In Body Corporate for HQ Apartments CTS 39869 v Queensland Building and Construction Commission (QBCC) [2015] QCAT 115, the Queensland Civil and Administrative Tribunal (QCAT) determined that it would be unfair for the QBCC to direct a builder to replace a defective building product where the existence of the defect in the product would not have been apparent to a reasonably competent builder.

WHAT HAPPENED?

A developer contracted with a builder, Jadecorp Constructions Pty Ltd (Jadecorp) to build a nine storey unit complex in Chermside. The complex is known as HQ Apartments.

Jadecorp constructed the building using the AFS Logic Wall System (Logic System) manufactured by Architectural Framing Systems. The Logic System uses prefabricated wall and floor panels made out of galvanised steel sections with bonded formwork boards on each side. At the time the Logic System was recognised as being acceptable for use in a project of this type and complied with Australian Building Standards.

The walls in the complex began cracking, bulging and delaminating, and the metal components in contact with the walls deteriorated rapidly. In addition, there were serious dampness problems which were traced to the Logic System.

The Logic System was found to be defective in that the formwork bonded to the galvanised steel sections consisted of magnesium oxychloride boards (MOBs). The MOBs are significantly more ‘hygroscopic’ than other materials like fibro cement or blockwork. This means that they attract more moisture and in this case moisture was able to enter the MOBs and cause the problems described above.

The Body Corporate for HQ Apartments (Body Corporate), made a complaint to the QBCC in relation to numerous defects in the complex, including those relating to the Logic System.

WHAT DID THE QBCC DETERMINE?

The QBCC did direct Jadecorp to rectify a number of defects but decided not to direct Jadecorp to rectify the problems relating to the Logic System. This was on the basis that it would be unfair to do so in circumstances where Jadecorp could not have been expected to know of the existence of the defect in the Logic System.

The Body Corporate applied to QCAT for a review of that decision.

QBCC ACT

In relation to directions by the QBCC, section 72(2) of the Queensland Building and Construction Commission Act 1991 (the Act) provides that the QBCC can direct the person who carried out building work to rectify the work and to remedy consequential damage caused by the work, if the work was defective.

However, section 72(5) of the Act provides that the QBCC is not required to give the direction if it would be unfair to do so.

WHAT DID QCAT DETERMINE? 

In the review the Body Corporate argued that it would not be unfair to direct Jadecorp to rectify the problems relating to the Logic System for a number of reasons, including that the true cause of the problems was that Jadecorp had not properly sealed and waterproofed the building.

Member Gordon did not accept these arguments and confirmed QBCC’s decision that in the circumstances it would be unfair to direct Jadecorp to rectify the problems relating to the Logic System.

In coming to that decision it was accepted that the relevant Logic System documentation provided to Jadecorp stated that fibro cement boards were used for the formwork in the product, rather than MOBs. The Member stated:

“[i]t would not have been apparent to a reasonably competent builder without making tests, that AFS Logic Wall System panels used magnesium oxychloride boards for the formwork rather than fibro cement boards.

“[t]he operatives and officers of Jadecorp were not aware at the time of construction that the AFS Logic Wall System panels actually used on site used magnesium oxychloride boards for the formwork rather than fibro cement boards.”

In these circumstances the Member concluded that the unfairness test in section 72(5) had been met.

Member Gordon also found that Jadecorp had not failed to properly seal and waterproof the building.

IS THERE ANY RELIEF FOR THE BODY CORPORATE? 

The Member concluded that, although it would be unfair to direct rectification of the defects relating to the Logic System, it was possible that Jadecorp may be contractually responsible for the defects.

The Body Corporate has in fact commenced court proceedings against Jadecorp and others relating to the defects in the complex.

The author acknowledges the assistance of Mitchell Cox, Law Graduate, in preparing this article.