Do you operate your business through a company or partnership? Even if you personally have a building licence, you need to check your company is properly licensed, otherwise you risk Building Services Authority (BSA) prosecution or not getting paid.
In this case, a subcontractor did not get paid because its company was not properly licensed, even though the plumbers were directors of the company with their own licences.
This decision is a reminder to contractors that it is essential to check that you are complying with licensing requirements if you change your business structure or enter into a partnership. Not only can unlicensed contractors be prosecuted by the BSA, they are not legally entitled to payment for their labour or profit.
Two plumbers, Mr Martin and Mr Leslie, were in business together. They both had licences in their own names.
On their accountants’ advice, Mr Martin and Mr Leslie each set up a family trust and a company. Each plumber’s company was the trustee of that plumber’s family trust, and each of the plumbers were the sole directors of each of their respective companies. The two companies then formed a partnership with its own ABN and trading name, ‘Plumbing by Trade’, as per the diagram below.
The problem here is that the companies conducting the plumbing business did not have their own licences, which means the partnership was not licensed either. When the plumbers decided to start trading as companies, at least one of the companies needed to have its own licence.
The subcontractor issued a payment claim under the Building and Construction Industry Payments Act (BCIPA). The contractor disputed it by payment schedule. The dispute went to adjudication, where the adjudicator awarded payment to the subcontractor.
The contractor then applied to court to declare either the payment claim, or adjudication decision, void or invalid so that the subcontractor could not enforce payment.
The contractor argued the subcontractor was not entitled to payment because it was unlicensed. Unlicensed contractors cannot make valid payment claims under BCIPA, meaning the adjudicator was not allowed to even consider the dispute in the first place.
The judge agreed with the contractor and declared the payment certificate invalid and the adjudication decision void.
Key Points
- Having a licensed nominee or director is not enough- your company needs its own licence too.
- If you or your company are not licensed, you are not entitled to any profit or to be paid for your own labour, and the BSA can prosecute you.
It is also worth noting:
- If you are in a partnership, you need to submit official partnership documents to the BSA.
- It is sufficient for one partner to be licensed, but it is prudent for each partner to have its own licence.
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