The matter of Cook's Construction Pty Ltd v SFS Pty Ltd
(formerly trading as Stork Food Systems Australasia Pty Ltd)
was recently handed down by the Queensland Supreme Court's
appeals division. The practical implications of the result in this
matter are significant in relation to the operative effect of s 42
of the Queensland Building Services Authority Act 1991.
This section relates to the implications of an unlicensed builder
illegally carrying out building works.
Cook's Construction Pty Ltd (CCPL) had carried out
earthworks and concrete works for SFS Pty Ltd (Stork) under a
subcontract made in June 1998. These works were building works as
defined by the Act. Between July 1998 and April 2000, CCPL made
claims for progress payments for work done which were paid by
Stork, totalling $15.5 million. In 2001, CCPL commenced proceedings
to recover moneys unpaid for work done under the subcontract. Stork
resisted the CCPL claim, and made a counterclaim under s 42(3) of
the Act, asserting that CCPL was not in fact entitled to any
monetary or other consideration for the building work carried out
under the subcontract, as it was not licensed under the Act.
CCPL claimed that it was entitled to payment for the building
work in accordance with s 42(4), which allows a reasonable
remuneration for carrying out building work as an exception to the
operation of s 42(3).
In August 2008, the trial judge gave judgment in favour of CCPL
on a partial amount of its contractual claims and in favour of
Stork on its counterclaim for restitution for its payments to CCPL
of $9.9 million. In a separate judgment in September 2008, the
trial judge awarded some $5 million as interest in favour of Stork
and consolidated the claim and counterclaim. The net result being
that judgment was given in favour of Stork in the sum of $15.2
This decision was upheld unanimously on appeal. The judgment
provides a detailed assessment of the purpose, construction and
affect of s 42 of the Act.
Section 42(3) provides that an unlicensed person who carries out
building work is not entitled to any monetary or other
consideration. Since amendments to the Act in 1999 s 42(4) now
provides a qualification to s 42(3) and allows reasonable
remuneration subject to some conditions. Section 42(4) amongst
other things does not allow the unlicensed contractor to claim
certain items such as the supply of the contractor's own
labour, profit and costs not reasonably incurred.
In this case, it was held that s 42(3) is only affected to the
extent that a claim for reasonable remuneration by the contractor
is made out in conformity with s 42(4), and the onus of proof must
lie with the unlicensed contractor. In other words, if an
unlicensed contractor performs work and seeks to claim the cost
expended for the work, it must prove those costs. Their Honours
asserted that this was consistent with a proper construction of the
legislation and the public policy considerations underpinning
The result of this appeal has the effect of reinforcing that s
42 of the Act will prevent an unlicensed contractor from recovering
moneys owed for the performance of building work. If moneys are
paid to an unlicensed contractor for performing building work which
requires a licence the moneys cannot be retained. Although s 42(4)
will allow for the recovery of moneys actually expended for the
supply of materials and labour, the unlicensed contractor will not
be able to recover items such as profit or the contractor's own
labour. Furthermore, the unlicensed contractor will have committed
an offence under s 42(9) and may be penalised.
In this particular case, CCPL did not prove its costs of
carrying out building work, and the result was that they had to pay
Stork a sum in excess of $15 million. The Court has illustrated
that it requires strict compliance with the Act and contractors
must be licensed for the building work they perform.
This matter demonstrates the importance of having a valid
licence to perform building work. Contractors should ensure that
licence is current and that it encompasses the works which intend
to perform. This will avoid the situation where a significant
amount of work has been performed and no recourse for payment is
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