CJM Innotrack Pty Ltd v Liang & Wang [2022] QCAT 53

Andrew Orford  |  Matt Hammond  |  Nikole Rabeling

Key takeout

An unlicensed contractor who undertakes building works under an oral contract is still entitled to payment on a quantum meruit basis, however, that claim is limited by section 42(4) of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).

Facts

The dispute concerned the construction of a duplex on the Gold Coast by builder CJM Innotrack Pty Ltd (CJM) on land owned by the respondent, Mr Liang.  CJM’s involvement occurred in two phases. 

The first phase involved preliminary works performed under an oral agreement between Mr Xiu, the director of CJM, and Mr Liang.  These works included Mr Xiu coordinating building and development approvals, obtaining council permits and arranging the demolition of the existing structure on the land.  These preliminary works occurred at a time when CJM did not hold a building licence.  This was a fact known to both parties.   

The second phase occurred after CJM had obtained a building licence, and the parties had entered into a written HIA contract to construct the duplex.  After completing most of the works, but prior to practical completion, CJM suspended work and failed to rectify defects on the basis that Mr Liang had failed to pay relevant progress payments under both the oral and written agreements.  Mr Liang argued it was entitled to withhold payment to CJM because of an alleged retention scheme, and that CJM could not recover the progress payments it claimed by virtue of section 42 of the QBCC Act. This restricts the amount a builder may recover when performing unlicenced building work.

Decision

The Tribunal determined there were two separate agreements between the parties and that it was appropriate to sever the works which were the subject of the oral agreement from those which were performed under the written contract.  It was held that the HIA contract was solely for the construction of the duplex and was not intended to include the preliminary works. The obligation to pay for work performed by CJM under the HIA agreement sat outside any other obligation to pay for the unlicensed work under the oral agreement.

Following the 2019 decision of the High Court in Mann v Paterson Constructions Pty Ltd the Tribunal determined that CJM was entitled to a common law claim on quantum meruit basis and was entitled to recover the fair and reasonable value of the work it had performed.  The quantum meruit claim extended to the preliminary works, the works performed under the HIA contract and variations.  The assessment of the reasonable value of the work was tempered by two main constraints.

1. Following Mann v Paterson, any claim should not exceed a fair value calculated in accordance with the contract price or the appropriate part of the contract.
   
2. The unlicenced portion of the works were limited by section 42(4) of the QBCC Act, which provides that the amount claimed must only be for an amount that: 

• is not more than the amount paid in supplying materials and labour for carrying out the building work;
• does not include an allowance for the unlicensed person’s labour, profit or any unreasonably incurred costs;
• is not more than the amount agreed to for the work; and
• is not for unlicensed person’s own direct or indirect benefit.

The Tribunal held that 42(4) only applied to the unlicenced portion of the works, and as such this limitation did not affect the substantive building works performed under the written contract, nor related variations.

This decision is a helpful clarification of principles as to the limitations, both under statute and at common law, on entitlement to payment for unlicensed building work.