Donohoe v Queensland Building Services Authority
[2013] QCAT 19
•11 January 2013
| CITATION: | Donohoe and Anor v Queensland Building Services Authority [2013] QCAT 19 |
| PARTIES: | Terrence Donohoe Lorraine Donohoe (Applicant) |
| v | |
| Queensland Building Services Authority (Respondent) |
| APPLICATION NUMBER: | GAR10-12 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 26 October 2012 |
| HEARD AT: | Rockhampton |
| DECISION OF: | Gerald T Byrne, Member |
| DELIVERED ON: | 11 January 2013 |
| DELIVERED AT: | Rockhampton |
| ORDERS MADE: | 1. Application dismissed. 2. No order as to costs. |
| CATCHWORDS: | General administrative review – statutory insurance scheme – where soil test supplied by consumer or owner – where soil test classification is wrong Queensland Building Services Authority Act 1991, Part V PMB Australia Ltd v MMI General Insurance Ltd [2002] QCA 361 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Terrence and Lorraine Donohoe represented by Mr A M Arnold of Counsel instructed by Purcell and Associates, Emerald |
| RESPONDENT: | Queensland Building Services Authority represented by Mr E T Bird, Solicitor |
REASONS FOR DECISION
The broad scope of this matter is whether the Donohoes, who were insured for loss in the building of their house for defective building work by the Queensland Building Services Authority (QBSA) Act statutory insurance scheme (statutory insurance scheme), were excluded from claiming because someone other than the builder caused the loss to occur.
I find it was common ground that:
a) the Donohoes entered a contract[1] with Wills Constructions Pty Ltd, a builder registered with the QBSA, to build a residential property at 252 Donohoes Road, Emerald, Queensland;
b) prima facie the statutory insurance scheme covered the building work;
c) specifically, within the terms of the policy, in particular 3.1 (a) of the Insurance Policy Conditions Edition 7[2], there was subsidence and settlement damage to residential construction work, that was primary building work, that the QBSA would pay the cost to remedy, subject to other terms of the policy
d) the relevant subsidence and settlement was within the meaning set out in 3.1(b) of the Insurance Policy Conditions Edition 7;
e) the Donohoes caused a soil test to be done by R and R Construction Testing (R and R) with site classification done by Lindsey Consulting Pty Ltd. This was confirmed by Terrence Donohoe in cross- examination;
f) the site classification resulting from the test was Class S – Characteristic Surface Movement of less then 20ml;
g) the site classification was supplied to the architects (Paul Cruse Architect Pty Ltd t/a Tropical Architects) and/or the engineer (Qantec McWilliam Consulting Engineers) and used as the basis of the residential property design; and
h) the builder Wills Constructions Pty Ltd built the house to the above design.
[1]Attachment “SOR-2” to the Statement of Reasons for the Decision of Edward Goodsall Exhibit 3.
[2]Attachment “SOR-1” to the Statement of Reasons for the Decision of Edward Goodsall Exhibit 3.
Mary Holmes of Holmes McLeod Consulting Engineers Pty Ltd (Mary Holmes) gave evidence concerning her report commissioned by the QBSA. The report was in evidence as part of the QBSA documents[3]. She stated that the house design complied with Australian Standards, and though a somewhat unusual design, would have performed adequately, if built on an S Class site.
[3]Attachment “SOR-7” to the Statement of Reasons for the Decision of Edward Goodsall, Exhibit 3.
She gave further evidence that the relevant site was not an S Class site and that the measured movement in the slab was 68 mm, where an S Class site design is for a maximum of 20 mm of movement.
Mary Holmes also gave evidence as to the methodology of soil testing generally. Under cross-examination she indicated that while she would prefer to visit the site of a soil test, it is acceptable for an engineer to ‘do soil testing remotely’ provided the engineer was confident in the abilities of the onsite testing people.
In cross-examination Mary Holmes confirmed there was significant damage to the house in every room, but very little damage to the outside of the house.
Mary Holmes indicated in cross-examination that she would prefer to use 3 test holes for soil tests, but that one hole met the Australian Standards (it may be that only one hole was done in the soil test referred to above by R and R).
She gave further evidence that the soil tests she had done on behalf of the QBSA correlated with the slab movement that she measured to give a clear picture of a site more reactive than the original test, on which the design and building was based.
Also in cross-examination Mary Holmes readily conceded the importance of footings and that an error in them could be very serious. She also agreed that the engineer has great reliance on the soil classifier and must be confident in the test. She also indicated that if the soil test was certified by another engineer (which this one was) one would use it unless they had obvious concerns for some reason that would compel otherwise.
Mary Holmes conceded that with the type of house design, with non load bearing internal walls, that she would have to be very confident in the soil test. She indicated that it is a judgement call by the firm of engineers.
In re-examination she explained the different building techniques and why this particular technique is very sensitive to movement in the slab.
She also indicated that the Roadtest results, from the soil test that firm conducted, reached the same conclusion she reached; that it, is a reactive site and not an S Class site.
Based on the written report and oral evidence of Mary Holmes, whose findings on the soil test were supported by the Roadtest data, I find the original soil test to have, for whatever reason, resulted in an incorrect classification of the site.
Mr Goodsall of the QBSA gave evidence. Much of his cross-examination focussed on steps taken by the QBSA and delay that ultimately are not relevant to my decision.
The crux of this dispute turns of two aspects.
The first is an exclusion in the insurance policy for any loss that is caused by a party who does not, in practical terms, ‘belong’ to the contractor. The exclusion states:
5.4 Other Exclusions
The Insured is NOT ENTITLED to payment for loss where the loss is caused by or contributed to by:(a) the act, omission or inaction of any person other than the contractor or the contractor's agent, employee, subcontractor, supplier or invitee.
The parties were invited to provide further written submissions on this point. The Donohoes did so on 1 November 2012 and the QBSA on 9 November 2012. The QBSA also provided a supplementary case on 12 November 2012.
Counsel for the Donohoes submitted that the applicant's loss was caused by a number of entities including the builder, soil tester, the engineer and to be all encompassing, the local authority or building certifier who approved the building.[4] The submission goes on to say:
(f) Therefore, without some qualifying rider on the act, omission or inaction that can be relied upon for the purpose of exclusion, the exclusion would operate in all circumstances and the policy would be nugatory;
(g) This means, that, for the exclusion to be meaningful, there must be in the circumstances, some wrongful act, neglect or default on the part of another party to exclude indemnity. It is submitted the only way in which the exclusion can have meaning.
5.In short, in the present matter none was shown and as such the exclusion should not apply.
[4] Further submissions for and on Behalf of the Applicant paras 4 (f) (g) and 5.
I am not able to agree with this submission. The plain words of the exclusion quoted above are that the loss is caused by or contributed to by the act, omission or inaction of any person. If the drafter intended the words to be wrongful act, neglect or default then those words could have been inserted in the exclusion – they are not. At a practical level, it may well be that for a loss to occur there will be some form of wrongful act, neglect or default or similar needed to cause the loss. If everyone involved did their job properly, in theory, there should be no loss. However, it is not possible to consider the almost endless types of situations that may bring about a loss to see if this hypothesis is correct. I am not persuaded that it is appropriate to imply into of the exclusion limiting words, that there must be a wrongful act, neglect or default, given the very clear and broad nature of the words use by the draftsperson.
In the matter before me, I find that the loss was caused by an error in the soil test. It was caused by one person or contributed to by some persons. On the evidence, none of these persons were the contractor, nor were they its agent, employee, subcontractor, supplier or invitee. Consequently, the exclusion applies.
In this matter I have seen no evidence that the contractor, the council, any inspector or the designing engineer caused the loss. On the evidence, the loss came about as a result of the error in the soil test and nothing else.
At a practical level, in this case I cannot see how the policy would be nugatory based on the interpretation I am adopting, because the limiting factor is that the person other than the contractor must have caused or contributed to the loss.
How or why the soil test returned an incorrect result I can make no finding. However, there must have been some form of error made in the original soil test as it is clear that the classification of S Class was an error. This could be some form of neglect or default or even a wrongful act, or it may be just an error that falls short of these tests. However, on a plain reading of the words of the exclusion, it is not necessary for me to find in those terms as I am satisfied that the loss was caused by or contributed to by a person(s) who did not ‘belong’ to the contractor and the error must have come about within the broad words of the exclusion of act, omission or inaction.
The terms "caused by" and "contributed to by" are not defined in either the Insurance Policy Conditions or the QBSA Act, nor are they defined in the Acts Interpretation Act 1954.
In Lange v Queensland Building Services Authority[5] (Lange) the Full Court of the Supreme Court of Queensland cited with approval the comments of Kirby J in Insurance Commission (WA) v Container Handlers Pty Ltd[6], in relation to the interpretation of a policy of insurance enacted via a statutory instrument. In the passage referred to, Kirby J states that in construing the statutory insurance policy the proper interpretation is the one that upholds the purpose of the legislature in enacting that form of policy.
[5] [2011] QCA 58 at [53], Margaret Wilson AJA (McMurdo P and Ann Lyons J agreeing).
[6] (2004) 218 CLR 89 at [99].
It is clear law that the interpretation which will best achieve the purpose of the QBSA Act is to be preferred to any other[7].
[7] Lange, Margaret Wilson AJA [26].
The relevant objects of the QBSA Act are found in s 3:
(a) to regulate the building industry—
(ii) to achieve a reasonable balance between the interests of building contractors and consumers; and
(b) to provide remedies for defective building work.[8]
[8] QBSA Act, section 3.
The insurance scheme is under Part V of the QBSA Act and its purpose is consumer protection against defective building work. Consequently, I am bound to construe the Policy in the way which will best achieve that purpose[9].
[9] Lange, Margaret Wilson AJA at [30].
A further principle of interpretation that binds me in this matter is that where words have been used which have acquired a legal meaning it will be taken prima facie, that the legislature has intended to use them with that meaning unless a contrary intention clearly appears from the context[10].
[10]Ex rel Tooth and Co Ltd v Brewery Employees Union of New South Wales (1908) 6 CLR 469 at 531. Note the adoption this principal by White J concerning interpretation the QBSA Act in Riteway Constructions Pty Ltd v Baulderstone Hornibrook Pty Ltd [1998] QSC 167.
Consequently, the meaning of the words will be their plain meaning or their legal meaning, which in the circumstances is the meaning given to them by insurance law.
For the purposes of a policy of liability insurance caused by means ‘a direct or proximate cause’[11].
[11]PMB Australia Ltd v MMI General Insurance Ltd [2002] QCA 361 at [15]; Lasermax Engineering Pty Ltd v QBE Insurance (Australia) Ltd [2005] NSWCA 66; State Government Insurance Commission v Sinfein Pty Ltd (1996) 15 WAR 434.
What is proximate cause is a matter of applying common sense standards having regard to the wording used and read in the context of the policy as a whole in layman’s terms[12].
[12]See McColl JA in Lasermax Engineering at [109] citing Australian Casualty Co Limited v Federico (1986) 160 CLR 513 at 525.
The words contributed to have a wider meaning than caused by, but must still have, in my opinion, some causal connection. Without the words contributed to, where two or more parties caused the loss, it could be argued that exclusion would not apply. From a legislative perspective it would not make sense to have an exclusion apply for a loss where the contractor was not involved, that would cease to operate if two or more parties caused the loss, rather than one party.
The wording of the exclusion seems to me to be clear on its face. Having regard to the use of similar wording and interpretation in insurance law it is still clear. I can see no basis for implying the suggested words into the exclusion. There is no evidence before me that anyone other than those involved in the soil test are at ‘fault’ or caused the loss. This work was done for the Donohoes prior to the builder becoming involved and it seems to me this is exactly the type of situation the exclusion is designed to cover.
In further submissions the QBSA supplied a case of Juris Ace Pty Ltd v QBSA[13] (Juris). That case is in many ways similar to this matter and my findings in this matter is consistent with it. The exclusions under the policy are very similar.
[13] [2001] QTB 46 (29 March 2001).
In Juris, Member McVeigh found that by insisting the builder use the soil test, the Applicant had contributed to the loss. As indicated above, I find that the matter turns on the words caused by and I need not make any finding regarding contributed to. If I were wrong in this finding, I would also hold that the Donohoes contributed to the loss within the terms of the exclusion. I note the member in Juris states that his decision is consistent with the prior decision by Member White[14].
[14] Meek v QBSA (unreported, QTB, R004-98).
A second aspect raised by the Applicant involved Clause 5.4(b)(ii) in Insurance Policy Conditions Edition 7 which states:
5.4 Other Exclusions
The Insured is NOT ENTITLED to payment for loss where the loss is caused by or contributed to by:(b) defective design:
(ii)… unless the design was prepared by or on behalf of the contractor or by:
· An engineer;
· An architect; or
· A building designer.
There is no evidence before me that there is any defective design. The design is appropriate on the evidence of Mary Holmes for an S class site. The engineer’s design is based on an S class site, because the Donohoes supplied the soil test and the engineers used it. What was defective was the classification of the site, not the design.
There was cross-examination to suggest that there should have been more oversight, supervision or checking of the soil test before design work was done. I have no evidence before me about the relationship between the various parties involved in the soil test and design and little evidence of specifically how the process was actually done to make any finding in regard to these matters. Nothing came from cross-examination to establish that Qantec McWilliam Consulting Engineers was negligent or similar in the matter.
In the circumstances of this case I find the exclusion in Clause 5.4 of the insurance policy applies and I dismiss the application. I make no order as to costs.
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