Commissioner for Consumer Affairs v Morgan No. Dcaat-99-94 Judgment No. D96

[1999] SADC 96

COMMISSIONER FOR CONSUMER AFFAIRS v MORGAN
[1999] SADC 96

Judge Robertson, Assessors: Hutchinson, Hebbard & Iveson
Civil

1 The Commissioner for Consumer Affairs ("the Commissioner") has issued a summons dated 6 April, 1999, against Keith Morgan ("Mr Morgan"), pursuant to the Plumbers, Gas Fitters and Electricians Act 1995 ("the Act"). The Commissioner seeks the cancellation of Mr Morgan's plumbing contractors licence, PCL6697 and his electrical contractors licence ECL6697. The order for cancellation is sought pursuant to s.24(1) of the Act.
2 It is not disputed that Mr Morgan became bankrupt on 27 February 1997. Section 9(1) of the Act provides that one of the conditions for a natural person to be granted either of the licences under consideration here, is that the person not be an undischarged bankrupt. Section 20(1) of the Act provides that there is proper cause for disciplinary action if an event has occurred such that a contractor would not be entitled to be licensed as a contractor if the contractor were to apply for a licence. Clearly, the bankruptcy of Mr Morgan is a relevant event within the meaning of that Section. Accordingly we are satisfied that there is proper cause for taking disciplinary action pursuant to s.24 of the Act.
3 The only matter then remains is the appropriate order to be made. As we mentioned earlier the Commissioner seeks the cancellation of both licences. The Commissioner's primary submission is that Mr Morgan's bankruptcy has shown that he does not have the required business skills. It is submitted by the Commissioner that by the cancellation of the licence the Commissioner will, pursuant to s.9 of the Act, require Mr Morgan to successfully complete some business course subjects before any fresh licences will be granted to him.
4 It appears from the evidence that Mr Morgan's total unsecured debts were $31,317.  Some of these debts were owed jointly with his wife.  Some of the debts were not business related.  It would seem that at most the total business debts were $20,357.  Of this amount the sum of $3,189 has been repaid to the Australian Taxation Office. 
5 The Commissioner did not produce any evidence of Mr Morgan's lack of business skills.  The argument was simply that Mr Morgan became bankrupt, and it follows from that fact that he does not have the adequate business skills.  Mr Morgan gave evidence concerning the events that led to his bankruptcy.  He said that he first suffered problems in July/August 1992 when his telephone went out of order and remained in that condition for a considerable period of time.  He was operating as a self-employed plumber at the time, performing plumbing work of a restricted nature.  In the course of the work he was required to do a minimal amount of electrical work.  Mr Morgan estimated his loss of turnover as a result of the telephone problem at approximately $10,000.  He said that thereafter he took a loan out to assist him in recovering the lost ground, but the general economic situation at the time did not allow his business to recover.   In 1995 he ceased business for a short time.  Thereafter in 1996 he commenced performing sub-contracting work.  After seeking financial advice he declared himself bankrupt.  His wife also declared herself bankrupt for the joint personal debts.  She was not a partner in Mr Morgan's business. 
6 We do not accept that the fact of bankruptcy automatically leads to the conclusion that a person does not have appropriate business skills.  There is no evidence here that Mr Morgan lacked business skills.  The unchallenged evidence of Mr Morgan indicates that his bankruptcy was due to events outside his control.  In our opinion if the Commissioner wishes to make good a claim that a person's bankruptcy was due to the lack of business skills then he is required to produce evidence of this. 
7 Mr Parkinson, counsel for the Commissioner, in his submissions, referred us to the decision of the Commissioner of Consumer Affairs v Brian Clarke, dated 4 May 1999, in which a licence was cancelled on the basis of his bankruptcy.  The facts of that case are far removed from those here.  Their Mr Clarke had been bankrupted for a second time.  His total unsecured creditors were $420,000.  In any event, as we have already said, the evidence here is that the cause of the bankruptcy was from outside events.  In our opinion the Commissioner's primary basis for seeking cancellation is not established. 
8 Mr Parkinson also referred us to the decision of the Commissioner of Consumer Affairs v Carney, dated 18 June 1999, this related to a licence under the Building Work Contractors Act 1994. The requirement for obtaining a licence as a building work contractor is significantly different than the requirements for a licence under the Act. Those circumstances distinguish that case from the case at bar.
9 In our view the fact that a person holding a licence is made bankrupt cannot be an automatic basis for the cancellation of the licence.  It would seem to us that this proposition could reduce harsh and unfair results.  There are many examples where circumstances outside the control of a licenced person could lead to that person's bankruptcy.  For example a sub-contractor being forced into bankruptcy through the failure of a contractor. 
10 There is one further matter which we seek to raise.  The Commissioner first received notice of Mr Morgan's bankruptcy on 19 June 1997 when Mr Morgan filed his Annual Return for renewal of his licences.  The Commissioner also received notice of Mr Morgan's bankruptcy on 14 July 1998 and 14 December 1998 when Mr Morgan filed two further Annual Returns.  The first step taken by the Commissioner in dealing with this matter was on 15 February 1999 when he wrote to Mr Morgan.  Counsel for the Commissioner, Mr Parkinson, was unable to offer any satisfactory explanation for the delay in taking action.  The Commissioner received a response to the letter of 15 February 1999 from Mr Morgan on 25 February 1999 in which he explained the circumstances of his bankruptcy and other matters. 
11 The delay is unfortunate.  It seems to us that Mr Morgan could be prejudiced by that delay.  If the application seeking cancellation of the licences had been taken promptly, and if the court had cancelled his licence, then he could have commenced studies some time ago with the object of obtaining the required qualifications for the issue of fresh licences.  At the present time he will automatically receive a discharge of his bankruptcy in approximately seven months.  It is agreed that unless objection is taken that Mr Morgan will be discharged on 27 February 2000.  We are not told of the number of study modules Mr Morgan would be required to complete or the time required for their completion if his licences were cancelled and he sought fresh licences after he is discharged.  Nevertheless the fact remains that the opportunity to undertake those studies has been significantly delayed due to the failure of the Commissioner to act more promptly. 
12 In our opinion, the basis upon which the Commissioner based his application for cancellation has not been established.  This by itself leads us to the conclusion that cancellation is not the appropriate order.  Apart from that, the delay is a further factor militating against any order for cancellation. 
13 In our opinion the appropriate order is that the two licences be suspended until Mr Morgan is discharged from his bankruptcy.