Smith Developments Pty Ltd v Maybrey Pty Ltd
[2012] QCAT 234
•13 June 2012
| CITATION: | Smith Developments Pty Ltd v Maybrey Pty Ltd and Ors [2012] QCAT 234 |
| PARTIES: | Smith Developments Pty Ltd |
| v | |
| Maybrey Pty Ltd Jan- Mar Trading Pty Ltd ESR Management Pty Ltd (known collectively as Moreton Island Development Group) (MIDG) |
| APPLICATION NUMBER: | BDL031-09 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 18 May 2012 |
| HEARD AT: | Brisbane |
| DECISION OF: | Sandra G Deane, Member |
| DELIVERED ON: | 13 June 2012 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. Smith Developments is to file in the Tribunal two (2) copies and give to MIDG one (1) copy of an Amended Application seeking to recover amounts as provided in s 42(4) of the QBSA Act by 4.00pm on 11 July 2012. 2. If Order 1 is not complied with the Application will be dismissed without further order and will proceed only in respect of the Response and Counter Application. 3. If Order 1 is complied with then: a. MIDG is to file in the Tribunal two (2) copies and give to Smith Developments one (1) copy of any Amended Response and Counter Application by 4.00pm on 1 August 2012. b. Smith Developments is to file in the Tribunal two (2) copies and give to MIDG one (1) copy of statements of evidence and copies of any relevant documents by 4.00pm 22 August 2012. c. MIDG is to file in the Tribunal two (2) copies and give to Smith Developments one (1) copy of statements of evidence and copies of any relevant documents in response by 4.00pm 12 September 2012. d. The parties must exchange and file in the Tribunal lists of issues by 4.00pm on 26 September 2012. e. The matter is listed for a Directions Hearing at 1:30pm on 3 October 2012. |
| CATCHWORDS: | BUILDING – whether contractor unlicensed – prohibition on recovery of amounts by unlicensed contractor Queensland Building Services Authority 1991, ss 42, 51, 51A, 77 Sutton v Zulo Enterprises Pty Ltd [2000] 2 Qd R 196 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Smith Developments Pty Ltd represented by Mr BW Smith (director) |
| RESPONDENT: | Moreton Island Development Group represented by Mr L S Reidy of Counsel instructed by Creevey Russell Lawyers |
REASONS FOR DECISION
Background
Smith Developments Pty Ltd brought a claim against Maybrey Pty Ltd, Jan- Mar Trading Pty Ltd and ESR Management Pty Ltd collectively known as Moreton Island Development Group (MIDG) for monies owing under a domestic building contract and for variations. MIDG has defended the claim variously on the grounds that they deny the variations, allege defects in the works and claim that Smith Developments is not a licensed contractor.
This hearing was restricted to preliminary points relating to the licensed contractor issue and applicability of section 42 of the Queensland Building Services Authority Act 1991 (QBSA Act).
The Tribunal has power to resolve certain building disputes and to order the payment of an amount found owing by one party to another or order relief from payment of an amount claimed by one party from another.[1]
[1] Section 77 QBSA Act 1991.
Section 42 of the QBSA Act provides that:
“(1)A person must not carry out, or undertake to carry out, building work unless that person holds a contractor’s licence of the appropriate class under this Act.
(3)Subject to subsection (4), a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.
(4)A person is not stopped under subsection (3) from claiming reasonable remuneration for carrying out building work, but only if the amount claimed –
(a)is not more than the amount paid by the person in supplying materials and labour for carrying out the building work; and
(b)does not include allowance for any of the following –
(i) the supply of the person’s own labour;
(ii) the making of a profit by the person for carrying out the building work;
(iii) costs incurred by the person in supplying materials and labour if, in the circumstances, the costs were not reasonably incurred; and
(c)is not more than the amount agreed to, or purportedly agreed to, as the price for carrying out the building work; and
(d) does not include any amount paid by the person that may fairly be characterised as being, in substance, an amount paid for the person’s own direct or indirect benefit.”
MIDG contends that Smith Developments was not a licensed contractor when the contract was entered into nor at any time during the period when the works were being performed and therefore Smith Developments is not entitled to claim any money from MIDG other than as allowed in s 42(4) of the QBSA Act and to the extent that monies have been paid to Smith Developments under the contract those monies ought to be repaid.
Smith Developments’ position in the claim and in the written submissions filed 18 May 2012 is that:
a)Smith Developments was the contracting party and entitled to bring the claim;
b)Smith Developments was itself unlicensed until 23 July 2007;
c)Mr Smith was the sole shareholder and director of Smith Developments;
d)Mr Smith was the person who carried out the work on behalf of Smith Developments through undisclosed arrangements between them;
e)Mr Smith held a contractor’s licence of a relevant class;
f)the contract was lodged with the QBSA against Mr Smith’s licence number and insurance was obtained in his name;
g)in these circumstances the provisions of s 42(3) of the QBSA Act do not prevent recovery under the contract because Mr Smith was licensed and actually carried out the work.
At the hearing Mr Smith presented alternative positions, that Mr Smith was the contracting party and that Smith Developments was licensed as from July 2006.
Evidence
It is not in dispute that:
a)the contract was signed by Mr Smith on or about 14 March 2006;
b)Mr Smith held a contractor’s licence at the time the contract was signed;
c)the work commenced on or about 21 March 2006;
d)the first progress certificate was issued on or about 20 May 2006;
e)each progress certificate was issued to Smith Developments;
f)work ceased toward the end of 2006;
g)MIDG has paid at least $528,753.50 under the building contract.
Mr Smith’s evidence is set out in his statements filed 4 June 2010 and 19 March 2012. Mr Smith also gave some oral evidence and was cross examined.
Mr Smith’s evidence was that:
a)he had provided a quote for this work in the name of Hazelfield Homes;
b)he sent a fax to Mr Ehrlich setting out some information dated 28 February 2006 including advising he was intending to trade as Smith Developments Pty Ltd;[2]
[2] Exhibit LE3 to Mr Ehrlich’s statement dated 16 April 2012.
c)he was presented with a contract by Mr Ehrlich;
d)the details of the contractor were not filled in and the price was not filled in because there were matters that were still being discussed and despite this he signed the contract;
e)when the contract was signed he intended to trade in future as Smith Developments but had not yet acquired the company. He had received advice from his accountant that:
i) he ought not to enter into contracts in the company name;
ii) he ought to enter into contracts in his own name;
iii) invoices could be issued in the company name for work performed in contracts entered into in his own name;
f)he did not obtain legal advice but relied upon the advice provided by the accountant;
g)he signed in the part of the contract on page 3 for a company rather than an individual in error;
h)in addition to signing on page 3 and 4 he filled in some details such as the fax number. Under cross-examination he conceded he also initialled many pages and inserted information in the schedules;
i)the process of signing did not take very long;
j)Mr Ehrlich subsequently filled in details in the contract;
k)he did not receive a copy of the contract for some time after he signed it and had not raised as an issue the company being inserted as the contractor;
l)he bought a company on or about 11 May 2006 and changed its name;
m)shortly after the work commenced he applied to obtain a builder’s licence in the company’s name and after that applied for his licence to be changed to a supervisor’s licence;
n)his statement of 19 March 2012 was in error and the QBSA licence searches attached[3] are in error because they show the company obtained its licence on 23 July 2007 and his licence being changed to a supervisor’s licence at that time whereas he contends this occurred in mid 2006. He had only noticed this error on the day of the hearing;
o)there were in fact no arrangements between himself and the company to which reference was made in his statement of 4 June 2010 at paragraph 13[4].
[3] Exhibit BS2 and BS3 to Mr Smith’s statement dated 19 March 2012.
[4]The written submissions filed 18 May 2012 also make reference to such arrangements.
On behalf of MIDG Mr Ehrlich’s evidence is set out in his statements filed 25 July 2010 and 16 April 2012. Mr Ehrlich also gave oral evidence.
Mr Ehrlich gave evidence that:
a)it is his practice to fill in a contract with relevant details in pencil and then the details can be erased and corrected or written over. This is why a number of the details in the contract appear to be fuzzy[5];
b)he filled in the details of this contract in pencil and provided a copy to Mr Smith and to the Respondents prior to the meeting with Mr Smith in March 2006 when Mr Smith signed the contract;
c)he originally had Hazelfield Homes as the contractor in pencil but rubbed that out and inserted Smith Developments Pty Ltd at Mr Smith’s request;
d)the contractor details and the pricing were not blank when Mr Smith signed the contract;
e)he was not told that the contract was to be in Mr Smith’s own name;
f)there were 3 copies of the contract and each had to be amended and written over so the process of signing the contract took some time;
g)he did not perform a QBSA licence check before entering into the contract.
[5] Exhibit LE2 to Mr Ehrlich’s statement dated 16 April 2012.
Mr Smith’s evidence was contradictory. In some respects his oral evidence was significantly different to his written statements and even the submissions filed earlier on the day of the hearing. His oral evidence appeared to evolve under questioning by the Tribunal and under cross examination.
Mr Smith did not appear well prepared to answer questions relating to the licensing issue and the entering into of the contract. He did not have with him copies of his written statements but was provided with copies of his statements by the Tribunal and copies of other documents by the Respondents.
Whilst:
a)the events in question occurred some time ago;
b)Mr Smith was self represented at the hearing; and
c)it appears that Mr Smith did not fully appreciate the legal difference between himself and his company,
this does not provide a satisfactory explanation for the differences and the evolution of his evidence.
I find much of Mr Smith’s oral evidence implausible. The issue of whether and when Smith Developments was licensed has been a live issue since 2007. Under cross examination Mr Smith denied that his then lawyers told him about this issue being raised.
In any event the issue was clearly raised in the Response to Smith Developments proceedings filed by MIDG on 19 January 2010, Mr Ehrlich gave evidence of when the licences commenced in his statement of 25 July 2010[6] and this hearing was specifically set down to address the issue at the directions hearing held on 21 February 2012.
[6] Exhibit LE4.
It is therefore implausible that Mr Smith would not have taken particular care in formulating his statement dated 19 March 2012, which relied upon the QBSA searches. If the searches were wrong as Mr Smith contended in oral evidence and cross examination then he ought not to have made the statement in its present form and he ought to have taken steps to have the QBSA records corrected or at least to produce some documentary evidence to corroborate his contention that the company applied for and obtained its licence in mid 2006. No such steps were taken.
I accept the evidence as to licensing dates contained within the QBSA searches in the absence of any documentary evidence which supports the proposition that these dates are incorrect.
By contrast Mr Ehrlich’s evidence was consistent with his written statements and with what one would expect to occur when parties are signing a contract for a significant amount of money.
I accept Mr Ehrlich’s evidence that the details of the contracting party were inserted into the contract at Mr Smith’s request and that it was inserted into the contract prior to Mr Smith signing the contract.
I therefore find that it is more likely than not that:
a)Mr Smith signed the contract on behalf of Smith Developments.
b)Smith Developments did not become licensed until 23 July 2007.
Discussion – Law
In Smith Developments’ written submission it is not disputed that if Smith Developments entered into the contract that it undertook to carry out building work in contravention of section 42(1) of the QBSA Act.
However, Smith Developments in its written submissions contends that it did not carry out the building work because in fact that was carried out by Mr Smith, a licensed builder and therefore it is not captured by the prohibition in s 42(3) of the QBSA Act and is not restricted to claiming the remuneration in s 42(4) of the QBSA Act.
This submission appears to attempt to blur the lines of individual and corporate responsibilities.
If a party to a contract is a company then it by necessity will require others to perform the work. The fact that this occurs does not detract from the concept that the company performs the obligations in a legal sense.
The licensing regime provides that a company must be licensed and must not carry out or undertake to carry out building work unless the licensee has a nominee who holds a contractor’s licence or a nominee supervisor’s licence[7]. This provision would not be necessary if Smith Developments’ contention was the preferred construction.
[7] Section 42B QBSA Act.
I also note that there is no suggestion that s 42(7) of the QBSA Act is applicable because Mr Smith’s evidence was that there were in fact no arrangements between himself and the company to which reference was made in his statement of 4 June 2010 at paragraph 13[8].
[8]The written submissions filed 18 May 2012 also make reference to such arrangements.
The licensing regime also provides that a licensee must not allow another person to make use of a licensee’s licence to pretend to be licensed[9] and must not help another to carry out building work if the licensee knows or ought reasonably to know that in carrying out building work the other is committing an offence against section 42. This concept is often referred to as licence lending and is prohibited[10].
[9] Section 51 QBSA Act.
[10] Sections 51 and 51A QBSA Act.
I therefore find that Smith Developments not only undertook to carry out building work but also carried out building work whilst not licensed.
The cases are quite clear that where the contracting party is unlicensed it is not entitled to claim under the contract or in quantum meruit and is restricted to claiming statutory restitution as provided in s 42(4) of the QBSA Act.[11]
[11]Sutton v Zulo Enterprises Pty Ltd [2000] 2 Qd R 196; McCoy v Sloss and Anor [2012] QCAT 60; Marshall v Marshall [1999] 1 Qd R 173; Cook’s Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453; Cant Contracting Pty Ltd v Casella [2006] QCA 538.
Where the director of an unlicensed company has physically undertaken work the company is not entitled to claim amounts in respect of the labour and effort of the director.[12]
[12] Nortask Pty Ltd and Speziali v Rodriguez [2008] QCCTB 250.
MIDG seeks an order that the sum of $528,753.50 admitted as paid under the building contract be repaid immediately on the grounds that Smith Developments is not entitled to claim under the contract.
I find that subject to a claim under s 42(4) of the QBSA Act being made out the sum of $528,753.50 ought to be repaid by Smith Developments to MIDG.
It is clear that the building work performed has value. It appears that some of the work was undertaken by subcontractors[13] and it is probable that Smith Developments provided materials. The amount properly recoverable as provided in s 42(4) of the QBSA Act is yet to be determined and the amount if any payable by MIDG to Smith Developments or to be refunded to MIDG once the s 42(4) amount is determined and deducted from monies paid to is yet to be determined.
[13] Applicant’s submissions 29 May 2012.
In these circumstances it is appropriate to provide Smith Developments with an opportunity to amend its claim to seek to recover amounts as provided in s 42(4) of the QBSA Act.[14]
[14] Section 64 QCAT Act.
I therefore propose to make directions to afford Smith Developments the opportunity to pursue such a claim.
Orders
Smith Developments is to file in the Tribunal two (2) copies and give to MIDG one (1) copy of an Amended Application seeking to recover amounts as provided in s 42(4) of the QBSA Act by 4.00pm on 11 July 2012.
If Order 1 is not complied with the Application will be dismissed without further order and will proceed only in respect of the Response and Counter Application.
If Order 1 is complied with then:
a)MIDG is to file in the Tribunal two (2) copies and give to Smith Developments one (1) copy of any Amended Response and Counter Application by 4.00pm on 1 August 2012.
b)Smith Developments is to file in the Tribunal two (2) copies and give to MIDG one (1) copy of statements of evidence and copies of any relevant documents by 4.00pm 22 August 2012.
c)MIDG is to file in the Tribunal two (2) copies and give to Smith Developments one (1) copy of statements of evidence and copies of any relevant documents in response by 4.00pm 12 September 2012.
d)The parties must exchange and file in the Tribunal lists of issues by 4.00pm on 26 September 2012.
e)The matter is listed for a Directions Hearing at 1:30pm on 3 October 2012.
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