Schulz v Queensland Building and Construction Commission
[2014] QCAT 427
•29 August 2014
| CITATION: | Schulz & Anor v Queensland Building and Construction Commission [2014] QCAT 427 |
| PARTIES: | Graham Schulz Deborah Schulz (Applicants) |
| v | |
| Queensland Building and Construction Commission (Respondent) |
| APPLICATION NUMBER: | GAR407-13 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Deane |
| DELIVERED ON: | 29 August 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The decision of the Queensland Building and Construction Commission to disallow the claim against the Queensland Home Warranty Insurance Scheme made on 14 October 2013 is confirmed. |
| CATCHWORDS: | REVIEW – claim for non-completion - whether statutory home warranty scheme responds - whether claim made in time under scheme Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 20, s 24 WP & SB Cusack v Raceberry Pty Ltd [2013] QCAT 330 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
Mr and Mrs Schulz seek a review of a decision of the Queensland Building and Construction Commission (‘the Commission’) to disallow a claim under the statutory home warranty scheme (‘the Scheme’). The decision is dated 14 October 2013.
The Tribunal has power to review a decision to disallow a claim against the Scheme.[1]
[1]Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) s 86(1)(h), s 87.
On a review the Tribunal has power to confirm or amend the Commission’s decision, set aside the decision and substitute its own or set aside the decision and return it to the Commission for reconsideration.[2] The Tribunal’s function is to reach the correct or preferable decision.[3]
[2]Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) s 24.
[3]Ibid s 20.
The Commission disallowed the claim against the Scheme for non-completion of work on the basis that coverage under the Scheme had expired prior to the making of the claim. The Commission relies upon clause 1.7 of the Scheme:
The QBCC is only liable to pay for loss under this Part where the Insured has properly terminated the contract with the contractor within 2 years from the date of payment of the insurance premium or the date of entering into the contract (whichever is the earlier).
The facts are not in dispute. A Master Builders Residential Building Contract was signed by Mr and Mrs Schulz and the builder on 15 July 2010. A contract to purchase the land upon which the house was to be built was entered into and dated 19 July 2010. The building contract was subject to a special condition that it was subject to settlement of a contract to buy the land. A special condition of the building contract provided that the deposit was payable within seven days of settlement of the land contract.
The land contract settled on or about 9 September 2010 but the builder did not enforce strict compliance with the special condition as to payment of the deposit within seven days of settlement. The deposit was paid on or about 15 February 2012.
There were substantial delays in the builder obtaining all necessary council approvals. Such delays entitled Mr and Mrs Schulz to terminate the contract but they did not exercise that right.[4]
[4]Building Contract clause 4.2.
The insurance premium was paid and the policy under the Scheme issued on or about 13 February 2012. The certificate of insurance noted that the risk commencement date was 15 July 2010. Construction commenced about this time and the builder claimed and was paid a number of stage progress claims.
On 30 August 2013 a liquidator was appointed to the builder. At that time the construction was incomplete and the building contract had not been terminated. There is no evidence before the Tribunal that Mr and Mrs Schulz terminated the contract at any time prior to making the claim under the Scheme.
The Tribunal has previously accepted that a home owner making a claim against the Scheme where the builder had become insolvent was sufficient to amount to the contract having been terminated otherwise at law for the purposes of the Scheme.[5]
[5]WP & SB Cusack v Raceberry Pty Ltd [2013] QCAT 330.
On 30 September 2013 the Commission received Mr and Mrs Schulz’s claim under the Scheme[6] and disallowed the claim by letter dated 14 October 2013.
[6]Claim is dated 27 September 2013.
Mr and Mrs Schulz contend that:
a) they believed the insurance started when the premium was paid;
b) the document signed on 15 July 2010 was not a valid lawful contract;
c) the building contract was entered into when the deposit was paid because the building contract ‘was an Agreement to Contract that was converted to a Simple Contract on or about 13 February 2012 when the Deposit was paid’;
d) there were a number of matters which were not agreed between the parties prior to signing which infers that the agreement was not to come into force until those matters were agreed;
e) the performance of the contract was frustrated by the Council until about 13 February 2012;
f) the Commission should be estopped from relying upon the risk commencement date in the certificate.
I confirm the decision of the Commission.
There is nothing in the terms of the building contract upon which I can rely to find that the building contract was unlawful or of no effect until the deposit was paid or until the premium was paid.
The Scheme does not afford coverage in all circumstances. The coverage of the Scheme is not limited to claims for non completion.
Unsurprisingly the QBCC Act and the Scheme use the same concepts in relation to coverage and commencement. The QBCC Act[7] and the Scheme both use the concept of entering into a contract.
[7]Section 69(2).
The QBCC Act distinguishes when a policy comes into effect depending upon the circumstances. Relevantly a policy comes into force on the earliest of either the payment of the premium, or on the date a contract is entered into or when the building contractor commences work.[8] In other circumstances, where the work is speculative residential construction work or where the work is managed by a construction manager, a policy comes into force on the earlier of payment of the premium or when the building contractor commences the work.
[8]QBCC Act s 69A.
It is clear that if a different trigger was intended it could have been expressly included in the terms of the legislation and therefore Scheme. It was not.
The concept of entering into a contract is not defined in the QBCC Act. In contract law a contract is entered into or formed once acceptance of an offer is communicated to the offeror. In this case that occurred on 15 July 2010 when the contract was signed.
All of the performance obligations under the contract may not become unconditional until certain conditions are fulfilled but that does not detract from the fact that a contract has been entered into.
The Scheme relevantly defines “contract” to mean:[9]
a contract for the performance of the residential construction work referred to in the certificate.
[9]Clause 11.1.
There is nothing in the definition which requires that the contract be unconditional.
Mr and Mrs Schulz contend that the document signed on 15 July 2010 was an agreement to contract which was ‘converted to a Simple Contract on or about 13 February 2012 when the Deposit was paid following resolution of uncertainty and frustration of the building Agreement’.
This contention appears to be that the document signed on 15 July 2010 was an agreement to negotiate and therefore not a binding contract so that a contract was not ‘entered into’ at that time.
Having regard to the terms of the building contract I find that the parties had reached agreement in principle and that the document signed on 15 July 2010 was not a mere agreement to negotiate. It was not so uncertain that it had no binding force.
Mr and Mrs Schulz point to a number of matters where it is said further agreement was required prior to performance. Where there is an agreement in principle the law will usually imply an obligation to negotiate in good faith if there are some remaining details which are to be agreed.[10]
[10]Chitty on Contracts 26th edition [122].
The General Conditions of the building contract contemplate that if there is an ambiguity the parties agree to consult in an attempt to resolve the matter and failing agreement the matter is to be resolved in accordance with clause 28.[11]
[11]Building contract clause 3.1.
Mr and Mrs Schulz contend that there were insufficient detail agreed as to the description of the works in Item 3 and Annexure A. Annexure A did show dimensions both as to the floor plan and the exterior of the house and information as to the materials to be used for the roof and the exterior of the house.
Mr and Mrs Schulz contend that Item 5(a), (b) and (e) were insufficiently completed. Those items identify that the builder was responsible for the supply of the plans, specification and the foundations data. Mr and Mrs Schulz seek to rely upon the standard form notes which indicate that:
If a detailed footing or slab design is required for development approval or similar authorisation it must be based upon the Foundation Data and included in the Plans prior to entering into the Contract.[12]
The Foundations Data must be obtained before entering into this Contract. If the builder is required to obtain this data a copy must be given to the Owner on payment of the costs incurred in obtaining the data.[13]
[12]Note to Item 5(b).
[13]Note to Item 5(e).
Mr and Mrs Schulz contend that the detailed footings or slab design based on the Foundation Data was not included in the Plans. I am not satisfied, because it is not clear to me based on the evidence before the Tribunal, that a detailed footing or slab design was required for development approval so that it was required to be included in the Plans prior to entering into the Contract.
Mr and Mrs Schulz contend that the failure to include details of incalculable delays in the Appendix Part C in circumstances where it was unknown when Council approval would be obtained indicates that the document was not intended to be a binding agreement. I do not accept that proposition.
Part C relates to grounds for extending the time set out in Item 8, the Construction Period. Having regard to Items 9 and 10 of the Contract Schedule it is apparent that the Construction Period relates to the period after the Date for Commencement which is to be determined under clause 8. The Date for Commencement is determined by a number of matters including the obtaining of all necessary building and/or planning approvals.[14]
[14]Clause 8.1(b)(iii).
A failure to include such information will be relevant to whether the builder was entitled to extensions of time to the Date for Practical Completion and whether Mr and Mrs Schulz had an entitlement to claim damages for delayed completion (either liquidated or general). I am not satisfied in the circumstances of this case that the failure is relevant to whether a binding contract existed.
I am not satisfied that the various omissions were of a sufficient nature to cause there to be no agreement in principle.
Mr and Mrs Schulz contend that the building contract was frustrated by the actions of the Council until about 13 February 2012. The concept of frustration entitles a party to bring a contract to an end or to bring to an end an obligation of performance of all or part of a contract. It assumes a valid contract was formed and is not relevant to when or whether a contract was ‘entered into’.
Chitty on Contracts states:[15]
The doctrine of frustration is relevant when it is alleged that a change of circumstances after the formation of the contract has rendered it physically or commercially impossible to fulfil the contract or has transformed performance into a radically different obligation from that undertaken in the contract.
[15]Chitty on Contracts 26th edition [1631].
Mr and Mrs Schulz contend that no consideration passed between the parties until it was lawful to do so. This appears to be a reference to a certificate pursuant to the Material Change of Use Conditions (‘MCUC’) imposed by the Council which was issued on or about 13 February 2012 and the payment of the deposit on 15 February 2012.
Consideration under a contract is not necessarily the payment of money. Consideration may take the form of mutual promises.[16] I am satisfied that there was valuable consideration in the form of mutual promises when the contract was signed on 15 July 2010.
[16]Ibid [1], [161].
Mr and Mrs Schulz contend that because the builder could not lawfully commence construction prior to the issue of the MCUC certificate that the contract was not lawful and therefore could not exist.
As mentioned earlier in these reasons the building contract clearly contemplated that building and planning approvals may be required to be obtained prior to construction commencing and expressly provided both parties a right to terminate if those approvals where not obtained within 75 days.[17] Such a right is inconsistent with the contract being unlawful and not valid. As noted above Mr and Mrs Schulz did not exercise that right.
[17]Clause 4.2.
In any event the building contract contains a severance clause so that if any provision was void, voidable, unenforceable or illegal it is to be read down or severed from the remaining provisions.[18]
[18]Clause 29.7.
Mr and Mrs Schulz claim that the Commission owes a duty to act with the ’utmost good faith’. Without making any finding as to whether such an obligation exists I am not satisfied that any matters have been brought to the attention of the Tribunal to demonstrate a lack of good faith by the Commission. The Commission is merely relying upon the terms of the Scheme and the QBCC Act as to when such a policy commences.
The circumstances of significantly delayed commencement of construction had the consequence that non-completion coverage was not available to Mr and Mrs Schulz. Unfortunately this is not a matter that the Tribunal is able to remedy. The Tribunal is a creature of statute and has no powers except those conferred by the QCAT Act or the enabling Act.[19] It appears that only a change to the terms of the Scheme could address the extent of coverage afforded for non-completion.
[19]QBCC Act.
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