In this two-part series, we explore the issue of unlicensed contracting. We all know that you shouldn’t carry out unlicensed building work, but what is covered by “building work” and what are the real consequences?
In the first instalment, we dug into what is building work. We took a look at the relevant laws around unlicensed contracting and the first layer of consequences if you carry out building work without a licence.
In this second and final instalment, we look at the second layer of consequences if you carry out building work without a licence and we provide some solutions so that you can avoid putting yourself at risk.
QBCC Act - You may not get paid
There’s nothing worse than doing work and not getting paid for it, right?
This is exactly what can happen if you carry out work without the appropriate licence.
Under section 42(3) of the Queensland Building and Construction Commission Act (‘QBCC Act’), a person who carries out building work without a licence is not entitled to get paid for doing so. There are some exceptions in that you can claim payment for the actual cost of materials and labour necessary for carrying out the work.
You cannot claim payment for the following:
The supply of your own labour;
Profit;
Costs of materials and labour that were not reasonably incurred;
An amount that is more than what you agreed to for carrying out the building work; and
Any amount that may fairly be considered as being for your own direct or indirect benefit.
From a security of payment perspective, however, the courts have taken a somewhat stricter approach.
What the Courts say
The security of payment legislation in Queensland is the Building Industry Fairness (Security of Payment) Act 2017 (‘BIF Act’). You may recall in our previous articles, we’ve talked about the power of security of payment and the BIF Act for enforcing debts. However, the majority of cases on this issue, relate to the BIF Act’s predecessor, the Building and Construction Industry Payments Act 2004 (‘BCIPA’). For the purpose of this article, we are going to refer to both Acts as the Payments Act.
The leading case is Cant Contracting Pty Ltd v Casella.[1] In this case, one of the judges, Justice McMurdo, said that “the Payments Act operates only when there is a construction contract of which the terms as to payment are enforceable by the builder”.[2]
Because the work that was being claimed for (the construction of poultry sheds) was carried out without a licence, the Court considered that the payment terms under the construction contract were not enforceable and therefore, the Payment Act could not be used to get paid. This was because, to have an entitlement to payment under the Payments Act, the entitlement must be lawful. A lawful entitlement doesn’t exist if the work was carried out without the necessary licence.
The Court found that the contractor was not entitled to progress payments under the Payments Act because a person is not entitled to get paid under section 42(3) of the QBBC Act for building work that has been carried out without a licence.
Other cases have been decided with reliance upon Cant Contracting Pty Ltd v Casella, with the effect being that unlicensed contractors are not entitled to progress payments under security of payment legislation in Queensland.
In Agripower Australia Ltd v Queensland Engineering and Electrical Pty Ltd & Ors,[3] the Court found that the contract was illegal because the electrical and engineering work carried out under the contract was done so without the necessary licence. The Court found that Agripower was not entitled to progress payments under the Payments Act and therefore, the adjudication decision awarding payment to Agripower was void for jurisdictional error. Agripower was prevented from getting paid using security of payment legislation because it had claimed for work that had been carried out without the necessary licence.
In Christie v Seventh Day Adventist Schools (South Queensland) Limited,[4] the Court found that an unlicensed contractor was able to recover payment using the Payments Act but only for work that related to non-building work.The legally performed work was able to be apportioned from the unlicensed building work and the contract severed, preserving a right to payment under the Payments Act.
In Dart Holdings Pty Ltd t/as A Dart & Co v Total Concept Group Pty Ltd & Ors,[5] the Court found that the performance of work without the appropriate licence rendered the entire contract unenforceable where the work could not be apportioned (unlike the Christie case). This meant that Total Concept Group had no contractual right to recover payment for any works performed under the contract, whether licensed or not, and that included no right to claim payment under the Payments Act.
So what are our takeaways?
If you carry out building work without the appropriate licence, you will not be entitled to utilise the payment process under the BIF Act.
You may able to utilise the payment process under the BIF Act for work performed that doesn’t require a licence.
If licensed building work (or building work that doesn’t require a licence) is not able to be apportioned from unlicensed building work, the entire construction contract will be rendered void and you won’t be able to utilise the payment process under the BIF Act for any work that you carried out under the contract.
Are there other options for payment?
Whilst the BIF Act will not be available to you if you are seeking payment for unlicensed work, you may be able to claim payment under section 42(4) of the QBCC Act on a quantum meruit basis.This means that you could make a claim in court for the cost of materials and labour necessary to carry out the work based on the statutory entitlement under section 42(4).
Some solutions
1. Read your scope of work. It is really important that you review the scope of work under a construction contract before you sign it to ensure that you have the necessary license to do the work. If you’re unsure about whether your licence covers the scope of works, it’s a good idea to seek clarification from a construction lawyer.
2. Get the right licence. Taking more of a big picture approach, if you find that you regularly have contracts with work that falls over into another licence class, it may be worthwhile getting other licences to cover this work. Alternatively, you can always ask the head contractor to hire separate trades to cover the work that you are not licensed to carry out.
If you have any questions and would like to get in touch, call us on 07 3128 0120 or email subcontractors@arbuildinglaw.com.au.
Endnotes
[1] [2006] QCA 538.
[2] Ibid, paragraph 61.
[3] [2015] QSC 268.
[4] [2012] QDC 32.
[5] [2012] QSC 158.
