Page 4802 - Week 13 - Thursday, 28 November 2019
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In this context, I should point out that phoenixing is a serious problem in Canberra building and previous regulatory changes have not been successful in stopping it. Several developers have repeatedly built dodgy buildings and then wound up the company to avoid fixing the problems. These director liability powers will have a deterrent effect, I hope, as well as the direct effect of recovering funds to fix the buildings.
That being said, there are issues that concern me about how director liability is handled in this legislation. Director liability has the potential to bankrupt people who were only marginally involved in the oversight of construction quality. I would have preferred the legislation to have made it abundantly clear that director liability is a last resort. I would also have liked to see protections so that the directors who are targeted are key directors with oversight of construction quality.
Why is this important? A good board would have a wide range of expertise. A large construction firm’s board could have a legal expert, a financial expert, construction experts and perhaps people with marketing, human resources or company governance expertise. The board of a large company also potentially has subcommittees with different oversight responsibilities. Some directors therefore may have little oversight of construction quality.
At the smaller end of the building company spectrum, I wonder about the impact that director liability may have on spouses, almost always women, who are on the company board but rely on their spouse to do the work. This is particularly problematic where the couple divorces after the defective building work has been done. The woman remains potentially on the hook for director liability, despite no fault and almost certainly no ongoing financial benefit from the business. We have all heard of sexually transmitted debt. I urge the government to reflect on these issues and to consider possible fixes in future legislation.
Retrospectivity is another issue I have considered carefully. This is in part a dry legal debate but it also matters a great deal to some Canberrans. Some of those Canberrans are the owners of recently completed apartment buildings currently in the regulatory period where the owners corporation and the government may need to rely on this legislation to get proper redress for the owners. This is why this is a very real and important issue.
On the legal issues, I thank the Master Builders for their legal advice and also acknowledge this morning’s government response to the committee report, which also provided a legal take on this issue. Looking at all this, I think that it is clear that there is a difference between a plain English understanding of the term “retrospectivity” and the legal meaning. Personally, I lean towards the MBA’s legal opinion, which states that, “a better view of the proposed amendments is that they will operate retrospectively at least in practical effect”.
However, despite this the Greens will support this legislation. Our reasoning is that the act, or the failure to act, that caused the defect was the wrong thing to do and illegal when it was done. Not fixing the problem when it was drawn to the attention of the company was the wrong thing to do, and in many cases it was also illegal.
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