WP & SB Cusack v Raceberry Pty Ltd
[2013] QCAT 330
| CITATION: | WP & SB Cusack v Raceberry Pty Ltd [2013] QCAT 330 |
| PARTIES: | WP and SB Cusack Dilam Pty Ltd (Applicants) |
| V | |
| Raceberry Pty Ltd (Respondent) |
| APPLICATION NUMBER: | GAR197-12 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 26 April 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Richard Oliver, Senior Member |
| DELIVERED ON: | 2 July 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. Declare the contract entered into between the applicants and Stylebuilt Homes Australia Pty Ltd dated 3 March 2010 has been lawfully terminated. 2. The application is listed for a directions hearing on a date to be advised to the parties. |
| CATCHWORDS: | Home Warranty Insurance Scheme – where the insurance policy imposes and obligation on a homeowner to properly terminate the contract before the policy will respond to the claim – whether the contract was terminated lawfully under the contract – whether the contract was terminated otherwise at law – whether applicants elected to accept the builders repudiation – whether claim made in time. CGM investments Pty Ltd v Chelliah (2003) 196 ALR 548; Cheshire and Fifoot “Law of Contract” (8th Aust Ed, 2002) p. 42 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANTS: | Mr Cusack, solicitor |
| RESPONDENT: | Mr Turnbull, solicitor of HWL Ebsworth. |
REASONS FOR DECISION
The applicants are the owners of a house at Schmidt Road, Fernvale. They entered into a contract with Stylebuilt Factory Direct Homes Australia Wide Pty Ltd (“the builder”) for the construction of the house in March/April 2010. The house reached practical completion on 1 April 2011, however there was still work to be done by the builder. The builder went into liquidation in March 2012. The work was not completed so the applicants lodged a complaint with the Queensland Building Services Authority making a claim on the statutory Home Warranty Insurance Scheme (“Scheme”).
The Authority made a decision to reject the claim. In a letter to the applicants dated 2 May 2012 the Authority said the claim was out of time in that two years had passed since “the date of payment of the insurance premium or the date of entering into the contract (whichever is the earlier)”. As the premium was paid on 20 April 2010 the former ground is not relied upon, only the date of the contract. The applicants filed an application to review the decision of the Authority on 30 May 2012.
Subsequent to the filing of the application, the parties have agreed that the Tribunal should decide, as a preliminary issue, the question of whether there is a valid claim on the Scheme. That determination will depend on whether the contract was lawfully terminated by the applicants either in accordance with the terms of the building contract or otherwise at law. To that end both parties have filed written submissions.
One of the contentious issues in the review application is the date the applicants entered into the building contract. For the purposes of deciding this preliminary issue, the Authority has submitted that the Tribunal should assume the date of the contract is 1 April 2010 even though it bears the date 3 March 2010. As I understand the applicant’s case this date was already on the document when received by them. The applicants contend this is not the date the contract was actually signed but rather it was signed at or about the time a rental agreement was signed leasing the house back to the builder to be used as a display house which was 1 April 2010. The evidence does not demonstrate with any clarity the actual date the applicants entered into the contract hence the concession by the Authority for the purposes of this decision only.
On that basis the parties then have agreed that the issues for determination are:
(a)Whether the contract ended by:
a. performance
b. by abandonment
c. lawfully by the applicants as a result of the builders breach of reliance on the terms of the contract or by operation of law
(b)whether the contract was properly terminated in accordance with the definition in clause 11.1 of the policy.
Background
Although there were delays in the completion of the house, a certificate of practical completion was signed by the applicants and the builder on 1 April 2011. The certificate set out the items of some incomplete work to be attended to by the builder which included; building of the back patio to the house, completion of fencing and landscaping and installation of stormwater drainage.[1] The applicants also agreed to rent the house back to the builder for use as a display home. A rental agreement was signed 1 April 2010 to give effect to this arrangement.[2] The display home was to be used by a prominent builder associated with Lifestyle Homes, Cavalier Homes.
[1] Affidavit of Pilecki 17 September 2012, Ex 7.
[2] Ibid Ex 1.
Although, it seems there were some discussions between Mr Pilecki, a representative of Racebury, and Mr O’Dare, a representative of the builder, about attending to the work referred to in the certificate of practical completion, nothing much was done subsequent to the house being handed over to Cavalier Homes. It was agreed that the construction of the patio would wait until Cavalier Homes stopped using the house as a display home.
In late 2011, Mr Pilecki had difficulty contacting any representatives of Cavalier Homes and was denied access to the display home even though it was not being used as such at the time. He was becoming concerned that no further work was being done on the outstanding items under the building contract. In February 2012, he spoke to a person in the Authority to get some advice about what he should do. He also enquired whether there were any complaints about Cavalier Homes. Then on 12 March 2012, he was advised that accountants had been appointed as Administrators to Cavalier Homes, and in turn, Lifestyle Homes. By this stage there was unpaid rent for which the applicant lodged a claim with the Administrators.
Mr Pilecki attended a meeting of creditors of Cavalier Homes and at that meeting he met Mr Ian Jennings, the General Manager of the Authority. There was general discussion about the availability of insurance under the Home Warranty Scheme and an arrangement was made for them to meet in the following week. The meeting occurred on 16 April 2012. Mr Boyle of the insurance division was at the meeting and there was discussion about the claims procedure. Mr Pilecki says a claim form was given to Mr Jennings at the meeting and Mr Jennings confirms this in his statement. However, the claim form has not been produced and the Authority says it knows nothing of it. In any event I cannot see that anything turns on whether a claim form was given to Mr Jennings at the meeting or not because a complaint was lodged soon after this meeting on or about 25 April 2012.
The Home Warranty Insurance Scheme
The Home Warranty Insurance Scheme will respond to a valid claim if the conditions set out in the policy are met. In respect of a non completion claim, which this claim is, the policy provides:
1.1Payment for Non-Completion
Subject to the terms of this policy, the BSA agrees to pay for loss suffered by the insured in the event of the contractor failing to complete the contract for the residential construction work.
1.2Termination of Contract
The BSA is only liable to pay for loss under this Part where the contract is for a fixed price and the Insured has properly terminated the contract with the contractor.
Properly terminated is defined in clause 11.1 of the Terms and Conditions as follows:
“properly terminated” means lawfully under the contract or otherwise at law, upon the contractor’s default which extends to, but is not limited to:
(a)the cancellation or suspension of the contractor’s licence; or
(b)the death or legal incapacity of the contractor; or
(c)the insolvency of the contractor;
(d)any breach of the contract by the contractor.
Relevantly here the terms and conditions also set out when cover under the policy expires.
1.7Expiry of Cover
The BSA is only liable to pay for loss under this Part where the insured had 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).
Obviously notice of the claim must be given to the Authority and this is provided for in s 70 of the Queensland Building Services Authority Act 1991. There is no issue about this save that the Authority contends that the actual claim under the policy is the complaint dated 25 April 2012.
Did the contract end by performance?
Despite the house reaching practical completion, the answer to this question must be in the negative. The builder remained under an obligation to complete the building work identified in the “Handover statement 1/4/11”. This included the patio, fencing, landscaping, straightening of the dog leg in the fence bordering the Brisbane Valley Highway and attending to stormwater issues. The applicants never resiled from insisting these works be carried out although it seems they were prepared to wait until the display house was handed back to them by the builder.
Did the contract end by abandonment.
According to the evidence of Mr Pilecki, the applicant always insisted upon the builder performing its obligations under the contract and the promise to complete the works set out in the handover statement. Although it may be said that the builder has abandoned the contract by the appointment of administrators, this is not the position taken by the applicants.
In a letter to the Administrators of Stylebuilt Homes of 16 March 2012, there was an insistence that Stylebuilt Homes complete the works under the contract. Further the applicant lodged a proof of debt in the administration which is consistent with exercising their rights under the contract. By doing so they are hardly abandoning any rights they might have under the contract. Viewed objectively the applicants conduct is not consistent with what was said in CGM investments Pty Ltd v Chelliah:[3]
In my opinion to show that a contract has been abandoned by inactivity on both sides it is necessary to establish that the inactivity (which may sometimes amount to no more than silence on one side) produces the clear inference that one party does not wish to proceed with the contract and the other party consented to that situation.
[3] (2003) 196 ALR 548 also see Marminta Pt Ltd v French [2003] QCA 541 at [22].
I am therefore satisfied that the contract has not been abandoned.
Estoppel
I will deal with the issue of estoppel because the applicant’s submissions contend that the Authority should be stopped from relying on the provisions of the insurance policy to reject the claim because of conduct on its part, generally, and specifically by the conduct of Mr Jennings.
The general conduct complained of includes complaints that the Authority did not inform the applicants of the specific provisions of the policy about termination. Also it is suggested that the Authority’s staff did not warn Mr Pilecki against giving the builder an “indulgence” by postponing the final completion until delivery of possession of the display home. It seems the applicants embarked on a course of conduct to try and achieve a practical outcome with the builder rather than rely strictly on the terms of the contract or the obligations contained in the handover statement. That as a conscious choice by the applicants for which the Authority cannot be held responsible.
With respect to the meetings with Mr Jennings, again it is submitted that the discussions about the applicant’s entitlement to claim under the policy should bind the Authority. Mr Jennings, quite properly in my view, told Mr Pilecki at the creditors meeting of the availability of the insurance fund to compensate the applicants for any loss that might result from the builder going into administration. However, Mr Jennings had no authority to bind the Authority to accepting any claim on the basis of the conversation with Mr Pilecki because the claim must be properly assessed under the conditions of the policy. He did no more than assist in the facilitation of that process.
Finally, I accept the Authority’s submission that the applicants cannot point to any specific conduct which induced them not to make a claim in time. No such conduct is asserted by them rather what is asserted are generalisations about the fairness or otherwise of the claims procedure and the how the policy is applied. I also accept, as contended for by the Authority, the submission that the terms and conditions of the policy are delegated legislation and an estoppel cannot be set up against the terms of a statute which carries a public purpose.[4]
[4] Immigration, Local Government & Ethinic Affairs, Minister for v Kutovic (1990) 92 ALR93 at 108.
Was the contract terminated lawfully under the contract?
The only objective conduct on the part of the applicants concerning the termination of the contract is the letter sent from the applicant on 16 March 2012.[5] This letter sought, inter alia, clarification of the builder company’s status upon Cavalier Homes (the tenant) being placed into administration. The letter was written as a “matter of courtesy” to advise that Stylebuilt was in default of rental payments in the sum of $6,999.00. As a consequence of that default, the applicants say they exercised their rights to take possession of the rental property under the rental agreement.
[5] Affidavit of Pilecki filed 11 January 2013 Ex “SJP3”.
There was also an insistence that Stylebuilt, or alternatively Cavalier Homes, reinstate the rental premises to their original condition. The applicants however acknowledged that there would be no real prospect of the premises being restored and that Stylebuilt would not be able to comply with their obligation set out in clauses 5.1.2 and 5.1.3 under the rental agreement. Clause 5.1.2 imposes an obligation to restore the garage to a habitable space and 5.1.3 imposes an obligation to have the property treated for ants, spiders etc.[6] The letter did not raise any specific issue about the building contract, Stylebuilt’s obligations to complete the work under it, or any issue about termination as a result of Stylebuilt’s default.
[6] Ex 1 to the affidavit of Pilecki 17 September 2012.
There was a response from the liquidators on 20 March 2012 simply to state that they were not responsible for any outstanding rental nor “any outstanding works in regards to The Property”. The applicants thereafter took no formal steps to terminate the contract because they still contended it was on foot obliging the builder and the Administrators to complete the work the subject of the certificate of practical completion.
The Home Warranty Insurance Scheme provides that the insurance policy will respond for non-completion claims only if the contract has been properly terminated lawfully under the contract as set out in the definition of “properly terminated” in the Policy.
Clause 28 of the contract sets out the mechanism of how a contract can be lawfully terminated by the homeowner for breach on the part of the builder. If the builder is in substantial breach for not carrying out the works the homeowner must give the builder a notice to remedy the breach within a reasonable time. If the breach is not remedied in accordance with the notice, the homeowner may terminate the contract. A termination in these circumstances would be lawful. If a party to the contract becomes insolvent then, in accordance with clause 29, the other party can give a written notice to the insolvent party ending the contract. Clause 31.1 sets out how the notice can be given which includes delivering by hand to the other party, posting to the last known address, or sending it by facsimile or email. Here the notice could have been given to the liquidators of the builder. There is no evidence that the applicants took any of these steps to lawfully terminate under the contract. The only document emanating from the applicants is the letter of 16 March 2012 which did not address any of these matters.
I accept the submissions of the Authority that the suspension of the builder's licence of the ultimate holding company and the appointment of administrators to the company of themselves do not amount to a repudiation entitling the applicant to elect to terminate. I therefore have come to the conclusion that the applicants have not properly terminated lawfully under the contract.
Was the contract terminated otherwise at law?
The next question is whether the contract has been lawfully terminated “otherwise at law”. The applicants rely on the judgement of McGill DCJ in Queensland Building Services Authority v Fox.[7] This is a case where the respondent made a claim on the insurance policy and the claim was rejected by the Authority because, relevantly here, it contended the contract had not been lawfully terminated under the contract or otherwise at law. The case was about a defective floor. The builder involved was an incorporated company, trading as Recycled Timbers Australia Pty Ltd. Mr Fox made a complaint to the Authority about the floor. The Authority issued a direction to rectify to the builder. However, subsequent to this, the builder company was deregistered and therefore ceased to exist as a legal entity.
[7] [2005] QDC 129.
His Honour considered the basis upon which the contract could be lawfully terminated which included the death or legal incapacity of the contractor or the insolvency of the contractor. He also referred to extracts from Cheshire and Fifoot[8] on how a contract may be terminated as a result of a frustrating event. One such frustrating event is “death or incapacitation” of the contracting party. This, he said, was equivalent to when a company is dissolved, albeit two months after the lodging of the request for dissolution. By reference back to the provisions in the insurance policy, this was synonymous with a basis of termination being the death or legal incapacity of the contractor. It was on this footing that His Honour found in paragraph [37] that the contract “was terminated so as to satisfy clause 1.2 by the legal incapacity of the company in the form of its dissolution”. The homeowner’s conduct subsequent to the dissolution is consistent with him treating the contract as at an end. His Honour also considered the contract had been abandoned but that is not the case here for the reasons stated.
[8] Cheshire and Fifoot “Law of Contract” (8th Aust Ed, 2002) p. 42.
The distinguishing feature in the Fox case is that the company there was dissolved as opposed to having administrators appointed as was the case here. At the time of the appointment the contract was still on foot and had not been abandoned. In a letter of 20 March 2012, in response to the letter from the applicants concerning the outstanding rental and building work, the Administrators said they did not have any interest in the rental property and were not responsible for any outstanding rent. They went on to say that “the Administrators are neither responsible nor liable for any outstanding works in regards of the property”. This statement can be read two ways. Firstly; that, logically, they have no personal responsibility to any liability of the company in administration, and, secondly; the Administrators, as representatives of the company, are saying the company is not liable for any outstanding building work.
It is trite to say that Stylebuilt Homes Australia Pty Ltd, with Administrators appointed, remained a legal entity and continued to be bound by the obligations under the contract with the applicants. It would come as no surprise to the applicants, one of whom is a solicitor, that even though the obligations continued, the Administrators were unlikely to take any steps to complete the works due to the company’s insolvency. What is abundantly clear is that the Administrators, in the letter of 20 March said that they, either personally, or as agents of the company, would not honour any obligations of the company in respect of the subject property either under the building contract or the rental agreement.
The question then becomes does the letter constitute a repudiation by the Administrators of the company’s obligations under the contract and the rental agreement. The only logical conclusion must be that it does evince an intention to be no longer bound by the contract[9], or the rental agreement, because not only is there the statement referred to above, but also because the company was insolvent and there was no capacity within the company to undertake its obligations under the contract.
[9] Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625.
The Authority submits that if I were to find that the letter of 20 March amounted to repudiation by the company that does not immediately end the contract. More is required and there must be some evidence of an election by the innocent party to terminate the contract. The Authority submits that, accepting there was a repudiation, there is no evidence that the applicants elected to terminate. In terms of any direct communication from the applicants to the Administrators, that is correct. The correspondence between them stops with the Administrators letter of 20 March 2013.
However, like in Fox the conduct of the applicants subsequent to receiving the letter from the Administrators is inconsistent with the continued existence of the contract. The first was taking possession of the house and the second was proceeding to claim under the statutory insurance scheme. Again adopting the analogous situation in Fox, where the availability of a claim under the statutory insurance scheme depends on the termination of the contract, pursuit of that claim was inconsistent with its continued enforcement and therefore manifested an election to terminate for the builders repudiation.[10]
[10] Queensland Building Services Authority v Fox supra at [40].
In the circumstances I have come to the conclusion that the contract was lawfully terminated by the applicants otherwise at law.
Was the claim made in time?
This deals with the preliminary question I have been asked to consider, but the remaining issue is whether the policy should respond to the claim as it seems on this analysis the claim could be out of time. Originally the Authority contended that the date of entering into the contract, as is recorded on it, is 3 March 2010. If a finding of fact was made that that is the correct date for the purposes of clause 1.7 of the policy then clearly the claim is out of time. As I said earlier, because of a dispute as to the date of entering into the contract and for the purposes only of determining if a valid claim had been made, the Authority conceded that the contract date should be taken as being 1 April 2010. Therefore on the applicant’s best case the date of entering into the contract can be no later than 1 April 2010.
The applicants received notice of the builder’s intention not to proceed with the contract, or repudiation, on 20 March 2012. There is a date stamp on the letter of 20 March 2012 indicating this is the date when it came into Mr Cusack’s office. The next relevant date is 26 March 2012 when there was a meeting of creditors when there was discussion about the potential to make a claim under the scheme. Next was the meeting of 16 April 2012 when it is suggested a claim form was handed to Mr Jennings. Although Mr Jennings confirms this, I have reservations. Firstly, because it was at that meeting that the claims procedure was discussed in detail with an insurance officer from the Authority for the first time and therefore it is unlikely Mr Pilecki would have had the necessary documentation ready to lodge a claim; and secondly, if that was the case why would the second claim/complaint dated 25 April 2012 be lodged with the Authority.
The relevance of this evidence is to determine the date when the applicants elected to accept the repudiation and treat the contract at an end. It seems to me if that date is after 1 April 2012 then the policy would not respond to the claim. As this aspect of the case remains contested it is appropriate I relist the matter for further directions to progress the application for a determination of this remaining issue.
Conclusion
In summary, I have come to the conclusion that in terms of the definition of “properly terminated” under clause 11.1 of the policy the contract was not terminated “lawfully under the contract”. I have found though, that it was terminated “lawfully otherwise at law”. There remains, for determination, the question of whether the claim was made within the time stipulated in clause 1.7 of the policy. Although I have come to the conclusion that the contract was lawfully terminated, which is contrary to that submitted by the Authority, I am grateful to the very helpful submissions filed by the solicitors for the Authority which I can say were of great assistance to me in deciding this matter.
2
4
0