Boyle v Queensland Building Services Authority - [2010] QCAT 665

CITATION:	Boyle v Queensland Building Services Authority [2010] QCAT 665
PARTIES:	MR & MRS HOWARD & INDRA BOYLE
V
QUEENSLAND BUILDING SERVICES AUTHORITY
APPLICATION NUMBER:	GAR022-09
MATTER TYPE:	Building Matter
HEARING DATE:	Decision on the papers
HEARD AT:	Brisbane
DECISION OF:	Mr Paul Favell
DELIVERED ON:	24 December 2010
DELIVERED AT:	Brisbane
ORDERS MADE:	The Tribunal orders that the claim for costs is dismissed.
CATCHWORDS:	Costs – Building matter – Whether in the interests of justice to award costs in favour of the successful party Queensland Civil and Administrative Tribunal Act 2009 ss 100, 102 Tamawood Ltd & Anor v Paans [2005] QCA 111 considered Ralacom Pty Ltd v Body Corporate for Paradise Island CTS 17653 (No 2) [2010] QCAT 412 applied
APPEARANCES AND REPRESENTATION:	Decision on the papers

REASONS FOR DECISION

Introduction and Claims

The Applicants sought a review of decisions made by the Queensland Building Services Authority (“the QBSA”) on 4 November 2009 and 16 June 2010 respectively to:

(i)disallow, in part, the Applicants' claim for compensation for incomplete works under the insurance scheme ("the decision about the non-completion claim"); and
(ii)disallow a further claim for compensation made by the Applicants regarding accommodation and the construction of retaining walls ("the decision about the accommodation claim and the retaining wall claim").

By an order made by the tribunal with the consent of the parties on 1 November 2010, the substantive application was resolved in the following terms:

(i)The decision about the non-completion claim is set aside and the matter is returned to the QBSA to approve a claim for incomplete works in the amount of $158,982.60; and
(ii)The decision about the accommodation claim and the retaining wall claim is confirmed.

The Applicants have applied for a costs order in their favour on an indemnity basis in the amount of $21,452.74.
The QBSA seeks an order that each party bear their own costs or, in the alternative, there is no order as to costs.

Material Facts

The Applicants made a claim for compensation under the Queensland Home Warranty Scheme administered by the QBSA.
The Applicants’ claims under the insurance scheme can be characterised as follows:

(i)A claim for incomplete residential construction work;
(ii)A claim for alternative accommodation, removal or storage costs; and
(iii)A claim for the construction of retaining walls.

In respect of the non-completion claim, the Applicants originally sought compensation in the amount of $186,022.60 under the insurance scheme. The day before the hearing, the Applicants altered their position regarding how their claim should be quantified or calculated. The Applicants submitted as follows:

“As the BSA’s maximum liability is $200,000 as specified in part 4 of the Policy, the Applicants claim this threshold limit, plus costs”.

In respect of the accommodation claim, the Applicants originally sought compensation in the amount of $42,780.00. The day before the hearing the Applicants submitted that the maximum amount payable by the Authority in respect of the accommodation claim was the amount of $5,000 under the insurance policy. During the hearing the Applicants consented to an order confirming the QBSA’s decision to disallow the accommodation claim.
In respect of the retaining wall claim, the Applicant sought compensation in the amount of $158,174.90 under the insurance scheme. During the hearing the Applicants consented to an order confirming the QBSA’s decision to disallow the retaining wall claim.
The total amount originally claimed by the Applicants under the insurance scheme was the amount of $386,977.50 in respect of the three heads of claim.

Applicants’ Submissions

The Applicants say that they originally attempted to seek a review of the QBSA’s decision of 4 November 2009 to offer $54,364.85 as compensation for the non-completion claim by attending the QBSA office, however, their attempts were unsuccessful.
The Applicants say that their solicitors attempted to enter into discussions with the Respondent on 2 December 2009 regarding the non-completion claim decision and the Respondent directed the Applicants to QCAT if they wanted to challenge the decision.
Accordingly, the Applicants claim that they were compelled to institute proceedings in QCAT in order to recover monies due and owing for the non-completion claim under the insurance policy.
On 13 September 2010 the Respondents sent a letter to the Applicants revising the amount of compensation offered for the non-completion claim which increased a previous offer to $96,982.60. The Respondents continued to rely on an underpricing clause in the revised compensation offer. The Respondents indicated that they would continue to rely on such clause until evidence was provided by the Applicants that the clause should not apply.
The Applicants disagreed with the application of the underpricing clause.
The Applicants claim that the Respondent in making its submissions applied clauses to the calculation of the non-completion claim that were not used in the original decision of 4 November 2009. The Applicants make reference to the Respondent’s attempt to apply an underpricing clause in the original decision of 4 November 2009 which during the hearing they conceded did not apply in the circumstances.
On 29 October 2010 the Respondents conceded that the correct compensation payable for the non-completion claim under the insurance scheme was $158,982.60.
The Applicants claim that if the above clauses had been correctly applied by the Respondent in the first instance in calculating the compensation payable under the insurance scheme then they would have had no need to institute proceedings with QCAT and therefore would not have incurred legal and associated fees.
Further, the Applicants claim that their solicitor was willing and under instructions to negotiate the matter at a compulsory mediation, however, the Respondent’s solicitors indicated that they had no authority or instruction to negotiate the matter.
It is therefore the Applicants’ position that the matter could have been settled significantly earlier had the Respondent entered into negotiations with the Applicants in the early stage of proceedings.
The Applicants therefore seek that the Respondent pays their costs in the amount of $21,452.72.

Respondent’s Submissions

The Respondent submits that a tribunal’s power to order costs is entirely a creation of statute. Accordingly, the Respondent seeks to rely upon s 100 of the Queensland Civil and Administrative Tribunal Act 2009 which states:

“Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding.” (emphasis added)

The Respondent submits that according to section 102(1) of the QCAT Act, the tribunal may make a costs order if the Tribunal considers “the interests of justice require it” to make the order. The Respondent claims that the phrase, in line with Herron v The Attorney General for NSW [1987[ NSLW 601, is to be construed according to its ordinary and plain meaning, conferring a broad discretionary power on the decision maker.
The Respondent submits that the question to be asked is whether there are circumstances relevant to the discretion inherent in the phrase “the interests of justice” have arisen; and, whether or not those circumstances are so compelling to overcome the strong contra-indication against costs orders in section 100 of the QCAT Act.
The Respondent submits that the Applicants bear the onus of proof given it is their application for costs.
The Respondent says that the Applicants have not identified any legislative basis whatsoever to support their application for costs.
The Respondent infers that the Applicants have based their application for costs on the fact that one of the orders made by the Tribunal had the effect of increasing the Applicants’ entitlement under the insurance scheme for the incomplete works from $54,364.85 to $158,982.60.
The Respondent submits that costs do not follow the event in this jurisdiction but the Respondent claims that even if costs were to follow the event, the final outcome of the hearing cannot be said to be particularly favourable to either party for the following reasons:

(i)In respect of the non-completion claim, the Applicants originally claimed compensation in the amount of the QBSA’s “maximum liability” under the insurance policy (the sum of $200,000) and received an approval in the amount of $158,982.60.
(ii)The Applicants claimed compensation in respect of the accommodation claim and the retaining wall claim which were claims the Applicants raised and pursued after the commencement of these proceedings up until the day before the hearing and then effectively abandoned, ignored or failed to prosecute at the actual hearing. During the hearing the Applicants consented to an order confirming the QBSA’s decision in regards to the accommodation claim and the retaining wall claim.
(iii)The total amount of the Applicants’ claims in respect of all three heads of claim originally pursued by the Applicants was the amount of $386,977.50. The actual amount approved in favour of the Applicants under the insurance scheme for the non-completion claim is less than half of that amount.

The Respondent submits that the following factors are relevant in considering whether to award costs in line with s102(3) of the QCAT Act:

(i)The Applicants failed to attend the hearing and no reasonable excuse was offered for their failure to attend;
(ii)The proceedings were not overly complex;
(iii)The strength of each party’s case is irrelevant as the original hearing ended by the parties consenting to orders that dispensed with the substantive application;
(iv)The Applicants were afforded natural justice by the QBSA;
(v)There is no evidence as to the financial circumstances of the parties to the proceedings;
(vi)The QBSA made appropriate concessions and offers during the proceedings;
(vii)The Applicants pursued the retaining wall claim and the accommodation claim despite the QBSA inviting the Applicants to discontinue those claims as they were without merit only to later consent to orders confirming the QBSA’s decision to disallow those claims;
(viii)No witnesses were called to give evidence or were required for cross-examination; and
(ix)The Applicants only delivered the letter of Paul Williams of Cre8tive Consultancy Pty Ltd of 28 October 2010 the day before the hearing.

The Respondent therefore submits that there should be no order for costs.
In the event that the Tribunal exercises their discretion to award the Applicants their costs, the Respondent submits that the circumstances of the case do not warrant an order for costs on an indemnity basis as the Applicants have not demonstrated any special or unusual features about the case to justify such an award.
The Respondent submits that costs should be awarded on a standard basis from 27 May 2010, which is the date the order was made permitting the parties to have legal representation in these proceedings.
The Respondent submits that the District Court scale of costs as the amount approved by the QBSA under the insurance scheme in respect of the non-completion claim falls within the monetary jurisdiction for civil claims in the District Court.

Legislation

Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 (“QCAT Act”) relevantly provides:

100 Each party usually bears own costs
Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding.

Section 102 of the QCAT Act relevantly provides:

102 Costs against party in interests of justice
(1) The tribunal may make an order requiring a party to a proceeding to pay all or a stated part of the costs of another party to the proceeding if the tribunal considers the interests of justice require it to make the order.
(2) However, the only costs the tribunal may award under subsection (1) against a party to a proceeding for a minor civil dispute are the costs stated in the rules as costs that may be awarded for minor civil disputes under this section.
(3) In deciding whether to award costs under subsection (1) or (2) the tribunal may have regard to the following—
(a) whether a party to a proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding, including as mentioned in section 48(1)(a) to (g);
(b) the nature and complexity of the dispute the subject of the proceeding;
(c) the relative strengths of the claims made by each of the parties to the proceeding;
(d) for a proceeding for the review of a reviewable decision—
(i) whether the applicant was afforded natural justice by the decision-maker for the decision; and
(ii) whether the applicant genuinely attempted to enable and help the decision-maker to make the decision on the merits;
(e) the financial circumstances of the parties to the proceeding;
(f) anything else the tribunal considers relevant.

Discussion

Clearly the intended purpose of the cost provisions of the QCAT Act is that parties must bear their own costs unless the interests of justice require otherwise. Factors the Tribunal may have regard to in making the decision whether the interests of justice require a costs order are set out in section 102(3) of the Queensland Civil and Administrative Tribunal Act 2009.
The essence of the applicant’s submissions as to why costs should be ordered are:

(i)They originally attempted to seek a review of the QBSA’s decision but were unsuccessful;
(ii)When the solicitors for the applicants attempted to enter into discussions regarding the non-completion claim decision, they were directed to QCAT. Essentially that seems to be a claim that natural justice was not afforded;
(iii)The respondent’s unreasonably relied on an underpricing clause which was not used in the original decision and which was later conceded;
(iv)If the QBSA had applied the correct interpretation of the underpricing clause an action would not be required;
(v)The respondent did not participate in a compulsory mediation reasonably in that they had no authority or instruction to negotiate.

The applicants did not in their written submissions seek to deal with all of the factors in section 102(3) of the Act. The submissions made were essentially by way of assertions rather than relying on evidence as to why all of those assertions applied.
The relative strengths of each party’s case may be a persuasive factor in determining the interests of justice however in my view there is nothing raised which leads to a conclusion that one side’s case was stronger than the other.
As has been recognised, there is no common law jurisdiction in Tribunals to award costs. The power is entirely a creation of statute.[1]

[1] Knight v FP Special Assets Ltd (1992) 174 CLR 178, 193

As Judge Kingham Deputy President of QCAT in Ascot v Nursing and Midwifery Board of Australia [2010] QCAT 364 said “The public policy intent of the provisions in the QCAT Act is plain. The tribunal was established as a no costs jurisdiction. That may be departed from where the interests of justice require. The considerations identified in section 102(3) are not grounds for awarding costs. They are factors that may be taken into account in determining whether, in a particular case, the interests of justice require the Tribunal to make a costs order.”
A consideration is whether a party has acted in a way that unnecessarily disadvantaged another party. The Applicants seem to assert that that has occurred because of the conduct of the QBSA in refusing to reconsider their decision requiring the applicant to make an application to QCAT, not being in a position to properly participate in ordered mediations and relying upon an unarguable underpricing clause. The latter raises the question of a consideration of the relative strengths of the claims made by the parties.
In Ralacom Pty Ltd v Body Corporate for Paradise Island CTS 17653 (No 2) [2010] QCAT 412 the President Justice Wilson said “The phrase ‘in the interests of justice’ is not defined in the Act but is to be construed according to its ordinary and plain meaning, which obviously confers a broad discretionary power on the decision maker.”
As here the Respondent in Ralacom Pty Ltd v Body Corporate for Paradise Island relied on the decision of the Court of Appeal in Tamawood Ltd & Anor v Paans [2005] QCA 111 a case decided that under the cost provisions of the now repealed Commercial and Consumer Tribunal Act 2003 (CCT Act).
Commenting on that Act the President Justice Wilson said in Ralacom Pty Ltd v Body Corporate for Paradise Island “although those provisions are not analogous to the equivalent provisions under the QCAT Act, the principals found in Tamawood provide guidance about the circumstances in which it may be in the interests of justice for this Tribunal to award costs against parties. His Honour considered the wording of the CCT cost provisions and said “the similar QCAT Act provision to section 70 (of the CCT Act) is, it might be said, in terms that more plainly indicate that the legislature has turned its face against awards of costs in this Tribunal: section 100 says that “other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding”.

In considering sections 70 and 71 Keane JA (as his Honour then was) referred however to two matters relevant here. His honour held that the CCT provisions negated the traditional proposition that costs should prima facie follow the event (unless of course that the Tribunal considers that another order is more appropriate) and that the nature and extent of the power to award costs could only be discerned by close consideration of the terms of the statute which created and prescribed the occasions and conditions for its exercise. Sections 100 and 102 of the QCAT Act attract the operation of the same principles.
Keane JA was of the view that where the complexity of the matter justified legal representation it would not be in the interests of justice to bar the successful party from recovering costs that were reasonably necessary to achieve a satisfactory outcome.
That conclusion must, here, be considered in the light of the difference between section 70 of the CCT Act and section 100 of the QCAT Act. Section 70 speaks of a “main purpose”, but section 100 mandates that parties shall bear their own costs. Section 70 contains, within itself, a reference to the condition or circumstance in which the main purpose may be subsumed to the interests of justice; section 100 has no such proviso, although it appears later, in section 102(1).
Under that subsection QCAT has a discretion to make a costs order “…if the Tribunal considers the interests of justice require it…”. Section 102(3) says that, in deciding whether to award costs, the Tribunal may have regard to matters not dissimilar to those set out in section 71 of the CCT Act including, in particular for present purposes, the nature and complexity of the dispute and the relative strengths of each party’s claims.
Under the QCAT Act the question that would 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” point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in section 100.”

Although the Applicant here does not specifically ask for indemnity costs, they ask for an order that the Respondent pay the Applicant’s costs in the amount of $21,452.72 being the addition of the amounts in the actual accounts rendered. In effect they are seeking costs on an indemnity basis and in full.

In Ralacom Pty Ltd v Body Corporate for Paradise Island the President Justice Wilson set out some of the law concerning the awarding of costs on an indemnity basis when he said: “the watershed case for awarding costs on an indemnity basis is the judgment in Colgate-Palmolive Co v Cussons Pty Ltd[2] following a comprehensive review of the authorities, Sheppard J sets out a number of factors at 257 which may warrant the exercise of discretion, including:

(i)The fact that proceedings were commenced or continued in lawful disregard of known facts;
(ii)The making of allegations which ought never to have been made;
(iii)The undue prolongation of a case by groundless contentions;
(iv)Evidence of particular misconduct that causes loss of time to the court and to other parties;
(v)Imprudent reversal of an offer to compromise.
[2] (1993) 118 ALR 248

These propositions have been cited in recent cases.
Chesterman J (as his Honour then was) in Todrell Pty Ltd v Finch (No 2) [2008] 2 QDR 95 at 96 [4] stated that “something irresponsible about the conduct of the losing party which exposed its opponent to costs which should, in fairness, be ordered on the indemnity basis”. His Honour was of the view that “irresponsible” conduct includes commencing proceedings which cannot succeed because of a known legal impediment.
McMurdo J in Thiess Pty Ltd v FLSMIDTH Minerals Pty Ltd (No 2) [2010] QSC 120 at [4] remarked that whether the criterion is “unreasonableness” or “irresponsibility”, there would need to be something about the facts and circumstances of the case, beyond the lack of merit evidenced in the outcome, that will justify an order of costs on an indemnity basis.
The circumstances of the plaintiff’s case in Fick v Groves (No 2) [2010] QSC 182 bear resemblance to those here. Applegarth J, in awarding indemnity costs against the plaintiffs, found that they had persisted with a practically hopeless case that included claims which they knew were contrary to the facts; that they had continued with the proceedings even after receiving evidence that overwhelmingly contradicted their case; and that the persistence in conducting the action generated unnecessary (and substantial) costs for the respondent in resisting the claim. He awarded costs against the plaintiffs assessed on an indemnity basis from the point which the plaintiffs became aware that they were persisting in a claim that lacked a proper foundation.”

The Applicants had made as part of their claim an accommodation claim and a retaining wall claim, the non-applicability of an underpricing clause, the payment of legal fees and the payment of interest.
In a letter dated 13^th September 2010 which is annexure HIB-16 to the submissions on costs by the Applicant the building services authority addressed each of those items. The accommodation claim sought by the applicants was disputed by the authority and it maintained that the applicants were not entitled to compensation with respect to the accommodation claim under the insurance scheme and explained its reasons. However it also indicated that if there was an entitlement to the accommodation claim then the accommodation claim was capped in the amount of $5,000 under the insurance policy conditions and accordingly the applicants were not entitled to a sum of $42,780 which was claimed in the material.
The retaining wall claim was also addressed by the authority and it maintained that a claim for the retaining wall was not in respect of a loss suffered by the insurance in the event of the contractor failing to complete the contract for residential construction work and not a claim for defective construction or subsidence which were the other heads of the claim available under the insurance policy conditions. The authority pointed out that the definitions of “residential construction work”, “primary building work” and “associated work” under the Queensland Building Services Authority Act 1991 and the Queensland Building Services Authority Regulations 2003 do not apply to the construction of the retaining wall because it is not “residential construction work”.
So far as the underpricing clause is concerned the Authority indicated that it would be prepared to reconsider its position in respect of the application of the underpricing clause if the applicants could supply further information or evidence that the effect that the original contract sum (the amount of $296,897 inclusive of GST) represented a fair and reasonable cost of carrying out the works under the building contract at the time it was entered into by the Applicants. The Authority also dealt with the question of the payment of legal fees as part of the claim against the insurance scheme and gave reasons supported by authority.
As to the payment of interest the authority’s view was that the claim for interest was misconceived and that there was no power or ability under the insurance scheme, the insurance policy conditions or in the context of an administrative review proceeding for the Tribunal to award interest. They supported that view with authority.
At the conclusion of the letter the authority made an offer to pay the applicants a sum of $96,982.60 in respect of the non-completion claim.
Part of the submission made by the applicant is in effect that a party to the proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding. The contention in effect is that the respondent has disadvantaged the applicants by not being willing to mediate and/or raising issues which were either unarguable or are not correct.
One of those issues is the applicability of underpricing clauses in the insurance policy conditions. Those clauses are clause 1.6(a) and clause 1.6(b).
Clause 1.6(a) is as follows “Where in the opinion of BSA, the value of the contract of works to be undertaken clearly exceeds the price to be paid, BSA will reduce the amount payable under this policy by the amount of that excess”.
Clause 1.6(b) is as follows “Where in the opinion of BSA, the insured pays to or on behalf of the contractor any moneys for the contract of works before they become due (“pre-payment”), BSA will reduce the amount payable under this policy by the value of that pre-payment (the value of that pre-payment is the value of BSA’s assessment of the value of the incomplete work in the stage of the contract which the pre-payment was made)” (“pre-payment clause”).
In the submissions on behalf of the authority filed before final orders were made, the authority was relying on an authority building inspector who originally inspected the site on 27 April 2009 who was to give evidence that a statement was made during his inspection to the effect that the building contract had been underpriced or undervalued to the value of $62,000. Accordingly the authority reasoned that any quantum of the non-completion claim needed to be reduced by that sum because of the underpricing clause. In my view that issue had been alive for some time and the basis on which the authority was relying on the clauses was clear. In my view that stance was not unreasonable.
In submissions lodged with the Tribunal the day before final orders were made there was attached a letter from Paul Williams from Cre8tive Consultancy Pty Ltd which was said to indicate that the contract was in fact not underpriced but priced at an amount at which the builder was realistically achievable by the builder due to the nature of the design and the builder’s connections in the industry. The respondents say that that letter was not provided to them previously and the provision of it made a difference to their position on the underpricing clauses.
After reviewing the material annexed to the submissions on costs, I am not persuaded that any party (the respondent) to a proceeding acted in a way that unnecessarily disadvantaged the applicant to the proceeding.
A review of the submissions lodged with the tribunal prior to the date set for the commencement of the hearing demonstrates there was a level of complexity in the dispute and demonstrates that the issues between the parties were being worked through up until the date set for the hearing. The position of each party had changed over time culminating in the order made on 1^st November 2010. The claims made by both parties met with some success in the final outcome. The applicants did not receive what they had initially sought and the authority was ordered to pay more than was initially to be paid under the decision of the authority of 4^th November 2009 and subsequent offers. In my view the level of complexity in the matter was not such as to warrant a conclusion that it would be in the interests of justice to require a departure from each party bearing their own costs.
In my view the fact that the respondent was ordered to pay the applicant by consent the sum of $158,982.60 does not of itself lead to the conclusion that it would be in the interests of justice to require the respondent to pay costs. That is particularly so when overall the applicants were seeking the sum of $386,977.50.
I am not persuaded that in this case the interests of justice require the Tribunal to make any order requiring any party to pay any costs. I dismiss the claim for costs and make no order as to costs.

Paul Favell
Member
Queensland Civil and Administrative Tribunal

Date: 24 December 2010