Draut and Anor v Queensland Building Services Authority [2012] QCAT 683

CITATION: Draut and Anor v Queensland Building Services Authority [2012] QCAT 683 PARTIES: Otto Draut Celine Fernando (Applicants) v Queensland Building Services Authority (Respondent) APPLICATION NUMBER: GAR201-10 MATTER TYPE: General administrative review matters HEARING DATE: 21 June 2012 HEARD AT: Brisbane DECISION OF: Barry Cotterell, Member DELIVERED ON: 21 June 2012 DELIVERED AT: Brisbane ORDERS MADE: 1. The decisions of the Queensland Building Services Authority of 3 March 2010 and 14 May 2010 to reject the insurance claim in its entirety are set aside and the Tribunal substitutes its own decision that the claim is accepted and, after taking into account the amount retained by Mr Draut and Ms Fernando, shall be paid in the sum of $105.97. 2. The application for costs in respect of the directions hearing on 19 January 2012 is dismissed. CATCHWORDS: BUILDING – application for review of decision to refuse an insurance claim – application for costs Queensland Building Services Authority Act 1991, sections 83, 86, 87 Insurance Policy Rectification of Building Work Policy Queensland Civil and Administrative Tribunal Act 2009, Division 3 APPEARANCES and REPRESENTATION (if any): -- 1 of 8 -- 2 This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act). REASONS FOR DECISION [1] The Applicants are seeking to review the decision of the Queensland Building Services Authority (QBSA) made on 3 March 2010 and upheld on 14 May 2010. These decisions were to disallow their claim under the Statutory Insurance Scheme to pay for the costs of rectifying defective work at their property. [2] The claim on the Policy was made by way of a letter to the QBSA dated 2 December 2009. [3] Upon receipt of the Applicants‘ claim the QBSA proceeded to assess the claim it states in accordance with its standard procedures developed in accordance with the Queensland Building Services Authority Act 1991 (the QBSA Act), the Policy and the Rectification of Defective Work Policy. [4] In an application number BD395-06, the builder involved in this matter, Mr Sam Torrisi, had applied to the Commercial and Consumer Tribunal (CCT) naming the Applicants as parties and the matter went to mediation in the CCT on 18 January 2007 where an agreement was reached. That agreement was made a consent order of the CCT on 24 January 2007. That order stated as follows: 1. The parties will agree on an independent accountant who will receive from the parties all documents relevant to the extra costs and credit details in the invoice of Sam Torrisi Homes dated 11 July 2006 to calculate what monies, if any, are owed by one party to the other by; 4:00 pm on 25 January 2006. 2. Any monies owing pursuant to paragraph 1 of this Order will be paid by the party who owes it to the party entitled to it, by: 4:00pm on 16 February 2006. 3. An inspector from the Queensland Building Services Authority (―the Authority‖) will attend the premises at 158 Whites Road, Buderim Queensland, in the presence of the parties and Paul Bloomer of Coastal Home and Building Inspections, to inspect the items listed in the annexure marked ―A‖ to this order. Which consists of a letter dated 11 October 2006 from the solicitors for the respondents and a letter dated 18 October 2006 from the solicitors for the applicant and the inspector will provide a report to the Tribunal and the parties as to whether or not the items listed require rectification. 4. The Applicant shall rectify any items listed in the Authority‘s report. 5. After such rectification the parties will notify the Tribunal in writing whether or not they require a further inspection by the Authority‘s inspector, together with Paul Bloomer of Coastal Home and Building Inspections. 6. The registry will provide a copy of this Order to the Authority.‖ [5] Mr Phil Wright, a certified practicing accountant was selected by the parties in compliance with this order and he provided a report dated 20 April 2007 where he assessed that $7,289.03 was owing to Mr Torrisi by Mr Draut and Ms Fernando. -- 2 of 8 -- 3 [6] Mr Torrisi has never been paid this money contrary to the CCT order. [7] The Applicants disagreed with Mr Wright‘s assessed amount and attempted to have the matter reopened in the CCT which on 10 November 2009 made an order that ―The application remains finalised‖. [8] Despite the fact that the Applicants had not paid Mr Torrisi by 16 February 2007 or at all, the QBSA carried out an inspection of the works referred to in clause 3 of the consent order of 24 January 2007 and assessed the cost of rectification of the outstanding work. It estimated the cost at $7,395. [9] In the decision under review of 3 March 2010, the QBSA referred to the mediation agreement in the CCT and the agreement for an independent accountant to review the monies owed which resulted in the assessment of $7.289.03 being owed by the Applicants to Mr Torrisi. The QBSA confirmed that Mr Torrisi had not been paid and, because the amount of money outstanding ($7,289.03) was commensurate to the approximate cost to rectify the defect items, the QBSA advised that ―BSA does not intend to take any further action in this matter.‖ [10] The Applicants‘ solicitor then made submissions to the QBSA in an undated letter apparently received by the QBSA on 12 May 2010 to which the QBSA replied on 14 May 2010 stating that ―the decision made by BSA as outlined in the letter of 3 March 2010 stands‖. [11] These are the two decisions the Applicants now ask the Tribunal to review. The Review Jurisdiction of QCAT [12] The decisions of the QBSA which are reviewable by QCAT are set out in section 86 of the QBSA Act which relevantly states: 86 Reviewable decisions (1) The tribunal may review the following decisions of the authority-- (a) … (h) a decision to disallow a claim under the statutory insurance scheme wholly or in part. [13] Section 87 then provides: 87 Application for review A person affected by a reviewable decision of the authority may apply, as provided under the QCAT Act, to the tribunal for a review of the decision. [14] QCAT‘s review jurisdiction is set out in sections 17 to 24 of the Queensland Civil and Administrative Tribunal Act 2009 (the QCAT Act). [15] Section 17 of the QCAT Act refers to the Tribunal‘s review jurisdiction conferred on the Tribunal by an enabling Act to review a decision made by another entity under that Act. In this context, that section gives QCAT the power to review a decision of the QBSA made under the QBSA Act. -- 3 of 8 -- 4 [16] Section 20 of the QCAT Act says as follows: 20 Review involves fresh hearing (1) The purpose of the review of a reviewable decision is to produce the correct and preferable decision. (2) The tribunal must hear and decide a review of a reviewable decision by way of a fresh hearing on the merits. [17] Section 24(1) of the QCAT Act says as follows: Section 24 Functions for Review Jurisdiction (1) In the proceeding for a review of a reviewable decision the Tribunal may: (a) confirm or amend the decision; or (b) set aside the decision and substitute its own decision; or (c) set aside the decision, return the matter for reconsideration to the decision maker for the decision, with the directions the Tribunal considers appropriate. Reviewing the Decisions of 3 March and 14 May 2010 [18] The QBSA refers in its Statement of Reasons for its decisions to section 83 of the QBSA Act which states as follows: 83 Proceeding in tribunal stops action by authority (1) If a proceeding about a building dispute is started in or removed from a court to the tribunal— (a) the tribunal is to have the management of the dispute; and (b) the authority must not act in relation to the dispute except as allowed or required by section 84. [19] Section 84 is not relevant here. [20] Section 83 is relevant because the ―building dispute‖ between Mr Torrisi and the Applicants had been started in the CCT where it was resolved by the CCT by a mediation agreement and an order of the CCT which required the QBSA to undertake certain specified tasks in accordance with the CCT‘s Order of 24 January 2007. [21] After the matter was commenced in the CCT the QBSA was not empowered to act ―in relation to the dispute‖ except in accordance with the CCT‘s orders. [22] The Applicants submit that the decision of Mr Wright was wrong and that the QBSA should not have relied upon it and should have reviewed it. The Tribunal finds that the QBSA was prohibited from acting in the ―building dispute‖ by section 83 of the QBSA Act. The outcome of the Wright report was an outcome of the mediation agreement and the consent order of 24 January 2007 and was beyond the power of the QBSA to act. [23] The QBSA acted in the ―building dispute‖ only on the basis of the consent order of the CCT of 24 January 2007. -- 4 of 8 -- 5 [24] The QBSA later became involved in this matter when the Applicants claimed from the QBSA under the Insurance Policy on 2 December 2009. At that stage the QBSA was faced with two facts. Firstly the amount owing by Mr Draut and Ms Fernando was $7,289.03. This amount was beyond the power of the QBSA to question as it had been determined arising from the consent order of CCT. Secondly, the QBSA had assessed the cost of rectification at $7,395. The 3 March 2010 decision of the QBSA was to offset one against the other and because they were approximately the same, the QBSA decided it did not ―intend to take any further action in this matter‖ of the insurance claim. [25] It is the decision of QBSA to compare the fact of the $7,289.03 being owed with the estimate of $7,395 to repair and then decide, because the two figures were approximately the same, not to proceed with processing the insurance claim which is reviewable and sought to be reviewed here. [26] In deciding a claim for insurance the QBSA must act in accordance with the QBSA Act, the Insurance Policy and the Rectification of Building Work Policy. [27] Part 2 of the Insurance Policy refers to defective work as follows: 2.1 Payment for Defective Construction (a) Subject to the terms of this policy, BSA agrees to pay the cost of rectifying defects in residential construction work that is primary building work… 2.2 Amount of Payment (a) Subject to clause 2.2(c) and Parts 4, 5 and 6 of this policy, the amount of the payment under this Part will be limited to the reasonable cost, as determined by BSA, of undertaking those works necessary to rectify the defects, less, where the Insured contracted with the contractor for the undertaking of the residential construction work which is defective, the owner‘s remaining liability under the contract. [28] Clause 2.2(c) is irrelevant except that it raises the issue of whether ―undertaking of the remedial work is unnecessary or unreasonable‖. To determine that issue involves reference to the Rectification of Building Work Policy which states: 1. Rectification of defective building work (1) It is a guideline policy of the Queensland Building Services Board that a building contractor who carries out category 1 or category 2 defective building work should be required to rectify that work, unless in the circumstances rectification is unfair or unreasonable. [29] It is not clear on the evidence, whether the work carried out by Mr Torrisi and remaining defective is category 1 or category 2 but even if it was the QBSA can determine not to order rectification if ―in the circumstances rectification is unfair or unreasonable‖. This is not referred to specifically in the reasons for the QBSA‘s decision of 3 March 2010 but under -- 5 of 8 -- 6 circumstances where Mr Draut and Ms Fernando had failed to pay the amount of $7289.03 to Mr Torrisi as required by the CCT consent order of 24 January 2007 it was open to the QBSA to decide that for QBSA to order rectification would be unfair or unreasonable. [30] QBSA determined not to order rectification of the works in determining this insurance claim and the Tribunal finds that this was within its discretion under the circumstances. [31] Under the circumstances, QBSA was left with an amount of rectification assessed at $7,395 and in determining the amount of the payment under clause 2.2 of the Insurance Policy it would deduct the owner‘s remaining liability under the contract of $7,289.03 resulting in an amount of $105.97. [32] The Tribunal finds that the QBSA acted in accordance with its obligation to this point. The Tribunal must now determine whether the QBSA acted appropriately in determining to dismiss the claim entirely. The QBSA did not address this point in its Statement of Reasons or in submissions to the Tribunal. [33] According to the ―Insurance Policy Conditions‖: Subject to the terms of this policy, the Queensland Building Services Authority (―BSA‖) will pay for loss for:  Defective construction Of the insured work referred to in the certificate of insurance. [34] The amount of $105.97 was a loss in accordance with Insurance Policy. The Tribunal has not been referred to any provision in the QBSA Act or the Insurance Policy which would allow the QBSA to avoid paying for the loss for which it has contracted to pay. [35] For these reasons the Tribunal determines that it should set aside the decision to reject the insurance claim in its entirety and substitute its own decision that the claim is accepted and, after taking into account the amount retained by Mr Draut and Ms Fernando, shall be paid in the sum of $105.97. The Tribunal considers this to be ―the correct and preferable decision‖. The Claim for Costs in respect of a directions hearing on 19 January 2012. [36] The Applicants have sought, through their solicitor, the amount of $495 for costs thrown away by what they allege to have been an unnecessary directions hearing caused by the QBSA not complying with directions as required. [37] Section 100 of the QCAT Act provides that "other than as provided under the QCAT Act or an enabling Act, each party to a proceeding must bear the party's own costs for the proceeding." -- 6 of 8 -- 7 [38] The proceeding arises out of a building dispute. The Tribunal draws its jurisdiction to deal with building disputes, including a review of an QBSA decision, from the QBSA Act. Section 77(1)(h) of that Act provides that the Tribunal ―may award costs‖ in a proceeding arising out of a building dispute. [39] When considering an appeal with respect to how the Tribunal should deal with costs arising out of building disputes, Deputy President Kingham, in Lyons v Dreamstarter Pty Ltd said that pursuant to section 7 of the QCAT Act, section 77(1)(h) of the QBSA Act modifies section 100 of the QCAT Act, so that section 77(1)(h) is read as part of the QCAT Act. Section 77(1)(h) does not provide guidance or prescription about the occasions for or conditions of exercise of the power to award costs. [40] Her Honour went on to say that a jurisdiction given in general terms, such as the jurisdiction to award costs in s 77(1)(h) of the QBSA Act, ―allows the Tribunal to make an order as to costs that is justified in the circumstances. It is a broad general discretion which must be exercised judicially, not upon irrelevant or extraneous considerations but upon facts connected with or leading up to the litigation.‖ [41] The QCAT cost provisions (Ch 2, Pt 6, Div 6) commences with s 100 which, on its face, indicates a plain intention that costs orders will not be an integral feature of QCAT‘s operations: ‗other than as provided under this Act or an Enabling Act, each party to a proceeding must bear the party‘s own costs for that proceeding‘. [42] However, under s 102 the Tribunal may make an order for costs ‗... if the Tribunal considers the interests of justice require it to make the order‘: s 102(1). Under s 102(3) in deciding whether to award costs the Tribunal may have regard to certain matters including: (a) Whether a party in a proceeding is acting in a way that unnecessarily disadvantages another party; (b) The nature and complexity of the dispute; (c) The relative strengths of the claims made by each party; (e) The financial circumstances of the parties; (f) Anything else the Tribunal considers relevant. [43] As the QCAT Appeal Tribunal has observed about these provisions, the question that will usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase ‗the interests of justice‘ points so compellingly to a costs order that they overcome the strong contra-indication against costs orders contained in s 100 at para [29]. [44] Here QBSA opposes the Applicants‘ application for costs and has filed detailed submissions addressing each of the matters in sub-section 102(3). The QBSA also assert that the Applicants have in the procedure a history of failing to comply with the Tribunal‘s directions. -- 7 of 8 -- 8 [45] The Applicants belatedly supplied the Tribunal with very general submissions after the QBSA submissions were filed. They did not specifically address the matters in sub-section 102(3) nor did they deny the QBSA‘s assertions of their failing to comply with the Tribunal‘s directions. [46] The Tribunal having considered both submissions finds that the Applicants have a history of failing to comply with the Tribunal‘s directions and it would be in appropriate for the QBSA‘s one breach to be the basis of a cost order. Therefore, it finds that it would not be in the interests of justice for the Tribunal to make the order sought. [47] Therefore, the application for costs in respect of the directions hearing on 19 January 2012 is dismissed. Orders [48] For the above reasons the Tribunal makes the following orders: 1. The decisions of the Queensland Building Services Authority of 3 March 2010 and 14 May 2101 to reject the insurance claim in its entirety are set aside and the Tribunal substitutes its own decision that the claim is accepted and, after taking into account the amount retained by Mr Draut and Ms Fernando, shall be paid in the sum of $105.97. 2. The application for costs in respect of the directions hearing on 19 January 2012 is dismissed. -- 8 of 8 --