By Matthew Bell
When can registration authorities for building practitioners refuse to register on the basis of lack of ‘good character’?
The High Court of Australia unanimously dismissed an appeal from a decision of the Full Court of the Federal Court of Australia, and agreed with the Full Court that the Victorian registration authority for building practitioners was unable to refuse registration in Victoria on the basis that the applicant did not meet the ‘good character’ provisions in the Building Act 1993 (Vic) (‘BAV’), to a practitioner registered in New South Wales, notwithstanding the lack of ‘good character’ provisions in NSW. This has ramifications for building practitioners, but also for registration schemes around the country and for the efficacy of legislative efforts to impose a certain level of competence on various practitioners.
The case revolved around two aspects of the Mutual Recognition Act 1992 (Cth) (‘MRA’):
- the discretion (if any) provided to state regulators to refuse registration (here, on the good character grounds) under MRA s 20(2); and
- whether those character provisions under the Victorian BAV fell within the exception provided (under MRA s 17(2)), by which the mutual recognition scheme is said not to ‘affect the operation of laws that regulate the manner of carrying on an occupation in the second State’.
The Court upheld a narrow view of such discretion and of the exception. This meant that the applicant was entitled to have his registration in Victoria considered without regard to character-related matters (which, in the Victorian authority’s view, disqualified him from registration in that state). As was summarised by Nettle and Gordon JJ at :
it was not open to the [Victorian Building Practitioners] Board to determine whether Mr Andriotis was of good character as required by the [BAV]. Mr Andriotis was entitled to registration in Victoria because, having lodged a written notice with that Board under the [MRA], the fact of his registration in New South Wales was itself a sufficient ground of entitlement to registration for the equivalent occupation in Victoria.
There are cogent policy reasons which justify such a result. These are founded in (as Kiefel CJ, Bell and Keane JJ noted at ) ‘the goal of freedom of movement and goods and service providers in a national market in Australia’. As Gageler J pointed out, the mutual recognition scheme is of vital importance in delivering upon such a goal, having been the first order of business for the Council of Australian Governments upon its establishment in 1992 (see –).
Freedom of movement is especially important in the construction industry, where many firms (whether contractors, developers, consultants or otherwise), and individuals within those firms, routinely work across state and territory borders. As has been pointed out repeatedly in the context of ‘security of payment’ legislation (including in the 2017 report by John Murray AM about its national harmonisation), and other regulatory measures, parochial disparities tend to stifle efficient project delivery.
At the same time, the decision in VBA v Andriotis potentially strikes a blow to improved and assured practitioner competence in the construction industry. This is a policy goal which is itself being strenuously pursued by governments in their various responses to deep concerns about quality and building materials across the industry, especially since the catastrophic Grenfell Tower fire in London in 2017 and recent high-profile structural problems with apartment buildings in Sydney and elsewhere.
The goal of enhanced quality assurance underpins the Shergold and Weir ‘Building Confidence’ report for the Building Ministers’ Forum (‘BMF’) and many similar reviews in Australia and elsewhere. Moreover, as was highlighted in an August 2019 4 Corners report on ABC-TV and a recent pilot study by Deakin and Griffith Universities, some of the most commonly-occurring residential defects relate to the type of work for which Mr Andriotis was seeking registration in Victoria: waterproofing.
How did Mr Andriotis fall foul of the Victorian registration regime?
Requirements that certain types of building work cannot be carried out unless the relevant practitioner is registered by the relevant state control authority have a long history in Victoria (and, elsewhere). They have been the subject of ongoing reform since the enactment of the BAV as omnibus industry legislation in 1993. A range of measures introduced in the light of the Auditor-General’s 2015 report on the Consumer Protection Framework for Building Construction, for example, significantly expanded the reach of ‘fit and proper person’ tests for practitioners and their firms. The Auditor-General’s report regarded practitioner competence — via ‘rigorous registration, monitoring and disciplinary processes’ — as one of five critical elements of an effective regulatory regime to promote consumer confidence about the quality of their homes.
The ‘good character’ test, which was at the heart of the Andriotis case, has been one of the key planks of the Victorian regime since the BAV was enacted. The regime under BAV s 170(1) provides that, if the Building Practitioners Board (‘BPB’ — supplanted in this role since 2016 by the Victorian Building Authority (‘VBA’)) is satisfied as to the applicant’s good character and the other matters set out in BAV s 170(1), it must register the applicant. Conversely, if the requirements of s 170(1) (including as to good character) are not met, the authority may refuse to register the applicant.
Nikolaos Andriotis received a waterproofing licence in NSW in March 2015 (see Nettle and Gordon JJ at  ff). Three months later, he lodged an application to be registered under the corresponding category of Domestic Builder in Victoria under the MRA. (The scheme and process for registration under the MRA is summarised by Kiefel CJ, Bell and Keane JJ at –.) The BPB refused registration to Mr Andriotis on the basis that he had failed to satisfy the Board of his good character as required by BAV s 170(1)(c). He then applied to the Administrative Appeals Tribunal for a review of the BPB’s decision.
The AAT received extensive evidence on matters relating to the BPB’s refusal to register Mr Andriotis. As a result, Senior Member Fice affirmed the BPB’s decision. The Tribunal called into question the basis on which NSW Fair Trading had issued the original licence to Mr Andriotis given, amongst other things, what the Senior Member found to have been a ‘complete disregard of the mandatory requirements to establish employment and experience history’. Indeed, he was moved to suggest at  of his decision that ‘a serious investigation needs to be conducted into the granting of occupational licences by authorised State authorities.’
Federal and High Courts: good character qualification cannot be considered by Victorian registration authority
Mr Andriotis appealed the AAT decision in the Full Court of the Federal Court of Australia. The Court allowed the appeal on the basis that the AAT erred in concluding that the good character qualification under BAV s 170(1)(c) could be taken into account by the BPB in exercising its power to register him under the MRA. The Court remitted the case to the AAT to be decided again; moreover, Bromberg and Rangiah JJ suggested that, as Senior Member Fice had made adverse findings against Mr Andriotis, the AAT be constituted differently on the re-hearing.
The seven Justices of the High Court handed down four judgments. Gageler J gave the most detailed insights into the background to, and structure of the mutual recognition scheme, and Nettle and Gordon JJ provided the most extensive outline of the facts and proceedings below. The judgments ran along similar lines and resulted in unanimous dismissal, with costs, of the VBA’s appeal.
The central issue in the appeal was whether the ‘good character’ provision in BAV s 170(1)(c) fell within the exception to the operation of the ‘mutual recognition principle’ set out in MRA s 17(2)(b), namely (together with the commencing words of s 17(2)) that the principle:
does not affect the operation of laws that regulate the manner of carrying on an occupation in the second State, so long as those laws … are not based on the attainment or possession of some qualification or experience relating to fitness to carry on the occupation.
Nettle and Gordon JJ took as a starting point at  that s 17(2)(b) ‘means, at least, that the second State cannot impose higher qualifications for registration than the first State.’ Their Honours framed the issue for determination, therefore, as being whether the exception in that paragraph meant that the Victorian authority could not consider whether Mr Andriotis was of good character because, either, he misstated his qualifications when seeking registration in NSW, or for some other reason (see also at ).
Nettle and Gordon JJ answered that question by observing at  (with their emphasis in italics) that
[t]he fact of registration in the first State is a sufficient ground of registration in the second State in respect of all aspects of qualification and experience, including any character requirements, relating to fitness to carry on an occupation. Thus, it is not open to the second State to go behind registration in the first State and seek to challenge or review any aspect of the applicant’s qualifications and experience, including any character requirements, relating to their fitness to carry on the occupation in the first State.
Their Honours supported this overall construction — and, with it, a rejection of the VBA’s submission that the second state has a discretion to refuse registration on character grounds (see ) — by reference to a number of other elements of the statutory scheme under the MRA. These included that:
- character-related matters were inevitably bound up in agencies’ assessment of applicants’ fitness to practice (see ); and
- the provisions for the second state to postpone registration via the MRA allowed for further investigation, including (if the first state deems it appropriate) by the first state into its approval of the registration (see , and similarly at  per Kiefel CJ, Bell and Keane JJ).
At , Kiefel CJ, Bell and Keane JJ elaborated on the first of these, noting the reference to qualification or experience ‘relating to fitness to carry on the occupation’ in the exception in MRA s 17(2)(b). The Court seems to be making the point, in other words, that a lack of express requirement that agencies consider character does not create a lacuna that other states’ express provisions could fill. That said, Kiefel CJ, Bell and Keane JJ did contemplate that a condition on registration in the second state may be allowable under the mutual recognition scheme (as anticipated by MRA s 20(5)). Such a condition would, however, need to be ‘not more onerous than would be imposed in similar circumstances’, and not operate as a precondition to the grant of registration. They identified as an example of such an allowable condition the requirement (under BAV s 169(2)(e)(i)) that an applicant prove that they have the requisite insurance cover (see –).
Nettle and Gordon JJ also noted at , by way of support for their construction of the scheme, the observation in the Second Reading Speech for the Bill for the MRA that, ‘[i]f someone is assessed to be good enough to practise a profession or occupation in one State or Territory, then they should be able to do so anywhere in Australia.’ A similarly-robust defence of the primacy of the mutual recognition provisions over the ability of the second state to impose its own, more onerous, requirements is found in Kiefel CJ, Bell and Keane JJ’s rejection of the VBA’s argument that the use of the word ‘may’ in MRA s 20(2) (in respect of the second state’s ability to register the application) connoted some residual discretion in that exercise. Their Honours observed at  that s 20(2) gives the authority
power to grant registration under the MRA on one ‘ground’ … namely registration in the first State. There is no room for the operation of a discretion when a person notifies the authority of that registration. … The word ‘may’ must be understood in context to be the grant of a power to register on that one ground and no more.
The thrust of Gageler J’s analysis at  was that the MRA operates as an integrated statutory regime to give effect to the ‘quasi-constitutional status’ of the mutual recognition scheme. The result of this analysis aligned with that of his fellow Justices, as noted at :
questions as to the continuing qualification of a person to engage in an occupation for which the person has been registered in the second State — including questions as to the person’s continuing good character or continuing fitness or propriety to engage in the occupation — are questions which the local registration authority of the second State has no authority to decide.
Edelman J canvassed three possible interpretations of the relevant aspects of the scheme. Whilst, in accord with the rest of the Court, he favoured the construction put forward by Mr Andriotis, he was prepared to observe that an ‘extreme’ interpretation was open on the language of the MRA at . This was (with his Honour’s emphasis in italics) that the MRA scheme ‘would require the local authority of the second State at all times to respect the assessment by the local authority of the first State’ in respect of the applicant’s qualifications, experience, character and fitness. His Honour was mindful that such an interpretation could have ‘extraordinary consequences’ in terms of overriding state-based regulation of occupations, especially bearing in mind that fitness to practice requirements now encompass occupations from childcare to pyrotechnics (see ).
An ‘unintended or absurd result’?
Nettle and Gordon JJ engaged with whether the Court’s construction of the scheme — that the VBA be required to register Mr Andriotis despite its misgivings about his character — might be seen as providing an ‘unintended or absurd’ result under the MRA. They saw the practitioner disciplinary procedures under the BAV as providing an answer to such an argument: in other words, they said at  that the inability for the VBA to refuse Mr Andriotis (or any other practitioner registered interstate) registration on the character grounds set out in the BAV does not preclude the VBA taking
disciplinary action, such as by cancelling, suspending or imposing conditions on registration, if the [VBA] was to find, for example, that Mr Andriotis was ‘guilty of unprofessional conduct’ by reason of his conduct after registration.
Thus, Nettle and Gordon JJ regarded the BAV’s disciplinary processes as operating consistently with the MRA (and other Justices made similar findings: see – per Kiefel CJ, Bell and Keane JJ and  per Edelman J).
The High Court is justified in taking a view that the disciplinary processes under the BAV (and, for that matter, corresponding practitioner registration legislation around the country) provide something of a ‘backstop’ to cure the registration of practitioners in a second state where, but for the MRA, they ought not to have been registered in that state (or, perhaps, in the first). However, and leaving aside here the specific case of Mr Andriotis, it should not be assumed that that ‘backstop’ provides anywhere near the required level of assurance to the public that such ‘bad apples’ would promptly be removed from the ‘barrel’ of practitioners.
Rather, practitioner disciplinary procedures in the construction industry have traditionally been drawn-out and inefficient, resulting in practitioners with inadequate skills being able to continue to offer their services to an unsuspecting public. Indeed, the Victorian Auditor-General noted in his 2015 report that
[t]here is little evidence that the practitioner discipline system is operating effectively to protect consumers from poor practitioner performance, and current sanctions appear ineffective in deterring misconduct.
There is certainly a perception in the industry that the VBA has used its expanded legislative powers and budget in the wake of that report to become significantly more proactive in its education, investigation and prosecution activities in recent years. This more assertive stance, taken in the public interest, was reflected, for example, in the VBA’s suspension in mid-August 2019 of the registration of a building surveyor for allegedly failing to prevent the installation of combustible external cladding on five multi-storey buildings around the state. Nonetheless, even the most rigorous disciplinary procedures can only ever be an imperfect safety net where inappropriately-qualified practitioners have been granted registration.
Ultimately, the construction applied unanimously by the High Court in VBA v Andriotis is unsurprising given the textualist and contextualist statutory interpretation tools available to the Court. It does, however, underscore the need for the nationally-consistent approach to practitioner competence improvement and assurance which was identified by the BMF as a priority for reform in its March 2019 Implementation Plan for the Shergold-Weir Report. The Court’s decision highlights the urgent need for such reform. Without it, there remains a real risk that ‘lowest common denominator’ (or, simply, the lowest) practitioner competence requirements amongst the states and territories will prevail as practitioners registered under less stringent regimes undertake work across the country.
AGLC3 Citation: Matthew Bell, ‘VBA v Andriotis: Is Interstate Freedom of Movement a Threat to Quality Assurance in Australia’s Construction Industry?‘ on Opinions on High (2 September 2019) <http://blogs.unimelb.edu.au/opinionsonhigh/2019/09/02/bell-andriotis/>.