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[2019] QCAT 14
General information, not legal advice.
Queensland Civil and Administrative Tribunal
2019-01-29
Original judgment source is linked above.
STATUTORY INSURANCE SCHEME - where builder failed to complete the construction of a house - where the owners engaged new contractors to do emergency work and complete the house - where the Queensland Building and Construction Commission refused the owners' insurance claim because work was done without prior written approval - whether there is any discretion to allow such a claim after legislative amendments taking effect on 28 October 2016 - whether the tribunal's discretion on review is any wider than that of the Commission
Queensland Building and Construction Commission Act
Queensland Building and Construction Commission Regulation 2003 (Qld), s 26B, s 58, s 64 of Schedule 2C Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 19, s 20
Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531
WorkPac Pty Ltd v Skene [2018] FCAFC 131
Derek Cronin, solicitor of Cronin Miller Litigation
[1] This is a review of a decision made by the Queensland Building and Construction Commission in which they disallowed an insurance claim. In a nutshell, the licence of contractors engaged to construct a new house for Matthew and Kate Cronin (the Applicants) was suspended and then cancelled before the house was completed. The Applicants made an insurance claim under the Queensland Home Warranty Scheme but also engaged new contractors to make the house safe and compliant and then to complete it. The insurance claim was rejected by the QBCC because the new contractors had been engaged to work on the house without their prior approval.
[2] The law which applies to the Queensland Home Warranty Scheme is in the Queensland Building and Construction Regulation 2003 (Qld) ('the QBCC Regulation'). In that regulation the scheme is called 'the statutory insurance scheme'.1 Changes were made to the statutory insurance scheme on 28 October 2016 and this decision concerns the law as it applies after those changes.
[3] The issues to be decided in this review were identified at the commencement of the hearing as:-
Issue 1 - Were the works at the property which were undertaken by the new contractors demolition works, rectification works or reinstatement works within the meaning of section 64 of Schedule 2C of the QBCC Regulation?
Issue 2 - If the answer to issue 1 is 'no', then is the Applicants' insurance claim to be allowed under the scheme? It is agreed between the parties that if this is the finding of the tribunal then it would be appropriate for the tribunal to invite the QBCC to reconsider its decision.
Issue 3 - If the answer to issue 1 is 'yes' then does the QBCC have a discretion to allow the Applicants' insurance claim under the scheme? If so, should that discretion be exercised in favour of the Applicants?
Issue 4 - If QBCC have no discretion to allow the Applicants' insurance claim under the scheme, whether in this review the tribunal has such discretion and if so, how it should be exercised.
[4] The issues as set out above are understood by the parties (and of course by the tribunal) as facilitating a fresh hearing of the decision made by QBCC on the merits to produce the correct and preferable decision. This is as required by section 20 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) ('QCAT Act').
[5] In final submissions filed on the Applicants' behalf another issue has been raised. This is whether the reference to 'claim assistance' in section 64 refers only to an
1 Section 23.
insurance claim when it is first submitted, rather than to an insurance claim as pursued and prosecuted through to its final conclusion. Although the QBCC has not made submissions on this issue because it gave its submissions first, I have decided to deal with it without requesting such submissions.
[6] The factual background to this matter is that on 11 February 2017 the Applicants entered into a contract with Bradley Sampson (then a licensed builder) for the construction of a house. For the purpose of the statutory insurance scheme this was 'primary insurable work' because it was for the construction of a 'residence' as defined,2 and accordingly it was 'residential construction work'.3 Therefore, because of the entering into of the contract, cover under the statutory insurance scheme came into force.4 The QBCC issued a notice of cover under the scheme showing that cover commenced on 11 March 2017.5
[7] On 6 October 2017 Mr Sampson's licence was suspended and it was subsequently cancelled on 30 October 2017. On 30 October 2017 the construction of the house had not been completed.
[8] Meanwhile new contractors attended the property. They had concerns about the safety of the structure and on about 31 October 2017 made it safe.
[9] The Applicants then made a claim under the statutory insurance scheme. This was submitted on 12 November 2017.6 On 16 November 2017 Mr Cronin had a conversation with a QBCC Assessment Officer about the claim, and I accept his evidence about what was said.7 He was told that the insurance claim would take months to be processed; three contractors would then be asked to tender for the work and construction would most likely not start until at least April 2018.
[10] Further work was done to the house by the new contractors as I describe when dealing with issue 1 below.
[11] The QBCC refused the insurance claim on 11 December 2017 on the basis that the Applicants had engaged a new contractor to complete the works without prior approval of the QBCC. On 8 January 2018 the Applicants sought an internal review of the decision. On 5 February 2018 the QBCC gave the result of the internal review which had confirmed the original decision.
[12] Prior to 28 October 2016, by the terms of section 69 of the Queensland Building and Construction Commission Act 1991 (Qld) ('QBBC Act') which then applied, upon a contract being made by a licensed contractor for residential construction work 'a policy of insurance comes into force in the terms stated in the board's policies for the purpose'.
3 As defined in section 67WA.
4 This is by section 68H of the Act.
5 Page 23 of the exhibit to Mr Cronin's affidavit of 3 July 2018.
6 There is some uncertainty about the date but the parties agree that this date can be used.
7 Paragraph 17 of Mr Cronin's affidavit of 3 July 2018.
[13] The reference here to 'the board's policies for the purpose' was a reference to a 'policy' of the Queensland Building and Construction Board. By section 10 of the QBCC Act the Queensland Building and Construction Board is the QBBC's governing body, and by section 19 the Board was able to make a 'policy governing the administration of this Act'.
[14] Such policies did not take effect until approved by regulation.
[15] With respect to the statutory insurance scheme, from time to time the Board made policies containing the insurance policy conditions. By 28 October 2016 this had reached Edition 8. It was approved by the QBCC Regulation in its terms then in force.8
[16] From 28 October 2016 the statutory regime governing the statutory insurance scheme changed quite radically. From that date the statutory wording about how certain work was covered by the insurance scheme changed and the insurance policy conditions were no longer made by the Board subject to approval by regulation.
[17] From 28 October 2016 by section 68H of the QBCC Act, upon a contract being made by a licenced contractor for residential construction work 'cover under the statutory insurance scheme comes into force'.
[18] Then section 67Y of the QBCC Act stated:-
Assistance available under statutory insurance scheme
The terms of cover under which a person is entitled to assistance under the statutory insurance scheme are prescribed by regulation.
[19] Section 26B of the QBCC Regulation stated: 'For section 67Y of the Act, the terms of cover under which a consumer is entitled to assistance under the statutory insurance scheme are stated in schedule 2C'.
[20] A new Schedule 2C was inserted in the QBCC Regulation entitled 'Terms of cover for statutory insurance scheme'.9
[21] Section 64 of schedule 2C which this decision needs to construe, is therefore one of the terms of the cover under which a person was entitled to assistance under the statutory insurance scheme.
[22] Section 64 reads as follows:-
64 Demolition, rectification or reinstatement without approval
(1) A consumer for residential construction work is not entitled to claim assistance in relation to the work if the consumer does any of the following without the prior written approval of the commission -
8 Approval was by section 34A and schedule 1A of the QBCC Regulation.
(b) rectifies the work;
(c) reinstates the built work.
_Note - _
See section 67(2).
(2) In this section -
approval does not include the following -
(a) a decision of the commission about the scope of works to be carried out to rectify residential construction work or reinstate built work;
(b) a decision of the commission to grant an application for an owner- builder permit.
[23] By section 2 of the QBBC Regulation, 'built work' means a structure of part of a structure, or another thing, resulting from residential construction work.
[24] Schedule 2 of the QBBC Act says that 'rectify building work' means to remedy defective building work or to complete incomplete building work.
New issue - does 'claim assistance' in section 64 apply only to the insurance claim when first submitted?
[25] The suggestion here is that section 64 only applies to work done prior to the submission of the insurance claim. In other words, the expression 'claim assistance' refers only to the initial submission of the insurance claim and not also to its pursuit or prosecution to a final conclusion. On this basis I am asked to ignore any work done to the house after the insurance claim was submitted on about 12 November 2017.
[26] If it is right that section 64 is limited to the making of the initial insurance claim, then it means that such a claim would be permitted in these circumstances:-
(a) House owner faced with incomplete work, makes insurance claim.
(b) Then, without prior QBCC approval in writing, house owner demolishes the original work and organises remedial work.
But that an insurance claim would not be permitted in these circumstances:-
(a) House owner faced with incomplete work, without prior QBCC approval in writing demolishes the original work and organises remedial work.
(b) Then house owner makes insurance claim.
[27] The obvious reason for section 64 is to discourage house owners from acting in a way which makes it more difficult for QBCC to assess the validity or amount of the insurance claim. But making the distinction contended for on behalf of the Applicants would mean that house owners would be able to maintain their insurance cover despite acting in that way, provided they made their insurance claim first.
[28] A distinction of this type is not necessary to make the claim fairer, nor to advance the objects of the Act - that is, to achieve a reasonable balance between the interests of building contractors and consumers and to provide remedies for defective building work.10
[29] This is because in the usual case, emergency work of the type initially done by the Applicants in this case would be outside section 64. For example, if propping or providing side support were necessary to make a structure safe, such work would not rectify the defective work. The work would remain defective but it would have been made safe by the added support.
[30] Equally, if the structure needed protection from the elements, providing such protection temporarily would not normally amount to demolition, rectification or reinstatement of the built work.
[31] Any such distinction as contended for on the Applicant's behalf would also appear to be contra-indicated by the use of the expression 'claim assistance' in another part of the statutory provisions covering the statutory insurance scheme. Although in most cases where this expression is used in the QBCC Regulation it necessarily refers to the initial insurance claim, in section 58 of Schedule 2C of the QBCC Regulation it is used as follows:-
A consumer for residential construction work is not entitled to claim assistance if the consumer unreasonably refuses the commission access to the built work for the purposes of assessing a claim for the work.
[32] Here the expression 'claim assistance' is clearly referring to events happening after the making of the initial insurance claim. It is right that this should not be regarded as wholly persuasive.11 But this shows at least that the expression in section 64 could mean the same as it does in section 58.
[33] In my view, the correct purposive interpretation of section 64, consistent with its use elsewhere in the QBCC Regulation, is that it applies both to work done before and after the initial insurance claim.
[34] With respect to this issue there were submissions as to which work should be considered. Is it work done prior to the making of the insurance claim on 12 November 2017, work done prior to the date of the first refusal of the insurance claim on 11 December 2017, work done prior to the date of the internal review on 5 February 2018, or work done prior to the date of the tribunal's decision?
[35] When considering the new issue above, I have ruled out 12 November 2017 as the correct date. On that basis it seems to me that, for the purposes of this review, when reaching the correct and preferable decision I am not restricted to consider events which have happened by any particular date. Section 20 of the QCAT Act makes it clear the hearing in the tribunal is a rehearing on the merits. Accordingly it is right I should make a decision based on events which have happened as at the date of the
10 As set out in section 3 of the QBCC Act.
decision of the tribunal. In practical terms this the date of the hearing in the tribunal because I have been provided with information about what has happened up to that date.
[36] Despite this, it may be convenient and helpful if I make factual findings as to whether the work done to 12 November 2017 and to 11 December 2017 were within section 64.
[37] Following the suspension and cancellation of the licence of the original contractor, the work done at the property fall into these three categories:-
(a) Emergency work to make the structure safe.
(b) Rectification work to ensure the structure complied with building standards and could properly be completed as a house.
(c) Work to complete the house.
[38] All these works were carried out by the new contractors engaged by the Applicants.
[39] There were in fact two contracts between the Applicants and the new contractors. The first contract was for emergency work and rectification [work type (a) and type (b)]. Although the first contract has not been disclosed, I heard about it from the Applicants' witnesses. The initial work under this contract and which was done prior to the making of the insurance claim on 12 November 2017 is listed in the subcontractor's invoice.12 This work included the most important emergency work under (a), to deal with a serious sag in the floor at level one, which was in danger of collapse. As a temporary measure the floor was relevelled and supported on temporary props.
[40] The other major defect at that time was with the frame. It was found that the way in which it had been constructed would not have supported the roof, which was yet to be installed. It was necessary to correct this by a combination of fixing tie downs, trusses, and beam connections, dismantling and reinstallation of some parts of the existing frame, and providing a partial supporting frame. On my finding, this was work of type (b). On the evidence, a substantial amount of this work was done before 12 November 2017 and the remainder was done just after that date and certainly before 11 December 2017.
[41] After an engineer's report had been obtained the structural support for the floor was redesigned and installed. Several outside walls had to be demolished and rebuilt because they were out of plumb. Since no drainage had been installed in the slab this had to be demolished and remade. These works were all necessary to enable the house to be completed. On my finding these works were done after 12 November 2017.
[42] The second contract was for the completion of the house [work (c)]. It was dated 21 November 2017.13 It stated that rectification of the frame was done under the first contract and not the second.14 Work under the second contract was completed in June 2018.
12 Exhibit DKT-1 to Mr Ticehurst's affidavit made on 7 August 2018.
13 Exhibit MFC-1 to Mr Cronin's affidavit of 7 August 2018.
14 Stated this in item 5.
[43] The emergency work of type (a) was not within section 64 because it was not demolition or reinstatement work, and it did not rectify any defective work, which remained defective. Work of type (b) did however rectify the work done by the original builder, and there was also an element of demolition and reinstatement. As I have found, a substantial amount of this work was done before 12 November 2017. Therefore work under section 64 was done without the written approval of QBCC before the insurance claim was made on 12 November 2017.
[44] The remainder of type (b) work was done just after 12 November and before 11 December 2017. This was also work within section 64. Therefore work under section 64 without the written approval of QBCC was done prior to QBCC's decision to refuse the claim on 11 December 2017.
[45] Whichever relevant date is chosen therefore, works within 64 had been done without the written approval of QBCC.
[46] Since I have found that the works were within section 64 I shall pass over issue 2 and deal with issue 3.
[47] On issue 3 (whether the QBCC has a discretion under section 64 to allow the claim even if section 64 applies), the main point made on the Applicants' behalf is that a discretion to allow a claim even where demolition or rectification work has been done without prior approval is required to achieve the objectives of the Act - which are to achieve a reasonable balance between the interests of building contractors and consumers and to provide remedies for defective building work.15
[48] The Applicants rely on the Product Disclosure Statement dated October 2016, which was available to the Applicants on the QBCC's website.16 It purported to describe the Queensland Home Warranty Scheme as it applied to contracts signed from 28 October 2016. When referring to exclusions and limitations it stated:-
The following actions may prevent you from being eligible for a claim under the scheme:
(emphasis in original)
[49] On behalf of the Applicants it is said that the use of the word 'may' in the opening clause indicates that a discretion exists to allow a claim in the circumstances listed in
15 As set out in section 3 of the QBCC Act.
16 Exhibited to Mr Cronin's affidavit on page 50.
the bullet points, which include where demolition or rectification work has been done without prior approval. It is said that the fact that a discretion exists is also indicated by the failure of the QBCC to warn the Applicants that if they did their own work at the premises they would not be able to make an insurance claim, despite QBCC knowing that new contractors had been engaged (by reason of the two new insurance premiums paid under the first and second contracts with the new contractors).
[50] It is pointed out on behalf of the Applicants that the Product Disclosure statement has now been changed. A new version dated November 2016 states:-
The following actions will prevent you from being eligible for a claim under the Scheme:
[51] Of particular note here is that the word 'may' has now been changed to 'will'.
[52] It is submitted on behalf of the Applicants that the discretion which exists is unfettered and should be exercised in the Applicants' favour bearing in mind the condition of the property when the builder's licence was cancelled, what was said to Mr Cronin on the telephone and all the other circumstances as set out in the submissions.
[53] The purpose of a PDS is to provide to the customer clear and accurate information about the insurance terms. Since the insurance scheme is a statutory scheme whose terms are now contained in a Regulation, a PDS cannot alter the terms of the scheme. It is quite unlike a PDS which describes a purely contractual scheme. This means that where there is a statutory scheme, if and in so far as the PDS is different from the terms of the statutory scheme, then it is simply an error. It cannot alter the statutory scheme.
[54] The terms of section 64 do not provide for any discretion to allow an insurance claim if the work described in the section has been done without prior written approval. For the reasons given when considering the new issue I am not persuaded that the absence of discretion does interfere with the aims and objects of the scheme or the QBCC Act. Even if it did, I think it would be too "far-reaching" to read section 64 as if there were such discretion - something which courts and tribunals must guard against: Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531, [40].
[55] It is clear therefore that there is no such discretion to allow a claim if work within section 64 has been done without written approval. This means that the second part of issue 3 is not reached. It is unnecessary to decide whether the insurance claim should be allowed.
[56] It was suggested at the hearing that the tribunal's discretion is wider than that which could be applied by the QBCC in any particular case. This submission has been expanded in the final submissions filed on the Applicants' behalf but there is no explanation in the submissions about how the tribunal's discretion can be any different from that of the QBCC other than what appears to be a suggestion that the tribunal will seek to construe the QBCC Regulation in accordance with the objects of the Act. It must however be wrong to suggest that the QBCC is able to construe the statutory provisions any differently than the tribunal is obliged to do.
[57] It cannot be the case that any different approach is permissible in the light of section 19 of the QCAT Act. Section 19(a) requires the tribunal to decide the review in accordance with the QCAT Act and the enabling Act. Section 19(b) permits the tribunal to perform the functions conferred on the tribunal by the QCAT Act or the enabling Act. Section 19(c) confers on the tribunal all the functions of the decision maker for the reviewable decision being reviewed. Without express provision therefore, the tribunal can do no more than could be done by the original decision maker. And there is no such express provision which applies to this particular case.
[58] It follows that the tribunal is unable on this review to make a decision which the QBCC itself would be unable to make.
[59] In the circumstances, the decision of the QBCC in this matter is confirmed.
Cronin
Queensland Building and Construction Commission [2019] QCAT 14
(2014) 253 CLR 531