Builder dispute options limited following QBCC insurance payout

The Queensland Court of Appeal has recently handed down the decision of Queensland Building and Construction Commission v Turcinovic [2017] QCA 77, confirming that, once the Queensland Building and Construction Commission has made a payment under a homeowner’s insurance policy, the builder will have very limited grounds on which to contest the QBCC recovering against the builder.

Builders performing work covered by the QBCC’s statutory insurance scheme need to take every opportunity to challenge QBCC decisions that they disagree with where the decision might lead to a payment being made to a homeowner under the insurance scheme.

Facts of the case

The builder carried out defective building works on a number of different homes throughout Brisbane.

The homeowners claimed under the QBCC’s statutory insurance for the defective work. Each claim was accepted by the QBCC and payments were made to the homeowners under the statutory insurance scheme.

The QBCC then sought to recover the amounts from the builder, through proceedings in the District Court, pursuant to section 71 of the QBCC Act.

First decision

The QBCC filed for summary judgment on the basis that the builder had no real prospect of defending the recovery proceedings.

This is because, by virtue of section 71 of the QBCC Act, the QBCC has the right to recover payments made on an insurance claim from the builder who carried out the relevant building work. This right can only be contested by a builder through either:

• the limited defences specified under section 71 (for example, mistaken identity); or
• on the basis that the payment was not made on a claim under the statutory insurance scheme.

The builder’s primary defence was that the amounts paid by the QBCC were so unreasonable so as not to be ‘payment on a claim under the statutory insurance scheme’. To supports this argument, the builder led evidence of a quantity surveyor that called into question the reasonableness of the payments made by the QBCC.

The District Court refused to grant summary judgment for the QBCC because, in its opinion, the builder had a real defence.

Appeal

The Court of Appeal set aside the decision of the District Court and granted the QBCC summary judgment against the builder.

This decision was made on the following grounds:

• Section 71 of the QBCC Act does not function as a ‘backdoor review catch all’ for any or all of the decisions made by the QBCC in the lead up to the recovery proceedings.
• The QBCC’s right to recover under section 71 of the QBCC Act is not conditional upon the correctness of any determination, decisions or steps taken by the QBCC.
• Circumstances that would enable a challenge under section 71 are limited. However, the Court suggested that a challenge might be made where the claim was not paid in accordance with the QBCC’s insurance policy or where the QBCC had failed to take a step in the process, such as calling for tenders.
• The builder’s evidence was insufficient to prove the payments were unreasonable, as the quantity surveyor’s report provided little reasoning supporting contrary findings.

Comments

Once the QBCC has made a payment to a homeowner under the statutory insurance scheme, a builder has only limited grounds on which to contest the QBCC’s recovery of that payment from the builder.

Accordingly, from the builders’ perspective, it is imperative that, where appropriate, builders take all opportunities to challenge decisions by the QBCC early in the process. This will avoid the QBCC proceeding to the stage of making payments to homeowners and then seeking to recover the amount of those payments from the builder.

Importantly, the QBCC Act provides a builder with the right to internally and externally review certain decisions made by the QBCC, including a decision:

• to direct the rectification of defective building work;
• about the scope of rectification works to be undertaken under the statutory insurance scheme; and
• that building work undertaken at the direction of the QBCC is not of a satisfactory standard.

We recommend that builders seek legal advice after they receive any decisions from the QBCC.

Cooper Grace Ward has extensive expertise in all aspects of construction disputes and review of QBCC decisions. To discuss how we can assist you, please don’t hesitate to call Rocco Russo from our building and construction disputes team on 07 3231 2444.