Cashen v Queensland Building and Construction Commission
[2014] QCAT 362
| CITATION: | Cashen v Queensland Building and Construction Commission [2014] QCAT 362 |
| PARTIES: | Mark Raymond Cashen ATF Cashen Family Trust (Applicant) |
| v | |
| Queensland Building and Construction Commission (Respondent) |
| APPLICATION NUMBER: | GAR387-13 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 15 July 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Senior Member Oliver |
| DELIVERED ON: | 29 July 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The decision of the respondent dated 8 October 2013 is set aside and in lieu thereof there be a decision that the applicant be categorised as a permitted individual. |
| CATCHWORDS: | PERMITTED INDIVIDUAL – where applicant declared bankrupt – where applicant contends the cause of the bankruptcy were the circumstances that developed to a marital breakdown – longstanding marriage – where building business deteriorated – where applicant took steps to liquidate assets to avoid bankruptcy Queensland Building and Construction Commission Act 1991 (Qld), s 56AD Younan v Queensland Building and Services Authority [2010] QDC 158 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mark Cashen in person |
| RESPONDENT: | Ms Kaye Joyce, in-house legal officer |
REASONS FOR DECISION
Mr Cashen holds a building licence, medium rise. On 19 October 2012 he entered into bankruptcy. As a consequence of his bankruptcy, the Queensland Building and Construction Commission (‘the Commission’) notified him on the 12 September 2013 that he was categorised as an excluded individual, meaning that his building licence would be cancelled. To avoid cancellation, he applied to the Commission on 2 October 2013 to be categorised as a permitted individual. On 8 October 2013 the Commission considered his application to be so categorised but was not satisfied that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in his bankruptcy. Mr Cashen then filed an application to review that decision on 5 November 2013.
The Tribunal’s function in a review proceeding is to produce the correct and preferable decision by way of a fresh hearing on the merits.[1] For Mr Cashen to be categorised as a permitted individual, he must satisfy the test set out in s 56AD(8) of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) which provides:
(8)The commission may categorise the individual as a permitted individual for the relevant event only if the commission is satisfied, on the basis of the application, that the individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.
[1]Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) s 20.
Section 56AD(8A) also sets out other matters that the decision-maker must have regard to in determining whether or not the applicant has taken all reasonable steps. Those matters are as follows:
(a)keeping proper books of account and financial records;
(b)seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business;
(c)reporting fraud or theft to the police;
(d)ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees;
(e)putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts;
(f)making appropriate provision for Commonwealth and State taxation debts.
The relevant event here for the purposes of the section, was the entering into bankruptcy on 19 October 2012.
The test for determining if an applicant did take reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event was formulated by McGill DCJ in Younan v Queensland Building and Services Authority:[2]
The test in s 56AD(8) requires first, the identification of the relevant event; second, the identification of the circumstances that resulted in the happening of the relevant event; third, a consideration of whether the relevant individual took all reasonable steps to avoid those circumstances coming into existence; and, if satisfied of that, fourth, a decision whether to categorise the individual as a permitted individual. What were reasonable steps depended on what was reasonable for the individual concerned in the circumstances in which he found himself, with such information as he then had. It is not a question of whether he did everything possible to prevent these circumstances from arising, or whether they would not have arisen if he had acted differently. The reasonableness of his behaviour must be assessed by reference to what was known by him at the time, without the benefit of hindsight. (my emphasis)
[2][2010] QDC 158 at [26].
Having identified the relevant event it is necessary then to identify the circumstances that resulted in the happening of the relevant event the applicant, in his application to be categorised as a permitted individual referred to the following matters:
a) Domestic discord or relationship breakdown, including property settlement;
b) Wife withdrew from family trust, being Cashen Family Trust;
c) Commonwealth or State taxation debt;
d) Excessive interest payments on loan monies;
e) Economic conditions affecting industry;
f) Inability to recover amounts owing; and
g) Sickness or injury.
The Commission did not contend there were any other circumstances in the material filed in response to the application. However, during the course of the hearing, it did become apparent that Mr Cashen’s financial position, vis-à-vis a family trust through which his building business was operated, was untenable having regard to the profit from the business activities of the trust and expenses in interest payments. The Commission submitted this ought to have been apparent to Mr Cashen and he should have taken steps to address this issue before 2011.
It is convenient to note here that Mr Cashen and his wife were discussing plans to sell the house to lighten the financial burden just prior to separation. However, this did not come to fruition and the separation intervened.
Background
It is not contentious that the catalyst for the financial difficulties ultimately experienced by Mr Cashen resulted from his marriage breakdown in February 2011. Up until that time, the financial records indicate the building business carried on through the Cashen Family Trust operated profitably. The building business mainly involved rectification and renovation building work as opposed to constructing new homes. The work was mainly sourced in the Brisbane area although both Mr and Mrs Cashen resided in the family home at Glenview on the Sunshine Coast. Mr Cashen also rented accommodation in the Shorncliffe area, which he would use when working in the Brisbane area.
The financial reports for the Cashen Family Trust show that there was a steady increase in gross turnover and nett profitability between the years 2009 to 2011. Although the profit was modest for the 2009 financial year partly because Mr and Mrs Cashen spent sometime in South Australia working with indigenous communities before returning to Queensland to regenerate his building business in that financial year. However, by June 2011 the accounts show that the Trust made a profit of $109,502. The gross income for that financial year was $427,429, which demonstrates that the business seemed to be functioning well with a healthy turnover.
The balance sheet for June 2011 showed that there was some differential in current assets to current liabilities with assets valued at $10,611 and liabilities valued at $24,560. There were non-current liabilities and non-current receivables particularly, from beneficiary loan accounts. However, against that the Cashen’s had a substantial asset in the family home at Glenview although this was subject to a mortgage. Mr Cashen said that the house had a valuation of over $600,000 at the time of separation, but because of a downturn in the residential housing market, it ultimately sold, in the hands of the mortgagee, for $415,000. The total repayments on debts including the house, were substantial amounting to about $52,000 per year.
It is important to note that the breakdown of the marriage after some 20 odd years was a devastating blow for Mr Cashen. Without going into detail, the effect of the breakdown is discussed in both his correspondence to the Commission, and in his evidence before the Tribunal. Mr Cashen had difficulty in maintaining the business because he did rely on his wife to assist him with the running of the business particularly, preparing accounts, quotes and liaising with their accountant.
After separation, realising that it was going to be difficult for him to carry on the business alone, Mr Cashen set about realising the main asset held between he and his wife, that is the Bayview house. In or about March 2011, he commenced discussing the sale of the property with a number of real estate agents and was advised that to maximise the selling price, it would be necessary to complete some building work to the house. This mainly comprised of a deck to the house so he set about doing this work. To fund the work, he borrowed $20,000 from his sister. When the work was complete, and whilst the property was being marketed, he rented the house for about $420 per week. There was a granny flat attached to it and this was rented for about $250 per week. Whilst the property remained for sale unfortunately, it did not sell until after his bankruptcy.
Mr Cashen said that he continued to work in the Brisbane area to generate income to make payments to the various creditors the principal creditors being:
a) Pepper Australia Pty Ltd (formerly GE Finance) monthly repayments of about $3,500;
b) ANZ Bank, monthly payments of about $600;
c) Citibank Credit Card monthly payments of about $350.
As at the date of the bankruptcy, his outstanding liabilities were as follows:
a) ANZ Bank $68,000
b) Deputy Commissioner of Taxation $20,000
c) Citibank $21,000
d) Pepper Home Loans $383,000
Although the list of creditors provided to his trustee in bankruptcy only shows Pepper Home Loans at $115,000 Mr Cashen explained in the hearing, that the total debt was much larger. This is supported by the documents that have been provided in the index of documents.[3]
[3]Exhibit 4.
The taxation debt of $20,000 was for the 2012 financial year but he was not advised of this debt until July 2012. Mr Cashen entered into an arrangement with the Australian Taxation Office to pay off the debt in by-monthly instalments. It appears the agreement was reached on 28 June 2012 with his first payment to be made by 27 July 2012. Although Mr Cashen believed he made a payment the evidence certainly does not demonstrate that any payment was made at that time nor was the September payment made before the bankruptcy occurred on 19 October 2012.
The Commission contends that this was the circumstances that lead to the bankruptcy however, I take a different view. By mid 2012, it was clear that Mr Cashen was in dire financial circumstances, he had already arranged for repayment holidays with Citibank, ANZ Bank, and Pepper Home Loans. Although the taxation debt was an additional liability, it was not one of the circumstances that lead to his bankruptcy. At this point, that is by mid 2012, bankruptcy was, I find, inevitable.
In 2011, Mr Cashen did take steps to reduce his monthly commitments by making arrangements to refinance the Glenview property with Westpac Banking Corporation. He said that Westpac were prepared to advance $484,000 which would clear the debt to ANZ Bank, Pepper Homes and Citibank. The interest rate Westpac offered was at a much lower rate which would give him the capacity to retain the property until a sale could be achieved. However, Mrs Cashen refused to be a party to the loan refinance with Westpac and therefore the refinance could not proceed. This of course is understandable however it meant that Mr Cashen was left with the burden of meeting all of the monthly repayments as and when they fell due.
In closing submissions, the Commission accepted that the separation was the catalyst for financial deterioration leading to bankruptcy. The Commission accepts that Mr Cashen made attempts to refinance to reduce the monthly commitments to a more manageable level. It also accepts that he took steps to generate further income to meet these liabilities by renting the house and at the same time putting the house at Glenview on the market for sale.
It is not accepted specifically, that he continued to work to generate cash flow to meet the repayments because unfortunately Mr Cashen has not filed his 2012 tax returns which were completed recently. It would have been useful to see what income had been generated in the financial year but it is not critical, again in my view, because by mid-2012 when it was clear that the debts could not be refinanced, Mr Cashen was clearly financially stressed resulting in the accommodation by the financiers for repayment holidays and then bankruptcy.
Did the Applicant take reasonable steps?
With respect to the specific matters referred to in s 56AD(8A) it is not contested that the applicant kept proper books of account and financial records. There is also no issue with failing to report fraud or theft to the police; providing guarantees without sufficient assets to cover liabilities; nor putting in place appropriate credit management or taking reasonable steps to recovery of outstanding debts. Mr Cashen did seek advice from Professional Business Advisors about his financial position in 2012 but there was little he could do until the house sold.
I have already dealt with the issue of making appropriate provision of Commonwealth or State taxation debts. Even though Mr Cashen failed to comply with the repayment programme, by September 2012 all the damage had been done. Furthermore, there is no evidence that he knew, prior to the issuing of the assessment, the amount of the tax liability. This was not causative of his bankruptcy.
That then leads to a consideration of Mr Cashen’s overall financial position at the time of the marital breakdown. As I have noted the financial documents for 2011 indicates that the business was operating satisfactorily. From the net profit of $109,502, the only fixed payments were about $52,000 for payments to the various finance companies. This then leaves about $57,000 for other living expenses. Even thought there was a shortfall of current assets over liabilities on the balance sheet, this would not of itself lead to bankruptcy, given the cash flow. Therefore, on the evidence before me it is reasonable for me to conclude that at the time of the separation there was no circumstance that was likely to result in the relevant event.
In the circumstances, and what occurred after it, I find the separation did have an adverse impact on the business of the Trust.
It is then necessary to consider what steps Mr Cashen took to avoid the coming into existences the circumstances that resulted in the bankruptcy. The circumstances were his inability to solely manage and conduct the business and meet the payments to the financiers.
There was no reasonable step he could take concerning the separation, insofar as it related to the conduct of the business. When he found that the financial position was deteriorating and likely to deteriorate further in the future he:
a) Engaged a real estate agent to assist in the marketing of the former matrimonial home;
b) On the advice of the real estate agent he set about improving the home and built a deck;
c) To generate cash flow he rented the home and resided in cheaper accommodation;
d) He then put the home on the market for sale;
e) He sought, and had approval, for a refinance package from Westpac but could not proceed without the involvement of his wife;
f) He sought advice from professional people about his financial position;
g) He made arrangements with his financiers for payment holidays to give him an opportunity to sell the house and continue to make payments;
h) He continued to work during this period without assistance;
i) He used the services of a bookkeeping service;
j) Although there was one bad debt for $7,000 it was reasonable not to pursue this subsequent to the involvement of a debt collection service due to cost.
Having regard to all of these matters, it seems to me and I find, that upon separation and the circumstances of it and its consequences there was little more he could reasonably do to avoid the downward financial spiral that led to bankruptcy.
It follows therefore that I find Mr Cashen took all reasonable steps to avoid the coming into existence the circumstances that resulted in his bankruptcy.
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