] The background set out below, although somewhat detailed, may assist in framing issues and future steps in the proceeding. I have also made further directions for the fair and efficient conduct of this matter, and taken the opportunity to make some observations that may assist the parties in that regard. Reasons for adjournment [6] In summary, I adjourned the proceeding because: a) It had become clear that the hearing could not be completed in the time allocated, so that it would inevitably have been adjourned at the end of 28 July 2017 in any case. b) By adjourning before hearing any further evidence, the likelihood of unfairness to either or both parties, arising out of the timing issue outlined below, might be avoided. c) Having regard to the issues that emerged (as discussed below), the hearing of the remaining evidence would likely be undertaken more efficiently if the parties had the benefit of the time between an adjournment and a resumed hearing. d) It having been foreshadowed that one or more applications for leave to introduce further evidence may be made, if those were to be granted the additional evidence would more efficiently, and fairly, be heard at the same time as the evidence covered by the witness statements already filed. The Applications [7] Application Number GAR216-15 sought review of the Commission’s decision not to issue a direction to rectify alleged defects relating to lanai 2 The name of the Applicant specified in the Application is Body Corporate for Clifton Views CTS 39725. However, a class of lot owners were joined as parties to the proceedings: see paragraph 33 below. I propose to consider directing that the Application for Review be amended by adding the names of these parties, once the Applicant complies with a direction that the Tribunal made to file evidence particularising the names of the affected lot owners. For convenience, the applicants are referred to collectively as the Applicant in these reasons. 3 Transcript, 1-36, lines 6-20. 4 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 122(4). -- 3 of 12 -- 4 louvres5 in units in the Clifton Views development and in relation to alleged water ingress to some units. [8] A notice to rectify would be futile, as the relevant builder has gone into liquidation. However, Mr Campbell advised that proceeding GAR216-15 was kept on foot for the sake of efficiency, so that evidence filed in that proceeding could be treated as evidence in Application Number GAR280- 16, a direction to that effect having been made by the Tribunal. The water ingress issue is no longer pursued. [9] Application Number GAR280-16 sought review of the Commission’s decisions to partially disallow claims taken to be made by lot owners against the statutory insurance scheme; in particular, decisions to disallow the claims in respect of the lanai louvres. These are the only remaining decisions for which review is now sought. The standing issue [10] At the start of the first day of the hearing, counsel for the Commission, Ms Moody, raised an issue concerning whether the body corporate was the proper applicant in the proceedings. The issue arose because the relevant complaints were made by, and the Commission’s decisions were directed to, the large number of individual lot owners, rather than to the body corporate. [11] Mr Campbell asserted that the proceedings had always been conducted on that basis and that it was unfair for the Commission to raise the issue at this late stage. Ms Moody denied this claim and said that it was for an applicant to establish its standing to make an application to the Tribunal. [12] Some debate ensued between counsel regarding whether or what notice the body corporate had of this issue. That debate took up precious hearing time and may or may not be relevant to applications for costs that both parties foreshadowed. However, there is little evidence on which I might resolve these issues now and it is not necessary for me to do so for current purposes. [13] I did not at the hearing and do not in these reasons fully resolve whether the body corporate was able to make the applications for review and, if so, did indeed make the applications on behalf of the lot owners. After a directions hearing on 11 August 2017, I made a direction giving the parties an opportunity to make further written submissions on the issue if they wish to do so. [14] However, it may be helpful to set out why I considered that there was a real issue regarding whether the Tribunal had jurisdiction to determine the 5 Since their character is an issue in the proceedings, I adopt, as I did at the hearing, the expression “louvres”, with the intention of using a neutral term. -- 4 of 12 -- 5 applications made in the name of the body corporate. This is necessary background to what then followed on the first day of the hearing. [15] Mr Campbell’s submission that the Applicant had standing to apply for review had two alternative bases, namely that: a) the applications for review were made by the body corporate on behalf of the lot owners; and b) the body corporate was a “person affected” by the reviewable decision to disallow in part the insurance claim. Were the applications for review made on behalf of the lot owners? [16] Under s 312(1) of the Body Corporate and Community Management Act 1997 (Qld) (Body Corporate and Community Management Act), the body corporate for a community titles scheme may start “a proceeding”6 only if the proceeding is authorised by a special resolution of the body corporate. [17] I was taken to copies of minutes purporting to record a resolution of a committee of the body corporate and minutes purporting to record a special resolution of the body corporate ratifying the decision of the committee. Although not authorising the body corporate in the clear terms that would have been desirable, construed in their context on one view the purported special resolution might be considered to satisfy the requirements of s 312(1).7 [18] However, even if that is so, the effect is merely to remove the statutory barrier to a body corporate starting a proceeding it otherwise has standing to commence. It is not clear that a body corporate has authority to apply for review of a decision of the Commission to partially disallow a claim for insurance where no complaint or claim was made by the body corporate. The only insurance claims that were made and (partially) disallowed were made by the lot owners, in the form of complaints treated by the Commission as insurance claims.8 [19] Mr Campbell submitted that the body corporate has such standing because it is subrogated to the rights of the lot owners. In this regard, attention was drawn to s 36(3) of the Body Corporate and Community Management Act, which is as follows: 6 In the absence of a definition in the Body Corporate and Community Management Act and any evident contrary intention, the definition of “proceeding” in Schedule 1 of the Acts Interpretation Act 1954 (Qld) applies. That definition is broad enough to include a proceeding before the Tribunal. 7 Mr Campbell also submitted that, on the authority of McEvoy & Anor v The Body Corporate for No 9 Port Douglas Road [2013] QCA 168, the commencement of proceedings without proper authority may be cured by subsequent ratification. There was no evidence that at the time of the hearing that such ratification had occurred. 8 This is the usual practice of the Commission. -- 5 of 12 -- 6 If, before a community titles scheme is established, a contract is entered into to have work carried out on land that becomes scheme land- a) a body corporate is, on the establishment of the scheme, subrogated to the rights (if any) of the original owner under the contract to the extent that the contract applies to work affecting scheme land that is common property; and b) a lot owner is, on establishment of the scheme, subrogated to the rights (if any) of the original owner under the contract to the extent that the contract applies to work affecting scheme land that is the lot. [20] Paragraph (a) does not seem to assist the body corporate as it only applies to work affecting common property. [21] The problem for the body corporate under paragraph (b) is that the lot owners are subrogated to the rights of the original owner under the contract for construction of the development. On its face, this says nothing about the entitlement of the body corporate to apply for review of a decision of the Commission under the statutory insurance scheme. [22] My attention was also drawn to s 162 of the Body Corporate and Community Management Act and s 170 of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld). [23] Section 162 provides that a regulation module: …may authorise the body corporate to bring a proceeding under the Queensland Building and Construction Commission Act 1991 (Queensland) or another law to have remedied a defect in building work carried out for the owner of a lot included in the scheme. [24] Section 170 provides: (1) If building work carried out for the owner of a lot included in a community titles scheme is defective, the body corporate may bring a proceeding under the Queensland Building and Construction Commission Act 1991 or another law to have the defect remedied. (2) If a body corporate brings a proceeding under this section, the body corporate is subrogated to the contractual and other rights of the person for whom the building work was carried out. [25] The difficulty for the body corporate under s 170 is that, on an ordinary reading of the provision, the lot owners would not be the persons for whom the building work, being the construction of the development, was carried out. The lots were not in existence at the time the work was carried out. -- 6 of 12 -- 7 Is the body corporate a “person affected” by the reviewable decisions? [26] Under s 87 of the Queensland Building and Construction Commission Act 1991 (Qld) (Queensland Building and Construction Commission Act), a “person affected by a reviewable decision” may apply to the Tribunal for review of the decision. Here, the relevant reviewable decisions are the decisions to disallow the lot owners’ claims under the statutory insurance scheme in respect of the louvres. [27] Mr Campbell submitted that the body corporate is a “person affected” by those decisions because the body corporate has been intimately involved in pursuing the applications for review and is, in a sense, although not legally, one and the same as the lot owners collectively. [28] In that regard, Mr Campbell relied on a decision of the then Queensland Building Tribunal in Baulderstone Hornibrook Pty Ltd v Queensland Building Services Authority R132-95 [1997] QBT 93, and the cases cited in the reasons for decision in that case, as authority for the proposition that persons “affected” should not be confined to those with a legal interest at stake. [29] The requirement of the relevant part of s 87 is that the person is affected by the reviewable decision. The decision is to partly disallow insurance claims by the lot owners. Only the lot owners could benefit under the insurance claims. It is difficult to see how, even taking a broad view, the body corporate is affected by the partial disallowance of the claims when it could not benefit under the lot owners’ claims. [30] Having regard to these matters, it seemed to me that there was a real doubt whether the Applicant had standing to make the applications for review. [31] After an adjournment to allow the parties’ representatives to confer, it was suggested that in order to allow the hearing to continue I might order that the lot owners be joined as parties. Mr Campbell assured me that he had authority to seek this course and to act on behalf of the lot owners. [32] However, I understood Ms Moody to advise me that a lot owner who had sold a lot after lodging a complaint would no longer have an entitlement under the insurance scheme. With my then understanding, and on the assumption that at least some lot owners who lodged complaints with the Commission would have since sold their units, I was not prepared to make an order that would potentially, indeed likely, have the effect of joining as parties to the proceedings persons who were no longer unit holders and who had no interest in the outcome of the proceedings.9 9 Mr Campbell noted that the Applicant did not necessarily accept that persons who lodged complaints, but were no longer unit holders, had no remaining interest in the outcome of the proceedings and foreshadowed that an application may be made to join as parties former lot owners who had lodged complaints. -- 7 of 12 -- 8 [33] Ultimately it was agreed (Ms Moody not objecting) that to enable the hearing to proceed, and thus avoid additional cost and inconvenience to the parties and their witnesses (and the Tribunal), I should order that those lot owners who lodged complaints and remained lot owners on the day of the hearing (27 July 2017) would be joined as parties to the proceedings. I duly made that order orally and also ordered that the Applicant lodge within 14 days a schedule of lot owners who lodged complaints and remained lot owners at 27 July 2017, with evidence of their status as continuing lot owners. The time limit issue [34] By the time the matters relating to standing outlined above were dealt with, and noting that time was also taken up in various complaints by counsel about one another’s conduct, there was only time left on the first day to hear evidence from the Applicant’s first expert witness, Mr Mackenzie. As the Applicant’s second expert witness, Mr Honkanen, had limited availability by telephone the next day, until 10.30 am, it was agreed that the Tribunal would commence at 9.00 am, thirty minutes earlier than the usual starting time for hearings. [35] Shortly after Ms Moody commenced her cross-examination on the second day of the hearing, she attempted to explore evidence that might be relevant to whether, in regard to clause 2.5(a) of the Insurance Policy Conditions,10 an opinion might be formed that the claims were not made within three months of the alleged defects first becoming evident. [36] The Insurance Policy Conditions distinguish between category 1 defects and category 2 defects, with different time limits for making claims in each case. Whether the alleged defects are category 1 or category 2 defects is in issue in this proceeding. [37] A category 1 defect is defined11 as follows: “category 1 defect” means building work that is faulty or unsatisfactory because it either: a) adversely affects the structural performance of a building; b) adversely affects the health or safety of persons residing in or occupying a building; c) adversely affects the functional use of the building; or d) allows water penetration into a building. 10 Edition 7, effective 29 September 2017. 11 Insurance Policy Conditions, clause 9.1. -- 8 of 12 -- 9 [39] A category 2 defect is defined12 as follows: “category 2 defect” means building work that is faulty or unsatisfactory, other than a category 1 defect, because: a) it does not meet reasonable standards of construction or finish; or b) it has caused a “settling in period” defect in a new building. [40] The time limits for making claims are contained in clause 2.5 of the Insurance Policy Conditions. Clause 2.5 is as follows: 2.5 Time Limit for Making a Claim The Insured is NOT ENTITLED to payment for loss under this Part unless: a) in the case of a category 1 defect, the claim is made within three months of that defect first becoming evident (in the opinion of the BSA13); or b) in the case of a category 2 defect, the claim is made within seven months of the date of practical completion, or within such further time as the BSA may allow. (Emphases in original) [41] The attempted cross-examination arose because Mr Honkanen’s report appended a schedule entitled “Lanai Door Summary Report January 2015”, which Mr Honkanen’s report noted had been provided to him by the body corporate managers. The schedule listed the units in the development and on its face appeared to classify the highest deterioration over all four louvres at each unit into grades, namely: “Good Condition”; “Signs of deterioration, however ok; Mid Level Deterioration; “High Level Deterioration”; and “Totally Structurally Unsound”. [42] Mr Campbell objected strongly to this questioning. He noted that the Commission’s inspection reports listed under a heading “Date owner became aware of defect”: 23 March 2015. He maintained that the applicant had proceeded on that basis and that it had never been suggested by the Commission that there was any issue regarding when the defects became evident; noted that the issue did not appear in the Commission’s Statement of Reasons; and submitted that the Commission should not now be allowed to surprise the Applicant with the issue. [43] That, Mr Campbell suggested, would severely prejudice the Applicant, both in relation to whether the time limit had expired and, if so, in bringing evidence and making submissions regarding whether the Tribunal, 12 Insurance Policy Conditions, clause 9.1. 13 Now the Commission. -- 9 of 12 -- 10 standing in the shoes of the Commission, should extend the time for making the claims. [44] Ms Moody responded by noting that the Commission did not raise this issue in its Statement of Reasons, as it did not consider the alleged defects to be category 1 defects. It considered them to be category 2 defects for which a different timeframe for lodging claims applies. [45] Further, Ms Moody noted that a Respondent’s Statement of Reasons is not a pleading; that a statement of issues had not been filed and nor had the Applicant sought one; and that as decision-maker standing in the shoes of the Commission the Tribunal needed to know whether the three-month time limit had expired. Further, the time limit is not obscure – it is a clear part of the conditions for making claims – and it is the Applicant’s own evidence that raises a question about whether the time for making the claims had expired. [46] Thus, Ms Moody submitted, she was entitled, if not obliged in accordance with the Respondent’s duty to assist the Tribunal in making its decision,14 to explore evidence that is potentially relevant to determination of the entitlement under the claims and therefore to the Tribunal’s task of making the correct and preferable decision on the application for review. [47] It seemed to me that, even if I were to accept Mr Campbell’s submission on being taken by surprise, I could not direct that Ms Moody not cross-examine on this timing issue. It is an issue that the Tribunal must determine to decide eligibility under the insurance policy. [48] As the argument proceeded on this issue, it became clear that there would no longer be time to complete the cross-examination and re-examination of Mr Honkanen within the limited time that he had available, and hear from the various other witnesses, on 28 July 2017. It was inevitable that the Tribunal would be forced to adjourn and reschedule further time for hearing of the matter - neither counsel suggested otherwise. [49] This left the Tribunal in the position of needing to decide whether to proceed with hearing from other witnesses on 28 July 2017 and then return on another occasion to hear from Mr Honkanen and to hear submissions. [50] Although that approach might potentially have saved half a day of allocated hearing time, and some cost to the parties, it would have come at the cost of potential unfairness to either or both parties in respect of the timing issues. It seemed to me that, since adjournment of the hearing was inevitable in any case, the preferable approach was to deal with all remaining evidence at a resumed hearing at which there should be no concern about lack of fairness in dealing with the timing issue. 14 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 21(1). -- 10 of 12 -- 11 [51] I also observe that, having regard to the experience with the hearing of the matter thus far, there is no certainty that evidence from the other witnesses would have been completed on 28 July 2017 in any case. Additionally, orderly introduction of the evidence should be able to be achieved at a resumed hearing in a way that would not have been possible if the hearing had continued on 28 July 2017 but with Mr Honkanen’s cross-examination to be resumed at a later date. The future conduct of this matter [52] A directions hearing was held on 11 August 2017, some two weeks after the adjournment of the hearing. I had hoped that in that time counsel would have conferred and agreed so far as possible on the future conduct of this matter – any additional witness statements to be filed, the order of witnesses and so on – but it seems that was not possible. [53] After hearing from the parties, the Tribunal made detailed directions for the purpose of endeavouring, so far as possible, to ensure the fair and efficient conduct of the balance of the hearing. [54] Those directions included requirements for the exchange of statements of issues and outlines of submissions. In that regard, in the interests of maximising the hearing time devoted to evidence and submissions relevant to the substantive issues and based on my current understanding of the matter, I note that the issues I expect the Tribunal will need to consider will include:15 a) Are the alleged defects category 1 or category 2 defects or neither? b) If the alleged defects are category 1 defects: i) What opinion should the Tribunal, standing in the shoes of the Commission, form regarding whether the claims were made within the three-month period?; and in that regard: ii) Does a defect become evident when deterioration that results from a defect becomes evident or when the cause of the deterioration becomes evident? iii) Does the reference to a “defect first becoming evident” require an objective inquiry and, if so, what is the nature of that inquiry, or does it require a determination of whether and when an alleged defect became evident to a particular person or persons? iv) Noting, as the Tribunal understands, that the Commission’s practice is to treat complaints as claims under the insurance policy, on what date were the claims made; in particular, were 15 Since these are based on my current understanding of the matter, I have set the issues out here rather than include them in prescriptive directions. -- 11 of 12 -- 12 the claims made when the complaints were made or when they were so treated by the Commission? c) If the alleged defects are category 1 defects and if the claims were not made within the three-month period, should the time for making the claims be extended and, in that regard, what circumstances are relevant to the decision whether to extend the time? [55] On reflection, I have decided to also make a direction for the parties to confer with a view to agreeing upon a hearing plan for the resumed hearing or, if the parties are unable to agree, for each to file their proposed hearing plan. Additionally, while it is to be hoped that generally any concerns either party may have with the other’s evidence might be dealt with as a matter of weight in final submissions, if there is to be any objection to the admission of evidence foreshadowed in witness statements, written submissions setting out the basis of the objections will be required prior to the hearing. -- 12 of 12 --