In Queensland, most residential building work valued over $3,300 must have home warranty insurance under the Queensland Home Warranty Scheme.  Under the scheme, the builder is required to pay a premium to the Queensland Building and Construction Commission (“QBCC”) before work begins.   A person may be able to make a claim to the QBCC under the scheme where:

• a licensed builder does not complete the contracted residential construction work and you have terminated the contract;
• the contractor fails to rectify defective work;
• the building suffers from subsidence or settlement.

It is often thought that the QBCC can only recover an amount paid out by the Queensland Home Warranty Scheme from the building contractor who carried out the building work.  This is not the case.

In the case of defective or incomplete building work, the Queensland Building and Construction Commission Act 1991 (“QBCC Act”), states that if the QBCC is of the opinion that building work is defective or incomplete, then it may direct “the person who carried out the building work” to rectify the building work.[1]

Subsequently, if the defective or incomplete building work is not rectified, the QBCC may seek tenders for carrying out the building work if it is of the opinion that a person may be entitled to assistance under the scheme, and may accept any tender it considers appropriate, whether or not the tender was for the lowest cost.[2]

If the QBCC then makes any payment on a claim under the insurance scheme, it may recover the amount of that payment, as a debt from:

• “…the building contractor by whom the relevant residential construction work was, or was to be, carried out”; or
• “… any other person through whose fault the claim arose.”

“Building contractor” in this instance is defined to include nine categories of person: eight of which include the description “building contractor”, and the last of which is “a person who, for profit or reward, carried out the work”.[3]  In other words, a person who is not otherwise a building contractor can be included in the meaning of that expression “Building contractor” under these provisions if they are a person who carried out the work for profit or reward.

Further, reference in the Act to “a person through whose fault the claim arose” is taken to include a person who performed services for the work if the services were performed without proper care and skill.

Taken together, the scope of class of person or entity from whom the QBCC can recover is not limited to building contractors and is potentially very wide, but since only a person who carried out “building work” can be directed to rectify,[4]  it was thought that only a person who carried out “building work” could be liable under the statutory insurance scheme to repay the amount paid for rectification costs.  Apparently, that is not the case.

In the recent Queensland case of Marshall & Ors,[5] the Supreme Court confirmed that a building certifier can be caught by the provision as coming within the meaning of “any other person through whose fault the claim arose”.

In that case, a building company entered into a building contract with a land owner to construct a building.  The building work is alleged to have incorporated defects because the fire separation walls between adjoining residential units or in the roof spaces of adjoining units did not comply with the requirements of the Building Code of Australia.

The QBCC made a payment on a claim under the statutory insurance scheme and then sued various parties for the debt.  These defendants included a private building certification company and its three directors (“Applicants”). The QBCC asserted that the private building certification company was a person (in the legal sense) through whose fault the claim arose for the purposes of the Act.

The Applicants applied to the Court for summary judgement and strike out against the QBCC, primarily on the basis that the QBCC could not establish that they carried out the relevant residential construction work.

This decision is of concern to our clients because “certification work by a building certifier” (along with many other types of work) is expressly excluded from the meaning of “building work” under the Act.[6]

However Justice Jackson took the view that the phrase “a person who, for profit or reward, carried out the work” is not expressly conditioned on that person being a person who carries out or was to carry out building work.  He stated:

“That certification work is not itself building work does not exclude the possibility that a building certifier could perform services for residential construction work. There are a number of categories of persons who would potentially be classed as design professionals who might come within the meaning of the words “a person who performs services for the work”.[7]

Likewise, Justice Jackson found that the words “any other person through whose fault the claim arose” also did not include that condition.

In my view, this decision has serious implications for not only certifiers, but also other classes of service providers whose work is expressly excluded under the Act, including (but not limited to) architects, engineers, licensed surveyors; plumbers, electricians and electrical engineers.

Where the QBCC issues a defect notice, the recipient is entitled certain procedural fairness mechanisms including internal review[8] and independent merits review of some QBCC decisions including the decision to issue the notice.[9]   If required to rectify the defects, then the recipient of the notice is usually able to rectify the defects at cost using their own resources.

However, because work performed by these other classes of service providers is excluded under the definition of “building work”, it appears that the QBCC cannot issue them a Defect Notice.  And as the Court of Appeal has previously held that recovery by the QBCC of a payment made under the statutory insurance scheme is only depend on a payment being made by the QBCC and is not dependent on the valid issue of a defect notice, in my view, the effect is that these other classes of service providers are excluded from those procedural fairness mechanisms and from the opportunity to rectify the work themselves.

[1] QBCC Act s 72(1) and (2).

[2] QBCC Act s71AC

[3] QBCC Act  S 71(2)(a)(ix).

[4] QBCC Act s 72(1) and (2).

[5] [2016] QSC 200.

[6] Item 34 in Sch 1AA of the Queensland Building and Construction Commission Regulation 2003 (Qld) expressly excludes certification work performed by a building certifier in a certifier’s professional practice, under the Building Act 1975 (Qld), from being “building work” within the meaning of that term as defined in the dictionary of the  QBCC  Act.

[7] Marshall & Ors [2016] QSC 200, at [39].

[8] Under QBCC Act s 86A(1.

[9] Under QBCC Act s 86(1)(e).