Auret v Queensland Building Services Authority & Anor [2013] QCAT 623

CITATION: Auret v Queensland Building Services Authority & Anor [2013] QCAT 623 PARTIES: Mr Frederick William Auret (Applicant) v Queensland Building Services Authority (1st Respondent) Deck Design and Build Constructions Pty Ltd (2nd Respondent) APPLICATION NUMBER: GAR345-12 MATTER TYPE: General administrative review matters HEARING DATE: 10 September 2013 HEARD AT: Brisbane DECISION OF: Member Paratz DELIVERED ON: 14 November 2013 DELIVERED AT: Brisbane ORDERS MADE: 1. The decision of the Authority made on 24 September 2012 to decline the claim by Mr Frederick William Auret and Ms Rhyl Armstrong for non-completion of premises at 29 Fry Street, Holland Park, in full, is confirmed. 2. Either party is allowed 7 days from the date of receipt of these reasons to make submissions as to costs if they wish. If so, they are to advise the other party who shall have 7 days to respond, and give a copy to the other party and to the Tribunal and the question of costs will be decided on the papers thereafter. No application for costs may be made after these time periods. CATCHWORDS: Estoppel – Deed of Settlement – meaning of settlement deed – interpretation of settlement deed - homeowner failing to disclose claim to QBSA for non-completed work – negotiating in good faith – proper termination of contract – -- 1 of 24 -- 2 equitable remedy – Compulsory Conference Queensland Building Services Authority Act 1991 s 83 Legal Practitioners Complaints Committee v Fleming [2006] WASAT 352 McEwen v Barker Builders Pty Ltd [2010] QCATA 49 Azad v Ljubas [2007] QDC 018 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Sedl v Queensland Building Services Authority [2011] QCAT 2 Vandenhoven v Queensland Building Services Authority [2011] QCAT 673 Grace v Peter Harrison Designs & Signs Pty Ltd [1998] QSC 27 J & MD Milligan Pty Ltd v Queensland Building Services Authority [2012] QSC 213 Walton Stores (Interstate) Ltd v Maher (1998) 164 CLR 387 Sourdin,T Alternative Dispute Resolution, Lawbook Co, Sydney, 4th ed 2012 Seddon & Ellinghuas, Cheshire and Fifoot’s Law of Contract, 9th Australian Edition, 2008 Joshua Thomson, Estoppel by Representation in Administrative Law, [1998] Federal Law Review, Volume 26, p 83 I.C.F. Spry, Equitable Remedies, The Law Book Company, Australia, 1971 APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr Russell Ensbey (Hemming and Hart) 1st RESPONDENT: 2nd RESPONDENT: Ms Emily Roberts (QBSA In-House Lawyer) Mr Phillip Richards (Director) -- 2 of 24 -- 3 REASONS FOR DECISION [1] Mr Auret and his partner Ms Rhyl Armstrong were the owners of a house at 29 Fry Street, Holland Park (the homeowner). They entered into a contract on 9 March 2011 with Mr Richards of Deck Design and Constructions Pty Ltd (the builder) to extend the house. [2] The contract price was $269,653.92. This included payment of the appropriate insurance premium under the statutory scheme. [3] The builder filed an Application for domestic building disputes in the tribunal on 1 November 2011 seeking payment of an amount owing of $69,936.72 together with interest of $10,000.00 against the homeowner as amounts owing to the builder and sub-trades. [4] Nine days after the builder filed his Application, the homeowner lodged a complaint form with the Authority on 10 November 2011 as to non- completion of work. [5] The homeowner filed a Response in the tribunal proceedings on 23 November 2011 disputing the amount claimed, and made a Counter- Application for $92,617.35 against the builder as follows:- Attached in Schedule B is a list of the claims I am making against the Applicant firstly for reimbursement of invoices paid by me in relation to unlicensed contractors and secondly for overpayments that I have made and thirdly for damages for mismanagement of the Contract by the Applicant. [6] The Application was set for a Compulsory Conference on 16 February 2012, and the parties were given leave to be legally represented at it. [7] The builder and the homeowner participated in the Compulsory Conference, together with solicitors for each of them. The Conference resulted in the parties coming to an agreement, and a handwritten Deed of Settlement was drawn up by the solicitors and signed by the builder and the homeowner. [8] The Deed of Settlement was to assume critical importance in this matter, as it was relied on by the Authority some 7 months later as the basis to deny cover under the insurance scheme. [9] In the intervening period between the signing of the Deed of Settlement and the ultimate rejection of the claim, the Authority had proceeded to process the claim to an advanced state. [10] The Authority had conducted inspections, advised the homeowner that the claim would be assessed under the insurance scheme, prepared a scope of works for rectification, and obtained quotes for the rectification of the property. It was just about to accept a quote from Greg Thornton Constructions when it decided “at the 11th hour” to decline the claim. -- 3 of 24 -- 4 [11] The Authority sent the homeowner a letter on 24 September 2012 advising that his insurance claim had been declined. [12] The homeowner filed an application in the Tribunal on 17 October 2012 seeking a review of the decision of the Authority to decline the insurance claim. That application is the subject of this decision. [13] Ms Armstrong was given leave to withdraw from the proceedings on 1 August 2013. She did not lodge any material or give any evidence. I will use the expression “the homeowner”, referring to both Mr Auret and Ms Armstrong before that date, and referring only to Mr Auret after that date, in these reasons, for convenience. [14] The builder was joined as a respondent in this application by the tribunal at the request of the QBSA. The QBSA argued that doing so would avoid possible subsequent proceedings between the builder and the QBSA if the Authority was required to pay out under the insurance scheme, and then sought to recover that amount from the builder. [15] The parties filed an Agreed Statement of Facts on 4 July 2013 which included a Chronology. It is convenient to reproduce those columns of the chronology listing dates and facts:- DATE FACT 09.03.2011 The Applicants and the Second Respondent signed a Build 4 Cost Contract for alterations and/or additions for the property. 09.03.2011 A construction notification was entered into the Authority‟s database records to advise of renovations and/or alterations to be completed at the property by the Second Respondent in the amount of $269,653.92. 17.03.2011 Alleged work was to have commenced. 04.11.2011 The work was allegedly left in an incomplete state 10.11.2011 Mr Auret lodged the complaint with the Authority. 12.12.2011 The Authority sent a letter to Mr Auret indicating that the Authority could not be satisfied that the Contract had been validly terminated. 16.02.2011 Deed of Settlement entered into between the Applicants and the Second Respondent in full and final settlement of:  the application dated 1 November 2011 and numbered BDL316-11;  the Second Respondent‟s counter-claim; and  all matters arising under and related to the construction contract between the Applicants and the Second -- 4 of 24 -- 5 Respondent dated 9 March 2011. 19.03.2012 Mr Chris O‟Shannessy, a Building Inspector in the employ of the Authority, attended the property to carry out an inspection of the items contained on the Complaint in the presence of Mr Auret and Mr Richards 30.03.2012 The Authority sent a letter to Mr Auret confirming that: (a) the Authority would not be issuing a direction to rectify to the second respondent; and (b) the Complaint would now be assessed as a claim pursuant to the Statutory Insurance Scheme. 01.05.2012 The Authority sent a letter to the second respondent stating that it appeared as though the contract had been terminated due to no fault of the applicants. 26.07.2012 The Authority sent letters to Redprince Pty Ltd and R J Baxter Constructions Pty Ltd requesting they provide a quotation for the rectification work at the property. 26.07.2012 The Authority sent a letter to Mr Auret advising that he was eligible for insurance assistance and enclosed a copy of the scope of work for defective building work. 07.08.2012 Email between representatives of the Authority enclosing a revised Scope of Works. 27.08.2012 The Authority sent a letter to the Second Respondent notifying it of its potential debt due to a claim being approved under the Home Warranty Insurance Policy. 05.09.2012 Redprince Pty Ltd trading as Greg Thornton Constructions, submitted a quote in the amount of $149,924.67 for the rectification work at the Property. 24.09.2012 The Authority sent a letter to Mr Auret advising that it had declined his insurance claim for non-completion. [16] There are three specific issues of law raised in this matter, and I have been asked to make rulings, and decide, on each of them:- (1) What is the effect of the Deed of Settlement? (2) Was there a proper termination of the building contract? (3) Is the Authority estopped from denying cover under the claim? -- 5 of 24 -- 6 The Deed of Settlement [17] The builder says that his intention and understanding was that the Deed of Settlement was to bring an end to all issues between him, the homeowner and the contract between them. [18] The homeowner on the other hand says that the agreement was only intended by him to cover the matters which were the subject of that Application, but left the claim for non-completed works to the QBSA alive. [19] Both parties were represented by solicitors at the compulsory conference. The parties had been given leave to be represented in the proceedings by order of the tribunal on 3 January 2012. [20] The Compulsory Conference was conducted by an experienced sessional member of the tribunal. [21] The deed is hand-written on paper that is taken from a file note pad which has the letterhead and contact details of the solicitors for the builder. [22] The Deed is signed by Mr Auret and Ms Armstrong; and by Mr Richards (on behalf of the company). [23] The Deed of Settlement is dated 16 February 2012. It is headed as between “Owner: Frederick William Auret & Rhyl Meredith Armstrong (Respondent)” and “Builder: Deck Design & Build Constructions Pty Ltd (Applicant) BSA Licence: 1160244”. [24] The opening paragraph of the Deed is as follows:- In full and final settlement of the application dated 1 November 2011 and numbered BDL316-11 and the respondent‟s counterclaim and all matters arising under and related to the construction contract between the Applicant and the Respondent dated 9 March 2011 (“the Contract”), the Applicant and Respondent agree as follows: [25] After the Deed was entered into, the homeowner pressed ahead with his claim for non-completed works which had been lodged with the QBSA. [26] In his Application to the Tribunal, the builder, at paragraph 10 of Part A, ticked “no” to the question Have you made a complaint to the QBSA? and then in paragraph 11 ticked “no” to the questions Has the QBSA (a) notified you that a complaint has been made against you? (b) given you a direction to rectify. -- 6 of 24 -- 7 [27] However, in paragraph 11 of Schedule A to Part D of the Response filed on 23 November 2011, the homeowner states: I have made a complaint to QBSA in relation to the Applicant. [28] Mr Richards said in his evidence that he had been asked about the use of unlicensed tradespeople by the QBSA before the Compulsory Conference, and that he was fined by the QBSA for use of unlicensed tradespeople. He thought this was the complaint that was referred to. [29] Given that there were these discrete complaints, it is conceivable and understandable that the builder took the reference in the Response to “a complaint‟ meaning that it referred to the complaint of use of unlicensed tradespeople, rather than a claim as to non-completed work, and that it would not have alerted him to a QBSA claim for non-completed work. [30] The solicitors for the homeowner wrote a letter to the solicitors for the builder on 8 November 2011 alleging that the contract had been validly terminated and was no longer on foot. At the end of the letter they allege:- Your client has failed to meet the standard of care required of it to obtain best prices for various aspects of the building works and to keep within the specified budget to the extent that there are gross overruns in costings throughout. This will be the subject for a claim for substantial damages by our client and that will follow in due course. [31] There is no reference in that letter to any non-completed works, or any intention to lodge a claim with the QBSA for non-completed works, which was done by the homeowner two days later. [32] The submissions by the Authority contain a copy of a letter from the homeowner‟s solicitor to the homeowner dated the same day, 8 November 2011.1 That letter asks for instructions and advises as follows:- Would you please confirm that you have completed an application to BSA and lodged same. We will need to formulate the appropriate monetary claim against the Builder. [33] In his evidence, Mr Auret said that he did not tell Mr Richards about the QBSA claim for non-completed work which he had lodged on 10 November 2011. [34] Significantly, Mr Auret sent an email to Mr Jacques of the QBSA, on 23 October 2012, which clearly supports the proposition that the builder was not aware of the home owners QBSA claim for non-completed work at the time of the conference2:- (2) Can you please send me confirmation of the date the builder was first advised of my claim. This was some time after the QCAT settlement on 16th February and before 21st February. We spoke on 21st February when you 1 Page 396. 2 QBSA SOR p15. -- 7 of 24 -- 8 told me the builder was upset at finding out about the insurance claim after QCAT on 16th. [35] The homeowner and his solicitor were therefore both clearly aware of a claim being lodged with the QBSA for non-completed work well before the conference. There is no indication however that the builder or his solicitor was also so aware. [36] I am satisfied that the builder was not aware that a claim had been made to the QBSA as to non-completed work at the time of the compulsory conference. This is consistent with the evidence and email of Mr Auret. The question of a claim in the QBSA for non-completed work could therefore not have been in the mind of the builder or his solicitors at all, at the time of the conference. [37] Mr Richards said that when he signed the Deed of Settlement, his understanding was that it would be the end of the matter. The Deed was written out by his solicitor. [38] Mr Richards was pressed in cross-examination as to whether he thought it strange that no-one was discussing non-completed work at the conference. He agreed that the value of non-completed work was in the order of $100,000 to $150,000. However, he said that the non-completed work was not his concern as he had just “dropped a whole lot of money” in the settlement. He said that he had been in a room for 6 hours costing $100 per hour and he just wanted to get out. He described the money value of the settlement as being about $32,000. [39] The claim that was made to the QBSA was for: non completion of residential construction work. Cost to complete in excess of $142,179.15. [40] In Schedule B to the Response filed by the homeowner, there is no specific claim in the counter-claim of $92,617.35 for non-completed work. There are specific amounts claimed for amounts paid to unlicensed contractors, amounts for overcharges, and missing items. There is however a final figure claimed for “Breach of contract, interest and penalties” of $10,000. [41] It is conceivably arguable that an amount claimed as “breach of contract” could be said to encompass a claim for non-completed work, and that if the builder had turned his mind to why the question of non-completed work was not being specifically discussed, could have assumed that this was encompassed in that claim. This was not pressed by either party, and I do not rely on it, but the argument appears to have been open. -- 8 of 24 -- 9 [42] For his part, the homeowner makes it clear that the QBSA claim for non- completed works was very much in his contemplation. He says in his statement:3 At the time the deed of settlement was being negotiated, and before it was signed, I specifically sought and received confirmation from my (then) legal representative that the signing of the deed of settlement would not prejudice any rights that myself and Rhyl had in our claim for non completion lodged in December against the BSA‟s insurance. [43] If the Deed of Settlement had included clear words indicating whether the claim to the QBSA for non-completed work was included or excluded, then there may be no doubt as to what the Deed encompassed. [44] When it is considered that neither the builder, and presumably his solicitor, was aware that a claim to the QBSA for non-completed work was in contemplation, or in progress, at the time of the conference, then it is understandable why no specific reference was sought to be made by them to the QBSA claim for non-completed works in the Deed of Settlement. [45] Ultimately, the Deed is to be interpreted upon its face and upon the plain meaning of the words contained in it. It is only if the plain meaning is uncertain, that it is necessary to interpret the words, or to look to the surrounding circumstances of their making. [46] The President of the Tribunal described the status of a settlement agreement as follows4: An agreement to settle an action normally takes effect as a contract, and is binding (subject to the principles under which a contract can be set aside)5. The prima facie position is that parties who freely and lawfully enter into an agreement are bound by its terms unless one party can point to the existence of vitiating circumstances which mean the contract should be set aside.6 [47] The authors of one of the standard texts on contract note as to the importance of written terms that7: Where the parties have recorded terms of their contract in a document, the so- called parol evidence rule may apply. It excludes evidence of extrinsic terms that „subtract from, add to, vary or contradict the language of a written instrument”... The rationale of the rule lies in the desirability of preserving “finality in written instruments”, and of not allowing “written words to be altered or qualified by the uncertain testimony of slippery memory”. 3 Statement of Frederick Auret dated 9 August 2013, paragraph 3. 4 McEwen v Barker Builders Pty Ltd [2010] QCATA 49 at paragraph 5. 5 See, eg, Azad v Ljubas [2007] QDC 018 at para [27] citing Foskett, The Law and Practice of compromise (4th Ed: 1996), Chapter 4. 6 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 at [39]. 7 Seddon & Ellinghuas, Cheshire and Fifoot’s Law of Contract, 9th Australian Edition, 2008, [10.4]. -- 9 of 24 -- 10 [48] They also note that as to use of extrinsic evidence in the interpretation of documents that8: There have been many judicial statements seeking to define what evidence may be admitted where the meaning of the language of a document is in dispute, and they cannot all be reconciled. The classic exposition of the law is that of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 that: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. When the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties presumed intention in this setting. [49] Accordingly, the Deed of Settlement is to be given its plain and ordinary meaning, unless there is clear evidence that the Deed fails to correctly convey the true agreement between the parties. [50] The use of the phrases “in full and final settlement ..of all matters arising under and in relation to the construction contract” are common phrases which are used to attempt to finalise a matter completely, so that no further proceedings, or liability, of any type arise. [51] The Authority submits that9: 6.8 The Respondent submits that the Tribunal rightly determined in Sedl10 that the issues for consideration in that matter were whether the: “..matters covered in the settlement agreement are the same as those complaints the subject of the decision under review and if so the effect of the settlement agreement and the relevance of any identified effect on matters relevant to the decision under review.” 6.9 While the Tribunal determined in Sedl that the release contained in the deed of settlement did not release the Authority from an insurance claim because the claim was only for defects identified by the respondent‟s building inspector and the indemnity given was for the benefit of the Barletts, the facts in this matter are different. In this matter, the Applicant had lodged the complaint with the Authority for a non-completion claim while the BDL316-11 was on foot in the tribunal and the deed of settlement was for “full and final settlement of..all issues arising under the construction contract”. 6.10 The respondent submits that the tribunal in this matter should distinguish the facts in Sedl from this matter and confirm the Respondent‟s decision to decline the Applicant‟s insurance claim. [52] I accept the submission of the Authority that this matter is distinguishable from Sedl on the facts. 8 [10.11]. 9 The Authority’s Written Submissions Prior to Hearing on 10 September 2013, p 11. 10 Sedl v Queensland Building Services Authority [2011] QCAT 2. -- 10 of 24 -- 11 [53] The wording of the Deed is not ambiguous in any way. A person reading the Deed of Settlement on its own would reasonably consider that all matters between the owner and builder had been concluded, just as the builder argued in his evidence. [54] In order to go beyond the plain meaning of the words of the Deed, the tribunal would have to be satisfied that there were “two or more possible meanings” of the words. Then, as discussed in Codelfa, it would look to the objective framework of facts within which the contract came into existence, and to the parties presumed intention in this setting. As there are not two or more possible meanings to the words of the deed, then the tribunal will not look beyond those words. [55] There is also a question of public policy involved in considering whether the tribunal should readily look into, or go beyond, the meaning of an apparently clear settlement agreement. [56] The Compulsory Conference is a very important part of the processes of the tribunal. A very high percentage of cases in the tribunal are settled by means of the process of the Compulsory Conference. It assists the tribunal greatly in achieving its objects in s 3(b) of the QCAT Act to “deal with matters in a way that is accessible, fair, just, economical, informal and quick”. [57] It is consequently important that parties have confidence in the process of Compulsory Conferences and feel assured that they can enter into settlements which will finally conclude the matter. If the avenue is left open for apparently obvious and good settlements to be easily re-opened, or to give way to further proceedings, then parties will be reluctant to be, or see little point in, agreeing to settlements. [58] I therefore consider that: (a) the Deed of Settlement is plain in its meaning (b) the meaning of the Deed was to preclude the homeowner from thereafter making any further claim in any way against the builder, or which may result in liability to the builder (c) the Deed is to be given its plain meaning unless circumstances otherwise require (d) it is important that parties have confidence in the process of Compulsory Conferences and in settlements arising from them (e) there is no ambiguity in the Deed, or any circumstance arising, that would cause the tribunal to look beyond the plain meaning of the Deed [59] Accordingly, I find that the Deed of Settlement was in itself a bar to the homeowner from continuing to proceed with any claim in relation to the -- 11 of 24 -- 12 works, which would include the QBSA claim for non-completed works which he had previously lodged with the Authority. [60] Clause 6.15 of the Policy provides that:- 6.15 Effect of Release of Contractor or Provision of Indemnity (a) Where the contractor or other person has been released from liability in relation to the insured works the BSA is thereby released from liability under this policy to the same extent [61] As the builder was released from further liability by operation of the Deed of Settlement, then Clause 6.15 of the Policy is effective to also release the BSA. [62] I therefore find that liability to pay by the Authority under the Policy did not arise, by virtue of Clause 6.15, as it had been consequently released from liability. Termination [63] The Authority can only accept a claim for non-completed work under the Insurance Policy where it is satisfied that the Insured has properly terminated the contract with the contractor11. [64] The claim by the homeowner was first lodged on 10 November 2011. The Authority wrote to the homeowner on 12 December 2011 saying that it could not be satisfied that the Contract had been validly terminated. [65] In its letter of 12 December 2011, the Authority said:- 3. In accordance with the evidence at hand, BSA cannot be satisfied that the contract between Rhyl Meredith Armstrong and Frederick William Auret (“the owners” and DDB Constructions Pty Ltd t/a Deck design and Build Constructions Pty Ltd (the contractor) has been validly terminated. BSA‟s legal instruction is that we obtain further information from both parties before a determination of the termination of the contract can be made. However as the matter is now before QCAT, BSA has suspended all activity until such time as QCAT have made a decision on the matters before them. [66] The Authority then reproduced the wording of s 83 of the Queensland Building Services Authority Act 1991 which provides that a proceeding in the tribunal stops action by the authority. The letter then continued:- Once the Matter has been dealt with by the Tribunal, BSA can re-assess the file if required; BSA will require a copy of any decision made by the Tribunal to ensure BSA does not breach any orders of the Tribunal [67] The Deed of Settlement that was signed 3 months later made specific reference to the question of termination. 11 Insurance Policy Conditions, Edition 8, Effective 1 July 2009, Clause 1.2. -- 12 of 24 -- 13 [68] A “first draft” of paragraph 5 of the Deed is apparent as parts of it are ruled through. The original wording is as follows:- The parties agree that the Contract has terminated as at the date of this Deed been validly terminated by the Respondents by way of the letter of Termination issued by the Respondents Solicitors to the Applicant dated 28 October 2011. [69] The amended (and final) form of paragraph 5 reads as follows:- The parties agree that the Contract has terminated as at 28 October 2011. [70] The reason for the change in wording of Clause 5 is unclear. [71] The significance of paragraph 5 is that it brings the termination date back to a date before the homeowner lodged the claim with the QBSA. The inclusion of the date was directly referred to by the homeowner‟s solicitors in their letter to the Authority of the same day as the Deed. The reference to the termination date was obviously to satisfy the Authority that termination had been validly effected as at the date of the claim on 10 November 2011, and to support that claim. [72] Mr Auret said in evidence that the Deed went back and forth between the solicitors whilst it was being drafted. He was not sure who crossed out the paragraphs on it. [73] Mr Richards said that he did not know why the paragraph about termination was inserted in the deed. He said that it was legalese to him. [74] The Authority submits that “the Deed of Agreement merely agrees to a date of termination and does not state that the applicant terminated the contract due to the fault of the Second Respondent”12. [75] The expression “properly terminated‟ is defined in the Policy as: “lawfully under the contract or otherwise at law, upon the contractor‟s default…”13 [76] Did Clause 5 of the Deed of Settlement evidence a “proper termination” of the Contract? The expression “has terminated”, which is used, is equivocal. It does not provide evidence of, or acknowledgment of, default by the contractor. [77] It cannot be sufficient for a homeowner and a builder, who have come to some difficult impasses in building works, to jointly agree that they will simply mutually terminate the contract and advise the QBSA of a termination so that the Insurance Scheme will take over. This could lead to abuses of the system. The Policy is quite clear in saying that default by the contractor is required. 12 Paragraph 6.15. 13 Policy p 45 (QBSA SOR p 70). -- 13 of 24 -- 14 [78] I am not satisfied that Clause 5 of the Deed is sufficient to provide evidence of a proper termination of the Contract by itself, as it does not establish default by the Contractor. [79] I therefore find that liability to pay by the Authority under the Policy did not arise, by virtue of Clause 1.2, as proper termination had not been established. Waiver or Estoppel [80] The homeowner argues that he has suffered loss by relying on the actions of the Authority in continuing to process his claim between 16 February 2011 and 24 September 2011; and that the Authority was thereby estopped from refusing his claim on 24 September 2011, even if (a) the effect of the Deed of Settlement was to release the builder from liability for non-completed works; and (b) proper termination of the Contract is not shown. [81] The Solicitors for the homeowner sent a letter to the Authority dated 16 February 2012. That letter contained the following advices14:- A Deed of Settlement was concluded today at QCAT pursuant to a compulsory conference between the parties. A copy of the Settlement follows this fax. We draw your attention to clause 5 whereby the parties agree that the Contract has terminated as at 28 October 2011. That was the date of our Notice on behalf of the owners to the builder terminating the Contract. We believe Mr Auret will be in contact with you in the near future with a view to pursuing his BSA claim in this matter. [82] That letter is important in establishing the chain of events in this matter, and in understanding the actions of the Authority. [83] Evidence was given by Mr Peter Jacques, who was a case manager at the time. He explained that he assigned work to assessment officers for action. Mr Jacques explained that there are two types of file – legal and licencing. The reference on the letter was “1160244”. The proper reference for the legal file, as shown on previous correspondence between the authority and the homeowner was “1160244_6”. [84] Mr Jacques said that because the final part of the reference was not included, that the letter would have gone to the “licencing file” rather than to the “legal file”. He said that it might not get actioned for days if it went to the licencing file. [85] Mr Auret alleges in his written statement that he spoke to Mr Jacques from the BSA two days after the settlement deed was signed, and that he also spoke to him the following week and that:- 14 QBSA SOR p 404. -- 14 of 24 -- 15 Mr Jacques told me that the settlement agreement had “passed through legal, and everything was in order” and the BSA were proceeding with the claim.15 [86] Mr Auret made a more specific allegation in a letter which he wrote to Mr Jacques on 3 October 201216, where he alleged a specific conversation on or about 21 February 2012 with Mr Jacques about whether the Deed of Settlement may be an issue as to insurance:- My Solicitors forwarded to you on or about 16 February 2012, a copy of the Deed of Settlement. On or about 21 February 2012, you informed me that the terms of the Deed of Settlement may be an issue with my Insurance Claim. Later you advised that the Deed of Settlement had then been considered by your legal department in light of my Insurance Claim and that you agreed to accept my claim. [87] Mr Jacques says in response to those allegations that;- (a) he recalls speaking with Mr Auret, however does not recall on which day; (b) he advised Mr Auret that the Authority would be able to assess the claim as the building dispute had been finalised; (c) Mr Auret constantly reminded him that he needed the claim settled as soon as possible; and (d) that he repeatedly advised Mr Auret that the matter would proceed in accordance with the legislative process.17 [88] Mr Jacques said in evidence that he first saw the Deed of Settlement when he received an email from Mr Richards dated 28 August 2012 which attached a copy of the Deed. He said that he had no recollection of any discussion with Mr Auret about the Deed of Settlement, or of using the expression “passed through legal” which he says is not his terminology. [89] Something must have triggered the Authority to take up the claim just 5 days after the Conference. The obvious implication is that someone in the claims section did read the letter of 16 February 2012 from the homeowner‟s solicitor, which satisfied them as to the termination question, and then proceeded to process the claim. [90] Mr Jacques agreed in his evidence that one of his staff must have been aware that the QCAT proceedings had concluded before they proceeded to deal further with the claim. He said it was possible that the staff member had access to the Deed of Settlement; and that it was possible that the deed could have been on the legal file after about 20 February 2012. He said that the particular staff member who was handling the file had left the Authority and was in Singapore. 15 Auret statement dated 9 August 2013, paragraph 4. 16 QBSA SOR p 13. 17 Jacques statement dated 23 August 2013, paragraph 18. -- 15 of 24 -- 16 [91] Whilst Mr Jacques raised a query as to the incomplete reference being on the letter from the homeowner‟s Solicitor of 16 February 2012, I note that there are two annotated stamps on the copy of the letter from the Authority18. One stamp shows a date that the letter was faxed as “16 Feb 2012”. The second stamp shows a date of 17 Feb 2012 and has the Case ID 1160244-6. This strongly suggests that the letter was received by the authority by fax on 16 February 2012, and assigned the correct Case ID file the next day. [92] If the letter of 16 February 2012 from the homeowner‟s solicitor was taken at face value, and the copy of the Deed of Settlement that was said to be following was not carefully perused, it is conceivable that the QBSA staff member would accept that:- (a) the QCAT proceedings had concluded, and (b) that therefore was no bar to the Authority proceeding by virtue of s 83 of the QBSA Act, and (c) that there was agreement that the Contract was properly terminated as at 28 October 2011, which was the date of the homeowner‟s notice to the builder terminating the Contract, and (d) that it was therefore appropriate to proceed to process the claim. [93] It is clear that the QBSA claim was pursued diligently by the Authority from that time on, no doubt spurred on by the homeowner who was pressing for a resolution as he indicated to Mr Jacques. [94] The most likely scenario would appear to be that the Deed of Settlement was placed on the correct file on or about 17 February 2012, but would have been quickly “buried” by further documents as the claim was processed, and was not looked at with critical eyes until Mr Jacques had reason to do so after the builder raised the issue in August of that year. [95] The first “system failure” that appears to have occurred in the Authority‟s process was the failure to have the Deed of Settlement reviewed by appropriately qualified legal personnel as soon as it came to the Authority‟s attention, and before any further steps were taken in relation to the claim. [96] A letter was sent by the Authority to the homeowner under the reference of Mr Jacques on 21 February 201219. That letter referred to the complaint lodged with BSA on 10 November 2011 and said that the Complaint Form had been assessed and BSA would like to arrange an inspection of the work. It noted that in an effort to resolve the concerns promptly, that BSA had also written to the contractor requesting they contact the homeowner to address their concerns prior to the scheduled site meeting on 19 March 2012. 18 QBSA SOR p 404. 19 QBSA SOR p 408. -- 16 of 24 -- 17 [97] On the same day, 21 February 2012, a similar letter was sent to the builder in similar terms, and recommending the builder contact the homeowner and review the items of complaint before a BSA inspector inspected the work.20 [98] The builder did attend the inspection on 19 March 2012. The report of that inspection by Mr O‟Shannessy made on 29 March 2012 notes that the stages were complete to the following extent:- Base Stage 100% Frame Stage 100% Enclosed Stage 85% Fixing Stage 40% Plumbing 100% Stormwater 80% Sewer 100% Electrical 90% Landscaping 95% [99] The evidence of Mr O‟Shannessy is uncontroversial. He recounted his actions as an Inspector who was asked to identify and report on non- completed work. He was liaising with Mr Auret in following his brief. He did not go beyond what might be expected of an Inspector assigned that specific task. [100] Mr Jacques wrote to the homeowner on 30 March 201221 saying that the BSA would not be issuing a Direction to Rectify and that his complaint would now be assessed as a claim under the BSA Home Warranty Insurance Policy. He similarly wrote to the builder22, and advised that the BSA may seek recovery of an approved insurance claim. [101] This raises a question as to whether the builder immediately responded to the Authority, in response to these notifications, saying that the matter had been completely settled. Mr Richards said he believes that he did raise the issue, and sent a copy of the Deed himself to the Authority on about 30 March 2012. He said that he sent it to a particular staff member, and believes he also sent it to Mr Jacques. He says this is substantiated by the reference to “lost in cyberspace” in his email to Mr Jacques of 28 August 2012 that: Also I have attached the deed of settlement just in case it is lost in cyber space. [102] On 27 August 2012, the Authority issued a Notice of Potential Debt to the builder23 advising that BSA was proceeding with a claim for defective 20 QBSA SOR p 409. 21 QBSA SOR p 422. 22 QBSA SOR p 423. 23 QBSA SOR p 617. -- 17 of 24 -- 18 construction and enclosing a Scope of Works to be undertaken as a claim under the insurance scheme. The next day the builder sent his email attaching a copy of the Deed. [103] It therefore appears that the builder, on his evidence, did on two separate occasions clearly raise with the QBSA the issue of the Deed having concluded matters:- (a) immediately after receiving the first advice by the Authority on 30 March 2012 that he may be required to pay the amount of any insurance claim; and (b) then again on 28 August 2012 when he received the Notice of Potential Debt. [104] It may well be the case that the builder was not overly concerned whether the Authority had works done under the Insurance Scheme, if it did not involve him in any cost, and that he was quite prepared to attend the site meetings and to co-operate and to provide information; but that he did object and take issue immediately on each occasion when he was notified that he may have liability for such payment. [105] It appears that there was a second “system failure” in the handling of the file within the Authority, relating to the proper noting of conversations with Mr Richards and Mr Auret by way of file notes, and emails, and the placing of them on the file. Mr Jacques said that he did not have total carriage of the file, and that it was initially handled by a named staff member (the same staff member who Mr Richards said he had responded to about the Deed). Mr Jacques said that when a file goes “pear-shaped”, that it comes back to him, as this file did. [106] This suggests that there was an administrative breakdown in the processes of the Authority. This may relate to the staff member who subsequently left the Authority. [107] Mr Jacques said that “red flags started waving” in early September 2012. This would have been after the builder‟s email of 28 August 2012 was received. The matter was then referred to, and reviewed by the legal division of the Authority, and a decision was made to decline the insurance claim “at the 11th hour” on their advice. [108] The BSA then wrote to the homeowner on 24 September 2012 declining his claim for non-completion on the basis of the Deed of Settlement. [109] The two principal witnesses are Mr Auret and Mr Jacques. Their evidence differs markedly in some critical respects, such as whether there was a discussion between them about the meaning of the Deed and its having “passed through legal” in February 2011. [110] Mr Jacques was clearly uncomfortable with how the file had been handled. He obviously thought it had been poorly handled. To my -- 18 of 24 -- 19 observation he was embarrassed by the whole situation. I did not gain the impression however that he was “covering-up” for words he had said, or actions he had taken, or for the sake of the Authority. He was frank in saying the file had gone “pear-shaped”. [111] Mr Auret was pressing to have his house completed. He was clearly placing great pressure on all parties to get a resolution favourable to himself. He was complicit in concealing the QBSA claim from the builder prior to, and at, the Compulsory Conference. His recollections generally put the most favourable interpretation to him on events, and probably with the assistance of hindsight. I view his evidence with reservation. [112] Where the evidence of Mr Jacques and Mr Auret conflict, I prefer the evidence of Mr Jacques. [113] Whilst the Authority may have, through its staff who handled the file, fallen short of a desirable proper handling of the process, which undoubtedly raised expectations for the homeowner, that does not necessarily result in a finding that the Authority is bound by those expectations. [114] The homeowner argues that the Authority is bound by its actions between February 2011 and December 2011 because he relied on the representations made to him and acted to his detriment, and that the Authority is therefore estopped from thereafter changing its mind. [115] The Authority argues that it is not estopped. [116] The homeowner says he relied on the representations of the Authority that it would pay him under the insurance scheme by committing himself to expense in having a kitchen fitted, and completing decking and balustrading. He said that he would not have done so if he had known that the Authority was not going to pay him, as he could not afford the kitchen at the time and had to go into further debt as a result. [117] The builder responded to this suggestion by arguing that the homeowner would have incurred the expense of a kitchen at some time in any event, and that he did not suffer any detriment by doing so earlier than he otherwise would have done. He also argues that completion of the decking and balustrading was a responsibility of the homeowner and was required as a safety issue. [118] The Authority did not at any time strictly say that payment would be made under the policy to the homeowner. It did raise a very reasonable expectation on the part of the homeowner that they would pay by advancing the progress of the claim to such an advanced state. [119] The homeowner understandably says that he is aggrieved because the Authority led him to believe that he would be paid. [120] The Authority did not handle this file well. It should have realised that there were serious issues in February 2011 when the Deed was first -- 19 of 24 -- 20 forwarded to them; and then again when the builder made complaint on each occasion in March and August. [121] Underlying this matter however is the action of the homeowner, through his Solicitor, in obtaining the Deed of Settlement without making full disclosure at the time of negotiating it. The homeowner took the risk that the matter would implode at some stage. Through poor administration of the Authority, that implosion took 9 months to occur, but it was always fated to most likely occur at some stage. The homeowner took that risk onto himself when he induced, and entered into, what he knew was a Deed that was not the product of a genuine mutual understanding of its bases by both parties. [122] It is unknown why the homeowner and his solicitor pursued this course. Naturally however, the builder would react unfavourably and seek to take matters further when he was ultimately made aware that he faced an unexpected liability of $150,000. [123] In Vandenhoven v Queensland Building Services Authority [2011] QCAT 673 it was held that the BSA had waived its right to take the issue of time in relation to a complaint. The Authority had written a letter to the claimant saying that: I have assessed your claim and advise that you are eligible for insurance assistance under the Scheme. [124] It was held24 that: This letter was the time in the process for the BSA to take the issue of time under the policy if it chose to. It did not. [125] A letter using similar phrasing was sent to the homeowner by the Authority in this matter on 26 July 2012.25 [126] The Authority submits that:26 ..the facts in this matter can be distinguished from those in the matter of Vandehoven. In this case, the existence of the deed of settlement between the Applicant and the second respondent was brought to the attention of Mr Jacques after the second respondent was advised that the Authority intended to assess the claim. [127] I have accepted the evidence of Mr Jacques that he was not aware of the Deed of Settlement until August 2012. This was several months after that letter as to eligibility was sent. [128] The eligibility letter was therefore sent without a proper appreciation of the facts of the situation. If Mr Jacques had been aware of the deed, he would not have allowed that letter to be sent. He did not make a conscious or 24 Para 18. 25 QBSA SOR 604. 26 The Authority‟s Written Submissions 6.24. -- 20 of 24 -- 21 effective decision to waive the right to rely on the policy breaches, having knowledge of all relevant matters. It was not an informed advice. [129] It could be strongly argued that the Authority as a whole had corporate knowledge of the relevant matters, even though it had not appreciated the significance of them. The letter from the homeowners solicitor and the Deed does appear to have been in the possession of the Authority by late February 2012; and the builder does appear to have advised the Authority in late March that he considered the matters had been settled – both of these pieces of information appear to have been directed to the employee who was handling the file (who was not Mr Jacques). [130] In other circumstances, this may have been sufficient to assign knowledge to the Authority, and the fact that it failed to analyse that knowledge, could be seen to be its own concern, and a conclusion could be reached that the homeowner should not suffer detriment because the Authority had not done its job properly. [131] The position of the homeowner in this case however is tainted by the underlying and prevailing reality that the settlement had been obtained in the absence of mutual knowledge of the facts. That is such an important consideration that it has effect, at whatever stage its full implications emerge. [132] In these circumstances therefore, I consider that a conscious waiver by the Authority, having full knowledge of the detail and circumstances of the settlement, would be necessary. That did not occur. [133] I therefore do not consider that the Authority can be said to have waived compliance with the policy terms in July 2012. [134] The homeowner submits that an estoppel by representation arises in this matter. He refers to Grace v Peter Harrison Designs & Signs Pty Ltd27 where the elements of such an estoppel were discussed. His submission is that estoppel is available in this case: Whilst estoppel is not available to prevent the exercise of a statutory duty or a statutory discretion of a public character28 however, it is available to hold the Executive to its representation where the outcome does not significantly hinder the exercise of the relevant discretion in the public interest29 [135] I accept that estoppel may be available against the Authority in an appropriate case. Estoppel however is at heart an equitable remedy. The nature of estoppel in public law is discussed in an article by Joshua Thomson30 where the author says31: 27 [1998] QSC 27. 28 J & MD Milligan Pty Ltd v Queensland Building Services Authority [2012] QSC 213 at [27]. 29 Applicant‟s Submissions para 5. 30 Estoppel by Representation in Administrative Law, Joshua Thomson, [1998] Federal Law Review, Volume 26, p 83. -- 21 of 24 -- 22 Private law estoppel by representation is based on considerations of justice and fairness. Such considerations should be equally valid in public law, unless public policy necessitates adjustment. In recent cases, tortious duties of care have been extended from private individuals to administrative bodies. This in itself provides support by analogy for applying private law estoppel in public law. However, the matter is taken further by Brennan J's observation32 that “equitable estoppel complements the tortious remedies for negligent mis-statement or fraud and enhances the remedies available to a party who acts or abstains from acting in reliance on what another induces him to believe.” [136] It is a fundamental maxim of equity that “a plaintiff in equity must approach the court with clean hands and that he who seeks equity must do equity”33. [137] Spry notes that: Probably the most common case where this condition has been satisfied, and where relief has been denied through the absence of clean hands, has arisen when the plaintiff has been seeking to further a deception of the public. On other occasions, indeed, it is able to be shown that the right which the plaintiff seeks to enforce was obtained by him through an improper advantage, although generally in such a case it is necessary to establish fraud, or misrepresentation, or undue influence, or unfairness, or some other such recognised consideration as has already been discussed.34 [138] It is unexplained as to why the Deed was not clear in stating that a claim to the QBSA for non-completed work was not included. [139] A strong, and possibly irrebuttable, implication arises that the homeowner and his solicitor drew and agreed to the Deed of Settlement with no reference to the existing QBSA claim for non-completed works: (a) in the knowledge that the builder and his solicitor were negotiating in ignorance of such a claim; and (b) knowing that the homeowner intended to immediately thereafter proceed to pursue that claim; and (c) drew the deed so as to arm the homeowner with a clear expression as to the date of a proper termination of the Contract to support the claim, and to advantage the homeowner. [140] The claim on the insurance policy would have obvious implications for the builder under the QBSA Act, as he may then be liable to recompense the Authority for any amount paid out under the claim. [141] The making of such a claim is something that the builder was entitled in fairness to have had in contemplation in deciding whether to settle the 31 Page 89. 32 Walton Stores (Interstate) Ltd v Maher (1998) 164 CLR 387 at 427. 33 Equitable Remedies, I.C.F. Spry, the Law Book Company, Australia, 1971 at p 225. 34 Page 226. -- 22 of 24 -- 23 claim for any amount at that time. The builder should have had the full knowledge of the claims being made which could affect him, in the course of the negotiations, before being asked to agree to a settlement. [142] The obligation of a party to negotiate in good faith in an Alternate Dispute Resolution (ADR) proceeding is the subject of ongoing discussion35. [143] It is clear that a legal practitioner must not engage in misleading conduct. In Legal Practitioners Complaints Committee v Fleming [2006] WASAT 352, it was noted that36: … the conduct of a practitioner might be regarded as misleading because an affirmative statement is made in circumstances which required some qualification. In this context, misleading and unprofessional conduct might also be made out where a practitioner states a partial truth, or in the context of making statements of fact, omits relevant information. It might extend to statements which are literally true but where a qualification is called for, or were a statement initially true becomes false in the course of the negotiations. And in some circumstances the duty to not bring the legal profession into disrepute and fairness to an opponent may require that the practitioner draw attention to a particular matter, even where the opponent‟s misapprehension is not induced by that practitioner. [144] In relation to ADR processes specifically, it was noted that37: The public interest is served by practitioners encouraging an early settlement of their client‟s dispute. Indeed practitioners are under a duty to seek such a settlement… But, just as in litigation a practitioner may not use dishonest or unfair means or tactics to hinder his opponent in the conduct of his case (D’Orta- Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 [McHugh J at 111], so he ought not to do so in other areas of practice. Arguably perhaps, for a number of reasons, the proscription against such conduct is more important in settlement negotiations. [145] In this matter, the homeowner and his solicitor did not draw the builders attention to, or disclose, a fundamental consideration, being the existence of a claim to the QBSA which transpired to have a value of almost $150,000, in the course of negotiations in a Conference conducted under the auspices of the tribunal. [146] The homeowner has not come with clean hands in equity, by his unfair actions in entering into the deed without full disclosure, with the intent of obtaining a personal advantage to the effective detriment of the builder, and by thereafter seeking to pursue that advantage. [147] I therefore consider that the homeowner is not in a position to succeed in equity, and that the equitable remedy of estoppel should be denied to the homeowner in this matter. [148] I do not consider that the Authority is estopped by its actions between February 2011 and September 2011. Its actions are regrettable, and this matter could certainly have been handled better. Ultimately however, the 35 See for example: Sourdin,T “Alternative Dispute Resolution”, Lawbook Co, Sydney, 4th ed 2012, [11.25]. 36 [2006] WASAT 352 at [73]. 37 At [74]. -- 23 of 24 -- 24 Authority is entitled to rely upon the plain wording of the deed, and is not estopped from doing so. [149] I therefore conclude that, in the circumstances, the Authority was not estopped from refusing indemnity, even at the late stage at which it did so. Costs [150] At the conclusion of the hearing, the solicitors for the homeowner said that they would want to consider any costs application in light of the decision. It was suggested that there could be written submissions on the question. [151] I shall allow 7 days after they receive these reasons for either party to make submissions as to costs if they wish. If so, they are to advise the other party who shall have 7 days to respond, giving a copy to the other party and to the Tribunal and the question of costs will be decided by me on the papers thereafter. If no application is made within 7 days, the matter will be concluded. Conclusion [152] I find that:- (a) the Deed of Settlement was effective to release the builder and the BSA from liability for non-completed works, and (b) the Deed of Settlement failed to establish proper termination of the contract, and (c) the Authority is not liable under the Policy to pay the homeowner, by virtue of the release and lack of satisfaction as to proper termination, and (d) the Authority is not estopped by its conduct from refusing payment under the policy [153] The decision of the Authority made on 24 September 2012 to decline the claim by Mr Frederick William Auret and Ms Rhyl Armstrong for non- completion of premises at 29 Fry Street, Holland Park, in full, is confirmed. -- 24 of 24 --