Tashen Developments Pty Ltd –v- Queensland Building Services Authority

[2010] QCAT 151

CITATION: Tashen Developments Pty Ltd –v- Queensland Building Services Authority [2010] QCAT 151

PARTIES: Tashen Developments Pty Ltd –v- Queensland Building Services Authority

APPLICATION NUMBER:            QR241-08     

MATTER TYPE: Occupational Regulation

HEARING DATE:   25 February 2010

HEARD AT:   Brisbane       

DECISION OF: Peta Stilgoe, Member

DELIVERED ON:   25 February 2010

DELIVERED AT:   Brisbane

ORDERS MADE:  The Applicant’s Claim is dismissed.

CATCHWORDS :  Certificates of Insurance, Excluded Matters

APPEARANCES and REPRESENTATION (if any):

Tashen Developments Pty Ltd
Queensland Building Services Authority

REASONS FOR DECISION

1. In 2007, Tashen Developments Pty Ltd decided to build five townhouses. They signed a contract with PBC Constructions and the authority issued five certificates of insurance. In July 2008 the builder went into liquidation so on 18 July 2008, Tashen contracted with another builder to complete the work and on 17 September 2008 Tashen made a claim on the statutory insurance.

2. The Authority declined the claim on two bases; firstly that cover was excluded by Section 9 of the, sorry 1.9 of the policy and secondly that Tashen undertook completion works without the prior written approval of the Authority.

3. It subsequently transpired that completion work was started but not completed. Clause 1.9 of the policy says that the Authority is not liable to complete incomplete residential construction work in relation to a contract or contracts for;

4. Residential construction work involving more than two single detached dwellings between the insured and the one contractor.

5. Residential construction work involving more than one duplex between
1. the insured and the one contractor.

6. Residential construction work involving more than two residential units
1. within a multiple story dwelling between the insured and the one contractor.

7. Residential construction work to the common property of a multiple story
1. dwelling other than a duplex between the insured and the one contractor, unless it leaves fifty percent of the units occupied when the contract was entered into and when the contract was terminated.

8. Residential construction work involving the construction of a multiple
1. story dwelling other than a duplex.

9. It appears from the submissions that Tashen no longer disputes that houses fall within this exclusion. Tashen says though that the Authority is not entitled to rely on the exclusion because of a number of factors.

10. Firstly that the issuing of five certificates is an acknowledgment by the Authority that the Townhouses are separate dwellings. The Authority’s response to that is that the plans are not provided to it for certification and that there was no way that the Authority could tell that it was a multi-story dwelling and that the dwellings were joined together.

11. There was evidence at the hearing about conversations between Mr Strugnall on behalf of Tashen and the Authority and the evidence went no further than Mr Strugnall made some calls.

12. I am not satisfied that the mere fact of issuing five certificates is an acknowledgement by the Authority that there are five separate dwellings and, and I am not satisfied that, that is a ground to justify Clause 1.9 not applying.

13. The second ground that Tashen relied on is that the Authority’s letter of the 18 September 2007 that says in paragraph two, that the insurance and I quote, ‘covers you against the licensee failing to complete the works or failing to rectify defective works including subsidence of your footings”.

14. This submission by Tashen fails to take into account that the letter goes on to say that it is a limited, that the policy of insurance is a limited liability policy and that the insured should read the terms and conditions of the policy carefully to ensure that the insured is familiar with both the benefits and the limitations. The urging of the Authority to read the full terms and conditions in fact appears twice in the letter.

15. The third reason that Tashen says that Clause 1.9 does not apply, is that he, Mr Strugnall on behalf of Tashen rang the Authority five to eight times to confirm that he was covered. Mr Strugnall said in evidence that he absolutely believed on the basis of what he was told, that he was covered and that this was a critical matter for him.

16. As I previously said there is no detail of what Mr Strugnall asked the Authority, nor was any detail of what the information that he provided to the Authority when he asked the question. If indeed it was critical to Mr Strugnall that he be covered then it is, I find it difficult to understand why none of these conversations was recorded in writing by him.

17. I also have difficulty in considering that Mr Strugnall having received what he considered to be positive advice, on one occasion felt it necessary to continue to call. I can only speculate as to the reason for this. But even if I accept that the calls were made and that Mr Strugnall was given the information he said he was given, as I say I am left with a difficulty about the motivation for those calls. If in fact they were evidence making then better evidence would have been to reduce the content of the calls to writing. Without some supporting evidence I find Mr Strugnall’s explanation of the conversations unconvincing.  

18. The fourth reason that Mr and Mr Strugnall gave for justifying an avoidance of the effect of Clause 1.9 of the policy is that the Authority knowingly sold a policy with the same premium of a normal domestic insurance policy but with limited cover, and that, that cover wasn’t highlighted, sorry the limitation on that cover wasn’t highlighted and that without highlighting the exclusions and stating the limiting nature of the cover, the Authority impliedly waived the application of Clause 1.9.

19. I find this argument unconvincing. The policy terms are clear as Mr Strugnall, in evidence before the Tribunal said, he was familiar with the fact when a certification of insurance is issued you are given a policy of insurance which contained the terms and conditions. The Authority has pointed out Clause 1.9 is designed to exclude developers. Mr Strugnall stated that in his view Tashen wasn’t a developer. I have formed the view that Mr Strugnall and Tashen was a developer, if only a one off developer and of a very small scale.

20. I find that the Authority made no representation about the extent of the cover.

21. Mr Strugnall then relied on Section 3 of the Queensland Building Services Authority Act which says that the objects of this Act are to regulate the building industry to achieve a reasonable balance between the interests of building contractors and consumers., He relied on Section 3 to argue that it would be unfair of the Authority to issue a policy of insurance at the same premium but with only limited cover.

22. I am persuaded however by Section 69.5 of the Act which states, ‘to remove doubt it is declared that a policy of insurance under this section has effect according to its terms’ and a consumer cannot avoid the consequences of a breach of a provision of the policy of insurance, only because the policy of insurance forms part of a statutory insurance scheme.” My interpretation of that section is, that the policy is the policy; it’s informed by the objects of the Act but it stands on its own two feet.

23. Tashen’s next argument was that the letter of 18 September 2007 overrides the policy terms because the terms of the policy were promulgated in 2006 and the letter was written in 2007, therefore the later document overrides the former. I do not see how a letter can override the terms of the policy that is authorised by legislation and I’m not convinced by that argument.

24. The last argument put forward by Tashen is estoppel by convention and I was referred in that respect to the case of GEC Marconi Systems Pty Ltd –v- BHP Information Technology Pty Ltd. Tashen pointed to the six factors that have to be proven before a estoppel by convention can arise, the first of which is that the parties have proceeded on the basis of an underlying assumption of fact or law. It is clear from the evidence that only one of the parties, that being Tashen, proceeded on the basis of an underlying assumption of fact of law and that the Authority did not make that assumption.

25. The second element to be proven is that each party has to the knowledge of the other expressly or by implication accepted the assumption as being true for the purposes of the transaction. If Tashen accepted that assumption then it did not communicate that assumption in any meaningful way to the Authority and there is no evidence that the Authority accepted that assumption. In particular I do not find that the letters, that the letter of the 18 September 2007 is an acceptance of that assumption. Given that I don’t find that the first or second limbs of an estoppel by convention to be established, it’s not necessary for me to consider the balance of the elements. I accept that Tashen considers that it suffers detriment if the Authority is allowed to resile or depart from the assumption but that is only one element of six.

26. If I’m wrong in relation to, sorry, I therefore find Clause 1.9 of the policy does operate to exclude liability for non-completion of the work. If I’m wrong in relation to that then it falls for an examination of the exclusion under 5.1.

27. The relevant evidence in relation to this is that the work stopped in April of 2008. The Authority sent Tashen a notice during 2008 and again in July 2008 and Tashen lodged its claim in September 2008. As I’ve previously said, Tashen entered into another contract with another builder to complete the work on the 18 July 2008.

28. The relevant factors in relation to the exercise of the Authority’s discretion were helpfully set out by the Authority in its submissions. They are that the Authority has been denied the opportunity to, sorry, they are whether the applicant had sufficient notice and or previous dealings with the Authority in relation to the insurance policy conditions. As I’ve already stated the applicant had previous dealing with the Authority and was aware of the requirement to seeks the Authority’s prior written approval and chose not to do so.

29. The second question is whether the Authority suffered any prejudice as a result of the Applicant proceeding with the works. In relation to the second element these factors are relevant; there is no evidence of a particular cost saving to either Tashen or the Authority by Tashen signing the contract without the prior written consent of the authority. There is no contemporaneous evidence of the condition of the frame. We have an affidavit from Mr Taylor and Mr Taylor gave evidence but there are no photographs taken of the frame at the time. Although Mr Taylor provided a quote at the time, the quote is not in evidence before the Tribunal.

30. There is no report from any person at the time of the decision and there is no evidence of any threat to health and safety. There is also no reason to suppose, or any evidence, that the claim would not have been addressed promptly. Mr Strugnall spoke of his previous experience with a claim before the Authority and cited some number of months, however it emerged during evidence that the months required to process that claim were the months required to finalise the claim not the identification of the claim and an acknowledgment whether or not the claim was valid under the policy.

31. In terms of the prejudice to the Authority the failure to made it more difficult for the Authority to determine what the scope of works were. There’s also the difficulty of what consequences would have resulted from the Authority admitting the claim but not admitting that the work to be done by the new builder was the appropriate work or declining toward the contract to that builder.

32. The evidence suggests that Tashen’s decision to sign the contract appears to be motivated more by the availability of the builder who had previously worked on the job and not so much on the immediate need for that work to be done, particularly given that the work had been standing idle since April.

33. In all the circumstances the applicants claim is dismissed.