The Mystery of Holding Out
Written by: Alexander Milne, solicitor Lovegrove Solicitors
25th of November 2011
The notion of ‘Holding Out’ under section 176(1A) of the Building Act 1993 (Victoria) is a quasi-criminal offence relating to the direct and/or indirect actions or conduct of a person or entity who professes to be someone they are not. The Building Commission is looking at conduct that may amount to ‘holding out’ with increasing vigilance. There appears to be little case law clarifying what exactly amounts to holding out and what does not. Section 176(1A) states as follows:
(1A) A person who is not registered in the appropriate category or class under this Part must not-
- practice as a building inspector; or
b) hold himself or herself out as being registered under this Part or in a particular category or class of registration; or
c) hold himself or herself out as being qualified to practice as a building practitioner either generally or in a particular category or class of work.
Penalty: 500 penalty units.
Whatever ‘holding out’ is, it is fair to say that it is considered to be quite serious. It has a maximum penalty of 500 units, as compared to the maximum penalty of 120 penalty units for the offence of taking or using a specified protected title under section 176(1) of the Act.
Examining Sources of Confusion
The concept of holding at one end may be connoted by the mere use of a title “builder”. On the other extreme it is also a separate and discreet offence from the offence of actually practicing as a certain type of building practitioner whilst not being registered in the appropriate category. That offence also carries a maximum penalty of 500 units.
So clearly, according to the legislation, ‘holding out’ as being registered to practice requires something more culpable than taking or using one of the protected titles, but less than actually doing the work reserved for building practitioners who are registered, although looking at prescribed penalties it is potentially just as serious.
So what is the case where one is holding oneself out as being a registered building practitioner without advertising oneself as registered or telling someone that you are registered? Could someone be guilty of holding out as a building practitioner if they were caught driving a ute and wearing a tool-belt whilst holding a facial expression deemed to be suggestive of registration? Is there a fault element for this offence, or can somebody in fact accidentally hold themselves out as being a registered building practitioner?
It is a fact that there are instances of people who are charged with ‘holding out’ for conduct which is entirely accidental, and without having ever performed the work of a registered building practitioner. These clients tell us that they do not feel guilty because their conduct was accidental, and they ask us whether a court is likely to find them guilty or not. We have to tell them that the offence of ‘holding out’ is extremely unclear, and we cannot safely predict what a court would find, but that we can predict that they will avoid a large fine by pleading guilty. Clients may be pleading guilty to offences that they do not feel guilty of because the offences contained in section 176(1A) of the Building Act are broad and ill-defined in scope. This is not ideal.
Despite having light-heartedly mused on the lack of clarity about what conduct might or might not amount to ‘holding out’, thinking logically about the goals of the legislation gives one some idea of what vice this provision may be aiming to eradicate. It is the vice where someone, although not using a protected title, is advertising or spruiking that they can perform a certain type of work when they do not hold the requisite registration to perform such work.
This behaviour is closely related to taking or using a protected title, but other breaching conduct might not fall within the gambit of that offence. The Building Act quite rightly aims to eradicate this type of conduct because it undermines the positive effect of licensing regulations, and the potential damage which could be occasioned on the community is foreseeable.
It is also the case that while we could simply make it an offence to carry out the work of a registered practitioner whilst not registered, there may be cases where this has not yet occurred or cannot be sufficiently proven.
However if this is the type of conduct which we aim to catch, then this provision needs to be drastically amended, so that the current confused dynamic is promptly consigned to history. Perhaps this section could more specifically target the conduct of advertising or offering to perform work which they are not allowed to perform due to lack of registration.
There is a further real discord here because of the suggested seriousness of the current unclear offence. The legislation seems to imply that whatever ‘holding out as being registered’ is, it is potentially as serious as practicing as a building practitioner whilst not registered. The average James Bond impersonator who falsely claims to have a ‘license to kill’ surely hasn’t done much damage compared to the one unbalanced Bond impersonator who shoots and kills an innocent bloke one day because he happens to look a lot like a Russian spy.
It seems that there needs to be a clearer idea of what level of fault element should be attracting what level of penalty. Failing that there is simply too much uncertainty.
Clues from other Legislation where the Phrase ‘Holding Out is used’
One of the few other statutes where the phrase ‘holding out’ is used is under the Partnership Act 1958 (Victoria). Section 18 of that Act refers to the situation where a person holds themselves out as being a partner in a firm when they are in fact not. Section 18 has the title ‘persons liable by holding out’, and states as follows:
“Every one who by words spoken or written or by conduct represents himself or who knowingly suffers himself to be represented as a partner in a particular firm is liable as a partner to any one who has on the faith of any such representation given credit to the firm whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.”
From looking at this section we may divine that someone can ‘hold out’ by written or spoken words or by conduct.
For example the case of McNally v Harris, the Supreme Court of NSW held that someone was not liable under the similarly worded NSW equivalent  of section 18, by virtue of the fact that Mr Licardy had not knowingly represented himself as a partner with Mr Harris, even though the perception that he was a partner had formed in the mind of the other party.
This appears to suggest that holding out requires some form of knowing representation which causes another party to take action upon faith of the representation.
On this construction parties who inadvertently and unknowingly represent that they are a registered building practitioner would not be in breach, regardless of whether someone else picked up on this representation and acted in faith of it.
Parties would be even further from being found guilty in situations where they had inadvertently or unknowingly represented that they are a registered building practitioner, and in fact nobody acted in faith of this representation anyway.
Currently parties in these situations are pleading guilty to holding out under section 176(1A) of the Building Act. Perhaps they should not be, but naturally nobody wishes to be the test case when they can instead plead guilty, mitigate, and walk out of court with a nominal fine.
Taking Direction from other Similar Legislation
The Legal Profession Act 2004 (Victoria) (“the LPA”) has similar aims regarding restricting unlicensed people from practicing. It seems that this Act addresses the problems much more clearly and avoids some of the uncertainties present in the current Building Act. There are two categories of offences, and a rebuttable presumption, to deal with the three vices envisaged. There is the most obvious, and essentially the most heinous – the offence of engaging in legal practice when not registered to do so. Secondly there is an offence of representing or advertising that you are entitled to engage in legal practice. Complementing this second offence, a rebuttable presumption of breach is raised where a party has used or taken a protected title.
This legislation reinforces that the conduct we seek to prevent is where unlicensed people or companies represent that they are entitled to perform a service when in fact they are not so entitled. The chief way of doing this would be through taking or using a protected title. Therefore the LPA appears to perform its task more clearly and effectively.
A Suggested Solution
It seems that section 176(1A) of the Building Act should be reframed in the way that the LPA is framed. Firstly there should be an offence of practicing as a building practitioner when not registered in the appropriate category. Secondly there should be an offence of representing or advertising that you are entitled to perform a certain type of work, when you are not registered as a building practitioner in the appropriate category in order to be licensed to perform that work. Similarly there would be a rebuttable presumption of breach where a protected title is taken or used by a party.
This second offence should perhaps also incorporate a fault element, and/or an element of reliance by another party, as found in the Partnership Act 1958. Whether the fault element be knowledge or recklessness should be considered. The justification for these amendments would be that it is difficult to see the harm occasioned in cases where there is an inadvertent representation which nobody has relied upon.
By this suggested approach a clear and precise set of prohibitions can be incorporated into the Building Act, which should enhance compliance, and avoid the unnecessary prosecution of parties for harmless mistakes.
Alex Milne, Solicitor – Lovegrove Solicitors