The appellants were directors of a building company which was engaged to build two new residential dwellings at St Lucia for the owner in November 2006. The contract was terminated after relations between the parties soured and the dwellings were left incomplete with some work defective. The owner made a claim on the statutory insurance policy and obtained a Quantity Surveyor’s report in June 2009 which assessed the total cost to complete the residences at $1,120,000. In September 2011 QCAT determined, in proceedings between the owner and QBCC, that a cap under the policy applied to each dwelling and QBCC subsequently paid $400,000 to the owner.
QBCC commenced a proceeding in the District Court seeking recovery of this amount from the appellants under ss71(1) and 111C of the QBCC Act (the Act) which provides for the recovery of “any payment on a claim under the insurance scheme”. The appellants, by their amended defence, put in question the owner’s entitlement to have received payment in relation to the contract. QBCC sought summary judgment, contending that the matters raised in the appellants’ defence had no real prospect of successfully defending all or part of the claim and there was no need for a trial of the claim or part of the claim. The appellants sought to resist summary judgment on the grounds that there was a factual dispute about the amount the owner had paid under the contract which had the result that there was a dispute about whether any amount was payable under the terms of the policy. The appellants contended that QBCC had wrongly calculated the amount of the owner’s remaining liability under the contract and, as a result, had wrongly paid an amount that was not payable under the terms of the policy.
The primary judge concluded QBCC was entitled to a summary judgment and found the payment under the policy was valid and not conditional upon correctness of determination by QBCC in making that payment or the correctness of any anterior steps taken in deciding the amount of the payment. The primary judge held that even if there had been an error in the administration of the statutory insurance scheme it was not a factual error of such a nature that could give rise to a defence to the claim.
The issues on appeal were as follows:
- Whether there was a factual dispute as to the amount paid by the owner under the contract and therefore the amount properly payable under the policy.
- If there was such a dispute, whether it was legally relevant to the recovery claim and whether the appellants were entitled to defend the claim on the basis that no amount was properly payable under the policy.
Boddice J, with whom McMurdo P and Morrison JA agreed, allowed the appeal and dismissed the summary judgment application.
His Honour held that the QBCC had a right to recover a payment made by it on a claim under the statutory insurance scheme. This right was not dependant on QBCC establishing the legal correctness of its decision to make a payment or of anterior steps taken by it to reach that decision. A mere error of fact connected with the claim process was not enough to avoid a liability.
However the requirement that the payment be made “on” a claim involves a requirement that the payment made be within the policy. If there was a factual error of such a nature that the payment was not within the policy claim QBCC was not entitled to recover the amount from the appellants.
Here there was a genuine factual dispute as to the amount of the owner’s remaining liability under the contract and the questions surrounding the validity of payment did not merely relate to anterior decisions taken by QBCC but rather related to whether the payment was made “on a claim under the insurance scheme”, the determination of which directly affected QBCC’s ability to recover the payment.
This consideration had the effect that the matters raised by the appellants were not appropriate for summary judgment.
Damian Clothier QC successfully appeared with Philippa Ahern on behalf of the appellants, instructed by Peter Ryan Lawyers.
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