Body Corporate for Ipswich Senior Rental Accommodation v Queensland Building Services Authority [2014] QCAT 81

CITATION: Body Corporate for Ipswich Senior Rental Accommodation v Queensland Building Services Authority [2014] QCAT 081 PARTIES: Body Corporate for Ipswich Senior Rental Accommodation CTS 34652 (Applicant) v Queensland Building Services Authority (Respondent) APPLICATION NUMBER: GAR256-11 MATTER TYPE: Building Matter HEARING DATE: 7 May, 17 July and 29 October 2013 HEARD AT: Brisbane DECISION OF: Member Gardiner DELIVERED ON: 6 March 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. The decision of the Queensland Building and Construction Commission (formerly the Queensland Building Services Authority) dated 22 July 2011 is confirmed. CATCHWORDS: BUILDING MATTER – QBSA Statutory Insurance Scheme – Where claim made against fund rejected – Where owner, developer and licensed contractor the same company – Where the Certificates of Insurance were cancelled after the claim made – Where the contract was not produced and where no residential construction work found. Queensland Building Services Authority Act 1991 (Qld) ss 68,69 Queensland Building Services Authority Regulation 2003 (Qld) regs 10, 11 Acts Interpretation Act 1954 (Qld) s 24AA Parker v QBSA [2000] QCA 422 followed -- 1 of 9 -- 2 APPEARANCES and REPRESENTATION (if any): APPLICANT: Body Corporate for Ipswich Senior Rental Accommodation CTS 34652 represented by Mr G. Thompson of Counsel RESPONDENT: Queensland Building Services Authority represented by Mr B Turnbull Solicitor of HWL Ebsworth Lawyers REASONS FOR DECISION [1] The Body Corporate for Ipswich Senior Rental Accommodation seeks to review a decision of the Queensland Building Services Authority (as it then was) made on 22 July 2011 to disallow a claim by the Body Corporate under the Home Warranty Insurance Scheme for a development at Moores Pocket near Ipswich. [2] The Moores Pocket development comprises 8 single storey residential blocks. There are 63 one bedroom units across the blocks, all individually owned. The site has extensive internal driveways, car-parking and landscaping. [3] The Body Corporate alleges there are a number of substantial defects that have arisen in the complex. The development was constructed in an area that had previously been mined and there are extremely reactive soils present on the site. These underlying issues led to a claim by the Body Corporate against the QBSA statutory insurance scheme. The defects themselves are not the subject of this hearing. At this point, the parties are arguing about the ability of the Body Corporate to make the claim at all. [4] The review jurisdiction of this Tribunal is under s 24 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). In proceedings for a review of a reviewable decision, this Tribunal may confirm or amend the decision; set aside the decision and substitute its own; or set aside the decision and return the matter for reconsideration by the decision maker with directions if the Tribunal considers appropriate. [5] The purpose of the review1 is to produce the correct and preferable decision by way of a fresh hearing on the merits. At the end of the hearing what did the parties argue? [6] The BSA argued in submissions that there were no certificates of insurance. They were cancelled because the BSA says the work in question was not “primary building work” under Regulation 11 of the 1 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 20. -- 2 of 9 -- 3 QBSA Regulations and therefore was not covered by the terms of the policy of insurance. [7] The Body Corporate disagreed, submitting that section 68(3) of Queensland Building Services Authority Act 1991 (Qld) means that the insurance certificates are conclusive proof of the insurance coverage against which they can now claim. What Happened? [8] A determination of the facts in this matter is difficult. Of the main players, the company QPD had two directors at the time, Mr Thomas and Mr Catley. Mr Thomas has died, Mr Catley has had major health problems which have affected his memory during this project2 and, on his evidence, he was not involved in the development in any event, as he left arrangements to Mr Thomas. The Body Corporate did not exist at the time and the paper trail is sadly lacking. [9] It has fallen to me to try to piece together events from 2005 with little or no assistance from direct evidence and very limited documents, often with substantial logic gaps. Ultimately, I only have the evidence (or lack thereof) before me as provided by the parties upon which to base my decision. [10] Based on the evidence before me, the company, Queensland Project Developments Pty Ltd, lodged an insurance notification with the BSA on 3 March 20053. This notification shows QPD as the licensee and the owner of the development at Moores Pocket. It is described as stage one of a retirement community. This notification covers 48 units for a full value of $1,938,750.00 and is signed by Michael Thomas. [11] The BSA issued two certificates of insurance for this project. The first commenced on 14 February 2005 with a notified value of $40,390.63. This notification is recorded by the BSA at the time as covering each of 48 units at the site. The second certificate was issued on 4 May 2005 for a notified contract value of $43,333.33. This second notification is further recorded by the BSA at the time as covering each of a further 15 units at the site. [12] Both of these certificates were confirmed by the BSA in letters to QPD dated 4 March 2005 and 4 May 2005 wherein the BSA says that QPD had paid the appropriate insurance premium for the work described as 48 and 15 new dwellings at Moores Pocket. The letters were advised as “satisfactory evidence for an Assessment Manager to comply with the requirements of section 68(2) of the QBSA Act for issue of a development approval”. 2 See the statement of Gary Catley dated 8 July 2013, exhibit 7 in these proceedings. 3 See exhibit SOR-1 to the Statement of Reasons dated 17 January 2012, exhibit 2 in these proceedings. -- 3 of 9 -- 4 [13] In March 2005, the directors of QPD were Gary Catley and Michael Thomas. Mr Thomas was also the secretary of QPD4. Mr Thomas has since passed away. [14] On 24 November 2005, Mark Middleton was appointed as a further director of QPD. His directorship of QPD ceased on 28 April 20065. Mark Middleton is also the director and secretary of Middleton Projects Pty Ltd. His appointment date to the positions with Middleton Projects Pty Ltd was 13 February 20046. [15] QPD was the developer of these units7. [16] On 19 August 2008, QPD was placed under external administration8. [17] On 28 September 2010, the Body Corporate for Ipswich Senior Rental Accommodation made two complaints to the BSA. The first complaint lists Mark Middleton as the builder who was notified but also notes that, in a phone call to Mr Middleton of 20 September 2010, Mr Middleton advised he was not the builder. In the second complaint, the Body Corporate comments that the complaint is again against Mark Middleton but that the developer’s contact (presumably Mr Thomas) had deceased and that the builder left no contacts. [18] A letter was sent by the Body Corporate manager to Mr Middleton on 31 August 2010 advising him of the issues the Body Corporate had with the development9. [19] The Body Corporate is trying to effect repairs to its buildings. It, of course, did not exist at the time the building occurred. In making the complaint to the BSA, the Body Corporate is also attempting to identify the correct persons to involve in the action. [20] On 22 July 2011 the insurance claim was rejected by the BSA in a letter of that date to the Body Corporate. The reason given in that letter was the issue of the classification of the building – this ground was abandoned during the first day of the hearing of this matter. [21] On 12 August 2011 the BSA further wrote to the Body Corporate to advise the Body Corporate that the certificates of insurance were being 4 See exhibit TJM-2 to the statement of Timothy James Mitchell undated, exhibit 9 in these proceedings. 5 See exhibit TJM-2 to the statement of Timothy James Mitchell undated, exhibit 9 in these proceedings. 6 See exhibit CDT-2 to the statement of Craig Daniel Tanzer dated 17 July 2013, exhibit 10 in these proceedings. 7 See for example the exhibit MJG-3 to the statement of Martin Gardiner sworn 16 July 2013, a disclosure statement for the development. 8 See exhibit TJM-2 to the statement of Timothy James Mitchell undated, exhibit 9 in these proceedings. 9 This was sent to 27 Jeays Street Bowen Hill, the current address given by Mr Middleton to the BSA under his license number. See exhibit GC-2 to the statement of Gary Catley dated 8 July 2013, exhibit 7 in these proceedings. -- 4 of 9 -- 5 cancelled. A refund request was generated internally for both certificates but the refund was only made on one certificate – the first 48 units10. What legislation is to be applied? [22] Section 69(2) of the then QBSA Act states that the policy of insurance comes into force when a consumer enters into a contract for the performance of residential construction work with a licensed contractor (there is no allegation of fraud under s 69(2) (c) in this matter). [23] So the necessary elements for a valid insurance policy are: i) A contract with the appropriate license number; ii) A licensed contractor; iii) A consumer; iv) The performance of residential construction work covered by the statutory insurance scheme as defined under the BSA Act and Regulations. [24] The question under the legislation to be determined is “are these elements satisfied”? Is there a contract with the appropriate license number? [25] There was no contract with the appropriate license number provided to me. The documentation issued contemporaneously with the development disclosed to me was the insurance notification lodged with the BSA on 3 March 2005. It is not a contract. [26] The insurance notification shows QPD as the licensee and the owner of the development. A licensee is defined in Schedule 2 of the QBS Act as “a person who holds a licence”. A license is defined as a license under the Act. The licence number listed is 1058937 – that was the license number of QPD in the BSA records listing the company as (then) a builder – low rise. The insurance notification does therefore identify a contractor and a licence number. [27] There is no evidence that QPD was the party to an actual contract and I am not satisfied that a contract ever existed. Is there a licensed contractor? [28] The Body Corporate says the licensed contactor was actually Mark Middleton. Mr Middleton denies this. He says he fulfilled a “project management role” for QPD on this development11. Mr Middleton says he 10 See the affidavit of Gary Stick undated, exhibit 12 in these proceedings. 11 See the affidavit of Mark Middleton dated 15 July 2013, exhibit 14 in these proceedings. -- 5 of 9 -- 6 was engaged as a nominee for QPD in August 2004 and that from then until October 2005 he was paid a set figure per week for these services. [29] Mr Middleton denies any contract between himself, Middleton Project Development Pty Ltd and QPD at any time for the completion of any residential construction work12. [30] I am satisfied on the evidence before me that Mr Middleton oversaw this building for QPD. With no contradictory evidence, I must accept that he did so as a project manager for QPD as he says and as supported by the tax invoices exhibited to the statement of Gary Catley dated 8 July 201313 which show fees being paid to Mr Middleton from June 2004 to October 2005. [31] Further, in 2009, in a letter to Ms Ashton-Stewart dated 17 March 2009, Mr Thomas (prior to his death) tells Ms Ashton-Stewart that QPD was the builder for this development14. [32] In final submissions, the Commission cautions me to “not lightly” find Mr Middleton to be the builder as the consequences in making such a finding are “potentially severe” for Mr Middleton or any other building contractor so found. [33] The Body Corporate submits that there is no dispute in the proceedings that the subject works were performed by a building contractor (or contractors) under a contract (or contracts). The Body Corporate points to the affidavit evidence of Mr Middleton where he says he had a number of tradesmen whom he approached to do work for QPD and that these contractors entered direct sub-contracts with QPD as required by the financier. [34] None of these sub-contracts were provided to me in evidence in these proceedings. [35] Mr Catley directly contradicts this in his statutory declaration15. He says Mr Middleton “carried out the functions of a builder” and entered into contracts with “sub-contractors, architects and the like”. [36] I am satisfied on the balance of probabilities that QPD was the licensed contractor for this development because: i) Mr Middleton oversaw this building for QPD and I accept that he did so as project manager for QPD; 12 See the affidavit of Mark Middleton dated 15 July 2013, exhibit 14 in these proceedings at para 13. 13 Exhibit 7. 14 See exhibit LAS-3 to the statement of Lynette Ashton-Stewart dated 13 March 2013, exhibit 3 in these proceedings. 15 See the statement of Gary Catley dated 8 July 2013, exhibit 7 in these proceedings at para 11. -- 6 of 9 -- 7 ii) Tax invoices were produced which show fees being paid to Mr Middleton by QPD from June 2004 to October 2005; iii) Mr Thomas wrote to Ms Ashton-Stewart in 2009 telling her that QPD was the builder for this development; iv) The Insurance notification shows QPD as “the licensee” licensed as a low rise builder; v) In the same Insurance notification, the BSA notes QPD as the contractor showing QPD’s license number. Is there a consumer? [37] No arms length consumer distinct from QPD has been identified in these proceedings. [38] QPD cannot be the simultaneously the owner, developer, licensed contractor and consumer under a contract, even if one existed. No relationship of a contractor and a consumer has been established. Is the performance of residential construction work covered by the statutory insurance scheme as defined under the BSA Act and Regulations? [39] In deciding if there is residential construction work covered by the statutory insurance scheme, the first question is whether it is residential construction work at all. Regulation 10 of the QBSA Regulation 200316 defines residential construction work for the purposes of Schedule 2 of the QBSA Act, to include primary building work. Primary building work is defined in Regulation 11 to mean “work carried out by a building contractor under a contract for a residence of a value over $3,300”. [40] I have been unable to conclude on the evidence presented to me that here was an identifiable building contractor who “carried out” the work under a contract. (my emphasis added) The value of the work was clearly over $3,300. [41] Because I cannot be satisfied there was a contract, the requirements of primary building work as defined in Regulation 11 and in turn the definition of residential construction work in Regulation 10 are not met. [42] If the work cannot be so defined under the Regulations 10 and 11, then there is no residential construction work to trigger the insurance certificates as required by section 69 of the BSA Act. [43] The certificates were issued in 2005 by the BSA on the premiums paid by QPD. Section 68(3) of the QBSA Act says a certificate of insurance issued by the authority in relation to residential construction work is conclusive evidence that the work is covered by a policy of insurance under the statutory insurance scheme. (my emphasis added). 16 Agreed by the parties as reprint 1F. -- 7 of 9 -- 8 Are the certificates of insurance conclusive evidence? [44] The BSA says the certificates of insurance are not conclusive because the certificates were cancelled and therefore section 68(3) has no application because it was not primary building work. [45] The Body Corporate submits that the “seminal” requirement in section 68(3) giving rise to the conclusive effect of the insurance certificates is that they were “issued by” the BSA and that the subsection would be rendered meaningless, or at least lacking any practical worth, if the BSA could unilaterally at any time cancel the certificates. [46] The Body Corporate further submits that this conclusion should be avoided and as a matter of construction, section 68(3) expresses (within the meaning of section 4 of the Acts Interpretation Act 1954 (Qld)), a contrary intention which prevents the BSA cancelling the certificates (although the BSA submits that section 24AA of the Acts Interpretation Act allows this to occur)17. [47] Finally, the Body Corporate submits it would be grossly unfair to deny insurance cover in the circumstances to this complex by a stratagem which involves: a) Devaluing the insurance certificates issued by the BSA; and b) Criticising the Body Corporate for perceived failures of proof in relation to events occurring years ago in which the Body Corporate was not involved and over which it had no influence. [48] The Body Corporate submits that the BSA defence in these proceedings is unmeritorious and the decision should be set aside. [49] I have found that three of the necessary elements of s 69(2) have not been satisfied - there is no contract with the appropriate license number; there is no identifiable independent consumer; and, I am satisfied there is no residential construction work to trigger the insurance certificates as required by section 69 of the BSA. [50] The Supreme Court of Appeal in a majority decision in Parker v QBSA18 (Davies J.A. and Mullins J.) found that where the work the subject of the certificates is not residential construction work, section 68(3) does not operate to give the certificate conclusive effect. I am bound by this decision. [51] In these circumstances, as I have found there is no residential construction work as defined by the legislation and on the binding authority of the majority decision in Parker v QBSA, the certificates issued by the BSA do not attract the conclusive effect of section 68(3). 17 Section 24AA provides that the power to make an instrument or a decision includes the power to amend or repeal it. 18 [2000] QCA 422 at para 61. -- 8 of 9 -- 9 [52] In the absence of a finding that the project is residential construction work and without the effect of s 68(3), the insurance certificates are not conclusive evidence that the work is covered by a policy. [53] The decision of the Queensland Building and Construction Commission (formerly the Queensland Building Services Authority) dated 22 July 2011 is confirmed. -- 9 of 9 --