Australia: Unsatisfied Payment Orders And The Automatic Suspension Of Contractor Licences In New South Wales

On 1 April 2009 the Home Building Act's licence suspension provisions were 'enhanced'.    

One significant change was that, when a licensed contractor has been ordered by a Court or Tribunal to pay money to a home-owner pursuant to a building claim, if such money is not paid by the due date, the contractor's licence is automatically suspended. 

The change only applies to building claims commenced on or after 1 April 2009.  It takes many months for a building claim to work its way through the CTTT or the courts, sometimes years.  I am yet to see the new suspension requirement apply but, as it has been law for seven months, its impact will soon be felt.  It seems  therefore a good time to review its operation and identify ways it might be addressed.

The suspension takes place 28 days after the due date for payment unless, within that time, the contractor appeals the underlying decision and obtains a stay of the payment order.  The granting of such a stay is by no means a foregone conclusion but the bar to be cleared is not a particularly high one.

Licence suspension makes it illegal to contract to do any residential building or specialist work (plumbing, gas-fitting, electrical wiring, air-conditioning or refrigeration work).  Not only does it prohibit contracting, it also prohibits the contractor from performing any specialist work at all or any other residential building work to a market value that exceeds $1,000.

The contractor's residential building work and specialist work will grind to a halt.  That cessation will extend to all of the contractor's residential sites and all of its residential customers.  For specialist work, the cessation will extend to all sites.  The potential for delay and inconvenience is immense and its impact will be felt by the contractor's other clients, who have nothing to do with the dispute causing the disruption.

There are however some exemptions.  The Director-General may defer the operation of the suspension for any period up to the date on which the licence is due for renewal.  To complicate things, the Director General has delegated this discretion to the Commissioner for Fair Trading, so from here on I'll be referring to the Commissioner.

The Commissioner has issued some guidelines in respect of the exercise of the discretion to defer suspensions of licences for non-payment of court or tribunal monetary orders.  These guidelines indicate that a request to defer the operation of the suspension of a licence will be exercised where:

1. evidence is provided satisfying the Commissioner that the payment order has been satisfied
2. the licence holder has filed an appeal against the decision giving rise to the payment order and the court has ordered that enforcement of the payment order be stayed
3. the licence holder satisfies the Commissioner that the person entitled to be paid under the payment order has accepted an alternative arrangement, such as a payment plan or arrangement for the work to be rectified.

The guidelines note that in the last such circumstances the Commissioner will seek confirmation of the arrangements from the other party and the deferral of the suspension will be subject to the licence holder's continuing compliance with that arrangement.

The guidelines also state that:

The guidelines also provide that the Commissioner may temporarily defer the operation of the suspension whilst considering a request for deferral of the operation of the suspension.

The Office of Fair Trading's philosophy and the Commissioner's role are built on the concept of consumer protection.  Yet no acknowledgment is given to the impact of licence suspension on the progress on the contractor's other clients'  projects.  Such disruption will cause real hardship.  Heart-felt pleas by home-owners likely to be adversely affected by their contractor's licence being suspended are matters that the Commissioner should take into account.

To further complicate matters, the commencement of the suspension is the fourth trigger for home-owners to access their home warranty insurance indemnity.  This stands to raise the bar for licence holders seeking deferral of the suspension and provides another good reason to consign that junk form of insurance to the tip.

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