When Can You Sue a Building Company Director Personally
The building practitioner company will be insolvent..
So let’s sue the director!
It’s one of the most common instructions lawyers receive in building disputes.
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The company has no assets.
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The insurance position is uncertain.
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The natural reaction is to say:
“Hey - what about him or her?”
But here’s the issue:
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As often as an individual is sued or pursued in building disputes, it really isn’t because they are a director or that they profited.
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The principle of separate corporate personality exists for a reason. Courts do not lightly pierce the corporate veil simply because a company has failed. If they did, limited liability would mean…well nothing.
HOWEVER: there are important distinctions that many overlook when this does happen.
It often arises because the individual personally owed a duty / obligation or acted in their personal capacity AND that is different.
Say, the individual was the one who misled or deceived;
OR
The individual issued a certificate or exercised statutory powers personally.
That is quite different to suing the director or officer for holding that position.
Sure, a director can be sued under various provisions of the Corporations Act like section 180 - 183…
BUT I never see these causes of action in building defect cases because they are not open to third party owners…
What we have seen at Brockhill & Usherwood Lawyers is claims against individual building professionals exercising statutory functions, including private building surveyors who negligently issue permits or carry out statutory inspections, and other professionals who certify work or provide certain engineering services.
Their liability is founded on their conduct and specific legal duties, not merely because they happen to be directors.
That distinction matters.
Suing a director because they were the director is one thing.
Suing an individual because they personally breached is something entirely different.
In Victoria there are often negligence actions against surveyors personally because they exercise statutory powers under the Building Act, rather than because the corporate veil was lifted.
Likewise, engineers and licensed plumbers signing compliance certificates can incur personal liability where legislation places the obligation on the individual practitioner.
As insolvencies continue to plague the building industry and as the BPC in Victoria begins pursuing more recoveries as the so called ‘first resort’ insurance scheme gets underway, the BPC will naturally seek recovery and obvious other sources include:
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other individual practitioners;
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oh and plumbing insurance too!
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maybe public liability insurance; and
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certainly not suing directors for being directors.
The real issue here is you will have the regulator acting as third party defendant insurer and then instructing recoveries of practitioners it also regulates!
Wow interesting times ahead
This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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