Deflecting Deregistration – Pursuing a Deregistered Defendant

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Companies are increasingly surrendering to deregistration as a result of a multitude of factors, with lawsuits likely high on this list. What is important to acknowledge, however, is the turmoil this creates when these companies are seemingly riddled with potential claims against them. While deregistration alludes to the prospect of reaching the end of the road for liability claims, the Corporations Act [1] might just be of assistance.

 

For this we need to focus on section 601AG of the Corporations Act [1] which clearly states that “a person may recover from the insurer of a company that is deregistered an amount that was payable… under the insurance contract”. Two conditions must be satisfied to meet this requirement:

  1. The company had liability to the person; and
  2. The insurance contract covered liability immediately before deregistration.

Relevant factors in the operation of section 601AG

In addition to these considerations, case law has helped shape the understanding of this section.

The time immediately before the deregistration is critical: As the two conditions are expressed in the past tense, the inference is that the time for determining “whether the deregistered company had a liability to the person claiming, and whether the insurance contact covered that liability, is immediately before deregistration” [2].

It is not necessary to have a judgment against the deregistered company before making a 601AG claim: Insurers have repeatedly made unsuccessful attempts to argue that liability existed only when a judgment or awards had been made against the insured company [3]. In Hutchinson v ASIC, for example, the court held that the relevant liability was one where the claimant had “a fully constituted cause of action against the company” [4]. Notably, it was decided in Tzaidas v Child & Ors that all that was needed to be proved in a case of secondary liability was that the company was a joint tortfeasor immediately before deregistration [3].

The company must be deregistered and not in the course of being wound up: if the company is in the process of being wound up rather than deregistered, there is no action available under section 601AG [4].

Judicial consideration of section 601AG

Nicholas v Astute Hire Pty Ltd [2015] NSWSC 711: This was a personal injury claim, and the plaintiff joined the public liability insurer for the company (which was deregistered) under section 601AG. The insurer opposed this, denying that the insurance policy covered any such liability immediately before deregistration. Ultimately, the court allowed the insurer to be joined emphasising that liability must exist immediately before deregistration – at a prima facie level the insurance policy appeared to cover the insured’s potential liability to the worker. The court determined that it was the policy held at the time of deregistration that was relevant.

Young Investment Group Pty Ltd v QBE Insurance (Australia) Limited [2019] WASC 74: The plaintiff commenced proceedings against the insurer under section 601AG as the relevant policyholder had deregistered. The insurer did admit that the policyholder had a liability to the plaintiffs at the time of deregistration, and that the insurance covered the policyholder’s liability to the plaintiffs. However, the insurer claimed that this was subject to the application of an exclusion, meaning that the conduct which had led to the claim was committed by an authorised representative of the policy holder but that they acted in a manner which was excluded. This argument was succinctly rejected by the court, stating that the endorsement deemed the policyholder’s authorised representative to be an employee and therefore covered by the insurance policy.

Considering section 601AG

To recite the words of Ipp JA, “the purpose of the legislature in inserting s 601AG in the Corporations Act is to require the insurer of a deregistered company to stand in the shoes of the company to the extent necessary to allow creditors of the company to recover from the insurer whatever amounts they were entitled, by force of law, to recover from the company” [5].

And so, when faced with the brick wall of deregistration, it is critical to consider the power section 601AG holds in ensuring that plaintiffs can recover from deregistered defendants.

 

Reference List

[1] Corporations Act 2001 (Cth).

[2] Alamario v Allianz Works Compensation (NSW) Insurance Ltd (2005) 62 NSWLR 148, [19].

[3] Tzaidas v Child & Ors [2009] NSWSC 465, [25].

[4] Hutchinson v ASIC [2001] VSC 465.

[5] Alamario v Allianz Works Compensation (NSW) Insurance Ltd (2005) 62 NSWLR 148, [19].

Hedging your debt (certificates) – how much do you really owe?

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When entering into a contract for the performance of building works, the roles and responsibilities of each party are generally defined well enough to ensure the contract can be performed in a mutually beneficial manner. Although, what happens when these responsibilities are affected by the interaction between two pieces of legislation?

In Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club [2025] NSWSC 123, the Supreme Court of New South Wales considers this question, where payment obligations between a Builder, Principal and Subcontractor changed due to the simultaneous application of the Building and Construction Industry Security of Payment Act 1989 (NSW) (SOPA) and the Contractors Debts Act 1997 (NSW) (CDA).

Key facts

During December 2023, Woonona Bulli RSL Memorial Club Limited (the RSL Club) contracted with Warrane Design Construct Fit-Out Pty Ltd (the Builder) to undertake works to the RSL Club’s carpark and converting the bowling green to another parking space (the Works). Shortly after, to complete the Works, the Builder entered into a subcontract with All Civil Solutions Group Pty Ltd (the Subcontractor). In the following year, the Subcontractor subsequently obtained three debt certificates from the District Court of NSW each valued at $989,183.55, $1,102,958.87 and $464,008.78 for unpaid works which were then served on the RSL Club pursuant to sections 6 and 7 of the CDA.[i] These provisions effectively allow a subcontractor who was not paid and still owed for works that were carried out, to obtain that payment from the principal that engaged the contractor.

At the time, the RSL Club fully paid the first but only partially paid the value of the second certificate. It is important to note that these were monies that would have been paid to the Builder, not the Subcontractor, as the act of issuing the debt certificates effectively assigned the RSL Club’s requirement to pay the Builder under to the contract to the Subcontractor. [ii]

Following this, the Builder obtained an adjudication determination against the RSL Club pursuant to section 22 of SOPA, and successfully sought to enforce it by way of an adjudication certificate and garnishee order for just over $2 million.[iii] Throughout this process, the fact that the RSL Club had made payments to the Subcontractor was not raised as a contentious issue before the adjudicator.

In response to this, the RSL Club filed two separate sets of proceedings to quash the determination by $1,030,281.79, [iv] on the basis that they had already partly paid or at the very least remained liable to pay the Subcontractor under the CDA.[v] The RSL Club also sought to set aside the garnishee order until the conclusion of the first set of proceedings.

What did the Court say?

Justice Stevenson concluded that because the Subcontractors served the debt certificates onto the RSL Club and payments were made pursuant to the CDA, the $2,141,780.83 awarded overstated the amount the RSL Club owed the Builder by approximately $1.2 million. [vi]

His Honour concluded that it was proper for the garnishee order to be set aside as this would undermine the legislative purpose of sections 6 and 7 of the CDA.[vii] Justice Stevenson also affirmed that the interpretation and construction of both SOPA and the CDA should be done in a way that ensures their ‘harmonious interaction’.

What does this mean for you?

Occasionally, certain Acts interact with each other which create new implications for how contractors and principals are required to manage and undertake payments. Given the large role legislation plays in encouraging or requiring parties to fulfil their payment obligations, ensure you can keep track of these obligations or otherwise seek assistance.

[i] Contractors Debts Act 1997 (NSW) ss 6-7.

[ii]  Ibid s 8(1)-(2).

[iii] Building and Construction Industry Security of Payment Act 1989 (NSW) ss 22, 25.

[iv] Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123 [15] (Stevenson J) (‘Warrane’).

[v] Ibid [15]-[17].

[vi] Ibid [17].

[vii] Contractors Debts Act 1997 (NSW) ss 6-7.

Time’s up!

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In Australia, our Limitation Acts impose strict time limits for commencing legal proceedings.

Time limits vary depending on the type of matter and the jurisdiction.

Limitation periods (often referred to as ‘statutes of limitations’) are a statutory barrier to prevent individuals or businesses from pursing claims after a period of time has passed since the ‘cause of action’ arose. The primary purpose being to balance the rights of parties and the effective administration of justice and, in practical terms, to ensure finality to potential claims.

Civil Claims

Generally speaking, civil claims have a limitation period of 6 years from the date of the cause of action.

What is the relevant limitation period applicable to building claims in NSW?

To work out the applicable limitation period, start with the legislation that gives rise to the action (e.g. defective building work in NSW would be the Home Building Act 1989 (NSW) and/or the Design and Building Practitioners Act 2020 (NSW) (DBPA)). If there is no relevant legislation, look in the limitation act for your relevant state or territory:

  • New South Wales – Limitation Act 1969(NSW) (LA)
  • Australian Capital Territory – Limitation Act 1985 (ACT)
  • Queensland – Limitation of Actions Act 1974(QLD)
  • Victoria – Limitation of Actions Act 1958(VIC)
  • Tasmania – Limitation Act 1974 (TAS)
  • Northern Territory – Limitation Act 1981 (NT)
  • South Australia – Limitation of Actions Act 1936 (SA)
  • Western Australia – Limitation Act 2005 (WA)

These Acts may not apply if the limitation period for a specific cause of action is prescribed by another Act.

At times, more than two pieces of legislation must be considered to determine a limitation period. In building defect claims, the statutory duty of care is not merely the statutory warranty periods under section 18E(1)(b) of the Home Building Act 1989 (NSW) of 6 years for major defects and 2 years in any other case. Under section 37 of the DBPA a person who undertakes construction work has a duty to exercise reasonable care to avoid economic loss caused by defective construction work.  Section 41 provides that the applicable limitation is 6 years under the LA and subject to the 10 year longstop under section 6.20 of the Environment Planning and Assessment Act 1979 (NSW).

The table below sets out some of the more common causes of actions (COA) and corresponding limitation periods in NSW.

 

Implications for individuals and businesses

Being informed of the limitation period for a cause of action is essential as it can have significant implications on the rights and obligations of individuals and businesses.  If a limitation period expires, it may be difficult or impossible to commence legal proceedings, even if a case has merit.

Understanding the limitation periods for potential causes of action allows claimants to bring a claim within time.

Bradbury Legal is a specialist building and construction law firm. If you or anyone you know requires advice or assistance regarding a potential claim and the application of limitation periods, reach out to us on (02) 9030 7400, or email us at [email protected] to see how we can assist you.

 

[1] Section 14(1)(a) of the LA 

[2] Section 14A of the LA 

[3] Section 6.20(1) of the EPAA

[4] Competition and Consumer Act 2010 (Cth), Schedule 2 Section 18; section 14(1) of the LA 

[5] Section 14(1)(b) of the LA 

[6] Section 14(1)(b) of the LA 

[7] Section 16 of the LA 

“Or otherwise having substantive control” – what does it mean?

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The phrase “otherwise having substantive control” is a critical legal concept under the Design and Building Practitioners Act 2020 (NSW) (DBPA), particularly within the framework of section 37 which establishes a statutory duty of care for individuals engaged in construction work. This term plays a pivotal role in determining the liability of construction professionals, yet the DBPA fails to provide a clear definition, leaving us to look to case law for guidance.

The Legal Framework

Under section 37 of the DBPA, individuals involved in construction work owe a statutory duty to exercise reasonable care to avoid economic loss caused by defects.

This duty extends to property owners (and subsequent owners) where construction work is carried out. Section 36(1) further broadens the scope of “construction work” to include tasks such as supervision, coordination, project management, and notably, “otherwise having substantive control” over how construction is carried out.

Defining “Substantive Control”

Although “substantive control” is not explicitly defined in the DBPA, courts have clarified its scope through the case law. Essentially, the courts have interpreted the term to mean the ability to control the execution of construction work, regardless of whether that control is actively exercised. In other words, liability under the DBPA can extend to individuals who can influence how work is carried out, even if they do not directly perform that work.

Key Case Law Interpretations

  1. Pafburn Pty Ltd [2022] NSWSC 659

The Pafburn case, at first instance, established that substantive control doesn’t require the actual exercise of control, but only the ability to control. Justice Stevenson highlighted that a person could be considered to have substantive control if they were in a position to influence how construction work was executed. This includes situations where a party has ownership or decision-making authority, such as a developer owning all the shares in a builder.

  1. Boulus Constructions Pty Ltd v Warrumbungle Shire Council [2022] NSWSC 1368

In Boulus Constructions, the Court affirmed that individuals with authority over key decisions—such as a managing director or site supervisor—could be deemed to have substantive control. Even without directly performing the work, these individuals were responsible for supervising, directing subcontractors and overseeing the project. The Court allowed Council to join these people to the proceedings.

  1. Oxford (NSW) Pty Ltd v KR Properties Global Pty Ltd [2023] NSWSC 343

The Oxford case further solidified that a person who oversees or influences the construction process—even if not physically involved—can still be considered to have ‘substantive control’. The court ruled that the sole director’s oversight and ability to influence work constituted substantive control, regardless of direct involvement.

  1. University of Sydney v Multiplex Constructions Pty Ltd [2023] NSWSC 383

This case clarified that issuing compliance certificates alone does not constitute substantive control. For a certifier to be liable, the claimant must demonstrate the actual ability to control or influence how the work was carried out, beyond merely certifying compliance.

Practical Implications

  1. Broader Liability: Individuals such as directors, project managers and site supervisors who have authority to influence construction work may be held liable under the DBPA, even if they don’t directly perform the work themselves.
  2. Factual Inquiry: Whether a person has substantive control is determined on a case-by-case basis. Factors like ownership structures, authority over decision-making and the ability to direct construction work are key in assessing liability.
  3. Certifiers and Substantive Control: Certifiers may face liability under the DBPA, but merely issuing certificates without any direct involvement or influence over the work is not enough to establish substantive control.

Conclusion

Understanding “substantive control” under the DBPA is essential for construction professionals, as it extends liability beyond those directly engaged in physical work. Key roles with decision-making authority, such as directors or project managers, may be held accountable for defects in construction work if they have the power to control how construction work is carried out. This broad interpretation of control ensures that those in positions to influence construction practices are held to account, contributing to higher standards in the industry.

For construction professionals, it is essential to understand how your role and authority can expose you to liability under the DBPA. Even if you are not directly involved in the physical work, you are still responsible for exercising reasonable care to prevent economic loss and defects. Your ability to influence how construction work is carried out places a significant duty of care on you to prevent economic loss caused by defects.

 

Bradbury Legal is a specialist building and construction law firm. If you or anyone you know requires advice or assistance, reach out to us on (02) 9030 7400, or email us at [email protected] to see how we can assist you.