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1
Queensland Building Services Authority Amendment
QUEENSLAND BUILDING SERVICES
AUTHORITY AMENDMENT BILL 1999
EXPLANATORY NOTES
GENERAL OUTLINE
Objective of the legislation
The legislation is designed to remedy deficiencies that have arisen in
administration of the Queensland Building Services Authority Act 1991 and
in building industry regulation generally.
The goal of industry regulation is to provide for the maximum operation
of market forces consistent with protection of consumers, contractors,
suppliers and other industry participants from unconscionable practices and
injustice arising from their relative market knowledge and power.
In establishing regulatory mechanisms, the legislation also attempts to
allocate operational costs to the building sector and among participants, so
as to avoid costs being borne by taxpayers generally.
Reasons for the Bill
The Bill arises from a process of review of existing regulatory
arrangements that has been ongoing for some years. It represents the first
stage of legislative implementation of the outcomes of this review process.
The Bill simultaneously--
· remedies what are perceived as deficiencies in the overall structure
of industry regulation;
· explicitly recognises the structure of contractual relationships in
the building industry;
· deals with problems arising from contractual relationships among
industry participants;
· defines vague or poorly understood concepts and relations
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Queensland Building Services Authority Amendment
operating in the industry so as to minimise litigation;
· removes injustices through the creation of rights in certain
instances;
· addresses anomalies in functions and powers of the regulatory
authority; and
· establishes the basis for a more equitably sourced and in the long
term sound financial underpinning for the regulatory apparatus.
Consistency with fundamental legislative principles
There are a number of areas of possible inconsistency with fundamental
legislative principles as set out in the Legislative Standards Act 1991 (the
`LSA'). These arise primarily from administrative necessity in
implementation of the policy intent of the legislation. Detailed comments
are set out below.
Possible conflict 1
Clause 14 delegates the power to establish financial requirements to the
board, through publication of policies. This may be held to infringe the
fundamental legislative principle relating to the delegation of
administrative power (s4(3)(c) of the LSA although, in reality, this
probably is the delegation of a legislative power.
Comment 1
This is an appropriate case for the delegation of administrative power
given:
· familiarity of contractors with this arrangement;
· the detailed financial nature of the requirements; and
· the need to be able to amend the requirements promptly to deal
with emerging fact circumstances (for example, the board has
previously amended its policy relating to financial requirements
for licensing to allow licensing of subsidiaries where the directors
did not fully control the operation of the company and therefore,
were unwilling to sign director's guarantees).
Equally, members of the board are appropriate persons to hold the
delegated power for establishing financial requirements in that:
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Queensland Building Services Authority Amendment
· they are independent of the authority;
· are representative of the industry being regulated; and
· policies of the board are published in the gazette.
Possible conflict 2
Clause 23, which allows the authority to impose immediate suspension
of a licence, probably infringes the fundamental legislative principle
relating to consistency with the principles of natural justice (s4(3)(b) of
the LSA) given that contractors have no right to state their case prior to
the action being taken.
Comment 2
The infringement appears justified given the circumstances in which
the power may be exercised. The precondition in this instance is a
reasonable belief that there is a real likelihood of serious harm to
various persons if the action is not taken. The extensive rights of
representation and review available to affected parties concerning the
exercise of this power also mitigate the conflict.
Possible conflict 3
Clause 24, which empowers the authority to conduct random audits of
licensees and to require licensees to produce financial information, may
infringe the fundamental legislative principle relating to making rights
and obligations contingent on the exercise of administrative power
(s4(3)(a) of the LSA).
Comment 3
The power is adequately defined and hedged to prevent any arbitrary
exercise of power. A decision to audit someone does not have
significant adverse impact upon that person unless subsequent action is
taken against their licence. Safeguards are set up in the legislation to
prevent excessive or onerous auditing. It is arguable that the decision
to conduct an audit is not therefore reviewable by the tribunal, as it has
no definable adverse impact. Any action taken in consequence of a
random audit is, however, subject to full review before the tribunal.
Possible conflict 4
Clause 26, which sets up a process to exclude bankrupts and persons
making use of bankruptcy laws from holding licences or influencing
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Queensland Building Services Authority Amendment
licensee companies for a five-year period, may infringe the
fundamental legislative principle in relation to obligations being
dependent on administrative power (s4(3)(a) of the LSA). It is also
arguable at first sight that this clause infringes the fundamental
legislative principle relating to reversal of the onus of proof (s4(3)(d)
of the LSA).
Comment 4
The powers are adequately defined (being in some cases, largely
objective) and are subject to appropriate review.
The onus of proof issue is not applicable, as this is an administrative
and not a criminal proceeding.
Possible conflict 5
Clause 35, which holds directors of companies personally liable for
amounts owing to the authority under the Act, may be inconsistent
with principles of natural justice (and therefore s4(3)(b) of the LSA).
The inconsistency arises because a director or another executive officer
may be held liable for a debt without being first made aware that the
debt is arising (by, for example, payment of an insurance claim).
Comment 5
This provision does no more than give statutory clothing to a power
already available to the authority by litigating at common law under the
terms of guarantees and indemnities it holds. The impact of this
provision is ameliorated by the fact that the debtor can challenge the
validity of the debt in subsequent recovery proceedings. Further, the
debtor may, in some cases, be afforded an opportunity to rectify work
(and therefore minimise personal liability) where such action is
considered appropriate.
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Queensland Building Services Authority Amendment
Possible conflict 6
Clause 35, which indemnifies the general manager from actions arising
from warnings made under s18(2) of the Act infringes the
fundamental legislative principle of conferring immunity from
proceeding, that is, a defamation proceeding (s4(3)(h) of the LSA).
Comment 6
Warnings under s18(2)(f) of the Act are almost certain to be
defamatory, since they advise the public not to have dealings with a
building contractor on account of such matters as incompetence or
financial malfeasance. These warnings protect the public and minimise
the harm caused by rogue operators continuing in the market. The
immunity is necessary to allow the function to be exercised effectively
in the significant public interest of consumer protection. A similar
provision exists for the Commissioner of Consumer Affairs under
s109 of the Fair Trading Act 1989.
Estimated Cost for Government Implementation
The Bill envisages changes to the statutory insurance scheme to provide
for operational requirements of the authority as industry regulator. The
estimated cost for prudent administration is $5.5m in a full year. These
costs will be paid by consumers through the statutory insurance scheme.
Consultation
The Bill is based on extensive consultation with industry stakeholders
and other interested parties over a period of some years. Groups consulted
include the Queensland Master Builders Association and the Housing
Industry Association (representing builders); the Building Industry
Specialist Contractors' Association and the Master Plumbers Association
(representing subcontractors); the Construction Industry Group of the
Australian Council of Trade Unions - Queensland (representing
employees), and the Queensland Law Society.
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Queensland Building Services Authority Amendment
NOTES ON PROVISIONS
Clause 1 sets the short title of the Act as the Queensland Building
Services Authority Amendment Act 1999.
Clause 2 that the Act can be commenced by proclamation.
Clause 3 provides that the Act will amend the Queensland Building
Services Authority Act 1991. References to sections derive from that Act.
Clause 4 amends s4 (Definitions).
The omission and replacement of words in the preamble of s4
corresponds to contemporary drafting style and does not affect the
intention of the existing provision. The definitions added are necessary
to provide a basis for terms added to the Act by new provisions.
"completed building inspection" relates to an area being added to
the definition of "building work" in this section.
"executive officer" relates to a number of provisions affecting the
liability of persons involved in the control of companies under the
Act.
"field work" relates to an area being added to the definition of
"building work" in this section.
"fire protection system" relates to an area being added to the
definition of "building work" in this section.
"site classification" relates to an area being added to the definition
of "building work" in this section.
"site testing" relates to an area being added to the definition of
"building work" in this section.
Clause 4(3) adds to the definition of "building work" contained in the
existing Act a number of new areas, incorporating the definitions
added by clause 4(2). The effects of adding these areas to the
definition are to require the licensing of fire protection, soil testing and
completed building inspection (such as pre-purchase inspection)
practitioners, and to regulate these activities under the Act. In each
case, inclusion within the regulatory ambit of the legislation arises
from representations by industry. Consumers will also benefit from
access to the protections and dispute resolution procedures made
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Queensland Building Services Authority Amendment
available under the Act for these growing areas of the industry.
Clause 5 inserts new ss4B and 4C.
S4B provides that the State and as far as is possible the
Commonwealth are bound by the Act, except as otherwise provided.
This provision removes all doubt, inter alia, that contractors for the
State and Commonwealth must provide insurance cover under the
statutory insurance scheme for domestic dwellings they construct.
Since insurance cover runs with the building, this will provide
consumers, subsequent purchasers of dwellings constructed by the
State and Commonwealth will enjoy appropriate defects and
subsidence cover. Binding of the State and Commonwealth will also
ensure that contractors for public sector construction operate under the
same regulatory regime as contractors in the private sector.
Construction carried out by the State or the Commonwealth (i.e. using
State or Commonwealth labour and not private contractors) will
remain outside the ambit of the Act.
Neither the statutory insurance scheme (Part 5) nor the authority's
power to direct the rectification of building work (Part 6) appropriately
apply to inspections of completed buildings. New s4C removes this
area of building work from the ambit of those provisions.
Clause 6 amends s9 (Role of board)
The origins of the regulatory regime imposed by the Act lie largely in
the devastating losses sustained by subcontractors under former
provisions. The inclusion of a specific function for the board to
monitor security of payment to subcontractors recognises that
avoidance of potential injustices in this area is a significant object of the
regulatory regime.
Clause 7 replaces s10 (Composition of board) and inserts a new s10A
(Duration of appointment of members)
The new provisions inserted by this clause change the board to make it
smaller (reduction from 9 voting members to 7 voting members and 1
non-voting member) while retaining the same overall balance of
industry, professional and consumer representation as the previous
board. The former requirements for certain industry organisations to
submit lists of nominees are omitted as being inconsistent with
appropriate executive discretion. The total number of licensee
representatives is reduced from 5 to 3. 10(1)(a) provides that, of the 3
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Queensland Building Services Authority Amendment
licensees, at least one must be a builder and one a subcontractor. A
representative of building and construction unions is added. In order to
enhance communication between the authority and the Minister, a
non-voting public service representative is also added. The chairperson
is to be appointed from among the seven ordinary members, unlike the
former provision where the chairperson was appointed in addition to
the other members.
S10A, in line with contemporary drafting style, moves coverage of
technical issues concerning appointment to a separate section. The
maximum duration of appointment remains at 3 years and the
mechanism of appointment and determination of remuneration
remains through the Governor in council The automatic vacancy
provisions set by s10A(3) are also varied in line with contemporary
drafting style. The inclusion (s10A(3)(b))of a provision that an
automatic vacancy occurs if a member becomes an employee or
contractor of the authority is an appropriate safeguard and in line with
contemporary public sector practice.
Clause 8 amends s12 (Proceedings at meetings)
This clause is consequential on the changes to the composition of the
board wrought by clause 7. It reduces the quorum for board meetings
from 5 members to 4 members and accounts for the position of the
non-voting public service member in provisions governing voting.
Clause 9 replaces s15 (Fees and allowances)
This clause, while it has the effect of omitting existing s15 and
substituting a new provision, varies from the former provision only in
clarifying the requirement that members of committees established by
the board are only eligible for remuneration if they are also members
of the board. This limits the scope for the board to incur financial
liabilities without otherwise limiting its ability to establish committees
and order its affairs.
Clause 10 amends s18 (Role of general manager)
This clause inserts a new provision in the list of matters under s18(2)
for which the general manager is responsible. This is a new subsection
18(2)(ea) requiring the general manager to undertake strategic planning
so as to enable the authority to hold sufficient assets and reserves to
deal with the cyclical demands placed upon the authority's services by
industry activity. This appropriately makes explicit in the principal
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Queensland Building Services Authority Amendment
legislation requirements imposed implicitly elsewhere.
The omission of 18(2)(h)(ii) arises from false expectations on the part
of some consumers that the authority is able to, or should, provide a
legal advice service. The remaining provisions provide adequate scope
for consumer advice. Projected legislation governing domestic
building contracts will further clarify this issue.
Clause 11 inserts a new part2, division 5 (Insurance manager)
This clause inserts a new division establishing and making consequent
provisions for a statutory position of insurance manager to exist within
the authority. The purpose of the statutory position is to provide the
board with an independent channel of advice concerning the
administration of the insurance scheme. This is achieved while
retaining the advantageous features of existing corporate governance
allowing the general manager to deploy regulatory and insurance
powers to optimal effect in dealing with defective and incomplete
building work. S21 makes it explicit that the statutory insurance
manager is to be appointed by the authority along normal arrangements
concerning authority employees. S22 establishes the limited
independence of the position under the overall authority of the general
manager, with s22(2) providing that only in the provision of advice to
the board as requested by the board is the insurance manager to be
independent of the general manager's control.
Clause 12 amends s25 (General Statutory Fund)
The insertion of a new s25(2)(c) as provided by this clause allows for
the financial scheme established under clause 13.
Clause 13 amends s26 (Insurance Fund)
This clause enables funds to be raised for the operations of the
authority under the General Statutory Fund by collection through the
statutory insurance scheme. Under former arrangements in s26(3)
(omitted by this clause), funds raised by insurance premiums could
only be used for paying claims and for the administration of the
scheme itself. The new s26(3) provisions allow, in addition, some
funds to be raised through premiums to be transferred to the General
Statutory Fund. This reflects the principle that beneficiaries of a
service should contribute to the cost of a service.
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Queensland Building Services Authority Amendment
The maximum amount transferable under this arrangement in any
period of time is to be set by a regulation the head of power for which
is given by new s26(4). It is intended that a regulation under this
subsection would normally detail the amount raised from the scheme
to be transferred for the forthcoming fiscal year.
S26(5) allows the drawing down of funds for the purposes of the
authority's operations, without limiting the number or amounts of
tranches. The flexibility inherent in this arrangement will facilitate the
effective management of the two funds so as to deal with cyclical
conditions applying throughout the year.
S26(6) imposes a requirement for the premium rate as set by
regulation under this section to have regard to the amount to be
transferred.
Clause 14 amends s31 (Entitlement to contractor's licence)
Subclause (1) alters s31(1)(c) - where the licensee is an individual -
and s31(2)(c) - where the licensee is a company - to provide that the
financial requirements to be met by a licensee are defined by a policy
of the board rather than by regulation. This reflects in the principal
legislation the actual position at present, where the regulation delegates
setting of financial requirements to board policy. It is necessary to
have financial requirements set by board policy to allow the authority
greater flexibility in determining appropriate levels and ratios of assets
and turnover, allowing the regulatory apparatus to respond quickly to
changed economic circumstances and building technology.
Subclause (2) replaces s31(2)(b) with a new provision designed to
ensure that a nominated supervisor must have a licence requiring skills
appropriate for the work being supervised. The need for this
amendment arose because holders or house building or general
building licences are necessarily entitled to supervise all types of
building work. Many of these contractors do not have the necessary
experience or competency to carry out individual trade work however
the Act currently enables these persons to be nominated supervisors
for companies carrying out trade work. The amendment will require
such persons to demonstrate that they possess the appropriate skill
base before they will be entitled to be the nominated supervisor for a
company carrying out trade work..
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Queensland Building Services Authority Amendment
Clause 15 amends s33 (Application for licence)
The existing s33 implicitly limits the authority to information supplied
by the applicant in obtaining information for use in assessing a licence
application. The new s33(3) inserted by this clause explicitly allows
the authority to obtain information from extrinsic sources, such as
credit bureaus, referee checks and site inspections. This provision thus
gives legislative sanction to sound regulatory practice, aimed at
ensuring appropriate financial requirements and competencies are
achieved for entry to the industry as a licensed contractor.
Clause 16 amends s35 (Imposition of conditions etc. on grant of licence)
Under existing provisions, the requirement for a licensee to continue to
meet financial requirements in order to trade under the licence
following the initial grant of a licence is insufficiently clearly
established. The aim of new s35(2)(a) is to confirm that a licensee
must meet financial requirements for licensing at all times during the
currency of the licence, while new s35(2)(b) requires that variations in
the licensee's assets and turnover must be notified to the authority in
accordance with the financial requirements for licensing.
Clause 17 amends s36 (Subsequent imposition of conditions etc.)
During the course of dealings with licensees, it may become apparent
to the authority that that a licensee who, while competent in a general
sense, demonstrates a lack of competence in one particular area of the
building work performed under the licence. The section enables the
authority, in circumstances where it is not appropriate to suspend or
cancel the licence, to require the person to undertake a course in the
specific topic which the licensee has demonstrated a lack of
understanding. The new subsection 36(3A) inserted by this clause
explicitly empowers the authority to impose a condition that the
licensee complete an appropriate course remedying the skill or
competency deficiency.
Clause 18 inserts a new s38A (Receipt of fee does not revive licence)
The authority has received various submissions from solicitors
following cancellation or suspension of licences seeking to overturn the
effect of the action on the basis that it has subsequently accepted an
annual licence fee from a cancelled or suspended licensee. The new
s38A puts it beyond all doubt that the acceptance and receipting of a
licence fee does not of itself revive a cancelled or suspended licence
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Queensland Building Services Authority Amendment
where the licence has been suspended for reasons other than an unpaid
fee.
Clause 19 amends s39 (Register)
This clause inserts new provisions to establish enhanced information
resources for consumers contemplating entering into a contract for
building work. In so doing, it is expected that the new provisions will
activate market mechanisms as an additional sanction against
substandard building work or unconscionable trading practices. The
licence register is a public document that will be available for
inspection at authority offices, through telephone inquiries or through
the internet.
New s39(3) requires that the register also contain information on each
licensee about directions to rectify building work issued by the
authority, details of any disciplinary orders against the licensee made
by the tribunal, and convictions for offences under the Act.
S39(4), (5) and (6) safeguard licensees against the possibility that
directions to rectify, orders in the tribunal and convictions respectively
may be overturned on a review application by the tribunal or
subsequent appeal to a court by restricting the placing of notations on
the register until statutory periods to apply for review or to appeal have
expired, or where a review application is lodged but not proceeded
with.
S39(7) further safeguards licensee reputations by requiring that notes
made in the register under the new s39(3) must be removed after 5
years.
Subclause (3) removes the requirement for licensees to notify the
authority of changes in particulars - such as address - in writing.
Subclause (4) inserts a new subsection allowing the authority to
determine appropriate methods for advising changes in particulars,
providing flexibility to adapt to technological change and to relieve
licensees of unnecessary regulatory burden.
Clause 20 amends s42 (Unlawful carrying out of building work)
Until the 1998 decision of the Court of Appeal in Zullo Enterprises &
Ors v Sutton [1998] QCA 417 (15 December 1998), it was thought
that s42, which makes the carrying out or undertaking to carry out of
building work unlawful, did not prevent unlicensed contractors
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Queensland Building Services Authority Amendment
recovering their costs under the common law of contract. The Zullo
decision held that unlicensed contractors were prevented from
recovering anything at all, and held the prospect that unlicensed
contractors could be successfully sued for recovery of any moneys
paid for prior performance. This potentially allows considerable
injustice, such as deliberate recruiting of subcontractors from interstate
and legally escaping from any obligation to pay for work performed.
Unlicensed contracting will, of course, remain an offence committed
by the contractor, but the principle that a builder or owner should not
be able to enrich themselves through signing on unlicensed contractors
is enshrined in this clause.
This clause amends s42(3) and inserts a new subsection 42(4) to
provide an unlicensed contractor with a limited statutory right to
recover money which would otherwise be unavailable because of the
Zullo decision. The new provisions will allow an unlicensed contractor
to claim reasonable recovery of moneys actually expended for the
supply of materials and labour, other than the contractor's own labour
and profit. Existing subsections 42(4) to (6) are renumbered.
The new provision in s42(4)(iii) also prevents an unlicensed contractor
unreasonably incurring costs and claiming for recovery under this
provision.
S42(4)(c) prevents an unlicensed contractor recovering any more under
this provision than the contract price.
S42(4)(d) is designed to attack any scheme entered into by the
unlicensed contractor, for example employing the contractor's child or
the charging of a management fee by a company of which the
contractor is a beneficial shareholder, to use this new provision to gain
personal profit from unlicensed contracting.
S42(8) is an unrelated provision, having the effect of removing any
doubt that landscape architects, who are not part of the licensing
scheme, may continue to ply their trade even though the work they do
may in some way be characterised as building work.
Clause 21 amends s46 (Notification on certificate of title).
This clause corrects a deficiency in the Act that prevented the authority
from placing a notification on a certificate of title regarding
owner-builder work where a permit had not been obtained. The most
typical situation this remedies is where the owner-builder is forced to
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Queensland Building Services Authority Amendment
approach the authority for a permit so that the relevant local authority
can approve the work that was illegally carried out. Under the new
s46(2), the authority may notify the registrar of titles in respect of work
for which a permit should have been, but was not, obtained. The
purpose of the notification on the certificate of title is to give
prospective purchasers a warning that the building work to which the
owner-builder permit relates is not covered by the statutory insurance
scheme administered by the authority.
Clause 22 amends s48 (Cancellation of licence)
This clause is consequential on the new provisions regarding financial
requirements imposed by this bill in amending s35 (clause 16), and in
establishing the new regime of persons excluded from holding licences
on grounds of financial misbehaviour in new part 3A (clause 27). The
clause also corrects an error preventing the authority from acting to
suspend or cancel a licence for a breach of a condition imposed at the
time the licence was granted. Subclause (1) deletes s48(d), which is
rendered redundant by the deemed conditions established by clause 16.
Subclause (2) adds contravention of conditions imposed by s35 (upon
grant of licence) to the contravention of conditions imposed by s36
(subsequent to grant of licence) as grounds for cancellation of the
licence.
Clause 23 replaces s49A
The existing s49A provided for immediate cancellation of a license by
the authority on the sole ground that there was a "serious likelihood
that real harm may happen to consumers". In practice, this was found
to be overly draconian and so difficult to enforce. The clause inserts
new procedures for the immediate suspension of a licence and for the
automatic lifting of that suspension after 10 days if the authority takes
no further action.
S49A(1) extends the serious harm test to other licensees and their
employees, as well as consumers and suppliers.
S49A(2) requires immediate suspension action to be effected by
written notice and sets out the requirements of the notice, including
reasons for action, an invitation for written representations regarding
lifting, review rights, and a description of the automatic lapsing
provision.
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Queensland Building Services Authority Amendment
S49A(3) provides for automatic lapsing after 10 days unless the
authority gives notice of intention to suspend or cancel under s49, it
gives such notice but the licence is not suspended or cancelled within 3
months, or it suspends or cancels the licence under s48.
S49A(4) provides that the 3 month period in s49A(3)(b) can be
extended by the authority, but only if the authority forms the opinion
that such extension is in the interests of the licensee.
S49A(5) provides that the extensions provided in s49A(4) must be of
periods of one month each.
Clause 24 inserts new part 3, division 9A (Monitoring continued
satisfaction of financial requirements)
This clause provides the legislative mechanism to check ongoing
compliance with licensing financial requirements through audits of
licensees. It is neither desirable nor administratively possible to
conduct an audit of every licensee each year. The costs to licensees of
compliance are also a factor, as is the need to ensure that audits are
conducted on the basis of objective criteria so as to avoid any inference
being drawn that individual licensees are being victimised. It must also
be possible, however, for the authority to act on information received
where it has reason to believe that a licensee may be in financial
trouble.
The scheme proposed by the clause requires the Minister to approve an
audit program (s50A(1)). The program must contain information
about the purpose, scope and time frame under which it will be carried
out, and the criteria to be used for selection of audit subjects (s50A(2)).
Licensees selected for audit on the basis of the program may not be
audited more than once in any period of two years (s50A(3)).
It is important that the audit program both be objective and be seen to
be objective. Accordingly, s50B provides that the authority must
publish details of the audit program in the gazette prior to its inception.
S50B(1) requires the publication to be done between 14 and 28 days
prior to the program start. S50B(2) provides that, as a minimum, the
notice must be published in the gazette, but also allows publication in
other organs, such as trade magazines. S50B(3) states the minimum
contents of the notice to be published. This is similar to the audit
program requirements in s50A(2), but includes the additional
requirements that the notice state how subjects are to be advised of
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Queensland Building Services Authority Amendment
their selection (s50B(3)(f), and the obligations of an audit subject as set
out in this division.
S50C sets out how an audit is to be conducted and the obligations of
the licensee who is the subject of an audit. S50C(1) allows the
selection of audit subjects through the approved audit program or
because of information received by the authority.
The authority is then required (s50C(2)) to give written notice to the
audit subject, stating the financial records required for the audit. These
records are required to be only those reasonably necessary for the
conduct of the audit.
Licensees are required to comply with the notice within 21 days
(s50C(4)). Failure to comply is an offence carrying a maximum
penalty of 100 penalty units. Failure to comply is also a disciplinary
matter, since s50C(5) provides that failure to comply is taken to have
been a breach of licence conditions.
Clause 25 replaces s51
Deficiencies in the operation of the Act have emerged in that some
licensees and unlicensed contractors have openly engaged in `licence
lending'. Such schemes involve arrangements where a building
contractor will, for a fee, purport to be the contractor for building work.
The consumer will have a contract with the licensee, and the license
card will be used to imprint the contract and uplift plans from the
relevant local government. In fact, however, the licensee takes no part
in performance of the contract, which is undertaken by unlicensed
contractors. These practices clearly weaken the legislative regime and
are blatant schemes to avoid the intention of the Act. This clause is
designed to define the various practices associated with `licence
lending' as offences, and to set penalties for those offences, as well as
to catch persons misrepresenting themselves as licensees in line with
the former s51.
S51 attacks practices where a licensee allows an unlicensed contractor
to make use of the licence.
S51(1) defines the acts of the licensee in such an arrangement as
offences, setting differential penalties for the first and subsequent
offences.
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Queensland Building Services Authority Amendment
S51(2) defines the acts of the unlicensed contractor in pretending to be
a licensee as offences, again with differential penalties for the first and
subsequent offences.
S51(3) defines the acts of a licensee who uses another licensee's
licence - for example, to perform building work of a class for which
the defaulting licensee is not licensed - as offences, with a similar
range of penalties.
S51A(1) creates a more general offence for licensees - that of helping
another person to carry out unlicensed contracting where the offender
knows (or ought to know) that the other person is committing the
offence of unlicensed contracting. A similar range of penalties is
provided.
S51A(2) reinforces the requirement that a licensee must use their own
name and licence number when contracting for building work, by
making it an offence to use another licensee's name or number. To
avoid an offence being committed where an inadvertent breach has
occurred - for example, where 2 numbers are transposed in error -
there is provision for a reasonable excuse to be provided. Again, a
similar range of penalties is provided.
S51A(3) clarifies the intention that s42's expanded definition of when
building work is carried out applies to this section.
Clause 26 inserts new ss53A and 53B
These sections impose a requirement on licensees to demonstrate their
compliance with financial requirements by provision of financial
information supported by an accountant's certification at the time of the
annual licence renewal.
S53A(1) provides that the authority must not renew a licence unless
the required information is provided. The content of information
required is to be in a form approved by the board and provided within
time limits prescribed by regulation. S53A(2) provides that the form
approved by the board may require information to be provided by an
accountant.
S53A(3) to (5) provide a process for suspension and cancellation of a
licence where the required information is not provided. These
provisions mirror those in s38 when the annual licence fee is not paid.
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Queensland Building Services Authority Amendment
S53B(1) creates the offence of providing false and misleading
information about a licensee's financial position. The offence carries a
maximum penalty of 100 penalty units or 2 years imprisonment. This
provision mirrors s1308 of the Corporations Law. S53B(2) provides
s53B(1) does not apply where the affected person informs the
authority how the information is false or misleading. S53B(3)
establishes an evidentiary test in respect of the offence.
Clause 27 inserts a new Part 3A - Excluded and Permitted Individuals and
Permitted Companies.
A major deficiency with the existing regulatory structure has been the
ability of defaulting contractors to restructure their corporate structure
to re-emerge as a `phoenix' company following cancellation of a
licence. This new part is designed to remove individuals who have
demonstrated their incapacity to manage finances from the building
industry for a 5-year period.
S56AA establishes the conceptual framework for operation of the
provisions, introducing the definitions of "excluded" companies and
individuals, "influential" persons, "permitted" individuals, and
"relevant" events. The definitions of "influential person" for a
company and "permitted individual" are set out in detail. The concept
of "influential person" excludes directors, but includes individuals who
are in a position to control or substantially influence the conduct of a
company's affairs. Although this "influential person" definition is
premised on an individual, where an individual is in the requisite
position of control or substantial influence, the fact that the control is
exercised through a company structure would not obscure the
individual's identity as an "influential person". The concept of
"permitted individual" is tied to a "relevant event" in the individual's
financial history. This means that an individual can be "permitted" for
one event and "excluded" for another event contemporaneously.
S56AB establishes that this new Part operates despite anything in Part
3 - Licensing.
S56AC sets up the concept of how individuals and companies become
defined as "excluded individuals" and "excluded companies" in terms
of relevant events. S56AC(1) establishes the concept for individuals,
on the basis that the relevant event relates to their own financial
circumstances. In this case, the relevant event happens when they take
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Queensland Building Services Authority Amendment
advantage of the laws of bankruptcy or become bankrupt. S56AC(2)
similarly establishes the concept for an individual where the relevant
event arises from their role in a company, tying the relevant event to
the appointment of a provisional liquidator, liquidator, administrator or
controller, or winding up for the benefit of creditors. S56AC(3)
establishes that an individual is an excluded individual in respect of a
relevant event if the requirements set out in subsection (1) are met.
S56AC(4) does the same thing in respect of subsection (2). S56AC(5)
and (6) establish that an excluded individual's status as an excluded
individual is tied to a single relevant event. S56AC(7) defines an
"excluded company" as one having an excluded individual as a
director, secretary or influential person for the company.
S56AD sets out the process whereby an excluded individual may be
categorised as a "permitted individual". This provision exists to allow
individuals who have undergone a bankruptcy event through absolutely
no fault of their own to continue to operate in the building industry.
Excluded individuals may apply to the authority to be categorised as
permitted individuals (s56AD(1)), but may do so only once in respect
of any particular relevant event (s56AD(2)), so as to prevent vexatious
application. The application must set out the reasons for categorisation
(s56AD(3)). Because both companies and individuals may have an
interest in the application, s56AD(4) establishes that companies are
parties to any application where the company's status may be at issue.
The authority is required to give its decision on the matter within 28
days or a longer period agreed between the authority and the individual
(s56AD(5)). S56AD(6) provides that failure to give a decision in time
is deemed to be a refusal and may be the subject of a review to the
tribunal. S56AD(7) allows the authority to confirm refusal at any
time.
The sole ground for categorisation as a permitted individual is set out
in s56AD(8), namely that the applicant can demonstrate that all
reasonable steps were taken to avoid the occurrence of the facts giving
rise to the relevant event. This ground is intended to restrict
classification as a permitted person to instances where the applicant has
been the victim of fraud or defalcation by, for example, a partner or
spouse. S56AD(9) provides that once an individual is categorised as a
permitted individual in respect of a relevant event, the individual is not
an excluded person in respect of the relevant event.
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Queensland Building Services Authority Amendment
S56AE forbids the authority from issuing a licence to an excluded
person.
S56AF sets up the procedure to be followed when an existing licensee
is found to be an excluded individual. Where the authority forms an
opinion that an individual is an excluded individual (s56AF(1)), it is
required to issue the licensee with a notice (s56AF(2)) setting out the
reasons why the authority has formed this opinion, the licensee's rights
to apply to be categorised as a permitted person, and the circumstances
under which the licence is to be cancelled. The licence must be
cancelled if the licensee does not apply for categorisation or if
categorisation is refused (s56AF(3)). S56AF(4) establishes that this
procedure is distinct from the procedure for cancellation of licence set
out in s49.
S56AG establishes the procedure to be followed if the excluded
licensee is a company (s56AG(1)). Because the exclusion principle
operates on companies only by virtue of directors or influential persons
being themselves excluded, the procedure requires either that the
excluded persons responsible for the status of the company cease their
involvement with the company, or that the individuals concerned are
categorised as permitted persons. There is no procedure for
suspension, as such action may be onerous in the case of a company
which is financially sound despite the existence of an influential person
who is an excluded person. The relevant notice and cancellation
procedures are set out in s56AG (2) to (5). S56AG(6) establishes that
this procedure is distinct from the procedure for cancellation of licence
set out in s49.
S56AH provides that the formation of an opinion by the authority that
a person is an excluded person or a company is an excluded company
is a decision reviewable by the tribunal. Although there is no limitation
of the matters the tribunal may examine in such a review, the scheme
of new Part 3A is intended to allow merit review only of the question
of whether an individual is an influential person (in the case of a
company). The criteria for becoming an excluded person in respect of
an individual are essentially objective and not subject to interpretation.
Time periods mentioned in procedures - for example for suspension
and cancellations - are taken to stop upon lodgement of a review
application and to re-commence upon the review application being
determined (s56AH(2)). Such applications do not, however, impact
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Queensland Building Services Authority Amendment
on the validity of action already taken, for example the suspension of a
licence.
Clause 28 inserts a new Part 4A - Building Contracts other than Domestic
Building Contracts. This new Part provides regulatory recognition of
building industry practice whereby there is a chain of contracts governing
performance of building work. The part relieves subcontractors of some
unconscionable contract provisions and deems desirable provisions into
some contracts. The Part only applies to contracts other than domestic
building contracts because of different conditions in the house-building
industry and the regulatory environment provided by Part 4 of the Act.
S67A establishes the definitions used in the new Part. Of particular
significance are the definitions of "contracted party" and "contracting
party", where the "contracting party" is the person for whom work is
to be carried out and the "contracted party" is the person carrying out
the work under the contract. Also significant are the definitions of
"valuable instrument", meaning any of a number of defined
convertible financial instruments used in the building industry, and
"security", meaning either an amount of money or a valuable
instrument.
S67B(1) defines "construction management trade contract" as a form
of contract where the contracting party is a principal and directly
contracts a number of building contractors (rather than contracting a
builder who subcontracts with the contractors). This is significant
because contractors who might but for such arrangements be classed
as subcontractors are also brought into the scope of the Part. Where
the holder of a general building licence is the contracted party, such
contracts are specifically excluded from this definition. S67B(2)
removes doubt that a construction management trade contract includes
a contract entered into by an agent of the principal.
S67C defines "retention amount", and s67D "subcontract" for the
operation of the part. Both definitions correspond to common usage in
the building industry.
S67E removes doubt that this Part only makes void any conditions of
contract expressly made void by this Part, and that it applies to all
contracts, even if in entering into the contract an offence is committed
or the contract is entered into outside Queensland. The Part also has
effect despite anything contained in a building contract. Contractual
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Queensland Building Services Authority Amendment
provisions that conflict with the provisions of this Part are invalid to
the extent of the inconsistency.
S67F allows the authority to publish suggested forms for building
contracts. This is already an authority function for domestic building
contracts.
S67G sets out a general requirement that building contracts be in
writing and the formal minimum requirements for the contents of a
building contract. These include such matters as the scope of works,
completion time, the amount to be paid, or method of calculating
payment, agreements regarding retentions and securities, licence details
of the contracted party, and the address of works (s67G(4). Entering
into unwritten building contracts is an offence. The time at which the
offence is committed varies according to the reasonable cost of the
building work. Where the reasonable cost of the work is more than
$10,000, the offence occurs when work commences without a written
contract, and if it is less than $10,000, the offence occurs upon
completion of the building work (s67G(1)). A range of penalties is
provided for the first and subsequent offences. S67G(2) is a similar
provision, relating to work which is initially valued at less than
$10,000, but comes to be worth more during the carrying out of the
work. In these circumstances, the offence occurs when building work
is carried out in the absence of a written contract after the work exceeds
$10,000. S67G(3) clarifies that an offence under this section is
committed by both parties, and that it is also an offence for a written
contract not to comply with the content requirements of s67G(4).
S67G(5) removes application of the section to a principal.
S67G(6) provides that no offence is committed under this section if the
work is required to be undertaken urgently and it is not reasonably
practical to enter into a written contract. This will allow, for example,
emergency works in remote regions to be undertaken without the need
for written contracts, as is set out in an example.
S67H similarly requires that contract variations be put into writing and
sets out the minimum requirements for inclusion in written contract
variations, and makes breach of these requirements an offence. A
similar range of penalties is provided as in s67G. Again, principals are
excluded from these requirements (s67H(4)) and it is provided that no
offence occurs where urgency and practicality dictate otherwise
(s67H(6)). Provision is also made for deletion of the requirement to
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Queensland Building Services Authority Amendment
include method of calculation of the cost of variations if the contract
already provides such a method (s67H(5)).
S67I deals with the common practice in the building industry where
the contracting party may direct the performance of work without the
agreement of the contracted party. S67I(2) allows such directions to be
initially given other than in writing unless otherwise provided under the
contract. S67I(3) qualifies s67I(2) by providing that the contracted
party may ask for the direction to be given in writing and is not in
breach of the contract in not complying with a direction not given in
writing until it is given in writing. S67I(4) establishes an offence for
contracting parties not putting a direction in writing within 3 business
days after it was given. A range of penalties is provided for the first
and subsequent offences. S67(I)(5) confirms that a direction under
this section includes a direction for a variation of the building contract.
S67J limits the scope of set-offs available to contracting parties.
Set-offs are where amounts payable to contractors are reduced to take
account of, for example, site clean-up costs incurred by the contracting
party. Set-off provisions are often used in contracts in respect of
retention amounts held during the warranty liability period, which may
endure for some years. This section requires such set-offs to be
claimable from the contracted party only if timely notice (28 days) is
provided to the contracted party. The section recognises that in some
instances, the right to set-off may be known well before the amount of
set-off is known. For example, cracks appear in a wall during the
warranty retention period. This would trigger the section's
requirement (within 28 days) to provide the contracted party with a
notice. When engineering investigations define the scope of work and
tenders are called, a second notice is required to be sent within 3
business days of the amount being known. This will prevent set-offs
being effected when the trail has gone cold and the contracted party is
in no position to dispute alleged facts. It should be noted that this
provision does not prevent a contracting party who has lost the right to
set-off from subsequently recovering moneys duly owing.
S67K(1) and (2) limits total of the retention amounts and securities
held by the principal to 5 percent of the contract price, subject to the
other conditions set out in the section. S67K(3) provides that the
requirement does not apply where the security is obtained for
something which has been paid for by the contracting party, but not yet
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Queensland Building Services Authority Amendment
installed. For example, such a security may be held in respect of an
expensive piece of diagnostic equipment until such time as it is
installed in accordance with the contract. S67K(4) allows parties to
contract out of the retention amount limit imposed by this section if
such provisions are expressed and initialled by all parties.
S67L limits retention amounts for subcontracts to 5 percent other than
for the circumstance covered by s67K(3).
S67M limits deductions on amounts payable to a contracted party to 10
percent of the relevant amount.
S67N limits retention amounts held for the warranty period following
practical completion to 2.5 percent of the total contract price. This limit
does not cover minor works under the contract that remain outstanding
at the time of practical completion.
S67O sets up procedures whereby a contracted party may suspend
work under a building contract if the contracting party fails to pay
amounts due and payable under the contract, or determined by a court
or the tribunal. Under these conditions, the contracted party may give
the contracting party at least a week's written notice of intention to
suspend work (ss67R(2) and (3)). A further written notice must be
given to the contracting party upon expiry of the notice period, after
which the contracted party may suspend work immediately (s67R(4))
and is not in breach of the contract in so doing (s67R(5)). Suspension
of work under this section does not affect the contracted party's other
rights under the contract (s67R(5). If the amount owing is paid at any
time during the suspension of work, the contracted party is required to
resume work under the contract within one week, unless otherwise
agreed (ss67R(6) and (7)).
S67P provides that a penalty rate of interest is payable on late progress
payments or any portion thereof, so as to remove incentives to
contracting parties to delay payment. The penalty rate is set at the
90-day bill rate published by the Reserve Bank, plus 10 percent,
calculated daily. Parties are permitted to contract for higher rates.
S67Q makes void all `pay if paid' or `pay when paid' clauses in
building contracts.
S67R defines the operation of division 3 of this part (s67S, T and U) to
construction management trade contracts and subcontracts.
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Queensland Building Services Authority Amendment
S67S allows contracted parties to lodge a valuable instrument rather
than cash where the contract requires lodgement of a security. The
section also provides that such securities must be valuable instruments
from a security provider approved by regulation. Where a security
provider ceases to be an approved security provider, the contracted
party must replace the instrument with another instrument from an
approved security provider.
S67T allows contracted parties to substitute valuable instruments,
defined similarly to the provisions of s67s, for cash held by contracting
parties as retention amounts or securities (or both). The two sections
s67s and s67T will benefit building contractors by relieving them of
the burden of tying up large cash amounts.
S67U provides for maximum progress payment intervals unless the
parties expressly provide shorter intervals. The section sets the
maximum progress payment interval at one month (s67U(3)), and
requires that payment be made in respect of the progress payment
within 35 days following lodgement of claim for payment by the
contracted party (s67U(7)). Despite this, there is provision for parties
to contract out of any of these implied conditions, provided that in
doing so the condition is explained in the contract; the contract
expressly provides that it is not subject to the condition; and the
relevant provision in the contract is initialled by both contracting parties
(s67U(9)). S67U(10) removes doubt that the section does not affect
the operation of the Subcontractors' Charges Act 1974, or the right of
the contracting party to claim set-offs.
S67V applies only to construction management trade contracts. This
section provides additional protection for contractors who are normally
subcontractors entering into construction management trade contracts.
In such contracts, although they are indistinguishable in most respects
from ordinary subcontracts, the contractual relationship is direct
between the developer and the building contractor. Developers are
simply private persons and are not required to meet the financial
requirements imposed by the Act. S67V requires construction
management trade contracts to contain an explicit, initialled warning in
a form approved by the board about the possible dangers for the
contracted party inherent in a contract of this type. An offence is
established, namely failure to provide the prescribed warning.
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Queensland Building Services Authority Amendment
67W applies to building contracts other than construction management
trade contracts or subcontracts. This section contains very similar
provisions to s67U, but limits the period of payment following
lodgement of claim to 21 days, unlike the 35 day period set by s67U.
This difference recognises the differing circumstances faced by
principals and others lower down the contractual chain, who must wait
for cheque clearance, for example. Unlike s67U, the parties may
contract for a longer period as a normal contract provision. Again,
there is provision for parties to contract out of any of these implied
conditions, provided that in doing so either
· the condition is explained in the contract; the contract expressly
provides that it is not subject to the condition; and the relevant
provision in the contract is initialled by both contracting parties; or
· the contracted party is provided with a separate notice before the
contract is entered into explaining the conditions that vary from
the requirements of this section.
This second procedure allows for public tender processes where there
is no single contract document.
Clause 29 increases the maximum penalty payable for the offence of failure
to pay a premium under the statutory home warranty insurance scheme
from 20 to 40 penalty units.
Clause 30 amends s69 to reflect practical administration of the statutory
home warranty insurance scheme. The section requires the policy of
insurance to accompany the certificate. Previously the certificate of
insurance was to set out the terms of the policy (regulation 24(2)). In
practice this is not feasible as the policy of insurance forms a separate policy
booklet..
S69(5) requires consumers to abide by the terms of the insurance
policy.
Clause 31 amends s72 to clarify the factors the authority may take into
account in using its powers to direct rectification or completion of building
work.
S72(1) is amended to delete the word "reasonable" from the
requirement that the authority state a reasonable period during which
defective work must be rectified when issuing a direction. This is
consequential on the amended s72(3).
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Queensland Building Services Authority Amendment
S72(2) defines factors the authority may take into account to include all
relevant circumstances, including warranties - i.e. relevant factors are
not limited to the terms of the contract alone. It is also provided that
the period stated in the direction must only be less than 28 days where
substantial losses will be caused in the absence of a direction, or where
there is significant personal or public health, safety or environmental
hazard (s72(3).
S72(14) is inserted to provide that the authority is not required to issue
a direction to rectify where to do so would be unfair. An example,
where there are substantial outstanding amounts owing to the
contractor under the contract, is provided of such circumstances.
Clause 32 amends s74 to incorporate into the legislation sound financial
management procedures used to administer the statutory insurance scheme
concerning work carried out under a claim on the scheme. The new
provisions require the calling of tenders (s74(1) and (2)) and set out the
administration of the panel of licensed contractors from whom tenders may
be sought (s74(4) and (5)). The amendments will not prevent owners from
being permitted to call tenders on behalf of the authority where this is in the
interests of efficient resolution of a matter (s74(6)).
Clause 33 is a consequential amendment flowing from the amendment of
s31 by clause 14.
Clause 34 inserts a new s109A removing beyond doubt the question that
service is effected by service at the address of the licensee on the register.
Clause 35 inserts 3 new sections - 111A, 111B and 111C.
S111A is designed to assist the authority in meeting evidentiary
requirements when prosecuting or otherwise attempting to penalise a
person for a breach of a requirement of the Act. The section enables
the authority to establish a person had a particular state of mind if it can
prove that the person's representative had that state of mind.
S111A(1) specifies that the evidentiary provision applies in
proceedings for offences and disciplinary proceedings.
S111A(2) states that in any such proceeding, if it is necessary to
prove a person had a certain state of mind, it is enough to prove
the person's representative, acting within the representatives actual
or apparent authority, had that state of mind.
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Queensland Building Services Authority Amendment
S111A(3) provides that the person is liable for the act or omission
of the person's representative unless the person (not the
representative) can prove that the person could not reasonably
have prevented the act or omission.
S111A(4) defines "representative" to include executive officers,
employees or agents of a company, and employees or agents of
an individual.
S111B provides that an executive officer commits an offence if the
company commits an offence, namely the offence of failing to ensure
the company complies with the Act. The overall aim of this section is
to make directors and other executive officers of a company personally
responsible for the acts of the company, thereby preventing them from
escaping personal liability by hiding behind a company structure.
S111B(1) imposes a duty on executive officers to ensure that their
company complies with this Act.
S111B(2) provides that an offence by a company is taken to have
been committed by the company's executive officers, with
penalties to apply as for commission of the relevant offence by an
individual.
S111B(3) allows evidence that a company commits an offence
under the Act to be used as evidence that each and every executive
officer committed the offence.
S111B(4) provides a defence for executive officers in regard to
this section, namely that the executive officer exercised reasonable
diligence, or was not in a position to influence the relevant
conduct of the company.
S111C provides that directors of a company are personally liable for
the debts of the company owed to the Authority for offences,
disciplinary actions or insurance claims. The aim of this provision is
to replace the Deeds of Guarantee and Indemnity currently required by
the Authority from all directors of a company who is licensed.
S111C(1) provides that the section applies to debts incurred by a
company for offences committed if the debt is not paid by the
time required in the court's order.
S111C(2) similarly extends the operation of this section to orders
made by the tribunal under s101(4).
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Queensland Building Services Authority Amendment
S111C(3) extends the operation of this section to debts owing to
the authority under the statutory insurance scheme.
S111C(4) personally attaches the debt incurred by the company in
subsection (1) to all directors of the company at the time the
offence was committed and the time the penalty was imposed.
S111C(5) personally attaches the debt incurred by the company in
subsection (2) to all directors of the company at the time the act or
omission which results in disciplinary action occurred and the
time the penalty was imposed.
S111C(6) personally attaches the debt incurred by the company in
subsection (3) to all directors of the company at the time the
building work was performed, and the time the claim was paid by
the Authority.
S111C(7) provides that the section applies regardless of the status
of the company.
S111C(8) attaches all liabilities under this section that may apply
to 2 or more persons to all such persons jointly and severally.
Clause 36 inserts a new s114 (Protection)
S114(1) and (2) are the standard indemnities for public officials - in
this case the general manager and employees of the authority - acting
in accordance with their functions.
S114(3), (4) and (5) provide that the State, the authority and the general
manager do not incur any liability for a publication Act (ie. comments
that may otherwise be considered defamatory) as a result of a warning
given to the public under s.18(2)(f).
Clause 37 provides transitional arrangements. The sole substantive
provision is an amendment to s13 noting that the members of the existing
board go out of office upon commencement of this section.
Clause 38 provides for the establishment of a dictionary under Schedule 2
and is consequential on Clause 4.
© The State of Queensland 1999