JM Kelly (Project Builders) Pty Ltd v Queensland Building Services Authority
[2011] QCAT 463
•12 September 2011
| CITATION: | JM Kelly (Project Builders) Pty Ltd and Anor v Queensland Building Services Authority [2011] QCAT 463 |
| PARTIES: | JM Kelly (Project Builders) Pty Ltd Group Kildey Pty Ltd |
| v | |
| Queensland Building Services Authority |
| APPLICATION NUMBER: | GAR007-11 / GAR008-11 / GAR175-11 / GAR183-11 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 9 September 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Peta Stilgoe, Member |
| DELIVERED ON: | 12 September 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. The proceedings will remain as separate proceedings but be heard and decided together. 2. The proceedings will be heard concurrently and the evidence in one proceeding will be evidence in each of the other proceedings. 3. The application to stay the tribunal proceedings pending a decision in the Supreme Court action is dismissed. 4. The proceedings are listed for a directions hearing at a time and date to be advised. |
| CATCHWORDS: | DIRECTION TO RECTIFY – where dispute between project manager and developer about cause of defective work – where project manager claims underpayment from developer PROCEDURE – where proceedings between project manager and developer in Supreme Court – whether tribunal proceedings should be adjourned or stayed pending decision of Supreme Court – whether fair to require tribunal proceedings to continue – balance between tribunal’s objectives of quick and fair proceedings – whether lack of pleadings in tribunal relevant – issue estoppel Queensland Civil and Administrative Tribunal Act 2009, ss 54, 55, 62(1) Queensland Building Service Authority v Meredith [2010] QCATA 50 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | JM Kelly (Project Builders) Pty Ltd – T P Sullivan SC instructed by Cooper Grace Ward |
| Group Kildey Pty Ltd – M Dillman, solicitor of Macpherson & Kelley Lawyers | |
| RESPONDENT: | Queensland Building Services Authority – B Turnbull, solicitor of HWL Ebsworth Lawyers |
REASONS FOR DECISION
Group Kildey Pty Ltd is the developer of a block of units at Woody Point. The units had been started by another builder, which went into liquidation. Group Kildey engaged JM Kelly (Project Builders) Pty Ltd as project manager to finish the units. The project is the subject of a protracted and complex dispute in the Supreme Court filed by JM Kelly in 2005.
The Authority has issued four directions to rectify in relation to water ingress to a unit complex at Woody Point; two each to JM Kelly and Group Kildey. They have both applied for a review of the Authority’s decisions to issue the directions. The hearing before me concerned three preliminary issues:
a)Whether the four proceedings in the tribunal should be consolidated under s 54 of the Queensland Civil and Administrative Tribunal Act 2009, heard together under s 55 of the QCAT Act or simply allowed to run their separate course.
b)Whether the proceedings should be transferred to the Supreme Court; or
c)Whether the proceedings in this tribunal should be stayed pending resolution of the Supreme Court proceedings.
The parties have now agreed that I should not make an order that the proceedings be transferred to the Supreme Court.
The parties have also conceded (albeit with some reluctance from the Authority) that I should make an order under s 55 that the proceedings remain as separate proceedings but be heard and decided together. I agree that the proceedings involve related facts and circumstances and that some of the expert evidence will be common to all four proceedings. The commonality of the proceedings means that they should be heard at the same time. I acknowledge JM Kelly’s concerns about issue estoppel and agree that this is less likely to be a problem if the proceedings are heard under a s 55 regime rather than a s 54 regime.
The only decision I am required to make is whether the tribunal proceedings should be adjourned or stayed pending determination of the Supreme Court action. Counsel for JM Kelly argues that I should stay the tribunal proceedings; the Authority and Group Kildey want them to continue.
JM Kelly submissions
Section 72(2) of the Queensland Building Services Authority Act 1991 states that, when the Authority decides to issue a direction to rectify, it must take into consideration all of the circumstances it considers are reasonably relevant, including a consideration of the terms of the contract.
Section 72(14) of the QBSA Act states that the Authority is not required to give a direction if it is satisfied that it would be unfair. The legislation gives an example for s 72(14) that a direction may not issue because of the amount payable but unpaid under the building contract. JM Kelly says that the example in s 72(14) sits squarely with its position. The Supreme Court pleadings reveal that JM Kelly has a claim against Group Kildey for something between $385,000 and $1,094,352.
Group Kildey and JM Kelly executed a deed of forbearance in April 2005, the contents of which are relevant to the consideration of whether it was fair to issue the direction to JM Kelly.
The Supreme Court proceedings have been on foot since 2005. Pleadings have closed and disclosure has been completed. The action is on Justice Atkinson’s supervised list and the only substantial procedural step remaining is the preparation of expert reports.
[10] There is a significant counterclaim by Group Kildey based on the Trade Practices Act 1974 (Cth).
[11] There is a dispute over who is responsible for the defective work. Although the windows were installed by JM Kelly, the walling system was designed by Group Kildey and some of it was installed by the previous builder.
[12] The tribunal must balance its obligation to act quickly against its obligation to act fairly.
[13] The Supreme Court proceedings have progressed further than the tribunal proceedings. The “normal” tribunal timeframes will not fit this dispute as Counsel for JM Kelly estimates that it will take at least 3 months to obtain the necessary expert reports.
[14] The absence of pleadings in the tribunal proceedings will make the hearing of this proceeding more difficult. The lack of pleadings ignores the complexity of the dispute and the parties are more likely to be uncontrolled in the evidence they present.
[15] If there was a determination of the amounts owing under the contract and/or deed of forbearance, this would reduce the issues and may result in a faster determination of the issues before the tribunal.
[16] Any decision of the tribunal may have issue estoppel implications in the Supreme Court proceedings.
[17] The defects were identified in 2006. The Authority was aware that Supreme Court proceedings were on foot and decided to wait until those proceedings were finalised before issuing a direction to rectify. The Authority only issued the directions to rectify when the time limit under s 72(8) of the QBSA Act – 6 years and 3 months – was about to expire. The tribunal cannot ignore the Authority’s reasoning in 2006 and now require a determination on the direction to rectify to proceed.
Group Kildey submissions
[18] Group Kildey’s primary concern is the rectification of the defects to render the building waterproof at the earliest possible time. It considers that the issue of rectification can be heard and determined more quickly in the tribunal.
[19] The public interest is not served by having the Supreme Court proceedings determined first. More particularly, the interests of the 27 owners and residents of the units require rectification of the defects.
[20] The lack of pleadings in the tribunal is not an obstacle because the issues are clearly identified by the parties.
[21] Inquiries of the Supreme Court list clerk indicate that, even if the action was listed for trial now, it would not be heard until the latter part of 2012.
[22] The Authority is a party in the tribunal proceedings but not the Supreme Court proceedings. Therefore, the Authority faces the prospect of being bound by a decision without being able to present evidence in that proceeding.
Authority submissions
[23] The direction to rectify cannot be considered in isolation. There has been numerous complaints about this building for a long time.
[24] Because the tribunal is exercising its review jurisdiction, it must consider the objects of the enabling Act as well as the objects of the QCAT Act. Section 3(a)(ii) of the QBSA Act states that an object of the Act is:
To achieve a reasonable balance between the interests of building contractors and consumers.
[25] Section 3(b) states that an object of the Act is to provide remedies for defective building work.
[26] The Authority’s decision in 2006 to wait for the determination of the Supreme Court proceedings was reasonable when, at that time, it appeared that the pleadings had closed. The Supreme Court proceedings have now been on the case flow review list for over two years and the matter hasn’t progressed. The Authority is entitled to review its decision to wait in light of those circumstances and it is antithetical to the objects of the QBSA Act for it to wait again (or longer) for the outcome of the Supreme Court proceedings.
[27] The issues for the tribunal have been identified by the TA Taylor report. The defects are not minor defects.
[28] Because it is exercising review jurisdiction, the tribunal’s consideration of “fairness” cannot be determined with only the parties to the Supreme Court proceedings in mind. The tribunal’s consideration must include the point of the directions to rectify.
[29] Issue estoppel is not a relevant consideration because there is no tribunal proceeding between Group Kildey and JM Kelly. One of the essential elements of issue estoppel – between the same parties – is missing.
[30] Even if issue estoppel was relevant, it cannot “trump” the public policy considerations identified in the QBSA Act.
Discussion
[31] It is clear that, in exercising its review jurisdiction, the tribunal must have regard to the objects of both the QCAT Act and the enabling Act[1]. Therefore, my determination of a procedure that is both fair and quick must be informed by the objects of the QBSA Act.
[1] Queensland Building Service Authority v Meredith [2010] QCATA 50 at [3].
[32] The QBSA Act requires a balance between the interests of building contractors and consumers. JM Kelly’s submissions to the tribunal do not address the plight of the owners and residents, who have suffered from water ingress since 2006. Another object of the QBSA Act is to provide remedies for defective building work. So far, the owners and residents have been denied that remedy. In the absence of any other argument, the objects of the QBSA Act would require me to ensure that the tribunal proceedings continued.
[33] As JM Kelly has pointed out, the tribunal must consider all of the circumstances when deciding whether the directions to rectify should stand. Those circumstances include: the terms of the contract; the effect of the deed of forbearance; that JM Kelly claims that it has been underpaid by at least $385,000 and, perhaps, as much as $1M; and that JM Kelly says it is not responsible for the defects.
[34] If that consideration was undertaken with reference to JM Kelly and Group Kildey only, it is a complex task that would require expert evidence and consideration of Trade Practices Act 1974 issues for which it has no jurisdiction. It seems to me, however, that the task before the tribunal is somewhat simpler.
[35] The example in section 72(14) is most commonly invoked when the person affected by the defects is the same person who has not paid the full contract price; that is, in situations where a homeowner has not paid the final payment due under a building contract but is asking the builder to rectify defects. In that context the concept of “fairness” fits well into the objects of the Act in balancing the interests of the builder and the homeowner.
[36] In this case, the contest about money is between a builder and developer. They are both commercial entities which must accept the risks inherent in building and development. There is no suggestion that either party is suffering significant financial hardship because of the delay in squaring the accounts and neither of the entities has to suffer the day-to-day effects of the defective work.
[37] Unlike disputes between homeowner and builder, the dispute between Group Kildey and JM Kelly is “just about money”. In that context, the cost of complying with the direction to rectify is just another amount to be taken into account when determining the claims in the Supreme Court. As Counsel for JM Kelly has pointed out, the Supreme Court pleadings already include a claim for the cost of rectifying the defects that are the subject of the tribunal proceedings.
[38] The Authority’s practice is to issue directions to rectify that identify the problem but do not identify the cause or a method of rectification. The Authority leaves that to the discretion of the builder. Builders often argue that the cause of the defect is within a subcontractor’s work. Again, that is of no concern to the Authority because its primary concern is to have the defect rectified. It is of no consequence to the Authority that the builder passes that obligation, or the cost of the obligation, on to the relevant subcontractor. Similarly, the tribunal need not determine in this case which entity was the cause of the defective work.
[39] I do not agree that a Supreme Court determination of the amounts owing under the contract will facilitate the resolution of this dispute. The Supreme Court may decide which of Group Kildey and JM Kelly is responsible for the defect but it will not give consideration to what is “fair” under the QBSA Act.
[40] The argument that the Supreme Court proceedings are further advanced than the tribunal proceedings does not impress me. The Supreme Court file summary shows that there was no real progress between 2007 and 2009. It has been on Justice Atkinson’s case flow review list for almost two years. Counsel for JM Kelly has rightly conceded that there will be further amendments of the pleadings and the provision of expert reports will take some time. The proceedings in the Supreme Court will not be listed for trial until the latter half of 2012. The parties are not confident that they will have a decision before the end of 2012. If there is an appeal from the Supreme Court, there is the prospect that the owners and residents of the units will be denied the benefit of rectification work until some time in 2013. That is unsatisfactory.
[41] The parties have underestimated the tribunal’s power to give directions under s 62(1) of the QCAT Act. As a matter of policy, the tribunal has decided that it will control its proceedings, rather than allow parties to set their own pace and direction[2]. If pleadings are necessary, the tribunal can direct that they be exchanged. The tribunal can direct that the parties exchange a list of questions for the experts’ determination; the tribunal can settle the questions for the experts; and the tribunal can direct the experts attend a conclave chaired by a member of the tribunal in compliance with Practice Direction 4 of 2009. All of these steps are directed towards a cost effective, efficient and speedy determination of the dispute.
[2]See, for example, Abdullahi v Taxi Council of Queensland Incorporated & Anor [2011] QCAT 374 at [27].
[42] The Authority is not bound by its decision in 2006 to wait until the Supreme Court proceedings were finalised before issuing a direction to rectify. It could not have foreseen that, 5 years later, those proceedings would be no closer to finalisation. The Authority was entitled to issue directions to rectify and the looming deadline under s 72(8) meant that it was reasonable to do so. If the Supreme Court proceedings had been listed for trial, then it may have been reasonable to wait a further period for that determination. It is not reasonable to ask the Authority, owners and residents to wait another 12 months.
[43] Much of the argument before me concerned whether issue estoppel was relevant and/or whether the possibility of issue estoppel should operate to persuade me that these proceedings should be stayed pending the Supreme Court determination.
[44] The parties agree that, by making an order under s 55 of the QCAT Act rather than s 54, the risk of issue estoppel is reduced. Ultimately, it will be a question for the Supreme Court. I do not propose to second guess what that decision will be but I suspect that the prospect of issue estoppel arising from the tribunal decision will be of little consequence to the Court:
a)Counsel for JM Kelly says that the tribunal’s reasons for decision must deal with questions of interpretation of contract documents, causation and money due or not due under the contract. As I have already identified, it is entirely possible that the tribunal will acknowledge the arguments between builder and developer but decline to decide them.
b)These proceedings do involve different parties. The tribunal proceedings are not adversarial proceedings between JM Kelly and Group Kildey in the same way as the Supreme Court action. The tribunal is not required to determine the respective rights and obligations between Group Kildey and JM Kelly. Its function is to make the correct and preferable decision, standing in the shoes of the Authority.
[45] The tribunal proceedings should not be stayed pending the finalisation of the Supreme Court action. The tribunal proceedings will be listed for a directions hearing to determine what steps are necessary to bring them on for hearing.
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