Tribunal confirms that a Domestic Regulated Contract that is not in writing, dated and signed has no effect

Clarke v Queensland Building and Construction Commission [2020] QCAT 88

It is surprising the number of matters we see where builders have not complied with their obligations under Schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) which regulates the content and form of domestic building contracts in Queensland.  

In particular, we often see cases where builders have failed to comply with section s13(2) or 14(2) of Schedule 1B of the QBCC Act that require domestic building contracts over $3,300 to be in written form, dated and signed.

Ignorance of these statutory obligations often results in serious consequences for builders.  However, interestingly, it was the homeowner who bore the brunt of not having a signed written contract in the recent Queensland Civil and Administrative Tribunal (Tribunal) decision in Clarke v Queensland Building and Construction Commission [2020] QCAT 88.

Background

The homeowner, Mr Clarke (Homeowner), unsuccessfully reviewed a decision of the Queensland Building and Construction Commission (QBCC) not to issue a direction to rectify against Latitude Construction Consulting Pty Ltd (Builder).   

The Homeowner and the Builder entered into a contract for the construction of a new house behind an existing home.  The Builder also carried out works to renovate the existing home, however the Builder did not sign a contract in respect of these renovation works.  The only signed contract related to the construction of the new home and did not specify any work to be performed on the existing home.

A dispute arose over whether the Builder completed the works on the existing home. The Homeowner argued that the contract for the existing home required three items of work to be undertaken by the Builder that were not completed (or in fact commenced).  The Builder argued that those items were not required to be undertaken by it.

The Homeowner requested the QBCC issue a direction to rectify to the Builder requiring the Builder to complete the incomplete works on the existing home. The QBCC declined to issue the direction. This decision of the QBCC was confirmed in an internal review.

The Homeowner then applied to the Tribunal to review the QBCC’s internal review decision. The Homeowner argued that a direction to rectify should be issued as the Builder failed to complete, or even commence, the disputed works relating to the existing home.

Decision

The Tribunal held that, if the disputed works were required to be undertaken under a contract that related to the existing home, as they were not commenced, they would be incomplete. Thus, it was necessary to determine whether the Builder had been engaged to carry out the disputed works.

Importantly, there was no version of a contract signed by both parties that related to the works to be performed on the existing home. The Homeowner argued that an unsigned version of a contract contained a reference in the Homeowner’s writing to the disputed works, and that this document reflected the agreement. The Builder contended that it had never seen that document and that the contract was in fact an oral agreement that the Builder would carry out the works detailed on the plans relating to the new house.

Relevantly:

1.    section 14(2) requires Level 2 Regulated Contracts to be in written form, dated and signed; and

2.    section 44 provides that, unless the contrary intention appears in the Act, a failure to comply with a requirement of the QBCC Act in relation to a domestic building contract does not render the contract void or unenforceable.

The QBCC submitted the effect of sections 14(2) and 44 of Schedule 1B of the QBCC Act does not make the unsigned contract or the oral contract void or unenforceable and the Tribunal could still determine the scope of the contractual agreement between the parties.

Despite the QBCC’s submission, the Tribunal considered that the contrary intention appears in section 14(10) of the QBCC Act which provides that a contract only has effect if it complies with section 14(2). Accordingly, it was held that Level 2 Regulated Contracts only have effect if, in written form, dated and signed by both parties. 

Therefore, any contract between the Homeowner and the Builder was void or unenforceable and therefore the Tribunal could not turn to the contract to determine if the disputed works were incomplete.

Ordinarily the terms of a written contract between an owner and a builder are relevant circumstances taken into consideration when determining whether a direction to rectify should issue.

In this case, however, given the Tribunal’s finding that the contract was of no effect, the contract was not a relevant circumstance that could be considered.  Consequently, the Tribunal held that the power to give a direction to rectify was not enlivened because the Tribunal was unable to determine if the disputed works were incomplete.

Important Message for Builders

This is an important reminder to builders that:

1.    both Level 1 ($3,301 to $19,999) and Level 2 ($20,000 or greater) Regulated Contracts must be in writing, dated and signed to be enforceable; and

2.    builders who fail to comply with this requirement do so at their own risk and expose themselves to the offence provisions in the QBCC Act (fines and demerit points).

Notably, whilst the decision in this case favoured the Builder, it is important for builders to be aware that this is a rare outcome.  More often than not, failure to comply with section 14(2) will result in significant negative cost implications, fines, and demerit points from the QBCC for builders.

If you have any queries about your building contract and its compliance with the QBCC Act, contact Aleisha MacKenzie 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.