Queensland Building and Construction Commission v Smith
[2024] QDC 101
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- Unreported Judgment
- Queensland Building and Construction Commission v Smith[2024] QDC 101
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Queensland Building and Construction Commission v Smith[2024] QDC 101
Reported at (2024) 4 QDCR 76
Queensland Building and Construction Commission v Smith[2024] QDC 101
Reported at (2024) 4 QDCR 76
DISTRICT COURT OF QUEENSLAND
CITATION: | Queensland Building and Construction Commission v Smith [2024] QDC 101 |
PARTIES: | QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION (Plaintiff) V DAMIEN JOHN SMITH (Defendant) |
FILE NO/S: | 1967/21 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court |
DELIVERED ON: | 26 April 2024 (ex tempore) |
DELIVERED AT: | Brisbane |
HEARING DATE: | 26 April 2024 |
JUDGE: | Judge Porter KC |
ORDER: |
|
CATCHWORDS: | STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – Particular words and phrases – Generally – where the plaintiff seeks to recover from the defendant as a director of a building contractor – where the building contractor is deregistered – where the plaintiff primarily relies on sections 71 and 111C of the Queensland Building and Construction Commission Act 1991 (Qld) to take proceedings against the defendant personally – where the defendant is not personally liable under section 71 of the Act – whether the company’s deregistration prevents liability for the debt claimed in this proceeding from attaching to the defendant pursuant to sections 111C(3) and (6) of the Act |
LEGISLATION: | Corporations Act 2001 (Cth) s. 601AD Queensland Building and Construction Commission Act 1991 (Qld) ss. 71(1), 111C |
CASES: | Mahony v Queensland Building Services Authority [2013] QCA 323 R v A2 (2019) 269 CLR 507 Re Austral Family Homes Pty Ltd (in Liq) (1992) 28 NSWLR 247 Russian & English Bank v Baring Brothers & Co Ltd [1936] A.C. 405 Stankovic v SS Family Pty Ltd [2018] QDC 54 |
COUNSEL: | M. B. Ambrose KC & H. Clift for the applicant (plaintiff in the proceedings) |
SOLICITORS: | Dentons for the applicant (plaintiff in the proceedings) The respondent (defendant in the proceedings) appeared in person |
Introduction
- [1]This is a proceeding between the plaintiff, the Queensland Building and Construction Commission (the Commission), and the defendant, Damien John Smith, whereby the Commission seeks to recover from Mr Smith, as a director of a incorporated building contractor, a sum paid on the statutory insurance scheme created by the Queensland Building and Construction Commission Act 1991 (Qld) (the Act) on a claim against the corporate contractor. A question has arisen as to whether, on the proper construction of the relevant provisions, Mr Smith can be liable as director where the corporate building contractor has been deregistered. That question was ordered by me to be dealt with as a preliminary point. For the reasons which follow, I find that Mr Smith can be liable in those circumstances.
The statutory context
- [2]The Commission relies on two provisions, primarily, to take proceedings against Mr Smith personally. The first is section 71(1) of the Act, which provides:
71 Recovery from licensed contractor etc.
- If the commission makes any payment on a claim under the statutory insurance scheme, the commission may recover the amount of the payment, as a debt, from the building contractor by whom the relevant residential construction work was, or was to be, carried out or any other person through whose fault the claim arose.
- [3]Section 71(1) forms part of Part 5 of the Act, which creates the statutory insurance scheme for the categories of building work covered by that scheme which are, broadly, domestic building work. Section 67X of the Act creates that scheme. It provides:
67XStatutory insurance scheme
- The statutory insurance scheme previously established under this Act is continued.
- The purpose of the statutory insurance scheme is to provide assistance to consumers of residential construction work for loss associated with work that is defective or incomplete.
- [4]The scheme, broadly, provides for insurance premiums to be paid by licensed contractors, for claims to be made on that scheme by parties to relevant building contracts and, relevantly in this case, for the recovery of payments under s. 71(1) of the Act.
- [5]It is not in dispute in this case that the building contractor was not Mr Smith, but a company of which he was a director, at the relevant times. Accordingly, Mr Smith could not be liable directly under s. 71(1) of the Act, because he was not the building contractor. Nor is it contended on the pleadings that he was another person through whose fault the claim arose within the meaning of those words in s. 71(1).
- [6]To pursue Mr Smith personally, the Commission must rely on section 111C of the Act. That section does not appear in Part 5 of the Act, dealing with the statutory insurance scheme; but appears in Part 10, which deals with miscellaneous provisions. Section 111C of the Act is plainly intended to gather, in the one place, all the different ways in which directors can be made liable for penalties or civil amounts due under the Act by bodies corporate. Section 111C relevantly provides:
111C Liability of directors for amounts
- This section applies if—
- a company is convicted of an offence against a provision of this Act; and
- a penalty for the offence is imposed on the company; and
- the amount of the penalty is not paid within the time required for its payment.
- This section also applies if—
- a penalty is imposed on a company as the outcome of disciplinary action taken against the company; and
- the disciplinary action takes effect under section 74G; and
- the amount of the penalty is not paid within the time required for its payment.
- This section also applies if a company owes the commission an amount because of a payment made by the commission on a claim under the insurance scheme.
- If this section applies because of subsection (1), the liability to pay the penalty attaches to—
- each individual who was a director of the company when the offence was committed; and
- each individual who is a director of the company when the penalty is imposed.
- If this section applies because of subsection (2), the liability to pay the penalty attaches to—
- each individual who was a director of the company when the act or omission happened giving rise to the finding of the tribunal; and
- each individual who is a director of the company when the penalty is imposed.
- If this section applies because of subsection (3), the liability to pay the amount attaches to—
- each individual who was a director of the company when building work the subject of the claim was, or was to have been, carried out; and
- each individual who was a director of the company when the payment was made by the commission.
- A liability under subsection (4), (5) or (6) to pay a penalty or an amount applies regardless of the status of the company, including, for example, that the company is being or has been wound up.
- If a liability under subsection (4), (5) or (6) attaches to 2 or more persons, the persons are jointly and severally liable.
[underlining added]
- [7]Of particular relevance in this case is section 111C(3) which, as noted above, identifies that the section applies if a company owes the commission an amount because of a payment made by the commission on a claim under the insurance scheme. That is the gateway provision for Mr Smith to have liability as a director under section 111C(6) of the Act.
Whether the defendant can be liable under section 111C(6)
- [8]The question arose on the pleadings in this case as to whether Mr Smith can be liable under section 111C(6) of the Act if the company was deregistered at the time the building work the subject of the claim was carried out; and/or, at the time when the payment was made by the Commission.
- [9]The point is a narrow one, and is explained concisely in the Commission’s written submission, in paragraphs seven to twelve (footnotes omitted):
The pleadings
- The factual issues identified in the pleadings are largely non-contentious (either being the subject of admissions or non-admissions). The denials made by Mr Smith concern the timing of the relevant policies, the proper characterisation of claims made under the policies, and directions to rectify. The Commission’s affidavits are formal in character and simply provide the factual foundation for key allegations in the pleadings. Mr Phillips, a debt-recovery officer employed by the Commission, provides evidence of claims made by the relevant home owners, acceptance of those claims, the directions to rectify, and the payments made by the Commission in respect of the three properties. He annexes the relevant business records. Mr Duan, a solicitor, annexes company and license searches to his affidavit.
- The Commission alleges that payments were made on claims under the statutory insurance scheme relating to three properties on a range of dates between 13 May 2016 and 8 February 2017. To place that into the context of the separate question, 3 of the 9 payments were made after the date the Company was deregistered by ASIC on 21 August 2016.
- Having set out the material facts necessary to satisfy s 71 of the Act, the Commission then pleads Mr Smith’s liability in paragraphs 46 and 47 of the statement of claim:
- 46.The Company owes to the Plaintiff the amount of $360,599.00 pursuant to section 71(1) of the Act.
- 47.The Defendant is liable for payment of the amount owed by the Company pursuant to section 111C(6) of the Act.
- In its prayer for relief, the Commission claims (as well as interest and costs):
$360,599.00 owing by the Defendant as a liquidated debt to the Plaintiff pursuant to section 111C(6) of the Queensland Building and Construction commission Act 1991 (‘the Act’), such liability attaching to the Defendant as a result of the liability of D J Smith Constructions Pty Ltd ACN 156 552 288 (deregistered) pursuant to section 71(1) of the Act;
- In response, Mr Smith relevantly pleads in paragraph 25(e) of his defence that:
- In relation to paragraph 46 of the Statement of Claim the Defendant denies the allegations made therein because the allegations are untrue on the basis that:
…
- as at 31 August 2016 the Company was deregistered and ceased to exist, accordingly the Company does not owe any sum of money to the Plaintiff pursuant to section 71(1) of the QBCC Act.
Particulars
Section 601AD(1) of the Corporations Act
- Those extracts demonstrate how the separate question arises in this case.
- [10]The point made in paragraph 25(e) of the Defence is beguilingly persuasive. Section 601AD(1) of the Corporations Act 2001 (Cth) (the Corporations Act) deals with the effects of deregistration of a company. This section provides that a company ceases to exist upon deregistration. The Corporations Act then contains a note under sub (1) that says:
Note: Despite the deregistration, officers of the company may still be liable for things done before the company was deregistered.
- [11]Section 601AD of the Corporations Act then proceeds to deal with some specific questions relating to property; rights, powers, and so on, that the company may have post-deregistration. It does not have anything special to say about liabilities. However, it has long been the accepted position at common law that the effect of a company ceasing to exist upon deregistration is that no action can be brought to which the company would be a necessary party, and the dissolution extinguishes all claims by or against the company. It is sufficient to refer to Re Austral Family Homes Pty Ltd (in Liq) (1992) 28 NSWLR 247 at 249, about point D, and the cases cited there. The foundational statement seems to be articulated in Russian & English Bank v Baring Brothers & Co Ltd [1936] A.C. 405 at 427, where Lord Atkin (originally from Brisbane) adopts a statement from Blackstone that, “[t]he debts of a corporation either to or from it are totally extinguished by its dissolution …”.
- [12]Section 601AD Corporations Act has been authoritatively construed in that way. Under the present scheme, by which constitutional power is conferred on the Commonwealth Parliament to legislate for corporations, that section is a valid act of the Commonwealth Parliament; and, to the extent a State Act is inconsistent with it, it would be invalid under s. 109 of the Commonwealth Constitution.
- [13]When one then looks at the language used in the relevant provision of the Act, it seems to invite the argument advanced in Mr Smith’s pleading. Section 71(1) speaks of recovering the amount of the payment as a debt from the building contractor. Section 111C(3) of the Act provides that it applies “if a company owes the Commission an amount”. Applying s. 601AD, authoritatively construed in the way I have outlined above, it seems, on a literal reading of s. 71(1) and s. 111C(3) of the Act, on the dissolution of a corporate building contractor, it cannot owe the Commission an amount, because on dissolution its debts are extinguished.
- [14]Those charged with drafting the Act might not have thought of that possibility when they chose the language for s. 111C. If the statutory scheme stopped there, the Commission may have had a difficulty with that s. 111C(3) applying in circumstances where the company in question had been deregistered, for the reasons I have already articulated.
- [15]However, the Commission has the very considerable advantage of s. 111C(7) of the Act, set out above, which relevantly provides that a liability under subsection (6) to pay an amount applies regardless of the status of the company, including, for example, that the company is being, or has been, wound up.
- [16]Deregistration falls within the ordinary meaning of the words “status of the company”. To the extent there is any doubt about that, it is eliminated by the express use of the phrase “wound up”, because a company which has been wound up will almost always be deregistered, or liable to be deregistered. Therefore, s. 111C(7) evinces a specific intention that liability under subsection (6), to pay an amount, will apply even if the company has been deregistered.
Whether section 111C(7) applies to liability arising under s 71(1)
- [17]There is a further difficulty, however. Subsection (7) applies, relevantly, to a liability under subsection (6). A liability under subsection (6), however, is subject to the condition that the section applies because of subsection (3). Subsection (3) is the precondition to the application of subsection (6). It is not literally caught by the language of subsection (7) and, as I have already explained, it creates a precondition of liability, that the company owes the Commission an amount and, for the reason I have explained, prima facie, any such liability is extinguished if the company is deregistered.
- [18]There are two compelling matters that suggest that, in broad terms, Parliament’s intention was that the provision in section 111C(7) would apply not just to a liability under subsection (6), but to a liability arising under section 71(1) that remained unmet. One matter arises from that subsection itself. The other matter arises from the context in which that provision was introduced.
- [19]As outlined in the Commission’s written submissions, the current scheme for third party liability for s. 71(1) debts was designed to replace a previous scheme whereby individuals were required, in some cases, to provide guarantees and indemnities which, of their nature, would ordinarily have given rise to a liability which existed independently of the existence, or otherwise, of the principal obligation.
- [20]Both of those matters indicate that it was the intention that subsection (6) liability apply regardless of whether the company is deregistered or not.
- [21]Of course, the difficulty the Commission had to get over (and which favoured Mr Smith) is Mr Smith’s submission that statutory construction has to be text-based. It does not necessarily require that the ordinary meaning of words be used, but it does require that there be text in the statute identified which can be rationally construed as giving rise to the meaning contended for. I refer, in that regard, conveniently, to R v A2 (2019) 269 CLR 507 at [520] to [522], although there are many cases which make the same point, including a decision of my own, Stankovic v SS Family Pty Ltd [2018] QDC 54. In that case the application failed because no words in the statute could be interpreted to mean what counsel was contending for as the overall purpose of the statute, a view which was upheld in the Court of Appeal.
- [22]It seems to me that it is possible to construe the words in ss. 71(1) and 111C of the Act to give effect to the intention that the status of the company is irrelevant to the liability under subsection (6). That involves two steps.
- [23]The first step concerns s. 71(1). In my respectful view, that provision should be construed as creating a statutory entitlement to indemnity, in fact, for a payment made on a claim under the statutory insurance scheme. That the payment made on a claim in the scheme is the integer of liability under section 71(1) has been confirmed by a Court of Appeal authority, including Justice of Appeal Gotterson’s decision in Mahony v Queensland Building Services Authority [2013] QCA 323 at [34] and [35].
- [24]His Honour’s judgment supports the proposition that section 71(1) of the Act provides for a statutory entitlement to indemnity, or a statutory entitlement to be paid the amount of a claim under the scheme. The next part of section 71(1) identifies the mode, in my view, in which that statutory entitlement to recovery can be pursued in a Court. That is, as a debt from the building contractor or any other person through whose fault the claim arose. It does not, as it were, create in terms a statutory debt. It creates a statutory entitlement to recover in respect of the payment, which can be enforced as a debt. In that sense, it is a sui generis right, and not itself a debt.
- [25]The next step in the reasoning is to look at s. 111C(3) of the Act. That section provides that it applies if a company owes the Commission an amount because of a payment under the statutory insurance scheme. Now, looked at literally, the company cannot owe the Commission an amount if it has been deregistered, for the reasons I have articulated. However, in my respectful view, “owes,” in that case, should be construed as meaning that the statutory entitlement which could have been enforced as a debt against the building contractor or the other person, has not been enforced, such that the statutory entitlement remains unmet.
- [26]It is in that sense that a company, whether liable as a building contractor or another person under s. 71(1) of the Act, owes the Commission an amount. It is notable as well that s. 111C(3) tends to support the view that s. 71(1) creates a sui generis statutory entitlement that is not of itself a debt, but it can be enforced as such, because it does not use the word “a debt”. It refers to “an amount”.
- [27]Accordingly, in my respectful view, a company owes the Commission an amount because of a payment under the scheme where the statutory entitlement created by s. 71(1) has not been met by the company, and it remains unmet. That is, I admit, the non-natural meaning of the phrase, “a company owes the Commission an amount”. But it is a construction which I believe is open on the language of the two sections, read together, which gives effect to the clear policy in s. 111C(7) of the Act.
Conclusion
- [28]For those reasons, in respect of the separate question which I ordered to be determined – being whether the company’s deregistration prevents liability for the debt claimed in this proceeding from attaching to the defendant, pursuant to sections 111C(3) and (6) of the Act – the answer to that question is, “no, the company’s deregistration does not prevent liability from attaching to Mr Smith, pursuant to sections 111C(3) and (6) of the Act.”
- [29]I will make no order as to costs of this application.