In late October 2019, the Building and Construction Legislation Amendment Bill 2019 (‘Amendment Bill’) was introduced into the ACT Legislative Assembly. ACT Minister for Building Quality Improvement, Gordon Ramsay, announced an intention to reform building legislation in the Territory in a bid to ‘crack down on dodgy builders’. In this article Gene Schirripa discusses the implications of this Bill.
The amending legislation proposes to amend the following:
- Building Act 2004
- Building and Construction Industry (Security
of Payment) Act 2009
- Construction Occupations (Licensing) Act 2004
- Construction Occupations (Licensing)
Liability for defects
Under the proposed Amendment Bill, directors of companies
would be made personally liable for building defects and could potentially
incur financial penalties.
The Amendment Bill proposes to insert a new section 126B
into the Construction Occupation (Licensing) Act 2004. The practical effect
of that new section is as follows: if a company is convicted of an offence
under the Act and a penalty is imposed on the company (and is unpaid),
liability will then be passed to each individual who was a director of the company
at the time when the offence was committed and the penalty was imposed.
Offences under the Act include:
- Pretending to be licensed or not carrying the
- Advertising without details
- Allowing unlicensed people to provide
- General breach of a licence condition or
Other changes affecting directors include:
- Insertion of section 58AA into the Construction
Occupations (Licensing) Act 2004, enabling ACAT to make occupation
discipline orders against director of company
- Amendment of section 35(3) of the Construction
Occupations (Licensing) Act 2004, enabling the registrar to make
rectification orders against directors.
Jim, Jane and Jill are the directors of JJJ Constructions.
They employ a construction manager to manage the day-to-day affairs of the
company. JJJ Constructions is building across three big sites around Canberra.
The directors spend a lot of time overseas and interstate and leave the affairs
of the company largely in the hands of the manager.
One day, the directors receive a notice that there are
significant defects present on two of the sites that require major
rectification works. It subsequently becomes known that the manager arranged
for unlicensed builders to carry out works and this caused many of the issues.
Jim, Jane and Jill, despite not having stepped foot onto any
of the sites recently, may be held personally liable for carrying out
rectification works and for the payment of penalties imposed by the ACT
What this means for builders
The Amendment Bill marks a serious crackdown on the part of
the ACT Government to reform building legislation in the Territory and increases
avenues for consumers to seek remedies against directors of building companies
personally for defective works.
Directors of companies holding a building licence will need to ensure that their employees and subcontractors are diligent at all times, as any issues with the building process may have significant consequences for directors of the head contractor. Directors may no longer be protected by the ‘corporate veil’ and company structure. If the amendments are passed, increased scope for personal liability will become a reality and directors of building companies must be on notice.
How can we help?
If you have any questions about the Amendment Bill, and how this may affect you, please contact our Business Law team on 02 6285 8000 or by email.