QBCC Home Warranty Insurance claims

This article is a continuation from the previous article done by Dundas Lawyers: Review of QBCC decisions – part 4 and the case that was outlined therein. Part 5 of the Queensland Building and Construction Commission Act 1991 (Qld) (Act) establishes a statutory home warranty insurance scheme (QBCC Home Warranty Insurance Scheme), the purpose of which is in certain situations to provide basic assistance to consumers of residential construction work. But does coverage under the QBCC Home Warranty Insurance Scheme extend to prepayments made for residential construction work yet to be performed?

The Act

The QBCC Home Warranty Insurance Scheme is created under Part 5 of the Act. Section 67X(2) notes:

“[t]he purpose of the [QBCC Home Warranty Insurance Scheme] is to provide assistance to consumers of residential construction work for loss associated with work that is defective or incomplete.”

It was this section of the Act and the policy terms of the QBCC Home Warranty Insurance Scheme that prevailed at the time Henry and Marie Schneider (Homeowners) entered into a residential building contract with Line Constructions Pty Ltd in 2014, which was the focus of a recent Court of Appeal of the Queensland Supreme Court (Court of Appeal) decision Schneider v Queensland Building and Construction Commission [2021] QCA 15 5 (Schneider).

Schneider

The Homeowners were sent invoices accompanied by photographs purporting to show the completion of the Enclosed Stage and the Fixing Stage of the house being built for them.^[1] The Homeowners paid the progress claims but it transpired they were in fact fraudulent in that the works had not been performed, the photographs being of a different property.^[2] Upon discovering the fraud, the Homeowners terminated the contract with the builder and lodged a claim under the QBCC Home Warranty Insurance Scheme.^[3]

The QBCC denied the claim under clause 1.6(b) of the relevant home warranty insurance policy on the basis the Homeowners had made prepayments, being payment for contracted works before the work had actually been undertaken and the money had become due.^[4] Those prepayments reducing the amount payable under the policy by their value.^[5] The Queensland Civil and Administrative Tribunal (QCAT) overturned the QBCC decision to reject the claim but upon appeal to the QCAT Appeal Tribunal, that decision was overturned.^[6]

The Homeowners then appealed to the Court of Appeal.^[7] The Court of Appeal held, given the wording of section 67X(2) of the Act and the policy terms of the QBCC Home Warranty Insurance Scheme that applied at the time of contracting in 2014, coverage did not respond to what were prepayments made in response to fraudulent claims for work not actually performed.^[8] Rather, the focus of the QBCC Home Warranty Insurance Scheme was whether work has been carried out and if so to what extent and whether or not it was defective.^[9]

In the case of Schneider, notwithstanding they had been induced by the builder’s fraudulent claims, the Homeowners had paid money for contracted works before they became due and were thus prepayments which under the policy terms of the then prevailing QBCC Home Warranty Insurance Scheme, would reduce the amount payable under the policy by the value of the prepayments.^[10] The Court of Appeal held the policy was not dependent upon the particular conditions of a contract or the reasons why the works had not been performed and did not depend upon the knowledge of the Homeowners or the state of mind of the building contractor.^[11] Rather, the policy operated solely upon the question of whether work had been done and therefore the money for that work had become due.^[12]

If a payment was made before that point, it was a payment of money for the contracted works before they became due and thus any claim made upon the QBCC Home Warranty Insurance Scheme would be reduced by the amount of the prepayment. In this instance, the Homeowners’ prepayments of $128,205.00 were not recoverable under the QBCC Home Warranty Insurance Scheme.^[13]

Takeaways

The current terms and conditions of the QBCC Home Warranty Insurance Scheme are found in the Queensland Building and Construction Commission Regulation 2018 (Qld) at Schedule 6. Schedule 6 makes it clear that assistance for residential construction work consumers is focused on work that is incomplete or defective. Accordingly, Schneider will inform the application and interpretation of the current terms and conditions of the QBCC Home Warranty Insurance Scheme moving forward.

Links and further references

Further information about the QBCC

If you are seeking advice or have concerns regarding the QBCC Home Warranty Insurance Scheme, particularly in relation to prepayments for residential construction work, contact Dundas Lawyers Gold Coast for a confidential and obligation-free discussion:

Mitch Brown
Dip.T.,BA.,LL.B.,MQLS.
Legal Practice Director – Dundas Lawyers Gold Coast Pty Ltd
Telephone: 07 5646 9174
Mobile: 0420 205 105
e: mbrown@dundaslawyers.com.au
1300 386 539 | 1300 DUN LAW

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.

[1] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [5].

[2] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [5].

[3] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [7].

[4] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [8].

[5] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [10].

[6] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [9]-[11].

[7] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [12].

[8] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [19]-[29].

[9] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [24].

[10] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [32]-[40].

[11] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [41].

[12] Schneider v Queensland Building and Construction Commission [2021] QCA 155 [41].