‘Licence to Drill’ – Do you have a contractor’s licence?

Without one, the only Bond you may need could be for bail.

The recent prosecution of an unlicensed tradie pursuant to section 42 of the Queensland Building and Construction Commission Act 1991 (Qld) (the ‘Act’), for carrying out unlicensed building work[2] has been followed up with some serious muscle-flexing from the Queensland Building and Construction Commission (the ‘QBCC’). Given QBCC’s sabre rattling, we thought it a good idea to look at section 42, because:

• Its application is complicated; and
• Getting it wrong can be disastrous; it really could knock ‘The Living Daylights’[3] out of you and your business

Frankly, we could write a book on this topic. However, we expect that reading such a tome would be like watching paint dry for most of you; as such, we will try to be brief.  If you take nothing else away from the thoughts below, it would be please get detailed legal advice before you, to quote another franchise, ‘…boldly go where no man has gone before’.

Section 42 is complicated

You mean, section 42 just doesn’t prohibit me from putting one brick on another if I don’t have a licence, you know, building stuff?

Sorry to break it to you, no. First, there are presently 11 items of work that are simply excluded from the requirement to be licensed under section 42 (noting that there are also exceptions to the exclusions[4]). Second, the definition of ‘building’ includes any fixed structure. You’d be surprised what that has caught over the years, including roads, and pipe works. Third, the definition of ‘building’ then influences what is meant by ‘building work’, which in turn is defined to include some 11 matters, each of which contains a certain level of ambiguity. Fourth, there are 54 items (none of which are clearly drafted) that might be thought to fall within the definition of ‘building work’, which are expressly excluded. Fifth, the term ‘carry out’ contained in section 42(1) contains three ‘sub-definitions’, the final one of what is further broken down into four matters, which also have definitions attached to them. Finally, you need to trawl through all of the classes of licence (more than 50 currently) to ascertain whether you have a licence ‘of the appropriate class’. We note that some licences overlap, and indeed, most feature the wonderful unclear phrase ‘incidental work of another class’.

Good luck getting that right.

What happens if I get it wrong?

Well, it isn’t pretty.

First, if you breach section 42, it invalidates your building contract, meaning you don’t have a right to be paid under it. That means that you might be forced pay back any money you have already been paid prior to the breach being detected. Good luck with that finding that money in a hurry if you’re not ‘Goldfinger’.[5] Just in case you are wondering, at least as regards the first point, it doesn’t matter whether the person with whom you are contracting knew that you did not have the proper licence.

Second, you are only entitled to ‘out of pocket’ expenses in respect of the ‘building work’ portion of the contract (section 42(3) and (4) of the Act). Whilst you can claim upon a quantum meruit basis for the non-‘building work’ carried out, there is a prospect (which hasn’t been considered since the High Court looked at the relationship between claims under a contract and those in restitution) that a Court will limit such a claim to the contract sum.[6]

Third, you cannot use the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the ‘BIF Act’) to assist you to recover amounts owing (as the BIF Act only applies if there is a valid contract in place).

Finally, it opens you up to the following:

• Criminal penalties (up to 250 penalty units[7] for a first offence, 300 penalty units for a second offence, and 350 penalty units or 1 year’s imprisonment for a third or subsequent offence or if building work carried out is tier 1 defective); and
• Disciplinary action.

Just regarding disciplinary action, if you have a licence (of one class) but carry out ‘building work’ which is outside that class, penalties can include suspension/cancellation of your licence. Such would be devastating for your business. We note that non-licensees can also be disciplined.

There’s also nothing that says that you can’t be criminally charged and disciplined based on the same facts.

So, how do I avoid this hellscape?

First, get legal advice. We repeat, get legal advice. Once more, with feeling, for those in the cheap seats, get legal advice.

Second, do not rely upon QBCC’s view of what your licence permits. They try hard, by the Courts have made it clear that their opinions are not able to be relied upon should ‘push comes to shove’. We have seen contractors caught taking this shortcut.

Third, drafting of your contract. There are drafting techniques that, based on a least one case, might mean that you can at least avoid the ‘civil’ consequences of a breach. There’s not much that can be done about the criminal and regulatory issues.

Take away

Remember, getting compliance wrong can lead to disastrous consequences. Get legal advice. If you get it wrong, we guarantee you’ll ‘Never Say Never Again’.[8]

[1] Yes, we know that Timothy Dalton was a rubbish Bond, but it worked for the title, so here we are.

[2] Resulting in a fine of $10,000.00 plus Court costs, but we note that the maximum penalty for a breach of section 42 is 350 penalty units (at the time of writing, $154.80 per unit) or 1 year’s imprisonment.

[3] See what we did there, another Bond reference.

[4] And you are unlikely to ‘luck into’ one of the exclusions. Assuming that they are able to be used in your situation, they generally need to be ‘set up’ by decisions made (and which you will need to prove have been made) before your tender is even submitted.

[5] Connery is still the best Bond.

[6] Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 per Deane J.

[7] As at July 1 2023, 1 penalty unit = $154.80.

[8] See, we even included a non-Eon Bond; this one had Connery too.

Queries

For further information regarding this article, please contact the author or any member of our Building & Construction team.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.