The construction industry in Queensland is heavily regulated, including the extensive builder licensing system.
There are significant penalties and financial implications for performing building work without the required licence (as discussed here).
Generally, the unlicensed company will bear the impact of performing unlicensed building work.
However, the directors and senior management of building companies may be personally liable for the company’s breach of licensing requirements, through specific provisions in the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).
These provisions expose company executives to liability which they might not otherwise have under the general law, which protects directors from personal liability for the company’s actions.
Executive officer liability offences
The QBCC Act provides that an “executive officer of a company” commits an offence if:
- the company commits an offence against an executive liability provision; and
- the officer did not take all reasonable steps to ensure the company did not engage in the conduct constituting the offence.
The executive liability provisions are:
- section 42 (Unlawful carrying out of building work); and
- section 42D (Licensed contractor must not engage or direct unauthorised person for fire protection work).
Consequently, where a company commits an offence against section 42 or 42D (that is, performing unlicensed building work, or engaging or directing unauthorised fire protection work), the executive officer of the company commits an offence, unless they can show that they took all reasonable steps to ensure that the company did not engage in the relevant conduct.
Who is an “executive officer of a company”?
An ‘executive officer of a company’ means a person who is:
- a director or secretary of the company; or
- a person who is concerned with, or takes part in, the company’s management, whether or not the person is a director or secretary or the person’s position is given the name of executive officer.
This broad definition includes many people beyond the directors of a company – it may encompass non-director employees such as the CFO, CEO, and other senior personnel.
Any person who is concerned with, or takes part in, the company’s management is therefore at risk of personal liability for the company’s breach of the executive liability provisions.
What are reasonable steps?
Whether an executive officer has taken reasonable steps will require a court to consider the following:
- whether the officer knew, or should have reasonably known, of the company’s conduct constituting the offence;
- whether the officer was in a position to influence the company’s conduct in relation to the offence; and
- any other relevant matter.
In the context of builder licensing, taking reasonable steps may involve consideration of the licence classes held by the company, the scope of work being performed by the company, the processes in place for procurement within the company to ensure licence restrictions are complied with, and review and auditing of processes to ensure compliance within the company.
The maximum penalty for which an executive officer may be liable is the maximum penalty for breach of the relevant provision by an individual.
The maximum penalty for breaches of these provisions is:
- for a first offence — 250 penalty units ($38,700);
- for a second offence — 300 penalty units ($46,440);
- for a third or later office, or if the building work carried out is tier 1 defective work —350 penalty units ($54,180) or 1 year’s imprisonment; and
- the contravention is a crime.
The executive officer may be found to have liability even if the company has not been convicted of an offence.
Directors and senior managers of construction companies should take reasonable steps to ensure that the company is operating within the requirements of the builder licensing system.
This may mean reviewing the permitted scope of work for the company’s current licence and considering the scope of work being tendered for. It may also include auditing procurement processes for engagement of subcontractors to ensure that the company’s operations are within the requirements of the QBCC Act.
Please reach out to Batch Mewing Lawyers for assistance with any inquiries regarding the building licensing system and compliance.