Under Queensland’s strict building licensing regime, the Queensland Building and Construction Commission (“QBCC”) may exclude an individual or a company from holding a QBCC licence for a period of 3 years if the person or company connected to the person is involved in a relevant bankruptcy or insolvency event. If under the regime an individual is excluded twice, they may be subject to a life ban.

These exclusions may have a catastrophic effect on a licensee’s ability to run a business and earn a livelihood in the building and construction industry.

This article briefly outlines the legislative regime regulating this area of QBCC licensing.

Excluded Individual

If a person is deemed under the Queensland Building and Construction Commission Act 1991 (“the QBCC Act”) to be an “excluded individual”, they will banned from holding a QBCC licence for a period of 3 years.

A person becomes an excluded person if they take advantage of the laws of bankruptcy or become bankrupt (referred to as a “relevant event”), and 3 years have not elapsed since that relevant event.

A person will also become an excluded person if they were a director, or secretary, or “influential person” of a “construction company” at the time the (or within 1 year immediately before) a “relevant company event” occurred, and 3 years have not elapsed since the relevant company event. A relevant company event occurs when, for the benefit of a creditor, the company is wound up, ordered to be wound up, or a provisional liquidator, liquidator, administrator or controller is appointed.

The QBCC Act defines a “construction company” to mean a company that directly or indirectly carries out building work or building work services, and it defines an “influential person” for a company to mean an individual (other than a director or secretary of the company) who is in a position to control or substantially influence the conduct of the company’s affairs, including, for example, a shareholder with a significant shareholding, a financier or a senior employee. These definitions are very broad and may significantly enlarge the scope of the provisions beyond the obvious meaning of the plain words used.

The QBCC is prohibited from granting a licence to an excluded individual, and if it considers that an existing licensee is an excluded individual, then the QBCC must take steps to cancel their licence.

To cancel the individual’s licence, the QBCC must give the person a written notice. This must identify the relevant event, provide the QBCC’s reasons why it considers the person to be an excluded individual, and advise the person that they may make a submission to the QBCC in response to the notice. If no submission is received, or if after receiving and considering a submission the QBCC still considers the person to be an excluded individual for a relevant event, the QBCC must cancel the person’s licence.

Excluded Company

Under the QBCC Act, if a construction company is involved in a relevant company event, then any individual who is a director, secretary or influential person of that company at the time of the relevant company event, or within the period of 1 year immediately prior to that event, becomes an excluded individual. The company will then be automatically deemed an “excluded company” on the basis that it has an excluded individual as a director, secretary or influential person of the company.

The QBCC is prohibited from granting a licence to an excluded company, and will take steps to cancel an existing licence of a company if it considers that company to be an excluded company.

To cancel the company licence, the QBCC must give the company a written notice – this must identify “the relevant individual” (who is the director, secretary, or influential person for the company who is an excluded individual for a relevant event), it must state the particulars of the relevant event, and it must also state that the relevant individual must stop being a director, secretary or influential person of the company within 28 days after the QBCC gives the company the notice.

If the relevant individual does not stop being a director, secretary or influential person of the company within 28 days after the QBCC gives the company the notice, then the QBCC must cancel the company’s licence.

Legislative changes in 2015 made it more difficult for affected individuals and companies to alleviate the potentially harsh outcome of being deemed an excluded individual or excluded company. If a relevant event or relevant company event existed prior to 1 July 2015, an individual affected by these provisions could seek to retain their licence by applying to become a “permitted individual” and demonstrating that they took all reasonable steps to avoid the causes of the relevant event.

However, for a relevant event or relevant company event that exists from 1 July 2015, the QBCC Act now limits a submission being made on whether the relevant event occurred – if it did then the excluded individual provisions will apply. Mitigating circumstances are no longer relevant to the decision.

In our view, these legislative provisions have become alarmingly broad in scope and may cause considerable injustice in some circumstances, particularly since a person will be caught by the provisions and deemed an excluded individual requiring cancellation of their licence, even if they left their employment or position as a director, secretary or influential person of a construction company up to a year before the occurrence of the relevant company event occurring, whether or not they had any involvement of “fault” in its cause.

Take the example of a senior employee (considered to be an “influential person” under the QBCC Act) who leaves a construction company to work as a senior employee in another construction company. If anytime within a year after leaving that position the remaining directors of the ex-employer company make decisions leading to the appointment of a provisional liquidator, liquidator, administrator or controller for the benefit of a creditor (say, because of a loss of trade due to the departure of the senior employee), then by operation of the QBCC Act, the departed senior employee is automatically deemed to be an excluded individual requiring the QBCC to actuate cancellation of his or her QBCC licence.

If the senior employee is subsequently employed by the new construction company in a senior position as an “influential person” and the QBCC considers that person to be an excluded individual, then the new company is deemed to be an excluded company, and the QBCC must provide notice to the new company and to cancel its licence unless the senior employee stops being an influential person of the company within 28 days of the notice being given.

Permanently excluded individual

Under the QBCC Act, a person is a “permanently excluded individual” if they have been an excluded individual for a relevant event on two occasions. The QBCC is prohibited from granting a licence to a permanently excluded individual. In the case of a company, the QBCC is prohibited from granting a licence to a company for which a permanently excluded individual is a director, secretary, influential person, or nominee. Effectively, it is a life ban.

However, for the purposes of these provisions, an excluded individual for one relevant event does not also become an excluded individual for another relevant event if the QBCC is satisfied that “both events are consequences flowing from what is, in substance, the one set of circumstances”.

This was an important legislative concession, which particularly addresses the situation of one set of financial circumstances affecting interrelated entities. A common example would be the situation where the individual is a director of several construction companies in a group, and because of interrelated financial arrangements involving the companies, the insolvency of one company triggers the insolvency of the others causing a relevant company event for each.

However, the individual circumstances involved may be complex and may be open to different legal interpretations of whether different relevant events have flowed from one set of circumstances, or not.

Review of QBCC Decision

A person may seek an internal review of the QBCC’s decision that a person is an excluded individual or excluded company, or that an individual is still a director, or secretary, or an influential person of a construction company.

Likewise, a person may apply to Queensland Civil and Administrative Tribunal (“QCAT”) for a “merits review” of the QBCC’s decision that a person is an excluded individual or excluded company, or that an individual is still a director, or secretary of, or an influential person for, a company. A merits review essentially involves the QCAT member standing in the shoes of the QBCC decision maker to hear and decide the matter on its merits by way of a fresh hearing based on the facts and evidence.

Alternatively, a person may file an application in the Supreme Court of Queensland under the Judicial Review Act 1991. Unlike a merits review which considers the facts and evidence used to make the decision to make a fresh decision, judicial review is basically limited to considering the lawfulness of the decision and decision-making process.

How Boss Lawyers can help you

This can be a complex area of law which can have a devastating effect on your ability to operate in the Queensland building industry in Queensland.

Given the serious consequences involved, you should always obtain competent independent legal advice regarding your particular circumstances, the validity of any adverse decision made against you, and the options that may be available to you.

For practical legal advice, support and assistance regarding your particular circumstances, call Boss Lawyers. We are ready to step in and assist you to assert your rights and protect your interests.