Contractors beware — be licensed or lose your right to payment

If you contract to carry out work or services that you are not licensed to perform, your contract may be illegal and you may be prevented from obtaining payment under the BCIPA.

There is a range of building works, engineering services and electrical works that can only be carried out in Queensland by persons who hold the appropriate licences and accreditations. If you enter a contract to perform such works, or offer to perform them, or even in some cases just advertise for them, and you don’t hold the appropriate licence or accreditation, the consequences can be severe.

Your contract may be illegal, you may not be insured for the work you do, you may lose your contractual rights to payment, and you may also lose any statutory rights to payment that you might have had under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA). You could even be liable for a significant financial penalty.

A Queensland Supreme Court decision in September 2015 dealt with some of these issues. An electrical contractor company (Contractor) had been engaged by Agripower Australia Ltd (Agripower) to provide electrical engineering works for a powder hopper, granulation plant and conveyor at Agripower’s site in Queensland. The Contractor exercised its rights under the BCIPA, and went to adjudication over money that it considered was payable under its contract with Agripower. The adjudicator decided in favour of the Contractor. Agripower then went to the Supreme Court to overturn the adjudicator’s decision, and succeeded.

The court decided that the adjudication decision was void, and that the contract under which the Contractor had been engaged was illegal, because at the relevant times neither the Contractor nor its representative were licensed to carry out electrical works for the purposes of the Electrical Safety Act 2002 (Qld) (Electrical Safety Act), and the Contractor’s representative was not at the relevant time a registered professional engineer for the purposes of the Professional Engineers Act 2002 (Qld) (Professional Engineers Act). It is worth noting that the Contractor’s representative did have a bachelor’s degree in electrical engineering technology.

The Electrical Safety Act has the express purpose of trying to prevent people being injured and killed, and property being damaged or destroyed, by electricity. It does this in a range of ways, including by licensing persons who perform electrical work. Specifically, section 56(1) of the Electrical Safety Act says that,

“[a] person must not conduct a business or undertaking that includes the performance of electrical work unless the person is the holder of an electrical contractor licence that is in force”.

A failure to comply with the above requirement can result in a significant financial penalty. Section 56(2) of the Act applies this prohibition broadly, because it says that a person will be conducting a business or undertaking that includes the performance of electrical work if, among other things, the person:

“(a) advertises, notifies or states that, or advertises, notifies or makes a statement to the effect that, the person carries on the business of performing electrical work; or

(b) contracts for the performance of electrical work, other than under a contract of employment; or …”

There are some exceptions to the above prohibition.  One such exception applies if the only electrical work that the person contracts to do is intended to be subcontracted to someone else who does hold an electrical contractor licence, and is authorised under that licence to perform the relevant electrical work.

The court decided that the Contractor’s behaviour was caught by both sections 56(2)(a) and (b) of the Electrical Safety Act. The behaviour that triggered section 56(2)(a) was that:

• the name of the Contractor company implied that the Contractor performed electrical works;
• the Contractor’s representative made statements to Agripower that the Contractor carried on a business of providing electrical engineering and electrical works; and
• the Contractor agreed to perform electrical works.

The behaviour that triggered section 56(2)(b) of the Electrical Safety Act was that the Contractor engaged a subcontractor to run Agripower’s granulation plant in operative mode over two weeks, despite the fact that the subcontractor did not hold the required licence to do that electrical work. The Contractor tried to argue that the subcontractor was merely pressing the start and stop button at each local control station to monitor whether the motors were working correctly, operating the start and stop function through the PLC to ensure that the program was working correctly, and running the equipment in sequence through the PLC, among other things, and that this did not amount to electrical work.

The court disagreed. It said that these activities qualified as “…testing… an electrical installation”, and this forms part of the definition of ‘electrical work’ in the Electrical Safety Act. In making this decision, the court thought it was relevant that this testing work took more than 100 hours, and was not a minor component of the overall work.

Consequently, the Contractor had breached section 56(1) of the Electrical Safety Act.  While the Electrical Safety Act does not have any express provision that prohibits a person in breach from recovering any monetary or other consideration in circumstances where they are not licensed, the court decided that the Electrical Safety Act made such contracts illegal, given its important purpose of protecting the public against the harm that can be caused by electricity. Accordingly, there was an implied prohibition against recovering any payment.

The Professional Engineers Act prohibits someone from carrying out professional engineering services if they are not a practising professional engineer. There is an exception if the person carries out the professional engineering services under the direct supervision of a practising professional engineer who is responsible for the services.

‘Professional engineering services’ is defined to mean,

“… an engineering service that requires, or is based on, the application of engineering principles and data to a design, or to a construction, production, operation or maintenance activity, relating to engineering, and does not include an engineering service that is provided only in accordance with a prescriptive standard.”

The Contractor argued that the engineering services were carried out in accordance with prescriptive standards, and therefore were within the exception to the definition of professional engineering services. The alleged prescriptive standards included the AS3000 wiring rules. This argument failed for two reasons.

First, the court concluded that significant areas of the work performed by the Contractor were not provided only in accordance with a prescriptive standard. Examples of these areas of work included:

• the Contractor specified shielded instead of unshielded cables in respect of some reassembled second hand switchboards;
• the Contractor prepared design drawings showing the location of conduits in the switch room that were to be installed allowing for a future connection to a transformer and the location of proposed cabinets;
• the Contractor prepared the design for the reassembly of second hand electrical switchboards so that they would be suitable for use in the switch room, and this design included the replacement of 110 volt wiring with 12 volt direct current wiring;
• the Contractor’s electrical design included the installation of a programmable logic controller stop button which controlled part of the switchboard;
• the Contractor installed a level switch mounted in a powder hopper, with significant changes to the programmable logic controller’s program code;
• the Contractor’s design for the installation for two new conveyors for the granulation plant conveyor works included the power and control cables required for the conveyors; and
• the Contractor’s design of the undersized hopper automation works included the automation of a valve on the bottom of an existing silo for undersized material, which included a junction box, a level switch and a light or bag change indicator.

Second, the court decided that AS3000 was not in all respects a prescriptive standard, within the meaning of the definition of ‘professional engineering services’ in the Professional Engineers Act.

This was because some of AS3000 required the application of professional judgment, including in deciding which part of AS3000 to apply. As a result of these decisions, the court concluded that the Contractor’s contract with Agripower was also illegal because the Contractor was performing professional engineering services in breach of the Professional Engineers Act. Under that Act, there is an express prohibition against a contractor recovering payment.

Based on the above, the Contractor was not entitled to exercise rights under the BCIPA to be paid money in connection with its contract, and the adjudication decision under the BCIPA was void for jurisdictional error.

The lesson for electrical contractors and engineers who carry out such work in Queensland is to know whether the type of work you are performing requires you to be licensed or specially qualified under the relevant legislation. If it does, get advice as to whether there is an exception that might allow a way for you to have the relevant work done. If there is not, you should avoid that work, and be careful to avoid possibly breaching the law by merely tendering, advertising or offering to carry out that work.

This article summarises some important aspects of one court decision, but different factual circumstances, and the effect of other laws, can result in different conclusions. The law is also frequently changing; therefore this article is not, and should not be relied on as a substitute for, legal advice.

*Ren Niemann, Partner, Projects Group. Ren specialises in the areas of construction, infrastructure and procurement and has advised clients on major projects in Australia and across the Asia Pacific region. He has more than 15 years of experience working across the transport, water, resources, social infrastructure, defence and logistics sectors.

*Tony Roccisano, Special Counsel, Projects Group. Tony is a procurement lawyer. His clients are public and private sector entities who operate in various industry sectors, including infrastructure, health, aged care, not-for-profit and resources.

*Annie Pang, Lawyer, Projects Group. Annie is a procurement lawyer working for a broad range of clients in the public and private sectors.

For more information, please contact Ren, Tony or Annie on 07 3233 8888.

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