Directions to rectify defective domestic building work – part 3

Under the Queensland Building and Construction Commission Act 1991 (Act) the Queensland Building and Construction Commission (QBCC) is empowered to issue to a builder a notice to rectify defective domestic building work. 

What is defective building work?

Schedule 2 of the Act defines “defective” as including faulty or unsatisfactory building work.

Under section 72 of the Act, if QBCC is of the opinion that building work is defective or incomplete, it may direct the person who carried out the work to rectify it as per the terms of QBCC’s Rectification of Defective Building Work Policy (Policy).

That said, under section 72(5) of the Act QBCC is not required to give a direction if satisfied that, in the circumstances, it would be unfair to issue a direction, such as where an owner refuses to allow a domestic building contractor to return to the owner’s home or because an owner’s failure to properly maintain a home has exacerbated the extent of defective building work carried out on the home.

However, the Policy does not provide guidance about what situations may result in a decision being made by QBCC not to issue a direction to rectify on the basis of unfairness.

For example, is money owing to a builder under a domestic building contract a factor that may mean a direction to rectify defective building work may be unfair?

This was the issue considered in the recent decision of O’Donnell t/as Ronin Built v Queensland Building and Construction Commission [2020] QCAT 293 (O’Donnell).

Background of O’Donnell

The builder performed building work and considered it had reached practical completion, subject to any minor defects and omissions to be attended to during the contract defect liability period.

The homeowners after obtaining a pre-handover report took a different view and disputed the amounts claimed under the contract.

In January 2019 proceedings were commenced before QCAT by the builder against the homeowners (Recovery Action), the homeowners paying to the builder the undisputed amount claimed under the contract with the disputed balance being paid into the Master Builders Queensland (MBA) holding account.

In June 2019 it was agreed some funds in the MBA holding account would be released to the builder and in September 2019 it was agreed the remaining funds would be released to the homeowners pursuant to a settlement agreement in the Recovery Action.

Parallel to the QCAT Recovery Action, the homeowners in January 2019 complained to QBCC about the alleged defective domestic building work.

QBCC’s findings

QBCC in May 2019 determined that of the 23 complained of items, some were not defective, some had been rectified and two were still defective, but it would be unfair to issue a direction to rectify because of the amount then outstanding in the Recovery Action.  In July 2019 QBCC internally reviewed the initial decision of May 2019, a direction to rectify being issued for the two outstanding defects notwithstanding money at that time remained unpaid under the contract.

Before QCAT, QBCC in reliance on Birrell v Queensland Building Services Authority [2013] QCAT 56 argued it was difficult to imagine a situation where it would be reasonable for a homeowner to pay a builder the full contract price when faced with a refusal to rectify alleged defects later confirmed as defects.

Based upon the evidence QCAT found while the homeowners were exacting clients who wanted to ensure a finished product free of defects, the two outstanding items were in fact defective and had not been rectified.

That said, when QBCC issued the direction to rectify in July 2019, the homeowners’ authorised release of the funds to the builder in June 2019 did not appear to be conditional upon him attending to the two outstanding defective items and there were still funds in dispute under the Recovery Action.

In July 2019 it would have been reasonably assumed that the cost to rectify the two outstanding defective building work items would have been less than the amount remaining in dispute under the Recovery Action.

QCAT found the builder was not being obstinate or recalcitrant when the directions to rectify were issued, rather he had been through a difficult process of trying to resolve differences with the homeowners through both QBCC and QCAT intervention and the dispute with the homeowners had not been fully resolved at the time the direction was issued.

Given the final outcome in the Recovery Action and considering all of the surrounding circumstances of the matter it would be unfair to issue a directions to rectify.

Accordingly, the direction was set aside.

Takeaways

Disputes about defective building work can be stressful for both domestic builders and home owners.   Taking timely legal advice at the beginning of a dispute about defective building work may assist in managing such disputes before they spiral into protracted litigation.

Links and further references

Cases

O’Donnell t/as Ronin Built v Queensland Building and Construction Commission [2020] QCAT 293

Birrell v Queensland Building Services Authority [2013] QCAT 56

Legislation

Queensland Building and Construction Commission Act 1991 (Qld)

Policies

Rectification of Defective Building Work Policy

Related insights

When to complain about defective domestic building work

Directions to rectify defective domestic building work – part 1

Directions to rectify defective domestic building work – part 2

Further information

Contact Dundas Lawyers Gold Coast for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.