Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 48, 68

Building Act 2004 s 42

Building and Construction Legislation Amendment Act 2019

Construction Occupations (Licencing) Act 2004 ss 29, 34, 35, 36, 38, 39A, 39B

Legislation Act 2001 ss 139, 140

Cases cited: Esso Australia Pty Ltd v Australian Workers' Union [2017] HCA 54

List of

Texts/Papers cited: Dennis Pearce, Statutory Interpretation in Australia (Lexis Nexis Australia, 9th ed, 2019)

Revised Explanatory Memorandum, Building and Construction Legislation Amendment Bill 2019

1. The decision under review is set aside and substituted by a decision not to make a rectification order in relation to the applicant under section 39A of the Construction Occupations (Licencing) Act 2004.
2. The respondent is to pay the sum of $366.50 to the applicant for the filing fee.

1. The decision under review is set aside and substituted by a decision not to make a rectification order in relation to the applicant under section 39A of the Construction Occupations (Licencing) Act 2004.
2. The respondent is to pay the sum of $366.50 to the applicant for the filing fee.

1. On 10 December 2019, the Building and Construction Legislation Amendment Act 2019 amended the Construction Occupations (Licensing) Act 2004 (COLA) among other things to allow for rectification orders to be made in relation to directors of licensed corporations.
2. The amendments include new sections 39A and 39B. Section 39A allows the Registrar to make a rectification order against a director of a licensed corporation if, before the Registrar makes the order in relation to the corporation, the corporation is wound up, enters external administration, or is deregistered. Section 39B allows the Registrar to make a rectification order against a director of a licensed corporation if, after the Registrar makes the order in relation to the corporation, the corporation is wound up, enters external administration, or is deregistered.
3. These applications are for review of a decision by the Registrar under section 39A to make rectification orders in relation to the former directors of a formerly licensed corporation that was deregistered on 21 March 2016.
4. The applicants challenge the validity of the orders on two grounds. First, they say the Registrar lacked jurisdiction to make an order under section 39A. Second, they say the order is unlawful because it operates retrospectively to impose liability on the directors for past conduct that was not unlawful at the time.
5. Both issues turn on the construction of section 39A.
6. A finding in favour of the applicants on either issue would be determinative of the applications. In those circumstances, the parties agreed that the issues should be determined separately, in advance of a determination of the remaining issues in the applications, if any remain.
7. I am satisfied that the Registrar lacked jurisdiction under section 39A to make orders against the applicants. The appropriate order in both applications is to set aside the Registrar's decision to make a rectification order and substitute a decision that no order should be made under section 39A.
8. Given my view on jurisdiction, the question whether the section operates retrospectively does not arise on the facts. In those circumstances, it would be inappropriate for me to express any view on the issue.
9. My reasons follow.

1. The material facts are not in dispute.
2. Euca Constructions Pty Ltd (Euca) was registered as a corporation on 28 March 2011. David Hill, the applicant in AT 80/2020 and Kieran Jones, the applicant in AT 86/2020, were appointed as directors of Euca. Mr Hill held a Class B Builder Licence No 197693.
3. On 19 July 2011, Euca lodged an application for a Construction Practitioner Licence - Organisation for a Class Builder Licence. The minimum requirement for a corporation to be eligible to be licensed was that the corporation had a single nominee appointed by it who was responsible for the supervision of the construction services provided by the corporation.[1] The application nominated Mr Hill as the sole nominee of Euca.
4. It is common ground that Euca was issued with a Class B Builder Licence, although the evidence does not disclose the date when that happened.
5. In late August 2011, the Crown lessee of Block 25 Section 7 Chifley, Active Developments Pty Ltd, appointed Euca as the builder for the construction of 11 residential units and basement carpark on the land.
6. Euca constructed the units and basement, which is the 'construction service' that is the subject of the rectification orders.
7. A Certificate of Occupancy and Use was issued on 30 April 2012.
8. Inspections of the premises undertaken by Peak Consulting on 10 and 11 March, 28 May, and 11 June 2015, revealed extensive defects.[2]
9. On 29 July 2015, Euca went into voluntary liquidation.[3]
10. Euca was deregistered on 21 March 2016.
11. In response to a complaint about the quality of the building work, on 6 August 2018[4] building inspectors employed by Access Canberra inspected the premises on 24 September 2018 and 14 June 2019.[5]
12. On 23 June 2020, the Deputy Construction Occupations Registrar (Registrar) issued a Notice of Intention to Make a Rectification Order (notice of intention) to Messrs Hill and Jones, inviting submissions about the making of a rectification order within 28 days of receipt of the notice of intention.[6]
13. On 8 October 2020, the Registrar gave notice of his decision[7] and issued rectification orders under section 39A of COLA against Messrs Hill and Jones.[8]

(a) the registrar believes on reasonable grounds that-

(i) a licensee or former licensee (the entity) has provided a construction service otherwise than in accordance with this Act or an operational Act; and

(ii) it may be appropriate to make a rectification order; and

(i) the entity becomes the subject of a winding-up order; or

(ii) a controller or administrator is appointed for the entity; or

(2) The registrar may give each person who was a director of the entity at or after the time the construction service was provided-

(a) if the registrar gave the entity notice under section 34 (Intention to make rectification order) before the entity was wound up, or a controller or an administrator was appointed for the entity or the entity was deregistered - a copy of the notice and a statement to the effect that the person is invited to make submissions about the making of the order within 28 days after the day the person receives the notice; or

(b) a written notice in accordance with section 34 (2)(a), (b), (d) and (e) and a statement to the effect that the person is invited to make submissions about the making of the order within 28 days after the day the person receives the notice.

(3) The registrar may make a rectification order in relation to a person who was a director of the entity at or after the time the construction service was provided if, after considering any submissions made within the 28 days, the registrar is satisfied-

(a) the entity contravened this act or an operational act; and

(b) it is appropriate to make a rectification order in relation to the person.

1. It is not necessary to refer to subsections 39A(4), (5) and (6).

1. Section 39A(1) specifies the factual criteria that enliven the registrar's power to give notice under section 39A(2) and make a rectification order under section 39A(3) and section 38 in relation to a person who was a director of a corporate entity at or after the time a construction service was provided by the entity.
2. The Registrar's notices given to Messrs Hill and Jones under section 39A(2)(b) state:[9]

Under Section 39A...I believe on reasonable grounds that the Entity provided a construction service otherwise than in accordance with section 42 of the Building Act 2004...and that it may be appropriate to make a rectification order.

1. It is common ground that section 39A(1)(a)(i) is satisfied in this case - i.e. that the Registrar formed the belief, on reasonable grounds, that Euca provided a construction service otherwise than in accordance with section 42 of the Building Act 2004, which is an operational Act for the purposes of the COLA.
2. The issue in this case is whether section 39A(1)(a)(ii) is satisfied.
3. The applicants submit that the Registrar's jurisdiction to proceed under section 39A(2) and (3) and to make orders under section 38 in relation to Messrs Hill and Jones, depends on the Registrar having formed the belief, on reasonable grounds, that it may be appropriate to make a rectification order in relation to Euca. As Euca was deregistered some four years earlier, the applicants submit that the Registrar could not reasonably have held the belief that section 39A(1)(a)(ii) requires. For that reason, the Registrar lacked jurisdiction to make rectification orders in relation to Messrs Hill and Jones.
4. The submission has considerable force. A corporation ceases to exist upon deregistration. An order made against a deregistered corporation can have no legal effect. As Senior Counsel for the Registrar conceded, properly in my view, there could never be reasonable grounds for a belief that it may be appropriate to make a rectification order against an entity that is deregistered.[10]
5. However, the Registrar submits that section 39A(1)(a)(ii) requires the registrar to form the belief, on reasonable grounds, that it is appropriate to make a rectification order against a person to whom section 39A(3) applies - i.e. a person who was a director of the entity at or after the time the construction service was provided.[11] As I understand the Registrar's submission, in some circumstances, such as where a controller or administrator is appointed to a company, it may be necessary for the registrar to consider the circumstances of the corporation in considering whether it is appropriate to make an order in relation to a director of the corporation.[12] However, I did not understand that to detract from the Registrar's primary submission that the requisite belief that the registrar must form on reasonable grounds for the purposes of subsection 1(a)(ii) is that it may be appropriate to make a rectification order against a person who is a director to whom section 39A(3) applies.
6. The constructional choice[13] with which I am presented is whether the words "it may be appropriate to make a rectification order" in section 39A(1)(a)(ii) refer to: (a) an order in relation to the entity in subsection 1(a)(i); or (b) an order in relation to a person who was a director of the entity in subsection 1(a)(i) at or after the time the construction service was provided.
7. As Gageler J explained in Esso Australia Pty Ltd v The Australian Workers' Union [2017] HCA 54 at [71]:

Difficult though it is, the constructional choice can and must be made in the application of workaday interpretative methodology. Nothing simpler or more sophisticated is involved than attempting sympathetically to determine which construction of the contested statutory text better fits the context of the statutory scheme of which that text forms part. Linguistic indications are important. More important is the "purpose and policy" reasonably attributed to the provisions within the statutory scheme.

1. Section 140 of the Legislation Act 2001 requires the provisions of an Act to be read in the context of the Act as a whole.
2. Section 39A sits within Division 4.2 of Part 4 of the COLA, which governs the registrar's powers to make rectification orders in relation to a licensee or former licensee, which section 34(1)(a) defines as 'the entity'.
3. The registrar's power to make a rectification order in relation to an entity resides in section 38. The registrar's jurisdiction to make an order in relation to the entity depends on satisfaction of several statutory preconditions.
4. The first is that the registrar must give the entity a notice of intention to make a rectification order, the contents of which must comply with section 34(2). The circumstances in which the registrar may issue a notice of intention are stated in section 34(1):

(1) This section applies if the registrar believes on reasonable grounds that-

(a) a licensee or former licensee (the entity) has provided a construction service otherwise than in accordance with this Act or an operational Act; and

(b) it may be appropriate to make a rectification order.

1. Although the words 'in relation to the entity' do not appear at the end of subsection 34(1)(b), that is clearly the intended meaning. Any doubt is resolved by the opening lines of section 36(1), which state:

(1) In deciding whether it is, or may be, appropriate to make a rectification order in relation to an entity that is contravening, or has or may have contravened, this Act, the registrar must consider the following...

1. The Registrar does not dispute this.
2. The subsequent preconditions appear in section 35(1), which states:

(a) the registrar has given an entity notice under section 34; and

(b) the entity provided the construction service, or part of the construction service, to which the notice relates; and

(c) after considering any submissions made within the time mentioned in the notice, the registrar is satisfied-

(i) the entity is contravening, or has contravened, this Act or an operational Act; and

(ii) it is appropriate to make a rectification order in relation to the entity; and

(d) if the registrar has accepted a rectification undertaking from the entity in response to the notice-the entity has failed to comply with, or has withdrawn, the undertaking.

1. If all preconditions are satisfied, section 35(2) allows the registrar to make an order under section 38 in relation to the entity.
2. Section 35(3) provides that if the registrar makes an order under section 38 in relation to an entity, and the entity is a corporation, the registrar may also make an order under section 38 in relation to a director of the entity.
3. Thus, before the registrar may make a rectification order under section 38 in relation to a director of a corporate entity, the registrar must:

(a) form the requisite beliefs in section 34(1) on reasonable grounds, including that it may be appropriate to make a rectification order in relation to the entity having regard to the considerations in section 36;

(b) give the corporate entity a notice under section 34(2);

(c) be satisfied in relation to each of the matters specified in section 35(1), including that it is appropriate to make a rectification order in relation to the entity; and

(d) make an order under section 38 in relation to the entity.

1. It is not necessary for the registrar to give a notice of intention to make a rectification order in relation to a director of the corporate entity in those circumstances. The applicants submit that section 35(3) permits the registrar to make such an order only in relation to a person who is a current director at the time the order under section 38 is made against the entity. I agree. The only factual criterion upon which the registrar's power to make an order under section 38 in relation to a current director depends, is that the registrar has made a valid order under section 38 in relation to the corporate entity.
2. The circumstances in which the registrar may make an order under section 38 in relation to a director of a corporate entity where, either before or after the registrar makes an order under section 38 in relation to the corporate entity, the entity becomes the subject of a winding-up order, or a controller or administrator is appointed, or the entity is deregistered, are governed by section 39A and 39B.
3. Section 39A is reproduced earlier.
4. Section 39B states, relevantly:

(a) the registrar makes a rectification order in relation to a licensee or former licensee (the entity); and

(i) the entity becomes the subject of a winding-up order; or

(ii) a controller or administrator is appointed for the entity; or

(2) The order is taken to have been made in relation to each person who was a director of the entity at or after the time the construction service was provided.

1. It is not necessary to refer to subsection 39B(3) and (4).
2. I discuss how I think the legislative scheme established by the amended Division 4.2 of Part 4 of the COLA operates in relation to a former director of a corporate licensees that has been wound up, had a controller or administrator appointed, or been deregistered later in these reasons.

1. Section 39A(1)(a) uses identical language to section 34(1). I have said earlier that the phrase "it may be appropriate to make a rectification order" in section 34(1)(b) refers to a rectification order in relation to the entity that provided the construction service in question. The Registrar accepts this meaning.
2. The use of identical language is a powerful, though not necessarily decisive, indication that both subsections are intended to convey the same meaning. I think that the obvious and natural meaning of section 39A(1)(a)(ii) is that it refers to the appropriateness of making a rectification order in relation to the corporate entity that the registrar believes, on reasonable grounds, has provided a construction service otherwise than in accordance with the Act or an operational Act.
3. This meaning is supported by section 39A(1)(c), which refers to certain happenings in relation to a corporate entity "before the registrar makes the order". In my view, the words 'the order' in (1)(c) can refer only to the 'rectification order' mentioned in (1)(a)(ii).
4. Taking that analysis a step further, before the registrar can make a rectification order in relation a corporate entity, the registrar must have formed the requisite beliefs on reasonable grounds required by section 34(1) - which provides the necessary link to section 39A(1)(a) - and given notice of intention under section 34(2).
5. Seen in that light, it is apparent that section 39A(1)(a) points to the time at which the registrar's jurisdiction to give a corporate entity a notice of intention under section 34(2) has been enlivened, although it is not necessary that the registrar should have given a notice under section 34, as section 39A(2) makes clear. Section 39A(2) provides for alternative notification steps depending on whether the registrar gave the entity a notice of intention under section 34 before the entity was wound up, a controller or administrator was appointed, or the entity was deregistered.
6. I accept, as the Registrar submits, that section 34 relates to the making of a rectification order in relation to an entity, whereas section 39A relates to the making of a rectification order in relation to a person who was a director of an entity that was wound up, had a controller or administrator appointed or is deregistered. A person who is a director of a corporate entity is not, by reason of that fact alone, an entity. Of course, as in the case of Mr Hill, if the person is licensed and the nominee of the corporate entity, the person is an entity in their own right and the registrar may proceed against them in that capacity in the ordinary way under sections 34, 35 and 38. But if the registrar chooses to proceed against a person under section 39A, as happened in this case, I am unable to find anything in the text of section 39A, or the broader context supplied by Division 4.2 of the COLA, that supports the Registrar's submission that the requisite belief that the registrar must form on reasonable grounds to satisfy section 39A(1)(a)(ii) is that it may be appropriate to make a rectification order in relation to the person.
7. A further obstacle to the Registrar's submission is that nowhere is there any statement of the criteria the registrar must consider in deciding whether it may be appropriate to make a rectification order in relation to such a person. Section 36 does not apply because it is concerned only with the appropriateness of making a rectification order in relation to an entity.
8. It is important to keep in mind that the belief under discussion is one that conditions the registrar's power to give the person notice in accordance with section 39A(2). That step is antecedent to the making of a rectification order under section 39A(3), when the registrar, after considering any submissions made within the relevant period, must be satisfied that (a) the entity contravened the Act or an operational Act, and (b) it is appropriate to make a rectification order in relation to the person.
9. In my view, the formation of a belief on reasonable grounds that it may be appropriate to make a rectification order in relation to a person who was a director of the entity at or after the time the construction service was provided is not a statutory precondition to the registrar giving the person a copy of the notice and statement in accordance with section 39A(2)(a), or a notice in accordance with section 39A(2)(b).
10. The relevant belief that the registrar must form on reasonable grounds for the purposes of section 39A(1)(a)(ii) is that, having regard to the considerations in section 36, it may be appropriate to make a rectification order in relation to the entity mentioned in section 39A(1)(a)(i).
11. The Registrar's submissions to the contrary should be rejected.

The legislative scheme after the commencement of the amendments

1. In my view, the legislative scheme established by the amendments to Division 4.2 of Part 4 of the COLA, which came into effect on 10 December 2019, applies to a person who was a director of a corporate entity at or after the time a construction service was provide in the following way. For the purposes of this explanation I will refer to:

(b) a corporate entity becoming the subject of a winding-up order, or having a controller or administrator appointed, or being deregistered, as the 'event'.

(c) the registrar forming the belief, on reasonable grounds, that a corporate entity has provided a construction service otherwise than in accordance with the COLA or an operational Act and that it may be appropriate to make a rectification order in relation to the entity, as the 'requisite belief'.

1. If the event happens at any time before the registrar forms the requisite belief, the registrar lacks jurisdiction to make a rectification order in relation to a former director. That is this case.
2. If the event happens after the registrar forms the requisite belief but before the registrar gives the entity a notice of intention under section 34(2), the registrar may give a notice to a former director under section 39A(2)(b). The registrar's jurisdiction to make a rectification order in relation to the former director then depends on satisfaction of the criteria in section 39A(3).
3. If the event happens after the registrar gives the entity a notice of intention under section 34(2) but before the registrar makes a rectification order in relation to the entity, the registrar may give a former director a copy of the notice of intention and the statement required by section 39A(2)(a). The registrar's jurisdiction to make a rectification order in relation to the former director then depends on satisfaction of the criteria in section 39A(3).
4. If the event happens after the registrar makes a rectification order in relation to the entity, pursuant to section 39B(2) the order is taken to have been made in relation to each former director.

1. In reaching these conclusions I have considered whether the meaning I think section 39A(1)(a)(ii) bears is one that best achieves the purpose of the COLA as amended on 10 December 2019. Section 139 of the Legislation Act 2001 requires that I should prefer the interpretation that would best achieve the purpose of the Act to any other interpretation.
2. The evident purpose of the amendments under consideration appears from the Revised Explanatory Statement:

The Construction Occupations (Licensing) Act and operational Acts provide for sanctions and penalties for contraventions of requirements for carrying out construction services. In some circumstances, such as for occupational discipline and rectification orders, actions may be taken against former licensees as well as current licensees.

It is difficult for an individual licensee to avoid their liabilities. However, the directors of a corporation may avoid the corporation's liability by closing the corporation in a variety of ways. In recent matters where the Registrar has moved to require rectification of defective building work, some corporations have responded by winding up. Further, some civil cases brought by owners against builders for defective work have also triggered the closing of the corporation.

Reform 37 in the Improving the ACT Building Regulatory System is to consider expansion of rectification and other relevant powers to allow orders to be issued to people closely associated with an insolvent or 'disappeared' corporate licensee.

To prevent the actions of directors undermining the intent and operation of the building regulatory system, the bill includes new provisions, which allow certain actions to be taken in relation to directors and executive officers of licensed corporations, and partners of licensed partnerships.

Although there are benefits to the corporate form, it is counter to the principles of corporations law to use a corporate vehicle for personal benefit only to end that vehicle or take other actions to avoid being called to account for any liabilities, or remedies other parties are entitled to. The provisions are intended to facilitate the obligations under ACT building and construction law being met, rather than only including punishments for failing to meet them.[14]

1. I derive from this that the evident purpose of the amendments includes to establish a normative standard of conduct for directors of current and former corporate licensees to prevent their actions in the future from "undermining the intent and operation of the building and regulatory system".
2. Accepting that an explanatory statement may not necessarily identify all the purposes that a piece of legislation is intended to achieve, nevertheless I see a world of difference between legislation intended to shape future conduct and legislation intended to create new consequences for past conduct, where the past conduct involves decisions by the directors of a corporate licensee to avoid exposing the corporation to the risk of a rectification order by allowing the corporation to be wound up, having a controller or administrator appointed or deregistering the corporation.
3. Clearly, the amendments that commenced on 10 December 2019 are intended to create a disincentive for directors to act in a particular way when faced with the risk that a rectification order may be made against a corporate entity.
4. However, that is not this case. The decision to wind up Euca was made more than four years ago, shortly after evidence of serious defects emerged but long before the matter came to the attention of the Registrar. Circumstances of that kind are not unique in the ACT. There have been many examples reported in the press and in hearings of parliamentary enquiries where owners have lost all avenues of recourse against a builder because the builder has been wound up, has gone into administration resulting a deed of company arrangement being executed that significantly compromises the rights of unsecured creditors, or been deregistered (usually following a voluntary liquidation as happened in this case).
5. If the Territory intended to create a new avenue of recourse for owners in those circumstances, by giving the registrar power to make rectification orders in relation to the former directors of a corporate entity that was wound up, had a controller or administrator appointed or been deregistered, regardless of how far in the past any of those events happened, subject only to the time limits for making a rectification order in section 35(5), one would expect that intention to be expressed clearly both in the statutory text and in any explanation of legislative purpose.
6. I am unable to find any textual or contextual support for giving the amended legislation such a wide field of operation. To the extent that the Revised Explanatory Statement sheds light on the purpose of the amendments, it supports the narrower interpretation that I have identified.

1. Given the reasons for my decision on jurisdiction, the question whether the legislation has retrospective operation in the way in which the parties have argued the issue does not arise. I express no view on the issue.

1. The appropriate orders under section 68(3) of the ACT Civil and Administrative Tribunal Act 2008 in both applications is to set aside the decisions under review and substitute decisions that no orders should be made under section 39A(3) of the COLA in relation to Mr Hill or Mr Jones. As both applicants have been successful, it is appropriate that I should make an order under section 48(2)(a)(i) of the Act that the Registrar pay each applicant the filing fee for the application.

[3] Exhibit 1 - Historical Company Extract

[8] T documents pages 19, 181, 486 [The T documents include three copies of the rectification order made in relation to Mr Hill, but do not include a copy of the rectification order made in relation to Mr Jones, although it is clear from the Registrar's Notice of Decision that the Registrar decided to make orders in relation to both directors. A copy of the order in relation to Mr Jones appears to have been filed with Mr Jones' application for review of a decision, who was then represented by Meyer Vandenberg Lawyers. As the parties have conducted the hearing on the basis that an order was made in relation to Mr Jones, I have made my decision on the same footing.

[9] T documents (AT 80/2021) page 324; T documents (AT 86/2020) page 320

[10] Transcript of proceedings 26 February 2021 page 37, lines 15-21

[11] Transcript of proceedings 26 February 2021 page 31, lines 31-35; page 38 lines 7-16; page 40, lines 42 to page 41, line 2

[12] Transcript of proceedings 26 February 2021 page 41, lines 4 to page 42, line 5

[13] Dennis Pearce, Statutory Interpretation in Australia (Lexis Nexis Australia, 9th ed, 2019) at [2.1], [2.13]

[14] Revised Explanatory Memorandum, Building and Construction Legislation Amendment Bill 2019, pages 13-14