Turcinovic v Gebeyehu

[2011] QDC 215

DISTRICT COURT OF QUEENSLAND

CITATION:

Turcinovic v Gebeyehu [2011] QDC 215

PARTIES:

HAJRUDIN TURCINOVIC
(Applicant)

AND

JEANTIFE GEBEYEHU
(Respondent)

FILE NO/S:

Misc1070/11

DIVISION:

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

15 September 2011

DELIVERED AT:

Brisbane

HEARING DATE:

15 September 2011

JUDGE:

McGill DCJ

ORDER:

Application dismissed with costs.

CATCHWORDS:

BUILDING AND ENGINEERING CONTRACTS – Recovery of Monies – adjudication certificate filed in court – whether grounds to stay enforcement of deemed judgment until separate proceedings concluded

Building and Construction Industry Payments Act 2004

RJ Neller Building Proprietary Limited v Ainsworth [2008] QCA 397 – applied.

COUNSEL:

P.J. Trout for the applicant

D.J. Topp for the respondent

SOLICITORS:

1. This is an application to stay enforcement of a judgment which arises as a result of the filing in this Court of an adjudicator’s certificate under the Building and Construction Industry Payments Act 2004 (the Act). Such certificate was filed in this court on 4 April this year as a result of an adjudication in favour of the builder against an owner.

1. The total adjudicated amount was $53,765.96.  An enforcement warrant was issued in respect of the deemed judgment on 23 May 2011.

1. On 7 September this application was made to stay enforcement of the deemed judgment or to stay execution of the enforcement warrant.  What is sought, in effect, is that enforcement of the deemed judgment be stayed until the trial of proceedings which the owner is contemplating bringing against the builder.

1. The application is worded in very broad terms but that, I think, is not the most particular problem with it.  Essentially, what happened here is that there was a contract between the parties in February 2010 to renovate a house on a particular site which involved moving it to a different part of the site and in addition building two new dwelling units on the site, which had the effect of putting three homes on a block of land where there was previously only one.  The site was then, effectively, subdivided into three sites, and one of them has, indeed, since been sold by the owner.

1. The work was largely completed by the latter part of 2010.  There was a final inspection certificate in respect of the three properties provided by a building certifier on 30 November 2010 and the final payment claim was provided on the 17 January 2011.

1. At that stage, there had been some minor complaints about some minor defects but on 30 October 2010, the owner signed a document in which he undertook to pay any moneys outstanding and owing to the builder upon completion and certification of the building on the site.  That undertaking has not been complied with.

1. The final payment claim was for an amount of some $48,387.07.  The owner, in response to that claim, lodged a payment schedule raising various issues.  That matter was submitted for adjudication under the Act and the adjudicator, essentially, found in favour of the builder.

1. One of what seem to have been a large number of reasons advanced for withholding payment was that there were many unrectified defects existing in the workmanship of the construction.  It was said that, at that stage, the respondent had been unable to engage an expert to quantify the cost of rectification of all of the defects of construction, but intended to do so.  Ultimately, the adjudicator was not persuaded that that or any of the other reasons advanced provided a good reason why the final claim amount should not be paid.

1. The owner has since obtained, from another builder, a quote for rectifying what are said to be various defects in the premises.  That builder has given a figure of just under $261,000 as a fair and reasonable estimate of the total present day cost to rectify each and every one of the applicant’s defects.

1. The defects are referred to as being in three detached houses and these were inspected by this builder in or about May of 2010, however, one of the houses has since been sold by the owner as appears from a title search, and that has caused problems when a complaint was made to the Queensland Building Services Authority about the defects.

1. The complaint was lodged with the authority but only on 25 July 2011.  The Building Services Authority (BSA) arranged an inspection which took place on 31 August this year.  Because one of the three houses had been sold, as far as the BSA was concerned, the case was closed because the owners of that property had not lodged a complaint.

1. In relation to one of the houses, the property was inspected, but as at 14 September the BSA was not in a position to provide any detailed response in relation to the alleged defects.  It was said that an inspection did not take place in relation to the other house, Lot 2, because the owner denied access for the licensee to undertake an inspection, because the BSA process is that both parties were invited to the site inspection.  Essentially, therefore, that part of the inspection did not proceed because the owner was not prepared to cooperate in the way required by the BSA.

1. The letter of 28 July 2011 gave notice that the contractor, or contractor’s representative, would be asked to attend this inspection, so this was something that the owner would have had plenty of notice about, and it does strike me as decidedly suspicious that he was not prepared to cooperate in this way.

1. In any event, there is no material from the BSA so far to confirm the existence of any defects and, at most, there will be evidence from the BSA relation to only one of the three houses.

1. The position in relation to an application of this nature was discussed by the Court of Appeal in RJ Neller Building Proprietary Limited v Ainsworth [2008] QCA 397. Reference was made there to the way in which the Act operates and to the proposition that the Act involves a legislative determination that where disputes are dealt with in the way indicated by the legislation a payment is to be made before there has been a final determination of the rights and wrongs of all the various complaints being raised by the parties.

1. This function was explained and the basis underlying the legislative choice has been outlined by the Court of Appeal and the court has indicated that, ordinarily, in accordance with the legislative judgment, the risk of a builder, or a person being paid under the Act, not being able to repay if there is, ultimately, a successful action by the owner, has been placed on the owner.

1. The court went on to say in paragraph 41:

“The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated, would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication.  There may, of course, be other circumstances which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate.  For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as, unfairly, to increase the owner’s exposure to the risk of the builder’s insolvency, or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are, ultimately, declared by the Courts.  In this case, there are no such circumstances.”

1. I should add that neither of the particular examples given by the Court of Appeal applies in the present case either but it was submitted that there were indications that the builder in the present case was insolvent or, at least, there was a particular reason to think that, in this case, there were substantial grounds for concern as to whether, if this money was paid, it would be recoverable if, ultimately, the owners claims were successful.

1. There were a couple of matters relied on here.  It was submitted – and there is evidence to indicate – that the builder’s licence as a builder has been suspended because of a failure to comply with the condition that he pay all debts as and when they fall due in accordance with normal industry trading terms.

1. The builder’s licence was, initially, suspended in June of 2011, and subsequently cancelled in July 2011, because of the failure to comply with that condition.  The explanation offered by the builder in relation to this is that he was unable to pay subcontractors some $25,000 which was owing in respect of this job because of the failure of the owner to make the final payment which is the subject of the proceedings under the Act.

1. In effect, the builder blames the owner’s behaviour and the owner’s failure to pay the money claimed for the financial position that he now faces.  It would be unsurprising if a builder had some liabilities to subcontractors to be paid out of the payment to be made by an owner under the building contract and this could not really be seen as, I think, special circumstances justifying some departure from the policy position adopted by the legislature.

1. The fact that the builder does not have a current licence means, of course, that he cannot practice as a builder and, indeed, he has said in his affidavit that he is not practising as a builder although he is still working in the industry.  His son has a building licence and I take it from what he said that he is working for his son.

1. The builder has also given evidence that he owns a parcel of land which he says was of significant value at Greenslopes, an address at Plimsoll Street, Greenslopes.  That property is currently the subject of mortgages but he also says that he is selling investment units, the proceeds of sale of which would be applied so as to clear off the mortgages on the Greenslopes property.

1. On the face of it, therefore, subject to the sale of those investment units he would be the owner of significant valuable unencumbered property at Greenslopes which would provide, I think, sufficient security for any judgment which might be obtained.  Presumably, if the investment units are not sold, then their value, whatever that is, would go into the mix although the mortgages would remain on the property.

1. On the face of the affidavit material, the builder may well have some temporary cash flow problems but it is not the sort of case where it looks as though the builder is going to be not worth suing at the end of the day.  Whether that, in itself, would be something which would satisfy the test for a departure from the prima facie position under the Act, is, I think, something that, ultimately, I do not need to decide.

1. The Court of Appeal seem to be focussing not so much on the question of whether the builder would be unable to make the repayment but rather whether there has been some specific conduct by the builder which would have the effect of prejudicing the position of the owner in relation to any ultimate liability of the builder for the defects when the merits of the situation are resolved.

1. It does not seem to me that there is anything in the present case which would indicate any deliberate action being taken by the builder to prejudice the position of the owner by reliance on the operation of the legislation, or which would put the owner in a worse position.  In so far as there is a risk of insolvency it is a risk that was there anyway, and may simply have been aggravated by the delay of the owner in making the payment which was apparently, prima facie, payable under the contract.

1. It does not seem to me that this is the sort of case contemplated by the Court of Appeal.  In my view, this is simply one of those cases where the ordinary policy of the legislation should be applied, and there is no sufficient reason to depart from that found in the material before me.  I have referred to the builder’s affidavit being taken at face value.  The builder was not cross-examined on his affidavit.  It is therefore appropriate that it be taken at face value.

1. In all the circumstances, the application is dismissed with costs.