QBCC v Ken McKay Homes Pty Ltd ACN 108 466 404

[2024] QMC 8

MAGISTRATES COURT OF QUEENSLAND

CITATION:	QBCC v Ken McKay Homes Pty Ltd ACN 108 466 404
[2024] QMC 8
PARTIES:	QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION
(Plaintiff/Applicant)
v
KEN MCKAY HOMES PTY LTD ACN 108 466 404
(First Defendant/Respondent)
AND
KENNETH THOMAS KCKAY
(Second Defendant/Respondent)
AND
STRUCTERRE WBA PTY LTD ACN 115 038 429
(First Third Party)
AND
INSURANCE AUSTRALIA LIMITED ABN 11 000 016 722
(Second Third Party)
FILE NO/S:	M665/23
DIVISION:	Civil
PROCEEDING:	Interlocutory Application filed 20 March 2024
ORIGINATING
COURT:	Brisbane
DELIVERED ON:	20 June 2024
DELIVERED AT:	Brisbane
HEARING DATE:	17 May 2024
MAGISTRATE:	Magistrate Hay
ORDER:
[1]  The plaintiff’s application for summary judgment is

dismissed.

[2]      The defendants are granted leave to file and serve a second, further amended defence.

COUNSEL:	N M Cooke of Counsel for the Plaintiff/Applicant
A J Tindall of Counsel for the Defendants/Respondents
SOLICITORS:	Gadens Lawyers for the Plaintiff/Applicant
Robinson Locke Litigation Lawyers for the Defendants/Respondents

1.   The plaintiff applies to strike out the Further Amended Defence, and for summary

judgment against the defendants.

2.   The defendants apply to file a Second Further Amended Defence and resist the

summary judgment application on the grounds that the claim approved by the QBCC

was not a “payment on a claim under the statutory insurance scheme” within the

meaning of phrase as expressed in s. 71 of the Queensland Building and Construction

Commission Act 1991 (‘QBCC Act’). The defendants argue that the payment was for

subsidence damage arising from design and inspection work performed by an engineer

engaged by the consumer, and that was specifically excluded under the relevant policy

wording.

3.    The plaintiff contends that the defendants are precluded from raising these issues as a

defence to the plaintiff’s claim due to the operation of s. 71(1) of the QBCC Act.

The Law

4. On an application for summary judgment under r. 292 of the UCPR the court must

consider two contentions. First, that there is no real prospect of successfully defending

the claim. Second, that there is no need for a trial.

5. Section 71(1) of the QBCC Act deems payments made by the plaintiff “on a claim

under the statutory insurance scheme” to be recoverable as a debt. Section 71(1) gives

the plaintiff the option of recovering the debt from the building contractor, “or any

other person through whose fault the claim arose.”

6.    The plaintiff submits that the defendants ought to have sought a merits review of the

payment decision in QCAT, the time for which has now passed.

7. It is settled law that a payment sought to be recovered as a debt by the QBCC that falls

outside the statutory insurance scheme, including the scope of a policy, will give rise

to a fact capable of being a defence to the debt claimed.

8.    In the 2015 unreported Court of Appeal decision in Samimi v QBCC Boddice J, with

whom McMurdo P and Morrison JA agreed, observed that the phrase “… ‘on a claim

under the insurance scheme’… connotes a requirement the payment made be within the

policy.” His Honour concluded that “…it does not follow that no factual error can be

the subject of a proper defence to a claim for recovery made pursuant to s. 71(1) of the

Act.” [1] Boddice J went on to review the case law and observed that a defence may arise

[1] Unreported [2015] QCA 106 at [30] – [31].

“where there is reason to question whether the payment was made in accordance with

the terms of the policy.”[2]

[2] Samini supra at [36] – [38].

9.    In the 2017 unreported Court of Appeal decision in in QBCC v Turcinovic,[3] the Court

of Appeal was invited to accept that questions as to the reasonableness of the amounts

paid by the QBCC was the type of factual issue that could constitute a defence to a debt

alleged under s. 71 of the QBCC Act. Relevantly, unlike Samimi, it was not an element

of the proposed defence that the amount paid exceeded the liability under the policy.

In rejecting the defendant/respondent’s assertion North J, with whom Morrison and

Philippides JJA agreed, again reviewed the cases, including Samimi. His Honour

observed that “there is limited scope for complaint about the legal quality of the

[3] Unreported, [2017] QCA 77 per North J at [27].

decision-making in making a payment or the decisions anterior to it.”

10. Philippides JA, agreeing with North J, observed “The respondent’s defence to the claim

… was no more than an attempt to seek a merits review of the payment made by the

respondent [sic] under the insurance scheme. Section 71(1)… should not be construed

so as to permit a backdoor judicial review or a merits review of the appellant’s

decisions to make a payment under the statutory insurance scheme set up under the Act.

Such an approach would be contrary to the statutory framework of the Act as

interpreted by the authorities referred to by North J, especially Samimi… and would

not be consonant with notions of finality of decision making.”

The Policy Wording

11. Section 68I of the QBCC Act governs when the policy comes into force, namely on the

earliest of the following three events:

a.	when the premium is paid by a licensed contractor;
b.	when the building contract is entered into by the consumer;
c.	when a licensed contractor commences work.

12. The plaintiff accepts that Edition 8 of the QBCC insurance policy applied when the

building contract was entered into. [4] However, it contends that the policy wording was

[4] Affidavit of Josh Phillips filed 18 July 2023 at [28]. See also Exhibit ‘JP-11”.

varied as a consequence of the 2014 legislative amendments. It argues that the removal

and replacement of part 5 of the QBCC Act broadened the scope of the cover provided

under the policy such that, regardless of who engaged the engineer, both the engineer’s

design and inspections together with any related subsidence damage were covered

under the policy.

13. The defendants contend that the Edition 8 version of the policy:

a. remains the relevant policy wording as a consequence of the saving provisions

found in the amending legislation of 2014 and 2017; and

b. Clause 4.1 of the policy:

i.    precludes cover of consequential loss; and

ii.    precludes payment for subsidence damage caused or contributed to by

an engineer engaged by the homeowner.

14. The effect of the Queensland Building and Construction Commission and Other

Legislation Amendment Act 2014 (Qld) (‘2014 Amending Act’) was, amongst other

things, to remove and replace part 5 of the QBCC Act so that the cover provided under

the statutory insurance scheme was to be no longer expressed in policy documents

issued by the board, but rather by way of subordinate legislation.

15. Section 59 of the 2014 Amending Act preserved the existing policies of insurance “…in

force on the terms stated in the board’s policies for that purpose”.[5]

[5] Sch 1 s 66 ins 2014 No. 57 s.59.

16. Section 65 of the QBCC Act, as amended, expressly preserves rights, privileges or

liabilities acquired, accrued or incurred either by the commission or a person under the

former part 5. Section 65(3)(e) of the QBCC Act, as amended, relevantly provides that

“ a proceeding to recover an amount under former section 71 may be started, continued

or completed and any defence available under that section may be relied upon.”

17. Section 66 of the QBCC Act, as amended, preserves policies of insurance in force under

the former part 5, and the former part 5 continues to apply for residential construction

work if the contract was entered into before the legislation’s replacement day.

18. There is nothing before the court on this application to suggest that optional additional

cover was obtained under s. 67Z of the 2014 Amending Act.

19. For these reasons, I accept the defendants’ contention that Edition 8 of the policy and

the former part 5, i.e. part 5 as it was worded prior to the 2014 Amending Act, continue

to apply to the contract for residential construction work that is the subject of this

proceeding.

20. In evidence on the summary judgment application are the QBCC Policy Conditions as

set out in Edition 8 (the ‘Policy’). [6]

[6] Affidavit of Josh Phillips filed 18 July 2023 at Exhibit ‘JP-11”.

21. Part 4 of the Policy provides for payment for defects in the ‘residential construction

work’ other than subsidence or settlement. Part 5 of the Policy provides for payment

for subsidence or settlement damage to the ‘residential construction work’ that is

‘primary building work’.

22. It is clear when read together, that the plaintiff board’s intention at the time was to cover

subsidence or settlement damage, albeit to limit the scope of subsidence or settlement

to ‘primary building work’ and to apply different time limits on the making of such

claims.[7]

[7] Compare Pt 4, cl 4.5 to Pt 5, cl 5.5 of the Policy.

23. The defendants, in their written submissions state: “… both the Plaintiff’s and the

Defendants’ material supports a view that the subsidence loss was caused or

contributed to by the engineer (not being engaged by the builder)[8] and accordingly that

the homeowner was not entitled to assistance under clause 7.4 of the Insurance

[8] Engaged by the homeowner or their agent as per Respondents’ written submissions filed by leave 17 May

Policy.”[9]

[9] Respondents’ written submissions filed by leave 17 May 2024 at [19].

24. Clause 7.4 of the Policy relevantly precludes the cover for claims arising from failures

by persons other than the building contractor’s agents with the notable exception of

engineers but only in so far as the loss relates to defective design,[10] or those other

matters set out in Parts 2 and 3 of the Policy (which are not relevant to this proceeding).

[10] Pt 7, cl 7.4(a)(ii) of the Policy

Decision

25. Having regard to the Court of Appeal’s decisions in Samimi and Turcinovic I find that

the defendants have raised a triable issue capable of giving rise to a defence to either

whole, or part, of the claim: namely, payments made outside the scope of the insurance

scheme due to the exclusion of an engineer’s inspection work under clause 7.4(c) of the

Policy.

26. On the information presently before the court, the material facts for determination at

trial in defence of the claim are:

a. whether the engineer was the homeowner’s agent or that of the building

contractor;

b. whether the payments were made for loss caused or contributed to by the

engineer having engaged in conduct excluded under Pt 7 clause 7.4(c) of the

Policy i.e. a failure to undertake reasonable inspections.

27. It is notable that any loss or damage arising from defective design by the engineer is

covered under Pt 7 clause 7.4 (a)(ii) of the Policy, and therefore any defence on this

ground should be struck out.

28. For these reasons I refuse the plaintiff’s application for summary judgment and grant

the defendants’ application to file a second, further amended defence limited to the

defence relating to the conduct as expressed under Pt 7 clause 7.4(c) of the Policy.

2024 at [18].