Australia: Contesting recovery proceedings brought by the Queensland Building and Construction Commission – a rare success story
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Civil procedure – summary judgment – insured granted order for summary judgment in action for recovery of payment made to home owners under statutory building and construction insurance scheme – insured appeals on basis that payment not made in accordance with Act – appeal allowed – whether insurer complied with Act in making payments to home owners is a justiciable issue for trial

In Samimi & Anor v Queensland Building and Construction Commission,¹⁴ the Queensland Court of Appeal allowed an appeal brought by a builder granting relief from an order for summary judgment in the District Court of Queensland. This decision is a rare example of a builder successfully defending recovery proceedings initiated by the Queensland Building and Construction Commission (QBCC) for payments made under the statutory insurance scheme established by the Queensland Building and Construction Commission Act (1991) (Qld) (Act).

Background facts

Kamran and Mojgan Samimi were the directors of a building company, which carried out residential construction works on two buildings for the building owner. Following a dispute with the building company, the owner subsequently terminated both construction contracts for these buildings and made a claim to the QBCC under the statutory insurance scheme established in Part 5 of the Act for the costs associated with non-completion of the construction work.

The QBCC considered that the owner's claim was valid and paid the owner $400,000 in accordance with the policy. In turn, the QBCC initiated recovery proceedings under section 71(1) and section 111C of the Act against the Samimis to recover this sum, and sought summary judgment on the claim which was initially granted by the District Court but ultimately refused by the Court of Appeal in allowing the appeal of the primary judge's decision.

This case demonstrates the circumstances in which a court may be persuaded to look behind and challenge the QBCC's processes after payment has been made to a home owner.

The decision on appeal

At first instance, the QBCC was awarded summary judgment against the Samimis, primarily, on the basis that there was no factual dispute requiring a trial and that a decision made by the QBCC to make a payment under the insurance scheme was not justiciable. The trial judge's decision was appealed, on grounds including that the material presented to the trial judge raised a dispute of fact regarding the amount paid by the owner on the original building contract, which would then impact on the amounts payable under the statutory insurance scheme. Indeed the amount paid on the original contract, in accordance with the Samimis submissions, would have meant that no sum would have been payable under the statutory insurance scheme.

On appeal, Boddice J delivered the leading judgment with McMurdo P and Morrison JA agreeing. The appeal was ultimately allowed on the basis that the matter did not satisfy the test for summary judgment found in r 292 of the Uniform Civil Procedure Rules 1991 (Qld). Boddice J noted that the Samimis had put on the record, legitimate questions of fact and discrepancies raised in the QBCC's submissions mitigating against granting summary judgment.

Although the Act has been interpreted as providing the QBCC with a right of recovery which is not dependent on establishing the legal correctness of a determination to make a payment or an anterior step that has led to the decision to pay, the Court found a factual error can be the subject of a proper defence to a claim for recovery under section 71(1). Section 71(1) of the Act requires as a pre-condition for recovery that a payment was made "on a claim under the insurance scheme" rather than just any payment.

His Honour did not accept the QBCC's submissions that section 71(1) of the Act precludes any judicial inquiry as to whether the QBCC has complied with the Act in making payment to the home owners. It was held that recovery under section 71(1) of the Act required the QBCC to make a valid payment on a claim under the insurance scheme. In circumstances where there is cause to question whether a payment on the insurance scheme was made in accordance with the terms of the scheme, factual matters sought to be raised by way of defence should be considered as justiciable under section 71(1) of the Act.

Summary

Once payment has been made by the QBCC under the statutory insurance scheme, the defendant/builder to recovery proceedings cannot usually go behind QBCC's processes to challenge the underlying payment as a defence to the recovery action. To defend a recovery action under the Act, the defendant must show the QBCC made a factual error, such that the payment was not made "on a claim under the insurance scheme". This case shows that if a defendant can raise evidence to suggest the payment made by the QBCC was not "on a claim under the insurance scheme" it will amount to a justiciable issue warranting determination at trial.