Bacia v Tan & Ors [1994] QSC 124

· ~.;l/-1 3_ - se.. q4/1 ?-4 JA• State Reporting Bureau IV TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bu:-eau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MACKENZIE J No 1621 of 1993 HILDA BACIA and THOMAS TAN and BONNYSIDE PTY LTD ACN 010 729 085 and BUILDERS' REGISTRATION BOARD OF QUEENSLAND and QUEENSLAND BUILDING SERVICES AUTHORITY BRISBANE .. DATE 23/ o·S/94 JUDGMENT 1 REV:SED CCP1ES ISSUED StatG Re~Jorting Bureau Date 3t 1. ); Oj<{ Plaintiff First Defendant Second Defendant Third Defendant Fourth Defendant 4th Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 13 -- 230594 dbm (Mackenzie J) HIS HONOUR: The orders that I make are the following: 1. I order that the statement of claim, insofar as it relates to the fourth defendant, be struck out on the basis that it discloses no reasonable cause of action. 2. I order that the respondent pay the applicant's costs of and incidental to the application to be taxed. I publish my reasons. ORDER 2 10 20 0\,~_ 30 40 l/ 50 60 -- 2 of 13 -- ' IJ.-d·,P\43 IN THE SUPREME COURT OF QUEENSLAND No. 1621 of 1993 Brisbane Before Mr Justice Mackenzie [Bacia v Tan & Ors] BETWEEN AND AND AND AND HILDABACIA Plaintiff THOMAS TAN First Defendant BONNYSIDE PTY LTD ACN 010 7:29 085 Second Defendant BUILDERS' REGISTRATION BOARD OF QUEENSLAND Third Defendant QUEENSLAND BUILDING SERVICES AUTHORITY Fourth Defendant JUDGMENT - MACKENZIE J. J udgrnent delivered 23 May 1994 COUNSEL: SOLICITORS: HEARING DATE: R. Holt for applicant (fourth defendant) J. Curran for respondent (plaintiff) Phillips Fox for applicant Goss Downey Carne as t/a for Michael Sing & Associates for respondent 5 May 1994 -- 3 of 13 -- J J ) IN THE SUPREME COURT OF QUEENSLAND BETWEEN AND AND AND AND No. 1621 of 1993 HILDABACIA Plaintiff THOMAS TAN First Defendant BONNYSIDE PTY LTD ACN 010 729 085 Second Defendant BUILDERS' REGISTRATION BOARD OF QUEENSLAND Third Defendant QUEENSLAND BUILDING SERVICES AUTHORITY Fourth Defendant JUDGMENT - MACKENZIE J. Judgment Delivered 23 May 1994 This is an application on the part of the fourth defendant for orders that pursuant to ) Order 22 Rule 27, the hearing of a point of law concerning the interpretation and application of section 23 of the Builders' Registration and Home Owners Protection Act 1979 ("the Act") be heard and determined pursuant to Order 22 Rule 28 instanter, that the plaintiff's claim against the fourth defendant be dismissed and in the alternative that the statement of claim against the fourth defendant be struck out on the basis that it fails to disclose any reasonable cause of action or is frivolous and vexatious, or embarrassing. The point of law said to be raised by the pleadings is that in consequence of section 23 the plaintiff has no cause of action against the fourth defendant. It is submitted that -- 4 of 13 -- ----------- --··-· - 2 the decision on the point of law will substantially dispose of the course action against the fourth defendant and that it would be appropriate to dismiss the action against it. The other relief is concerned with whether the way in which the cause of action against the fourth defendant is pleaded can support the relief sought. It is convenient first to refer to the pleadings to set the issues in. a proper context. The statement of claim discloses that the plaintiff contracted with Paddington Homes Pty Ltd to build a residence at Mt Tamborine. The first defendant is alleged to have created a defective design and failed to carry out inspections with the degree of skill required. The statement of claim alleges that there were major defects in construction which the first defendant failed to detect. The fourth defendant is the successor to the third defendant. The steps recited in the statement of claim which are alleged to culminate in liability of the fourth defendant are:- 1. that the plaintiff complained frequently to employees of the third defendant and fourth defendant from 4 August 1989 onwards that the house was not properly and adequately constructed and was not completed. 2. .. that when making such complaints the plaintiff sought the advice and assistance of the third defendant in r~ctifying and completing the construction. 3. that the third and fourth defendants were an insurer under a House Purchasers insurance policy provided for under section 69 of the Act in relation to the particular project. 4. that the third defendant and more recently the fourth defendant held themselves out as being skilled in identifying defective building work by virtue of (a) receipt of the plaintiff's complaints; c c c ( -- 5 of 13 -- 3 (b) attendance at her premises; " ·(c) the third defendant's general statutory functions and duties under the Act, but particularly sections 44(c), 59 and 86; and (d) it powers under the House Purchaser's Agreement policy, particularly clause 5 (whic~ allow,s the Board to decline to meet a claim for work that has been rectified without approval of the Board). 5. that the third defendant knew when the plaintiff was complaining:-_ (a) that she was an elderly lady who lacked the ability, skills or qualifications to identify the defects and inadequacies in the house building ) construction; and _/ (b) that at material times the plaintiff did not have the benefit of any skilled independent advice in such matters; and (c) that the plaintiff was relying on the third defendant to:- (i) spend the available insurance monies in such a manner as would J mitigate the loss and damage suffered by the plaintiff; (ii) alternatively, advise the plaintiff as to the manner in which such ) monies could be best spent to mitigate the plaintiff's loss or .. damage. The conclusion from these alleged facts is said to be that the third defendant (and more recently the fourth defendant) therefore owed a duty of care to the plaintiff- (a) to spend insurance monies available under the House Purchasers Agreement in a manner which would mitigate the loss and damage suffered by the plaintiff; (b) alternatively, to advise the plaintiff as to the manner in which such monies could be best spent so as to mitigate her loss and damage. -- 6 of 13 -- ---------·-·-----···-- --···· --- -·-·--·------- 4 The next allegation is that in compliance with such duty the third defendant should have expended the available insurance monies in correcting the major structural defects referred to in the pleadings and/or should have advised the plaintiff to spend the insurance monies in such manner. The breaches ·of such duty attributed to the third defendant may be summarised into the categories of: (i) expenditure on non-essential repair and rectification work; (ii) . inadequate repairs; c (iii) unsightly work; (iv) creation of further problems; -C (v) failure in any other respect to spend the insurance money in correcting the major structural defects or to advise the plaintiff as to them. The cause of action relied on calls in aid of the concepts discerned in Sutherland Shire Council v Hayrnan (1985) 157 C.L.R. 424 andother like cases, as the brief summary of the pleading will indicate, it is fundamental to the plaintiff's case against the fourth defendant c- that it, as successor to the rights and liabilities of the third defendant, owed a duty to the plaintiff to ~nsure ~hat any i~surance monies paid under the statutory policy were spent in ( the most beneficial way. When pressed Mr Curran, for the plaintiff, did not dispute that the fundamental proposition was that the fourth defendant had or had held itself out as having a duty to rank. ~ ' in.order of priority the defects which should be corrected in the event that the amount of money payable from the insurance policy was insufficient to correct all defects. In other words th~ fourth defe~dant had or assumed a _duty. to investigate and determine how the -- 7 of 13 -- ------------ _j 5 defects might be most effectively fixed and advise the plaintiff of its opinion. The validity of this proposition depends to some extent on the construction of the Act. Before dealing with that matter it is convenient to record that the applicant attacked the pleading on a number of grounds. In summary they are that:- 1. the statutory immunity afforded by section 23 of the Act was applicable; 2. there was no statutory obligation to advise on how the insurance money ought to be applied in mitigation of loss; J 3. there was no sufficient proximity of relationship between the third defendant and the plaintiff such as to give rise to a duty of care to avoid economic loss ) of the nature claimed; 4. there was no basis upon which any reliance could be found to be reasonable; 5. neither the fact that the applicant was the insurer under the House Purchaser's Agreement, nor the provisions of clause 5 of the agreement and the other statutory provisions identified in the pleading could amount to a holding out by ) the Board for the purposes relied on by the plaintiff; and 6. the Board did not owe a duty to the respondent with respect to spending the ) insurance moneys on her behalf or advising her how to spend them. The way in which the pleading is constructed alleges that the third defendant through• its officers took the complaint and investigated it. It is not pleaded that the Board failed to discover defects. There is no pleading that any of the officers of the Board held out by any other means that they were performing a function on behalf the Board Of the kind relied on. The only basis for the holding out is said to be the reception of the complaint, .. their attendance at her premises and the third defendant's general and specified statutory functions and duties under the Act and its rights under the House Purchaser's Agreement. -- 8 of 13 -- ~~~~~~~~-----~----- 6 It is implicit but not expressly stated that the respondent was paid a sum under the -' House Purchaser's agreement. This must be viewed in the context that the third defendant's obligation was to pay the sum due under the House Purchaser's Agreement to the respondent. The third defendant had neither the right not the obligation to dictate to her upon what and in what. order of priority the money was to be spent. As theAct stood at the relevant time the primary function of the third defendant was as a regulatory body in respect of the building industry. It maintained a register of builders, had disciplinary functiop.s, and also had regulatory and associated investigatory functions. There was an insurance_ scheme set up by Part V of the Act. The prescribed form (Form 17) pursuant to section 69 sets out the Board's powers and obligations under the scheme. Of relevance for present purposes are clauses 1 and 2 which impose monetary limits, which presumably result in a shortfall in respect of some claims, and clause 3 which provides as follows:- "3. Subject to this agreement, the Board agrees to pay to the purchaser where the house building construction undertaken to be carried out under a contract with a registered house build~r referred to in section 64(1) of the Act has not been commenced, or having been commenced has not been completed and the contract has been rescinded or determined otherwise than by reason of _ the fault of the purchaser,· an amount at the option of the purchaser being either- (a) _the amount by which any consideration paid in money or otherwise conveyed to the registered house builder, exceeds the value of any house building construction carried out; or (b) the amount which the Board determines is the reasonable cost of completing the house building construCtion. reduced by the purchaser's remaining liability under the contract at the time of ce8sation of work. The Board's liability shall be limited to the original contract price less the amount retained by the purchaser at the time of cessation of work." - Theplafntiff's difficulty, is .to sp~ll out a duty of "the kind upon which she relies, to . - . . . ' spend available moneys in a manner which would mitigate the loss and damage or to advise c c c ( -- 9 of 13 -- - ·--·--·--- 7 her as to the manner in which such moneys could be best spent to do so. The proposition that the terms of the House Purchaser's Agreement and the Act constitute a holding out that was reasonably relied on and therefore crystallised into a duty must be critically examined. Of the sections of the Act specifically mentioned, section 44(l)(c} permits the Board to cancel or suspend the registration of a registered builder who in the finding of the Board has been negligent or incompetent in connection with the performance of building work. ) This is purely a regulatory power. It is true that the exercise of the power presupposes that· the Board has made a finding as to the .quality of the work. Section 59 is designed to enable ) the Board to require a person to remedy faulty or unsatisfactory work. Once again it presupposes that the Board has formed an opinion as to the quality of the work. However,· those findings are made in the discharge of particular functions under the Act. Section 86 provides a right of entry and inspection for a member of the Board and persons authorised by the Board. The mere fact that there is right to inspect and make ) enquiries cannot have any critical significance in respect of the alleged a duty of care. Insofar as clause 5 of Form 17 is relied on, it neither as a matter of law nor reasonable ) implication holds out that the Board undertakes to dictate the order of spending of money. The primary purpose of clause 5 is to enable the.Board to disclaim responsibility in cases . . . : ·~{- . where work has been done and then the Board is asked to pay for it, without having the prior opportunity to satisfy itself that the fund was liable. In this particular case the primary obligation of the officers of the third defendant was to investigate the claim made by the respondent. It may be that If they found work which was negligent or incompetent which had not been reported already, they would In the ordinary course of events report that to the Board so that the Board might discharge its -- 10 of 13 -- 8 functions under sections 44(1)(c) and 59. Read in the context of the Act as a whole, none of the specific provisions relied on by the respondent supports the proposition that it was held out by the third defendant, when it undertook its statutory functions, that it would impose on the purchaser (to whom the Board's obligation to pay moneys due under the House Ptirchaser's Agreement lies under clause 3) an order of priority of rectification works or advise the purchaser on the subject. Nor in my view, do any of the provisions provide a basis for reasonable reliance on the existence of a duty of the kind alleged. I have carefully, considered the written and oral submissions of the respondent on c these aspects of the matter. Reliance by the respondent upon the third defendant carrying out "its obligations under the policy in a reasonable manner by spending the available money . . cwisely or alternatively advising the plaintiff as to these matters" is a critical step in the argument. The duty of care alleged was to. spend the insurance money wisely or to advise the plaintiff how to do so. It was submitted that "this duty springs from the fact that the building was incomplete and had major defects, the contractual relationship under the policy with the B()ard (including clause 5 thereof whereunder the ~oard was not obligated without ( having approved expenditure) and the fact of knowing reliance." Where, as seems likely, the claim was based on section 69(2)A(b) by reason of breach of a warranty to perform the work in a proper and workman like manner, the Board must consider whether· that warranty has beenbreached before it makes a payment. However, the making of that determination does not give the Board a right to determine priorities in expenditure of the money. Its only obligation is to pay the claimant the sum of money calculated in accordance with the monetary limits. It is in my view a non sequitur to read into clause 5 of the House Purchaser's Agreement an obligation to determine how the money is spent. The power in -- 11 of 13 -- .. 9 clause 5 arises at the time of determining a- claim where remedial work has been done without the Board's approval. There is no statutory duty of the kind asserted upon the Board. Leaving aside the statutory provisions, all that is pleaded is that the Board's officers received the complaint and attended at the respondent's premises in consequence of the complaint. There is nothing suggesting that they did more than carry out their statutory functions. In the absence of the pleading of anything more than that, it is untenable to convert the mere ) performance of statutory functions into a case where it was reasonable to believe that the_./ Board was holding out, merely by performing its statutory functions that it would in fact· ) act outside its functions. Nor would it be tenable to suggest that it was reasonable to rely upon the Board doing so. I have clearly come to the view that this fundamental step in of the respondent's argument cannot be sustained. It therefore becomes unnecessary to consider the other bases upon which the pleading was attacked. It follows that the fourth defendant is entitled ) to have. the statement of claim against it struck out on the basis that it fails· to disclose any reasonable cause of action. ) Relief 'Vas also sought pursuant to Order 22 Rule 27 by hearing the point of law that section 23 of the Act precluded the plaintiff from succeeding agairist the fourth defendant. ' The determination of such a point is discretionary and, in acase where the matter came to trial that issue would have to be considered in the context of the facts then proved. I have expressed a view on the viability of the plaintiff's present pleading against the fourth defendant in relation to striking out. I do not propose to exercise my discretion to determine the application of section 23 in these proceedings. The formal orders are:- -- 12 of 13 -- 10 1. I order that the statement of claim, insofar as it relates to the fourth defendant, be struck out on the basis that it discloses no reasonable cause of action. 2. I order that the respondent pay the applicant's costs of and incidental to the application to be taxed. ·.· ·~ .. .. c (' c (_ -- 13 of 13 --