ACN148 877 525 Pty Ltd v Queensland Building and Construction Commission [2022] QCAT 72

• [7] On 22 August 2012 the owner entered into a contract with Build Restore Pty Ltd for home renovations. Lee Crocker was a director of Build Restore Pty Ltd from 28 April 2004 to 11 January 2013. Dene Crocker was a director of Build Restore Pty Ltd from 28 April 2004 to 27 August 2017.
• [8] On 30 November 2013 the original contract was assigned to Build (Qld) Pty Ltd to complete the work.
• [9] On 4 August 2016 the QBCC cancelled Build (Qld) Pty Ltd's licence at their request.
• [10] On 12 December 2016 Build (Qld) Pty Ltd changed its name to ACN 148 877 525 Pty Ltd.
• [11] On 8 October 2016 a Notice of Practical Completion was issued to the owner and contractor by the architect.
• [12] On 5 April 2017 the owner lodged a complaint form with the QBCC.
• [13] On 11 June 2017 ACN 148 877 525 Pty Ltd (formerly Build (Qld) Pty Ltd) was deregistered by ASIC (reason s 601AB). Its former director (at the time of deregistration) was Dene Crocker who was director from 1 October 2016 to 11 June 2017. Lee Crocker was a former director from 19 December 2008 to 18 May 2014.
• [14] On 7 March 2018 the Crockers received notification of an amended scope of works decision dated 1 March 2018 (the decision). The decision letter was addressed to Build (Qld) Pty Ltd and began "Dear Directors".
• [15] On 13 March 2018 an application for review of the decision was filed in the Tribunal.
• [16] On 13 June 2018 the matter was adjourned pending the outcome of other Tribunal and court proceedings.
• [17] The owner's claim was progressed internally by the QBCC and the QBCC approved an insurance claim for $121, 112.83 in May 2019.
• [18] On 17 May 2019 Lee Crocker received a letter from the QBCC stating that a claim had been made, as previously advised on 1 March 2018, and that the amount of $121, 112.83 had been approved. Under the heading "How this will affect you" the letter states:

Under s 71 of the QBCC Act, the QBCC is entitled to recover the amount paid on the claim from you or your company...

• [19] In summary, the QBCC seeks an order striking out the review application pursuant to s 47 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) on the following bases:

(a) ACN148 877 525 Pty Ltd (formerly Build (Qld) Pty Ltd) ceased to exist on 11 June 2017. Legal proceedings cannot be commenced or maintained for or against a deregistered company.
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> (b) Lee Crocker and Dene Crocker do not have standing to review the decision about a scope of works dated 1 March 2018, as neither Lee Crocker nor Dene Crocker were the 'building contractor' for the relevant work;
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> (c) Neither Lee Crocker and Dene Crocker are an "affected person" in relation to the decision about a scope of works; and
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> (d) The review application is misconceived and should be dismissed.

• [20] The Crockers argue that the named applicants in the application for review were Lee Crocker and Dene Crocker and ACN148 877 525 Pty Ltd. The Crockers say they filed the application in their personal capacity as individuals and as applicants. They point to s 11(1) of the QCAT Rules which provides that two or more individuals or other entities may make a joint application to the Tribunal and to s 40(1)(a) of the QCAT Act which provides that a person is a party to a proceeding in the Tribunal's review jurisdiction if the person is the 'applicant'. Schedule 3 of the QCAT Act defines 'applicant' as the 'person who makes the application'. Further, if the Tribunal considers there is a procedural irregularity in the application form, that it has the power under s 61 to waive the requirement.
• [21] It is submitted that, under s 87 of the QBCC Act, the applicants have standing for the reviewable decision, being an 'affected person'. They say they are affected because they may be subject to a decision demanding money pursuant to s 71 of the QBCC Act and also under s 111C, as directors. The Crockers rely on the earlier decision of Crocker v QBCC ([2017] QCAT 304).
• [22] The Crockers rely on a letter written by the QBCC to Lee Crocker in his personal capacity on 17 May 2019 which stated that he was affected by the decision (approval of the scope of works/insurance claim) due to the operation of s 71 and which demanded payment by him of the sum of $121 112.83. The Crockers argue that the fact of writing to Lee Crocker in this way and putting him on notice of the decision, insurance claim and demand for payment of the debt means he is a person affected beyond that of a normal member of the public, regardless of the operation of either s 71 or s 111C of the QBCC Act.
• [23] The Crockers also rely on the fact that a search conducted on the QBCC License Register links the Crockers as related entities to the former company. This shows, they submit, that despite the separate entity principle, individuals are tied to or affected by the public record of the corporate entity, regardless of whether the individual is a current or former director and regardless of the status of the company. They argue that s 87 does not require the applicant to be affected in a specific way, for example, that a legal interest is affected and that they have been affected by the adverse entry on the QBCC's entry on the License Register beyond that of a member of the public.
• [24] The Crockers also submit they will be prejudiced if the review application is dismissed because they will be out of time to file a review application. The QBCC, on the other hand, if the review is unsuccessful, still can recover any insurance money paid to the owners, from the Crockers.
• [25] The Crockers submit that the approach to the scope of works decision was flawed in that the scope of the claim was not confined by the terms of the policy conditions, namely that as the works had reached the stage of practical completion, by the operation of the policy conditions, the QBCC was only liable for defective work that was 'primary building work' and was not 'associated building work', and that first became evident after the date of Practical Completion and was not apparent to the Insured prior to the date of Practical Completion. On that analysis, it is submitted, each item of the scope of works (32 items) is either not a defect, has been rectified or is excluded under the terms of the policy conditions.
• [26] Further, it is submitted that by virtue of clause 4.3(c) of the policy conditions the QBCC had no liability to pay the claim. Clause 4.3 (c) provides that the QBCC's liability to pay does not arise where the contractor has a continuing obligation to complete the residential construction work. The Crockers submitted that the original contract (which was extended to include the new contractor, ACN148877525 Pty Ltd and the guarantor Dene Crocker) by clause M14 provided that if there is any remaining defect or incomplete necessary work it does not come to an end when the defects liability period is over. Accordingly, it was submitted, because they were under a continuing obligation to complete, that the QBCC's liability to pay under Part 4 did not arise.
• [27] In summary, they submit:

(a) The decision is reviewable under s 86 of the QBCC Act.
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> (b) The application is not prohibited by s 86F of the QBCC Act.
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> (c) The Tribunal has jurisdiction to review the decision under s 87 of the QBCC Act.
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> (d) The applicants are "affected persons" within the meaning of s 87 of the QBCC Act by sections 71 and 111C of the QBCC Act and due to adverse listings on the Licensee Register maintained by the QBCC.
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> (e) The respondent's application for dismissal is misconceived and not made out.
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> (f) There is a prima facie matter to be heard in the review.

• [28] The Tribunal has the power pursuant to s 47 of the QCAT Act to dismiss a proceeding if the Tribunal considers it is frivolous, vexatious or misconceived, lacking in substance or otherwise an abuse of process.
• [29] The QBCC rely on the grounds that the proceeding is misconceived and lacking in substance and was not validly commenced.
• [30] It is generally accepted in the Tribunal that to dismiss a matter without a hearing taking place is a serious step and one which should not be taken unless a clear case has been make out to support a dismissal.[1]
• [31] I accept that proceedings for or against a deregistered company are a nullity and that it would be necessary, if the company was the proper applicant in this review, for the company to be reinstated in order for any proceedings to continue.[2]
• [32] I accept that the company, ACN 148 877 525 Pty Ltd (formerly Build (Qld) Pty Ltd) was deregistered by ASIC on 11 June 2017 and that it ceased to exist as a legal entity from that date.
• [33] The QBCC made its decision, relevantly, the decision about the amended scope of works, on 1 March 2018 and by its letter of 8 March 2018 purported to notify the then deregistered company, and directors, of that decision.
• [34] On 13 March 2018 an application for review of the decision made on 1 March 2018 was made.
• [35] The application form under the heading Part A Applicant's details provided:

ACN 148 877 525 Pty Ltd (formerly Build Qld Pty Ltd)

• [36] I accept that a review proceeding may not be commenced or maintained by a deregistered company. The effect of s 601AD of the Corporations Law is that a company ceases to exist on deregistration. It is also settled that a deregistered company cannot institute legal proceedings and that proceedings purportedly instituted by it are a nullity.[3] I accept that if I find the review proceeding was commenced in the name of the company, that it was not validly commenced.

Was the application for review made by the company?

• [37] The answer is not entirely clear. Ordinarily, the company would be the applicant. But here, the company was deregistered. Moreover, the Crocker's names appeared under the heading "Applicant".
• [38] In my view, in these circumstances and viewed objectively, the application was made by Lee Crocker and Dene Crocker and, perhaps, erroneously, by the company.

Did the directors have standing to apply for review of the amended scope of works decision?

• [39] I accept that the building contractor for the relevant building work was the former company. I also accept that the Crockers are separate from the company and have no time been the building contractor.
• [40] Section 87 of the QBCC Act provides that:

A person affected by a reviewable decision of the commission may apply, as provided under the QCAT Act, to the tribunal for a review of the decision.

(a) Identify the legal effect and operation of the reviewable decision; and
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> (b) Determine whether the applicant is affected by that decision.[4]

• [42] The scope of works decision is one decision in a series of decisions statutorily required by the QBCC Act. It is made after a decision to give a direction to rectify and after a decision to allow a statutory insurance claim in respect of work not rectified or completed. Both of these decisions are also reviewable.
• [43] It has been held that the review of a scope of works decision is limited to asking what rectification works are reasonable and necessary given the nature of the rectification work to be undertaken.[5] It is not broadened by decisions made before, or after it, to include considerations, for example, of whether the work was defective, whether a claim should have been allowed under the statutory insurance scheme or whether the building contractor is liable, ultimately, for the insurance debt, being a person "through whose fault the claim arose".
• [44] The purpose of the scope of works decision is to outline a programme of works which is reasonable and necessary to rectify identified defects. It may also extend to consideration of whether the relevant programme of works is a reasonable cost effective method of rectifying the identified defects.[6]
• [45] The scope of review of a scope of works decision is accordingly, narrow. I accept the submissions of the QBCC that it is a decision which serves to particularise the programme of work necessary to rectify building work in circumstances where it has already been determined that such work is defective and is work for which a claim by a consumer may be allowed under the statutory insurance scheme.
• [46] The nature of the decision to be made when reviewing a scope of works decision informs the consideration of whether a person is affected by the decision and therefore has standing to apply for review.
• [47] The principles to be applied in considering whether a person is affected by a decision were summarised in McCrystal.[7] I adopt those principles, in particular that if the decision could not have affected the applicants directly then it will be necessary for them to establish by evidence that his or her interests are in truth affected; and that an applicant must demonstrate that he is affected by the decision beyond that of a member of the public at large.[8]
• [48] Some assistance can be found in decisions relating to circumstances where a party contends that it should have been joined to proceedings, but was not, and hence was entitled as of right to set aside a judgment. In that context, it has been said, that the appropriate test is:

Will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action? [9] (emphasis added)

• [49] The test has been said to involve matters of degree, and ultimately judgment, having regard to the practical realities of the case; and the nature and value of the rights and liabilities of the third party which might be directly affected.[10] It has been held that the "direct affect" test in the context of joinder may be met even where there are a number of stages between the relevant order (here the reviewable decision) and its effect upon a non-party's rights or liabilities.[11] I note that in this context, the statutory test under s 87 only requires that a person may be affected, as opposed to will be affected, by a reviewable decision.
• [50] The QBCC submits that scope of works decisions are served on the building contractor and the homeowner and that they are the persons directly affected by the decision, with the corresponding right of review. I accept that the building contractor is directly affected by a scope of works decision. It is the building contractor that may be liable for the insurance debt pursuant to s 71 of the QBCC Act.
• [51] The Crockers may, however, be affected by the scope of works decision by the operation of s 111C of the QBCC Act. The scope of works decision precedes a decision to allow a claim by a consumer under the scheme. Once the claim is approved and paid, a director, without more, is personally liable for the insurance debt under s 111C. I note here that the QBCC has already approved the insurance payment of $121, 112.83. As I understand the process, the amount which the QBCC may seek to recover from the directors may be affected by the scope of work decision.
• [52] Section 111C provides:

111C LIABILITY OF DIRECTORS FOR AMOUNTS

(1) This section applies if -

(a) a company is convicted of an offence against a provision of this Act; and

(b) a penalty for the offence is imposed on the company; and

(c) the amount of the penalty is not paid within the time required for its payment.

(2) This section also applies if -

(a) a penalty is imposed on a company as the outcome of disciplinary action taken against the company; and

(b) the disciplinary action takes effect under section 74G; and

(c) the amount of the penalty is not paid within the time required for its payment.

(3) 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.

(4) If this section applies because of subsection (1), the liability to pay the penalty attaches to -

(a) each individual who was a director of the company when the offence was committed; and

(b) each individual who is a director of the company when the penalty is imposed.

(5) If this section applies because of subsection (2), the liability to pay the penalty attaches to -

(a) each individual who was a director of the company when the act or omission happened giving rise to the finding of the tribunal; and

(b) each individual who is a director of the company when the penalty is imposed.

(6) If this section applies because of subsection (3), the liability to pay the amount attaches to -

(a) 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

(b) each individual who was a director of the company when the payment was made by the commission.

(7) 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.

(8) If a liability under subsection (4), (5) or (6) attaches to 2 or more persons, the persons are jointly and severally liable.

• [53] This provision allows the QBCC to recover the insurance debt from the directors personally, thereby displacing the common law separate entity principle. This applies notwithstanding the company may have been deregistered.[12] The decision as to whether or not to recover the insurance debt is made after the scope of works decision and depends upon whether the person from whom recovery is sought was a director when the relevant building work was carried out and when the payment under the scheme was made.
• [54] In Crocker v Queensland Building and Construction Commission[13] Jackson J held, in considering a judicial review application to have decisions set aside on the basis directors had not been given notice of the decisions:

Otherwise, on the material before me, the essential plank in the applicant's case to set aside the other decisions was that he ought to have been given notice of the challenged decisions, which I have identified, in either paragraphs (c) or (d). It is not contended that, under the statute, there was any express requirement for him to be notified. The apparent difficulty that the implication of such a requirement would create is that failure to give notice to a director of a building contractor who may be affected under section 111C would have the consequence of invalidating every decision which is made by the respondent. That would be a startling conclusion. Nevertheless, if that is what is required on the proper construction of the statute, there is no reason to shrink from it.

However, in my view, apart from the fact of the incidence of the liability that is created under section 111C for a director who meets the requirements for that Section to apply, there is no reason to think that the statute should require that, for a valid decision of the kinds identified under paragraphs (c) or (d) to be made, notice must be given to the director of any company building contractor as well as to the company itself.

In my view, the fact of the operation of section 111C is not of itself a sufficient reason to imply that requirement into the statute. It follows that, in the result, none of the decisions that are challenged on the basis of the ground of absence of procedural fairness are reviewable under section 20 for the reason that the respondent was required to give the applicant notice of those decisions.

• [55] The QBCC submitted, in reliance on this passage from Crocker, that if there is no requirement to even notify a director of a decision about a scope of works, then a director is not a person directly affected by that decision and is therefore without standing to review it. Further, that if s 111C is enough to give standing for a scope of works decision to a director, then it must also be enough for other decisions taken in the course of administering a claim under the scheme. This approach, it is submitted, would impose an onerous burden on the Commission by requiring it to identify all persons who may be liable under s 111C and to serve them with notice of the decision as well as the building contractor.
• [56] I do not accept the first of those submissions. The issue of who has standing to apply for review (the present circumstances) and whether directors must, in addition to the company, be served with decisions are separate and distinct. Jackson J was not considering whether the effect of s111C was sufficient to permit an application for review by the directors as affected persons under s 87, and not where the company, which would ordinarily bring the application, had been deregistered. Jackson J was considering whether, for the decision to be valid, "notice must be given to the director of any company building contractor as well as to the company itself"? That involved a different issue of statutory construction.
• [57] I also do not accept that a finding in this case, that the directors may be affected by the scope of works decision would have the consequence that directors would need to be notified of all decisions, in view of the potential for liability under s 111C. Whether a director needs to be given a notice of decision is a different question and will depend upon the circumstances of each case. In my view, where the corporate building contractor is deregistered at the time of payment, notice of a scope of works decision should be given to each of the directors. However, it is not all decisions that will require notice to directors, even where the company is deregistered.
• [58] As Fraser JA held in Namour v Queensland Building Services Authority[14]:

The scheme of the Act is that a building contractor or other interested person who wishes to challenge such decisions should make the challenge before the respondent pays under the policy. A building contractor who does not make such a challenge is liable under s 71(1) whether or not one of those anterior decisions might have been the subject of a challenge. In the case of a building contractor which is a company, a director caught by s 111C(6) is similarly unable to challenge one of those anterior decisions in a proceeding for recovery of a debt. This is so because the director's liability is fixed by reference only to the liability of the building contractor. (I would add that there is a strong argument that in circumstances such as occurred in this case, a director is also entitled to challenge a decision to cancel a company's building licence. A director may plausibly claim to be a person affected by such a decision because the readily foreseeable results of cancellation of a corporate building contractor's licence during the course of a contract include termination of the contract, a claim upon the respondent by the owner under the statutory insurance policy, payment of that claim by the respondent, and a claim by the respondent against the company and its directors.[15] (emphasis added)

• [59] The QBCC submit that this is limited support for the proposition that a director should be able to step into the shoes of the corporate building contractor after deregistration. The QBCC submit that when the paragraph is viewed in its entirety it is authority for the proposition that, in the ordinary course, it is the building contractor who is affected by decisions taken in the administration of an insurance claim. It is further submitted that, to the extent Fraser JA commented upon the review rights of a director, those comments were made by way of obiter and appear limited in scope to the decision to cancel a company's licence and, moreover, do not address the critical concern of what the director's position is once the company ceased to exist.
• [60] In my view, s111C does have the effect of making the directors affected by the scope of works decision at least in circumstances where the company has been deregistered. Their interest is above that of a member of the public because the more extensive the scope of works, the higher the insurance debt for which the directors may be exposed to in recovery proceedings pursuant to s 111C. That said, I agree that whether they are liable depends upon whether a claim is paid by the QBCC and whether recovery of that claim is sought from the directors personally.
• [61] I agree that, ordinarily, the most appropriate person to bring an application for review is the building contractor for the relevant work. That person was the company. In a case like this where the company no longer exists, an application could be made to have the company reinstated under s 601AH of the Corporations Law, rather than have the directors pursue litigation on its behalf. However, that this is an appropriate course does not mean the directors are precluded from bringing an application for review if they are also affected by the decision.
• [62] The directors raise issues going to the merit of the review. The issues raised go mostly to challenging the decision to make a payment on a claim under the policy. It has been held that the appropriate course of action to review such a decision is by judicial review.[16] The Crockers may be persons with standing to bring such an action and would therefore not be without remedy if there were grounds for review.
• [63] I find the Crockers have standing to bring an application for review, and that, accordingly, the application to dismiss is refused.
• [64] The Registry has proceeded on the basis that the company was the applicant, without that issue having been determined. No criticism is intended of the Registry in this regard. In the circumstances, however, the name of the applicant is amended by substituting ACN148 877 525 Pty Ltd with Lee Anthony Crocker and Dene Ward Crocker.
• [65] The application is to be listed for a Directions Hearing on a date and time to be advised.

[1] Rita Commisso Enterprises Pty Ltd v The Body Corporate for Acacia Lodge Hostel [2013] QCAT 342 at [2]- [3].

[2] Stergiou v City Bank Savings Ltd [2005] ACTA 15 at [25]; Lomas v Veescorp Pty Ltd [2011] QCATA 290.

[3] Kingston Futures Pty Ltd v Waterhouse [2012] QSC 212; [2013] 1 QdR 507 at [19].

[4] McCrystal v Queensland Building and Construction Commission [2018] QCAT 207 at [42].

[5] Col Jenkins & Associates v Queensland Building and Construction Commission [2019] QCAT 117 at [25]; Hall v Queensland Building and Construction Commission [2020] QCAT 379 at [21]- [30] where it is said that the more accurate test is the 'reasonable cost of necessary works' as per the wording of clause 4.2 of the statutory insurance policy.

[6] Hall v Queensland Building and Construction Commission [2020] QCAT 379.

[7] [2018] QCAT 207.

[9] Penang Mining Co Ltd v Choong Sam [1969]2 MLJ 52 at 55-56 applied in China First Pty Ltd v Mount Isa Mines Ltd & ors [2018] QCA 350.

[10] News Ltd at 524-525; referred to with approval by the High Court in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 at [17], [22].

[11] See, for example, Re Octaviar Administration Pty Ltd (in liq) [2013] NSWSC 786; (2013) 94 ACSR 612.

[13] [2020] QSC 24.

[14] [2014] QCA 72.

[16] Lange v Queensland Building Services Authority [2011] QCA 58; [2012] 2 QdR 457.