Ramke Constructions Pty Ltd v Queensland Building Services Authority (No. 2)

[2013] QCAT 575

CITATION: Ramke Constructions Pty Ltd v Queensland Building Services Authority (No 2) [2013] QCAT 575

PARTIES:	Ramke Constructions Pty Ltd (Applicant/Appellant)
v
Queensland Building Services Authority (Respondent)

APPLICATION NUMBER: GAR126-12

MATTER TYPE: General administrative review matters

HEARING DATE: 16 September 2013

HEARD AT: Brisbane

DECISION OF: Michelle Howard, Member

DELIVERED ON: 12 November 2013

DELIVERED AT: Brisbane

ORDERS MADE:

1.    The decision of the Queensland Building Services Authority to issue a direction to rectify is set aside.

2.    A direction to rectify is not issued.

CATCHWORDS:

GENERAL ADMINISTRATIVE REVIEW- DIRECTION TO RECTIFY BUILDING WORK- where defect items – where contractual dispute about date of completion – where contractual dispute resulted in reduced price – where no compelling evidence about when the homeowners first noticed the defects – where complaint made by homeowners to QBSA outside of timeframes provided for in the Rectification of Building Work Policy – whether issuing a direction to rectify would be unfair

Queensland Building Services Authority Act 1991 s 72

APPEARANCES and REPRESENTATION (if any):

APPLICANT: Mr Simon Ramke, Director of Ramke Constructions Pty Ltd represented Ramke Constructions Pty Ltd

RESPONDENT: Mr Brendan Szima, in-house lawyer, Queensland Building Services Authority represented the Queensland Building Services Authority

REASONS FOR DECISION

1. Ramke Constructions Pty Ltd built a house at Sheep Camp Road, Mount Crosby for Mr and Mrs Blore (the homeowners). The contract schedule indicates that the contract was in the form of the Master Builders Residential Building Contract, Version RBS 01/91(v1).[1] The contract was dated 11 January 2010.  Unfortunately, a copy of the General Conditions to the contract were not provided to the Tribunal by either party.

   [1]        SOR, pages 121.

2. On 19 December 2011, the homeowners lodged a complaint about defects with the Queensland Building Services Authority (QBSA). They did not provide a statement or any other evidence to the Tribunal, although their complaint and documents they provided to the QBSA were before the Tribunal, and contained in the bundle of documents provided by the QBSA in compliance with the Queensland Civil and Administrative TribunalAct 2009 (QCAT Act).[2]

   [2]        See QCAT Act s 21.

3. Mr Arnold Fisher, a QBSA Building Inspector, subsequently inspected the property and prepared a lengthy report[3] in relation to the 68 items which were the subject of complaint.

   [3]        Exhibit 5.

4. A decision was made under the Queensland Building Services Authority Act 1991 (QBSA Act) to issue Direction to Rectify and/or Complete No. 37310 to Ramke Constructions, specifying 52 items to be rectified. Ramke Constructions has applied to the Tribunal for review of the decision.

5. Mr Fisher provided an updated inspection report[4] in which he opined that some items had been rectified since his initial report, namely items 1, 13, 19, 24 and 52. He reports that these have been rectified by the homeowners.

   [4]        Exhibit 6.

6. It is uncontroversial that Ramke Constructions did the building work under the contract which is now subject to the Direction to Rectify and that its representatives attended at the premises for several days for the purposes of rectification work after the Direction issued. Ramke Constructions reported problems with access.[5] Mr Ramke submits that that this work was done to endeavour to resolve the issues despite Ramke Constructions view that the Direction to Rectify was improperly issued.

   [5]        SOR, SOR 7 pages 226 -240.

7. The QBSA submits that the correct and preferable decision is to confirm the decision to issue the Direction to Rectify, save that the decision is amended so that it is dated the date of the Tribunal’s decision. Ramke Constructions submits that it should be set aside.

Adjournment Application

1. For completeness, I note that Mr Ramke e-mailed the Tribunal on 13 September 2013, effectively requesting an adjournment of the hearing for three weeks to allow Ramke Constructions time to respond to material received from the QBSA on 11 September. The material he referred to was the updated report of Mr Fisher which was filed on 30 August. The application for adjournment was refused. I have since delivered reasons for decision for the refusal.

2. At the commencement of the hearing, Ramke Constructions refreshed its adjournment application. Mr Ramke asserted that it was his intention to obtain a building inspection report for Ramke Constructions and because of the late provision of the QBSA’s report he had not had time to do so. QBSA submitted that it had served the document by post to the address nominated for Ramke Constructions on 30 August. Mr Ramke asserted that it should also have been e-mailed to him. It seems that Mr Ramke did not actually see it until 11 September.

3. Given the various directions made since the proceeding commenced in April 2012 for Ramke Constructions to file material it intended to rely upon, I consider it had ample opportunity to obtain a building inspection report if it intended to do so. The updated report of Mr Fisher did not affect the ability of Ramke Constructions to obtain its own report at a much earlier time if it intended to obtain a report in relation to the alleged defects. The updated report set out only Mr Fisher’s opinion that some items had now been rectified.

4. In any event, Ramke Constructions had known there was an updated report since a directions hearing on 22 August 2013, which was to be filed and served by 30 August. It had a responsibility to check its mail at its nominated address for service in a timely way. It appears it did not if Mr Ramke did not actually see the report it had been expecting until 11 September. For these various reasons, I determined that the hearing should proceed.

5. That said, at the hearing, I offered Mr Ramke the opportunity to supplement his brief written statement filed in the proceeding.

The Tribunal’s review jurisdiction

1. In its review jurisdiction, the Tribunal must decide the review in accordance with the QBSA Act and the QCAT Act.[6] For the review, the Tribunal has all the functions of the decision-maker for the reviewable decision.[7] The purpose of the review is to produce the correct and preferable decision, following a fresh hearing on the merits.[8] The decision must be the correct and preferable one based on the facts as found on the evidence and according to law. In effect, the Tribunal stands in the shoes of the decision-maker and makes the decision afresh.

   [6]QCAT Act s 19(a).

   [7]QCAT Act s 19(c).

   [8]QCAT Act s 20.

When can a direction to rectify issue?

1. Under section 72 of the QBSA Act, a person who carried out building work may be directed to rectify or complete building work.[9] All circumstances which are reasonably relevant, including the terms of the contract may be considered in deciding whether to give a direction.[10] Whether or not work is defective or incomplete is to be ascertained objectively.[11] Generally, a direction to rectify must be given within 6 years and 3 months of the building work having been completed or left in an incomplete state.[12] A direction may not be given if it would be unfair to give one.[13]

   [9]QBSA Act s 72(1).

   [10]QBSA Act s 72(2).

   [11]R v His Honour Judge Miller and Builder’s Registration Board ex parte Graham Evans and Co (Qld) Pty Ltd [1987] 2 Qd R 446, 458.

   [12]QBSA Act s 72(8).

   [13]QBSA Act s 72(14).

2. The QBSA’s ‘Rectification of Building Work’ Policy was gazetted. Therefore, it is a statutory instrument by operation of law.[14] Therefore, it must be applied in reaching the correct and preferable decision. It is a guideline policy which provides that a person who carries out category 1 (defined to include building work that adversely affects the structural performance or functional use of a building or allows water penetration into a building) or category 2 (defined to include faulty or unsatisfactory work which does not meet reasonable standards of construction, but does not fall in to category 1) defective building work should be required to rectify it unless rectification is unfair or unreasonable. The Policy acknowledges that all reasonably relevant circumstances are to be considered in deciding whether to issue a direction to rectify.

   [14]Statutory Instruments Act 1992 s 7.

3. The Policy sets out that the circumstances for consideration in determining whether to issue a direction might include delay by the homeowner in notifying the BSA of the defect and nominates different time frames for category 1 (more than three months after the defect became apparent) and category 2 (more than six months after work was completed or left incomplete or exceeds 7 months, if the owner notified within 6 months) defects after which delay might be relevant.

When was completion achieved?

1. Mr Ramke gave evidence that before practical completion, a supervisor from Ramke Constructions and Mr Blore met in about November 2010 to identify any alleged defects. In particular, he says that Mr Blore identified numerous concerns, including about paint work. He says that Mr Blore went through the house and marked areas of concern to him making ‘hundreds’ of pencil marks on the walls necessitating significant costs of repainting before completion was effected.

2. Mr Ramke says essentially that, after additional works, the ‘owners’ certifier’ subsequently issued a Form 21 Final Inspection Certificate on 24 January 2011 and that this is the deemed date of completion. He says that this date was later than actual completion, because it was completed on 26 December 2010, but at that stage the certifier had shut down for the Christmas break. He says he offered possession to the homeowners at that stage. However, he says the owners refused to sign the handover document.

3. Mr Ramke says that a contractual dispute ensued between the homeowners and Ramke Constructions which took several months to resolve. The parties attended mediation at the Master Builders Association. Ramke Constructions ultimately agreed to accept a reduced final payment to resolve the dispute. Instead of the final payment due under the contract ($64,000),[15] he says it accepted some $17,000 less. This is supported by documents provided by the homeowners to the QBSA.[16] Mr Ramke says the homeowners were refusing to pay and it had been so long since practical completion, he just wanted to come to some arrangement so that Ramke Constructions would be paid.

   [15]        SOR, page 130.

   [16]        SOR, page 53, 63.

4. Documentation confirms that a Form 21 final inspection certificate was issued by the certifier on 24 January 2011.[17] A handover document stating that the building had been completed, certified and handed over was prepared by Ramke Constructions and dated 26 January 2011.[18] It was not signed. On 24 May 2011, the homeowners emailed Mr Ramke, stating that the date is incorrect and it had not been signed. The email referred to final payment having been made on 11 May 2011 and keys being provided on 18 May 2011, and asking him to reissue it with the ‘correct date’.[19] There are copies of other emails from the homeowners around the same time effectively asserting handover occurred at about that time.[20]

   [17]        SOR, page 74.

   [18]        SOR, page 73.

   [19]        SOR, page 66.

   [20]        SOR, page 70.

5. The contract schedule indicates that completion was due 268 days from commencement. There is no evidence about when the building works commenced. No doubt the general conditions in the contract spell out when completion is effected under it and whether the refusal or failure of the homeowners to accept it, sign the handover document and take possession impacts on the completion date under the contract. As noted earlier, the general conditions have not been provided to either the QBSA or the Tribunal. This leaves the evidence in a somewhat unsatisfactory state. Whether they were in the standard format coinciding with the version schedule of the Master Builders Contract used is unknown and was not the subject of evidence.

6. The homeowners assertions about completion are contained only in the s 21(2) bundle of documents. The homeowners did not provide witness statements in the Tribunal proceeding and the information from them is untested. Mr Ramke gave a plausible account of events in the lead up to completion and following it.  I accept Mr Ramke’s evidence about the identification of alleged defects in November 2010, how completion transpired and about the contractual dispute which subsequently occurred.

7. Other than in response to the Direction to Rectify, there is no evidence to suggest that Ramke Constructions returned to the site to do any further work on the building after the Form 21 was issued. Whereas I accept that the homeowners did not take the keys and make the final payment until May 2011, I am satisfied based on Mr Ramke’s evidence, that Ramke Constructions completed the works prior to the Form 21 being issued and offered possession of the premises to the homeowners in January 2011.  That the homeowners chose not to accept it is irrelevant on the evidence before me, and in the absence of any evidence (by way of contractual terms agreed between the parties) that this affected the completion date under the contract.

The items specified in the Direction to Rectify

Item 1

1. Item 1 relates to there being no concrete set down at the bottom of the garage doors. The Direction to Rectify states that water is entering the dwelling causing damage to building elements.

2. Mr Fisher notes that a set down is required by BCA Volume 2-2007 Part 2.2.2 Weatherproofing. He notes that a garage is a Class 10 building, rather than a Class 1 building, and that the provision only applies if the construction contributes to the weatherproofing of a Class 1 building.[21]  In particular, he refers to the homeowners complaint that when it rains against the roller door, water runs off the door, onto the slab, into the garage and ponds against the study wall.[22]

   [21]        SOR, page 175.

   [22]        Exhibit 5, page 11, complaint 3.

3. Mr Fisher says that photographs[23] provided to the Tribunal illustrate water entry and damage. There is an area shown on the photographs of the garage floor immediately adjacent to the garage entry with rust coloured marks on the concrete, which Mr Fisher identified as water marks. The marks extend to the edge of the door fittings on one side. It is not apparent where they finish on the other side as the photographs do not show the entire doorway span. The photographs do not show water marks extending to a wall, that is, the study wall where water is said to pond.

   [23]        Exhibits 7 and 8.

4. Mr Ramke says that this is not a defect and there is no water intrusion into the house: he says that the garage is not a habitable area. In any event, he says that set down is not required if there is a fall on the concrete, and says that there is a gradual fall. It appears to me that if there is a gradual fall, the photographs demonstrate that it is insufficient to stop water from sitting inside.

5. The plans indicate a step up of 100 millimetres from the garage to the house.[24] That said, the plans indicate that the garage abuts a house wall. Accordingly, I accept that it contributes to weatherproofing of a Class 1 building, namely the house.

   [24]        SOR, page 156.

6. I accept that water running off the garage doors has at times stained the garage floor adjacent to the door of the garage. Although the photographs do not show it, I also accept on the basis of Mr Fisher’s evidence that the water runs in and pools against the study wall.

7. As Mr Ramke says, a garage is not a habitable area. However, in this case, it contributes to the waterproofing of the house. It must therefore comply with the BCA standard referred to by Mr Fisher.

8. For these reasons, I am satisfied that Item 1 is a defect as Mr Fisher opines and that it is category 1 defect under the Policy.

The other 51 items

1. The remaining 51 items refer in essence to installation of building components in specified areas and painting. These include installation of screws in garage side door (item 8); skirting boards (item 17); installation of the garage side door (item 9); installation of architraves (item 16, 41, 51); installation of pelmets (Items 22, 23, 25); installation of weatherboards in some areas (items 26, 27, 28, 34, 36, 38, 39 and 42); and installation of a sink (item 52). There are a large number of items relating to installation of paint to components and areas of the house (items 5, 7, 14, 15, 21, 24, 29-33, 37, 43-45, 47-48, 50) as well as installation of deck stain (Item 13).

2. Mr Fisher’s first report[25] of 17 February 2012 refers to inspecting 68 complaints. He said at the hearing that he noticed at his first inspection that the building work generally at the premises was not ‘up to scratch’. His evidence was that the only items which had been rectified since his initial inspection were those set out in his second report[26] prepared following a reinspection of the property. He says only 5 items had been rectified since his initial inspection, namely items 1, 13, 19, 24, and 52. He says these were rectified by the owner.

   [25]        Exhibit 5, attachment.

   [26]        Exhibit 6, attachment.

3. He was challenged in cross-examination about why owner supplied items were the subject of the direction to rectify. However, in respect of each of these items, he pointed out, and I accept, that the direction was in respect of installation of the items, not the items themselves.

4. He conceded that he did not have particular expertise in assessing painting standards. His resume discloses that he is a builder with an open licence in Queensland. It is not apparent how long he has been qualified and licensed as a builder.

5. During the hearing, Mr Ramke was given time to prepare a list of Items which he said should not be subject to a direction to rectify and explain the basis for his assertions. He prepared 3 lists. One list contained items which he said were either not completed (sic) or not defective (Items 21, 23, 27-33, 37, 43, 47-48). [27] Another list identified items which he said were not defects, [28] (Items 1-7, 10, 12-13, 24, 44, 45, 49, 50, 52). The other list contained a list of items which he said had been rectified   (8-9, 11, 15-20, 22, 25-26, 34-36, 38-42, 46, 51).[29]

   [27]        Exhibit 2.

   [28]        Exhibit 3.

   [29]        Exhibit 4.

6. Despite being offered this opportunity (other than in relation to Item 1 discussed earlier), Mr Ramke gave only very brief explanation for including items in the lists and only explained in respect of some items. He asserted generally that the homeowner could have done anything to the paintwork since occupying the house. He acknowledged that some items required rectification, stating that they were the ones he had identified as having been rectified by Ramke Constructions, as I understand it, while in attendance at the property after the direction to rectify had been issued.

7. Mr Fisher’s evidence was not seriously undermined in respect of the other 51 items. He is a builder with an open license. I am satisfied that his lack of particular expertise in assessing painting standards does not affect his ability to give expert opinion as a builder about the adequacy of the paint installation.

8. Mr Ramke is also a builder. However, he has not, despite ample opportunity, provided a detailed report of his own or an independent report to the Tribunal and did not personally provide comprehensive oral evidence. His evidence about the other 51 Items is scant and unsupported by compelling explanation. Also, he is not a disinterested and objective builder, given that he is a director of Ramke Constructions. He has a personal interest in the outcome of the proceedings.

1. For these reasons, I generally give less weight to Mr Ramke’s evidence about the other 51 items than Mr Fisher’s opinion. Therefore, I accept that the building work was defective as specified in the other 51 items.

2. That said, Mr Fisher’s report at Exhibit 5 opines that complaints 31 and 51 (respectively, Direction to Rectify items 25 and 43) are category 1 defects, whereas he opines that the remaining complaints (other than regarding complaint 3, to which Direction to Rectify Item 1 refers, as discussed separately above) in respect of which the Direction to Rectify was issued are category 2 defects.  Exhibit 5 sets out that complaint 31 is about missing caps over the screws on cavity slider pelmets in the pantry internal cavity slider. Complaint 51 is about the installation of paint on the handrails of the exterior garage stairs.

3. Neither of these items fits the definition of a category 1 defect, as discussed earlier. Direction items 25 and 43 both state that the work is not completed to an acceptable standard. This is in keeping with the definition of category 2 defects. I find that the other 51 items specified are all category 2 defects.

4. I also accept that only those items specified by Mr Fisher have been rectified.  In respect of item 19, which the parties agree has been rectified but disagree about who rectified it, it is unnecessary (for reasons explained later) for me to make a finding about whether it was rectified by the homeowners or Ramke Constructions.

Is it fair in the circumstances to issue a direction?

1. There is no evidence to the effect that further work (other than on the days on which Ramke Constructions attended following the direction to rectify issuing) was done by Ramke Constructions after January 2011.

2. A large number of the category 2 defects concern finish to paintwork and decking stain. Many others concern installation of cornice and architrave. One relates to missing screws.  The category 2 defects might best be described as defects which, although no doubt unsatisfactory to a homeowner, are relatively minor and likely to be fixed at a relatively modest overall cost.

3. I have accepted Mr Ramke’s undisputed evidence that a defects list was compiled by the homeowner and the supervisor from Ramke Constructions, and attended to, before the final inspection was undertaken by the certifier. Further, I have found that at the time the Form 21 issued, practical completion was achieved.

4. I have also accepted that a contractual dispute then ensued, which led to a negotiation. Ramke Constructions had not been paid the final instalment due of $64,200. By May 2011, Mr Ramke agreed to a reduced price as practical completion had long since been achieved and he wanted to sort it out an arrangement. A reduced price was agreed and paid.

5. The homeowners’ complaint to the QBSA was made on 9 December 2011. This is some 11 months after completion. All but one of the defects I have accepted existed are category 2 defects. That is, all but one of the defects was reported outside of the timeframes anticipated by the Policy for category 2 defects, (namely 6 months from completion or being left incomplete, or 7 months if brought to the builder’s attention within 6 months after completion or being left incomplete). On the evidence before me, I do not accept that there was any adequate reason for the delay. I do not accept that because Ramke Constructions attended at the property after the Direction to Rectify was issued that this was an acknowledgment by it of an obligation to rectify as opposed to an attempt to resolve a situation.

6. Further, it is reasonable to infer, and I do draw the inference, that the reduced price was negotiated to compensate the homeowners for anticipated costs of dealing with defect issues raised by them. That is, it was to compensate them for the costs of achieving the finish they desired in respect of the items with which they were unsatisfied. The homeowners received a not insignificant reduction in price of some $17,000.

7. For these reasons, I am satisfied that it is unfair for a direction to rectify to issue for the 51 category 2 defects.

8. Further, in case I am wrong about the date of practical completion (that is, if completion did not occur until 18 May 2011 as alleged by the homeowners material provided to the QBSA), I make the following observations. If completion was 18 May 2011, I would not in any event consider a direction to rectify should issue. The homeowners’ complaint suggests that the defects were first noticed on various dates, between March and November 2011. As discussed, the homeowners did not give evidence in the proceedings and the information in their complaint has not been tested. Given the history of many defects being raised in late 2010 including many regarding painting, and the contractual dispute which the homeowners instigated resulting in the reduction in price paid by them, it seems improbable to me that their complaints relate to defects not previously identified by the homeowners.

9. In particular, most are said by them to have been ‘first noticed’ on 19 May 2011, although a small number were apparently noticed in March and April 2011 (how they noticed defects in March or April 2011 is not apparent, in light of the history as it is discussed in evidence before the Tribunal, given that the homeowners had not enter into possession of the premises at that time), several in June 2011 and some in November 2011. The November complaints include complaint 58 (Direction item 50 refers) about the painting of timber verandah posts. It would be difficult to accept, given Mr Ramke’s uncontradicted evidence about events in late 2010, that an issue with clearly visible paintwork on verandah posts was first noticed by the homeowners in November 2011. Building work had not been undertaken by Ramke Constructions since January 2011. Because the assertions in the homeowners’ complaint have not been tested and the improbability that items said to have been first noticed as late as November 2011 were noticed at that time, I place little weight on the dates asserted by the homeowners in the complaint.

10. I am satisfied that it is more likely than not, that at least most (I note that a small number, such as complaint items 20 and 22, for relatively insignificant alleged defects, could be the result of settlement which may have later arisen) of the complaint items had been noticed and raised previously.

11. Therefore, I would conclude even if the completion date was 18 May 2013, for a number of reasons that a direction to rectify should not issue for items 2-52 specified in the QBSA Direction to Rectify. In particular, the lack of reliable evidence that defects were first noticed by the homeowners on the dates nominated by them, and my finding that in any event the homeowners received a reduction in cost to compensate them for the costs of achieving the finish they desired, I would be satisfied that it is unfair to issue a direction requiring Ramke Constructions to rectify or complete the 51 category 2 defects.

12. In respect of Item 1, which I have accepted is a category 1 defect, the same times frames are not provided for in the Policy. For a category 1 defect, the Policy provides that it may be unfair or unreasonable to issue a direction if there is a greater than 3 month delay, after the defect became apparent, in the homeowners notifying of the defect. In the complaint form lodged by the homeowners, they record having first noticed the problem on 19 May 2011.  The complaint was not made until 9 December 2011, more than 3 months after it is alleged by them that the problem was noticed. Also, Mr Fisher says that the defect has been rectified, although by the owner rather than Ramke Constructions.

13. For a number of reasons, I conclude that a direction should not issue for item 1. Given the negotiated reduction in price to compensate the homeowners for defect issues raised by them and the delay in notification, combined with the lack of evidence about any reasonable explanation for the delay in notification, (and while acknowledging that the item was defective when the direction to rectify was issued by the QBSA) given that the defect has been in any event been rectified), I am satisfied that it is unfair for a direction to issue concerning this defect.

14. Conclusions

15. I have found that it is unfair for a direction to rectify and/or complete to issue for any of the 52 items. Accordingly, I set aside the decision of the QBSA and make an order that a direction to rectify is not issued.