Satisfied Engineer

Disputing Debt Recovery Actions Commenced by the Queensland Building and Construction Commission: A Rare Story of Success

Traditionally, builders have had little success in defending debt recovery actions brought by the Queensland Building and Construction Commission (QBCC), on the basis that the QBCC’s ability to recover money paid under the Queensland Home Warranty Scheme (QHWS) is a statutory right once the QBCC pays an insurance claim. 

However, in the recent Supreme Court of Queensland (Court) decision of Lee Anthony Crocker v Queensland Building and Construction Commission [2020] QSC 24, the builder was partly successful in challenging a decision of the QBCC to pay a claim. In this case, the Court considered  whether the former director of a building company was entitled to review a decision made by the QBCC that he was liable pursuant to section 111C of the Queensland Building and Construction Commission Act 1991 (Qld) (Act). The builder’s application for judicial review was based on grounds that there was a failure by the QBCC to accord procedural fairness or that the decisions to issue the notices of potential debt were unreasonable.

Section 111C of the Act provides that a director of a company is liable for payments made by the QBCC on a claim under the QHWS.

Background

The applicant builder (Crocker) was the director of Statewide Residential Building Inspection and Maintenance Services Pty Ltd (Statewide), a building company that contracted to carry out building work for home owners (Owners) of properties in Norman Park, Toowong and Ashgrove. Statewide commenced but did not complete the works on all 3 properties, resulting in the Owners terminating their contracts with Statewide and making 3 claims under the QHWS for incomplete works (collectively, the Claims).

Importantly, in relation to the Toowong property, Statewide and the home owners entered into a deed of settlement wherein the home owners released Statewide from further liability under the building contract.

The Claims were approved by the QBCC and the total amount of $528,267.83 was paid out under the QWHS. The QBCC subsequently sought to recover the total amount paid under the QWHS from Crocker pursuant to sections 71 and 111C of the Act.

QCAT Review

In September 2016, Crocker sought to review the decision to recover the amounts paid on the Claims and the scopes of work in the Queensland Civil and Administrative Tribunal (QCAT) on the basis that he was only notified of the QBCC’s decisions and his liability for the first time by letter from the QBCC on 27 July 2016 (nearly two years after the claims were approved).

In 2017, QCAT granted Crocker an extension of time to review the QBCC scopes of work. However, QBCC successfully appealed that QCAT decision and the Appeal Tribunal found that it had no jurisdiction to review decisions made by the QBCC under section 71 of the Act or to extend the timeframe to review QBCC scopes of work past 28 days.

Decision of the Supreme Court

In January 2019, Crocker applied to the Court pursuant to the Judicial Review Act 1991 (Qld) (JR Act) for a declaration that he was not liable under section 111C of the Act.

The Court considered whether the QBCC’s decisions to, inter alia, issue a scope of works and approve the Claims were reviewable decisions, and if so, whether Crocker was liable for the statutory debts under section 111C of the Act.

The Court held that:

1. QBCC decisions to receive and accept the Claims were not reviewable;

2. however, QBCC decisions to approve the Claims, issue a scope of works and to make payments on the Claims were reviewable.

In relation to the decisions to approve the Claims and make payments on the Claims, the Court found that only one claim, being the claim in respect of the Toowong property, should be reviewed under section 20 of the JR Act. This is because the QHWS policy provides that where a contractor has been released from any liability by an owner in relation to the insured works, the QBCC is also released from liability under the QHWS to the same extent.  Accordingly, the Court held that the QBCC’s decision to admit the claim in respect of the Toowong property in the amount of $200,000 was unreasonable and ought to be set aside.

Importance of Decision

The important messages from the Court’s decision in Lee Anthony Crocker v QBCC [2020] QSC 24 are that:

1. it is nearly impossible for a builder to defend a QBCC debt recovery action for a statutory debt, however this builder managed to successfully do so (in respect of one of three adverse claims) in circumstances where a settlement agreement existed with the homeowner releasing the builder from further liability; and

2. decisions by the QBCC to approve claims under the QWHS are reviewable only in very limited circumstances and in limited timeframes before the claim is approved.

Accordingly, builders and directors of building companies must ensure that they exercise all review rights available to them in respect of early decisions of the QBCC (such as a valid termination of a building contract, Directions to Rectify, Scope of Works decisions and Failure to Rectify Decisions) that may lead to a decision under the QWHS  in order to limit the risk of being liable for any resulting statutory debt.

If you have any queries regarding decisions of the QBCC, contact Kirsty Stewart at Construct Law Group on (07) 3139 1874 or email us at info@constructlaw.com.au.

This article is provided for general information and educational purposes only and does not constitute legal advice. Readers should obtain appropriate independent legal advice based on their own specific circumstances