October 16, 2023
Payment disputes in the building and construction industry are common.
More important than ever, contractors and subcontractors should be well aware of their entitlements and risks to receiving payment when undertaking building work. The Queensland Building and Construction Commission Act 1991 (QBCC Act) and the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) are important pieces of legislation governing payments to contractors.
This three-part series will focus on contractors’ entitlements and potential risks when it comes to seeking payment for building work performed, including:
- unlicensed contractors’ rights to payment;
- ensuring work is adequately described when claiming payment; and
- challenging an adjudication decision.
Unlicensed Contractors – Entitled to Payment?
The QBCC Act seeks to regulate the industry and reduce risk by ensuring maintenance of proper standards for building work, one of those standards being the requirement to be appropriately licensed.
Despite the consequences, contractors are still engaging in works they are not licensed to perform and still intend on claiming payment.
So, does an unlicensed person have a right to be paid?
This has been considered in numerous Queensland court decisions, but primarily in the leading case of Cant Contracting Pty Ltd v Casella[1], a decision which whilst originally finding in favour of the contractor, was later overturned by the Court of Appeal.
Cant Contracting Pty Ltd v Casella [2006] QCA 538[2]
Cant Contracting Pty Ltd (Cant) entered into a contract with Con and Michelle Casella (Casella) to construct poultry sheds.
Cant had carried out substantial work on the Project before a stop work order was issued. Cant subsequently served a payment claim on Casella under the Building and Construction Industry Payment Act 2004 (Payment Act) (now the BIF Act) to recover the balance it claimed was due and payable under the contract.
Casella failed to provide a payment schedule within the timeframe required by the Payment Act and Cant subsequently obtained summary judgment in the Supreme Court against Casella for $493,339.45 with interest and costs.
Cant pleaded numerous claims under the Payment Act, including:
- Work was carried out under the contract between 1 November 2004 and 4 April 2005;
- The Payment Act applied to the contract and Casella was responsible for payment;
- That it was entitled to progress payments pursuant to s 13 of the Payment Act;
- A payment claim was served on Casella pursuant to s 17 of the Payment Act;
- No payment schedule was issued to Cant within the timeframes prescribed by s18(4) of the Payment Act and payment had not been received; and
- Cant claims the sum of $493,339.45 as a debt due and owing pursuant to s 19(2)(a)(i) of the Payment Act.
Casella in its defence pleaded that:
- Cant did not hold a building licence for the work done under the contract in breach of s 42 of the Queensland Building Services Authority Act 1991 (Building Act) (now the QBCC Act);
- Nothing in the Payment Act derogated Cant’s obligation to comply with licencing requirements under the Building Act; and
- Cant’s only remedy was pursuant to s 42(3) and s 42(4) of the Building Act (being for reasonable remuneration).
Section 42(1) of the Building Act states:
“A person must not carry out, or undertake to carry out, building work unless the person holds a contractor’s licence of the appropriate class under this Act”.
Summary judgment was initially given in favour of Cant, having been found that despite being unlicensed Cant could recover monies claimed in a payment claim as a statutory debt under s 19(2) of the Payment Act.
Casella appealed the decision to the Court of Appeal which later overturned the Supreme Court Judgement.
Issue
In the Court of Appeal, the question in issue was; can a contractor who has performed unlicensed building work (and is prevented by s 42 of the Building Act from recovering payment), recover the money under the Payment Act?
Held
While all judges delivered separate reasons, the Court of Appeal overruled the Supreme Court Judgement in finding that an unlicensed contractor cannot claim payment under the Payment Act.
Williams JA at [33] said:
“Because s 42(3) of the Building Act provides that an unlicensed contractor ‘is not entitled to any monetary or other consideration’ for doing work pursuant to the contract, such a contractor cannot be said to have an entitlement to progress payments pursuant to ss 7, 12 and 17 of the Payment Act.”
The Building Act therefore defeats any claim by an unlicensed contractor under the Payment Act.
Further, Philp McMurdo J at [61] held:
“This scheme for progress claims and their recovery [under the Payment Act] is evidently unsuitable for the case of unregistered builders, because it operates from a premise of the builder’s entitlement being according to its contract… It is unlikely the Act was intended to benefit builders who cannot enforce the payment provisions of their contracts, especially when the making of such a contract involved an offence by the builder. Ultimately, it far from appears that the Payments Act was intended to override the disentitlement according to s 42; the contrary appears. In my view, the Payments Act operates only when there is a construction contract of which the terms as to payment are enforceable by the builder.”
It was also determined that this defence was available even if the respondent (in this case Casella) failed to provide a payment schedule.
This case has since been relied upon in many decisions, including Dart Holdings Pty Ltd v Total Concept Group Pty Ltd & Ors[3] and more recently St Hilliers Property Pty Ltd v Pronto Solar Innovations Pty Ltd.[4]
What does this mean for contractors?
If a contractor is found to be undertaking unlicensed building work they will be denied the benefit of the BIF Act and will be unable to recover payment for the work performed under the contract.
Instead, a contractor will be limited to a claim for ‘reasonable remuneration’ under s 42(4) of the QBCC Act, which means they are only entitled to the cost of supplying other labour and materials (i.e., no profit or payment for their own labour).
This serves as a reminder for all contractors and subcontractors to carefully consider whether they hold the appropriate licence to perform the work they are contracted to perform.
Lamont Project and Construction Lawyers
Lamont Project and Construction Lawyers have extensive experience in the security of payment legislation and can assist parties in any stage of a payment dispute.
If you would like to discuss any matters raised in this article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.
The content of this article is for information purposes only and it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Stephanie Purser
Email: [email protected] or [email protected]
Phone: (07) 3248 8500
Address: Suite 1, Level 1, 349 Coronation Drive, Milton Qld 4064
Postal Address: PO Box 1133, Milton Qld 4064
[1] [2006] QCA 538.
[2] This case relates to the QBCC Act and BIF Act’s predecessors, however, for the purposes of this article both acts will be referred to as the Building Act and Payment Act respectively.
[3] [2012] QSC 158.
[4] [2018] QSC 164.