Fuge v Queensland Building and Construction Commission
[2014] QCAT 146
| CITATION: | Fuge v Queensland Building and Construction Commission [2014] QCAT 146 |
| PARTIES: | Paul Joseph Fuge (Applicant) |
| v | |
| Queensland Building and Construction Commission (Respondent) |
| APPLICATION NUMBER: | OCR390-12; OCR130-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 11 March 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Senior Member Oliver |
| DELIVERED ON: | 9 April 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The decisions of the respondent made on 2 November 2012 and 6 May 2013 are set aside. 2. The applicant be categorised as a permitted individual. |
| CATCHWORDS: | EXCLUDED INDIVIDUAL – WHETHER APPLICANT SHOULD BE CATEGORISED AS A PERMITTED INDIVIDUAL – whether the applicant should be categorised as a permitted individual – effects of the global financial crisis – where applicant a registered builder and company director – where Company borrowed substantial funds to finance the construction of speculative building projects – whether reasonable to expect the house and land package would sell within a reasonable time – whether the applicant took proper advice in respect of the finance package offered – whether the applicant/Company had sufficient and capitalisation to cover borrowings – where projects impacted by the global financial crisis – where properties devalued including collateral security – whether the applicant took reasonable steps to avoid the appointment of a controller to the Company and avoid bankruptcy Property Agents and Motor Dealers Act 2000 (Qld) Queensland Building and Construction Commission Act 1991 (Qld), s 56AD(8), s 56AD(8A) Younan v Queensland Building Service Authority [2010] QDC 158 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Wallace of counsel instructed by CPD Lawyers |
| RESPONDENT: | Mr Thomson of counsel instructed by the Respondent Legal Division. |
REASONS FOR DECISION
Mr Fuge holds a building licence – Medium Rise and Completed Residential Building Inspection (Nominee Supervisor). He is also a director of Paul Fuge Builders Pty Ltd (‘the Company’). On 14 May 2012, the Bank of Queensland Limited was appointed as a Controller of the Company as a result of the company’s default under a loan facility with the bank. Because of the appointment of the Controller and the operation of s 56AD of the Queensland Building and Construction Commission Act 1991 (Qld) (‘the QBCC Act’) Mr Fuge was automatically categorised as an excluded individual the effect of which was that his builders licence was cancelled. To avoid cancellation, Mr Fuge applied to the Queensland Building and Construction Commission (‘the Commission’) to be categorised as a permitted individual so he could retain his licence.
In addition to the appointment of the Controller, Mr Fuge also entered into bankruptcy under the Bankruptcy Act 1966 (Cth) on 23 July 2012. This second event also resulted in him being categorised as an excluded individual and again he applied to be categorised as a permitted individual for this event.
In respect of both applications to be categorised as a permitted individual, the Commission made a decision to refuse to so categorise him. Mr Fuge filed an application in the tribunal to review the Commission’s decisions, the first decision being made on 2 November 2012 in respect of the Company event and the second decision on 6 May 2013 being the personal bankruptcy event.
It has been agreed between the parties that both proceedings should be heard together and the evidence in one proceeding should be the evidence in the other because both events arise out of the same set of facts and circumstances.
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. For Mr Fuge to be categorised as a permitted individual, he must satisfy the test set out in s 56AD(8) of the QBCC Act which provides:
The commission may categorise the individual as a permitted individual for the relevant event only if the commission 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.
Section 56AD8(A) also sets out certain 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 two relevant events here, for the purposes of s 56AD were, obviously, the appointment of the Controller to the Company, and the applicant entering into bankruptcy.
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 is that set out by McGill DCJ in Younan v Queensland Building Services Authority:[1]
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).
[1][2010] QDC 158.
Having identified the relevant events, it is then necessary to identify the circumstances that resulted in the happening of the relevant events. The applicant, in his principal affidavit,[2] sets out in paragraph 217 the circumstances relied upon as follows:
(a)The Company entering into the loans to purchase and build on properties;
(b)The impact of the GFC (global financial crisis) on Sunshine Coast property prices;
(c)The Company being subsequently unable to sell the properties at prices which would have satisfied any significant portion of the loans;
(d)The Company, as trustee of the Fuge STI Trust been unable to generate sufficient income to satisfy loans.
[2]Exhibit 4 Applicant’s Statement filed 23 August 2013.
The Commission did not contest the circumstances contended for by the applicant but added the following further circumstances for consideration. They are:
(a)Entering into the purchase contracts for land upon which to build two speculative houses on 24 August 2007;
(b)Allowing interest on loans and construction costs to exceed the projected amounts;
(c)Failing to explain the reasons for the appointment of the Controller.
The parties having identified the circumstances for my consideration, it is necessary to consider all of the evidence put before the Tribunal to determine whether Mr Fuge did take reasonable steps to avoid those circumstances and do so by way of a fresh hearing.
Background Facts
Mr Fuge is an experienced builder. He is a qualified tradesman and worked as such between 1987 and 1990. He has been a registered builder since 1990 and built, invested in and refurbished a number of residential properties between 1990 and 2007.[3] All of his building work has been carried out in the Coolum Beach area on the Sunshine Coast. He is familiar with real estate developments in the area and real estate values generally. The respondent does not seriously challenge any of this evidence.
[3]Exhibit 4.
Prior to August 2007 Mr Fuge’s building business was operated in partnership with his wife Christine Fuge. At that time, and on the advice of his accountant Mr Kamp of Kamp Business Accountants, two trusts were established, The Fuge Family Trust and Fuge STI Trust. The trustee of both trusts was Paul Fuge Builders Pty Ltd. The ‘Fuge Family Trust owned and operated the building business and the Fuge STI Trust owned and operated the real estate investment business’.[4] In establishing this structure, Mr Fuge relied on the advice of his accountant that it would be cheaper to have a single company as trustee of both trusts and this would also provide some asset protection if there were any legal proceedings brought against the trustee. Whether or not this structure was justified, is largely irrelevant to this proceeding but provides some historical background to the way the business was operated after mid 2007.
[4]Exhibit 4 at [17].
In mid 2007 Mr Fuge became aware of a residential subdivision development on the David Low Highway at Yaroomba. Lend Lease Realty Pty Ltd marketed the development. It was to be a gated community known as ‘Whitehaven at Beachside’. This development is just south of Coolum on the Sunshine Coast. A number of the blocks in the subdivision have beachfront access, with the balance only a short distance from the beach.
The developer was anxious for houses to be built on the subdivision as soon as possible to assist in marketing the project. Mr Fuge was told that he could purchase a lot, pay a deposit construct a house on the lot and complete the purchase at some considerable time in the future, which would enable him to contract to sell the developed lot, before settlement. Lend Lease would assist in marketing the house and land package and only charge half the standard commission.
In addition to those representations, Lend Lease also had a database of buyers and if Mr Fuge were to proceed with the purchase of two lots then it had 1300 potential buyers to purchase the property.
After discussions with Lend Lease representatives, the Company, as trustee of the Fuge STI Trust purchased two lots, Lot 1 on SP 19891 and Lot 25 on SP 19894. The intention was to construct high quality homes and blocks and put them to market with approximate prices of $2.85 million for Lot 1 and $2.65 million for Lot 25. The purchase price for the particular lots was $735,000 for Lot 25 and $605,000 for Lot 1. This was consistent with Mr Fuge’s costing of the construction and supported by Lend Lease.
Prior to signing the contracts for the purchase of the two lots, a potential buyer for Lot 1 had signed an ‘expression of interest’ paid a holding deposit of $10,000 on the basis of purchase price of $2.65 million. After entering into the contracts, by October 2007 another potential buyer signed an expression of interest for Lot 25 on the basis of a purchase price of $2.95 million and also paid a holding deposit of $10,000.
On 11 September 2007 the Company, as trustee, signed contracts for the purchase of the lots and deposits were paid in respect of both lots.
To finance the project, Mr Fuge had discussions with the Bank of Queensland. The bank was prepared to provide finance for the project and ultimately provided an initial loan of $1.96 million on 9 October 2008 and a further advance of $1.2 million on 9 June 2009. In addition, Mr and Mrs Fuge had access to a line of credit, through a credit card, for $700,000. The security for this finance, although not clear, included the subject lots on settlement, their residence at Grandview Drive and personal guarantees from Mr and Mrs Fuge. Mr and Mrs Fuge had equity of $1.517 million in properties at Beachway Parade and Grandview Drive at Coolum. In fact, according to a valuation from Herriots, the Grandview Drive property had a total market value of approximately $3.5 million at that time.
Mr Fuge told the Tribunal and it is recorded in his statements that prior to executing the contracts to purchase the lots, that he had discussions with, and sought advice from, his accountant Mr Kamp about the project. They discussed; the structure of the loan he was to obtain from Bank of Queensland, the viability of constructing two houses on those lots even though the houses were for the ‘high end’ of the market, the security he had available to obtain the loans, and also considered whether there were any risk factors in proceeding with the project. Mr Kamp also provided a statement to the Tribunal[5] and confirmed in cross-examination that he recalls specifically that the total borrowings were about $3.5 – $3.6 million and that there was nothing unusual in the structure of the loan arrangements. This included setting up a special account to quarantine $300,000 for the purposes of paying interest on the loans for the project. Mr Kamp said it would be rare for a developer of a project of this type not to borrow the full costs of project, including interest in circumstances where there was a reasonable expectation that the first house would sell either during construction, or at the end of construction. Although he did not say so, the expectation is supported by the signed expressions of interests that indicated that project was not subject to any significant risk. This is a reasonable inference to draw from these facts. I have no difficulty in accepting Mr Kamp’s evidence and opinions without reservation.
[5]Exhibit 6.
Mr Fuge also consulted with his legal advisors in respect of the contracts with Lend Lease and discussed the project and again, there was no adverse advice from his lawyers about the project.
In considering to proceed with the project, Mr Fuge has told the Tribunal[6] that he relied on the following matters:– his experience as a property investor on the Sunshine Coast; his experience in the building industry on the Sunshine Coast; his general knowledge as a resident of the Sunshine Coast for over 30 years; the information provided to him by Lend Lease, including the proposed marketing of the properties;[7] the expression of interest signed by the purchaser for Lot 1; his calculations as to the cost of construction, and the time for construction; his own analysis of his personal financial position including the value of the house at Grandview Drive and Beachway Parade; the fact that the bank, when considering the total project were content to lend the funds and obtained their own valuations from Mr Casey; and the advice he received from his accountant, lawyer and a financial advisor Mr Lonegran.
[6]Exhibit 4 at [61].
[7]Exhibit 4 ‘PJF-7’.
In support of this, Mr Fuge, in his third supplementary statement[8] has provided his costings for the project. The costs for Lot 1 totalled $846,603; Lot 25 being $894,075. The actual cost for Lot 25 was $990,293.60. It is apparent that there was a cost overrun on Lot 25 and his evidence is that there was likely going to be a cost overrun on Lot 1.
[8]Exhibit 8.
With respect to the valuations, as I said the Bank of Queensland obtained a valuation from Mr Paul Casey which supported the value of the purchase of the land as well as the completed development. Mr Fuge saw those valuations and because they were provided to the bank, he did not see any reason to doubt the valuation and decided not to engage an independent valuer. In my view, and I find, that this was a reasonable step to take by him at that time.
On the basis of all of this information, Mr Fuge decided to proceed with the project. I should also say, although there was no independent evidence of this apart from the evidence of Mr Fuge, that it is well known that property values in 2007 were buoyant. This is not contested by the respondent. If any evidence is needed for this proposition, there is an affidavit filed Mr Mitchell which annexes search results for various properties on the Sunshine Coast during this period.[9]
[9]Exhibit 9.
Construction on Lot 25 commenced on 1 April 2008. Mr Fuge said that from the time he signed the contract, Lend Lease actively marketed the property even though they had not signed formal documents appointing Lend Lease as the agent for the purpose of the sale under the legislative requirements.[10] I accept Mr Fuge’s evidence on this point even though the necessary documents were not signed until March 2009. I have no reason to believe that Mr Fuge was not doing everything he could reasonably do to actively market Lot 25 during the construction period.
[10]Property Agents and Motor Dealers Act 2000 (Qld).
It has been raised as an issue, although dealt with rather comprehensively by Mr Kamp, that in allocating $300,000 of the borrowed money to a quarantined account purely for the purpose of paying interest, was unreasonable. I do not accept this to be the case based on Mr Kamp’s evidence there was nothing unusual at that time to establish a fund to pay the interest on monies as they were advanced for the construction of the house.
The house on Lot 25 was completed by December 2008. There had been no sale and the original purchaser who had signed an expression of interest for Lot 25 decided not to proceed and notified Mr Fuge of that in May 2008.
Mr Fuge contends that a reason for Lot 25 not selling during 2008 is the onset of the global financial crisis in September 2008. It is well known that after the onset of the GFC property sales slowed considerably, and ultimately values dropped. This is not contentious.
The Company, as it was required to do, completed the purchase for Lot 25 on 31 October 2008. I accept Mr Fuge’s evidence that in the circumstances he decided that the Company had no option but to complete that purchase given the level of investment in the property. Further the full impact of the global financial crisis was still to be fully realised and felt in the economy.
On the basis of the assets then held by the trusts and Mr and Mrs Fuge and with the expected sales of Lot 1 and Lot 2 of $2.65 million and $2.95 million respectively there was sufficient equity to proceed with the project and construct the house on Lot 1. Although the Company was required to commence the construction on Lot 1 by late 2008 there were delays some of which were the fault of Lend Lease but ultimately construction started in April 2009.
To continue with the project, a further advance was made from the Bank of Queensland of $1.2 million. Settlement of Lot 1 occurred on 23 June 2009. The applicant submits, and I accept, that once the original contracts were executed, and more particularly after the completion of the house on Lot 25, the Company had no option, really, but to proceed with the project in the reasonable expectation that Lot 25 would sell at or about the listed price. Once again, I accept Mr Fuge’s evidence that the property was actively marketed by Lend Lease and other agents.[11] I also accept that it was a reasonable expectation at the start of the project that no further funds would be required from Bank of Queensland, as the proceeds from the sale of Lot 25 would fund the rest of the project.
[11]Exhibit 4 at [146].
Even though the impact of the GFC was starting to take its toll by mid 2009, Mr Fuge had to make a decision on whether to proceed with the construction of the house on Lot 1. Given his options, I accept his evidence that there really was no choice but to continue with the settlement of the contract on Lot 1 and complete the construction of the house.
Construction continued through the later part of 2009 and 2010, somewhat slowly, but it got to a point, because of the failure to sell Lot 25, that the costs of interest and the effects of the GFC meant that the Company was running out of cash to fund completion of the project.
During this period Mr and Mrs Fuge put 14 Grandview Drive on the market. They had a valuation in October 2007 of $3.5 million and I have no reason not to accept that was a fair value for the property at the time of the valuation. In fact Mr Fuge says that he was told that he should sell it for more than that. Grandview Drive was actively marketed through 2009 and 2010 with various agents[12] but did not sell at the list price of $3.5 million and was eventually sold in October 2011 for $2 million. I accept that this substantial decrease in value was a direct result of the global financial crisis.
[12]Exhibit 4 at [161].
Therefore, by the end of 2011: work had stopped on the house on Lot 1 at lockup stage;[13] Lot 25 was on the market but no offers were forthcoming irrespective of the list price of something around $2 million; Grandview Drive sold at a substantial under value, and the other properties held by Mr and Mrs Fuge, that is the industrial sheds and Peachly Drive, were sold. The funds from these sales were used to pay interest.
[13]He took it to lock-up on the advice of his accountant.
Therefore it comes as no surprise that when the Company stopped meeting the interest payments on the loan in late 2011 that the Bank of Queensland moved on its securities to take possession of the properties on the 14 May 2012 and to exercise power of sale. Both properties were sold at auction, Lot 25 for $1.3 million and Lot 1 for $725,000.
On 1 March 2012 the Bank of Queensland commenced proceedings in the Supreme Court of Queensland against the Company, as trustee for the STI Trust, Mr Fuge and Mrs Fuge to recover the total monies advanced under the loan agreements and guarantees. Although the proceedings were commenced and served on Mr Fuge, no defence was filed and there was no application for default judgment. After Grandview Drive was settled, the total indebtedness to the Bank of Queensland was reduced to $1,568,639.[14]
[14]Exhibit 4 at page 516.
Because of the ongoing liability to the Bank of Queensland for the ‘unsatisfied balance of the loans’ which included the line of credit and also liability under the guarantees Mr Fuge took advice from his accountant and lawyer and entered into bankruptcy on 23 July 2012. He had no defence to the claims made by the Bank of Queensland and had no capacity to pay the outstanding balance.
There was another development which occurred in March 2012. W & D Investments Pty Ltd was appointed as the new trustee of Fuge STI Trust. Its unclear how this came about but the Company was removed as trustee and upon the new trustee being appointed, proceedings were commenced against Mr Fuge in the New South Wales Supreme Court. The cause of action against Mr Fuge included breach of fiduciary duties as a director of the Company in relation to the transactions entered into which put the trust property at risk. The total amount of the claim was for $8.5 million. Although Mr Fuge denied any liability he did not file any defence to the claim. Subsequently, on 3 July 2012 he agreed to an order by consent that he pay to the applicant $1.5 million. Mr Fuge conceded in cross-examination that he had no means by which he could pay this agreed settlement.
There really was no satisfactory explanation as to why, in the circumstances, W & D Investments as trustee, commenced proceedings against Mr Fuge. There did appear to be some animosity between the directors of W & D Investments, Mr Fuge’s sons Wade and Dain. The relationship was described by Mr Fuge as ‘not good’. Although the circumstances surrounding the change of trustee, and the legal proceedings against Mr Fuge are curious, and even though W & D Investments is listed as an unsecured creditor in Mr Fuge’s bankruptcy papers, because there was already indebtedness to the Bank of Queensland both by way of primary loans and guarantees, the consent judgment could not seriously be regarded as a circumstance which resulted in the relevant event of bankruptcy.
Therefore, the question to be determined is whether Mr Fuge took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the appointment of the Controller to the Company and, his personal bankruptcy. In respect of the matters to be considered under s 56AD(8A) there is no issue about whether the applicant kept proper books of account and financial records; reported fraud or theft to the police; put in appropriate credit management amounts for recovery of debts; and, making appropriate provision for Commonwealth or State taxation debts. The focus here is on whether Mr Fuge took appropriate financial or legal advice before entering into the financial business arrangements in conducting the business[15] and whether ensuring there were sufficient assets available to cover the liability under the guarantees.[16]
[15]s 56AD(8A)(b).
[16]s 56AD(8A)(e).
Was it reasonable to enter into the loans to purchase the land and build on the properties
I have already outlined the steps taken by Mr Fuge before coming to the decision to purchase the land and build the houses on Lots 1 and 25. The history demonstrates that Mr Fuge, an experienced builder, not only relied on his own knowledge and experience of building on the Sunshine Coast in the Coolum area, but he was also in close consultation with his accountant and legal advisors. The evidence from Mr Kamp supports Mr Fuge’s evidence in this regard and I have no reason not to accept it in its entirety. It goes without saying that at the time of entering into these transactions there was no hint that there would be a world wide major financial upheaval in late 2008 which would result in a significant devaluation of the properties and a significant slow down in retail sales of residential property.
Not only was there no indication of the coming global financial crisis, Mr Fuge already had a signed expression of interest in respect of Lot 1 and prior to commencing the construction of the house on Lot 25, had another signed expression of interest in respect of that lot.
Mr Fuge had sufficient assets to support the borrowings with the primary securities and in particular, the valuation by Herriot’s of $3.5 million for the Grandview Drive property, there are also other assets.
Mr Fuge also had the support of the developer Lend Lease in marketing both properties. They provided him with a house design which he varied again, relying on his expertise as a builder. Although there were no formal documents signed by the Company to market the properties I accept Mr Fuge’s evidence that Lend Lease were actively marketing the properties from the time the Company signed the contracts. No doubt, if a buyer had been forthcoming, Mr Fuge could have immediately signed the necessary forms to formalise the arrangement.
In my view, when taking all of these facts into account the only reasonable conclusion is that Mr Fuge did take reasonable steps in coming to the decision to proceed with the project.
Did the impact of the global financial crisis affect the property prices
This was a circumstance relied on which resulted in the happening of the appointment of the Controller. Little more needs be said about the impact of the global financial crisis. Even though there was an immediate effect in the later part of 2008, the consequences of those events continued to impact the economy, including property values and confidence through out 2009 and thereafter. Even after the commencement of financial crisis, it was difficult to predict where that would lead the local economy other than to say confidence was eroded.
In respect of the decision to proceed with the purchasing of Lot 1, the contract entered into by the Company required the development of Lot 1 and if the Company simply walked away from its contractual obligations it would have been exposed to either a claim for specific performance, presumably, or damages for breach of contract. Again it is a reasonable conclusion that if the Company did default, lot 1 would either not have been or sold at a significant lesser price leaving the Company exposed to a judgment and perhaps the appointment of a liquidator.
Mr Fuge had to made a judgment whether, in the circumstances, it was best to proceed with the construction on Lot 1 in the hope that Lot 25 would sell which would then provide sufficient cash flow to complete that part of the project. It is easy enough now to look back and say that an alternate decision might have been the better course, but faced with those events, one cannot be critical of Mr Fuge’s decision, at that time, to proceed with the construction of Lot 1. I therefore consider that this decision on the part of Mr Fuge was reasonable in those circumstances.
Were reasonable steps taken to market the properties?
I have already indicated that from the very commencement of the project the properties were marketed by Lend Lease. Not only did Mr Fuge market both Lots 1 and Lot 25, he commenced marketing Grandview Road, which was the primary collateral security for the loans in 2009. The evidence produced by Mr Fuge[17] demonstrates that there was little more Mr Fuge could do to market these properties. Ultimately, despite the early valuation of $3.5 million, the Grandview property was sold for much less. However this did not produce enough funds to complete the project. I am of the opinion that Mr Fuge did take all reasonable steps to sell the properties.
[17]Exhibit 4.
Did the Company generate sufficient income to satisfy loans
The answer to this question is obviously no. However, the Company did take steps to try and generate income by firstly, completing the house on Lot 25 and putting it straight to market and also commencing work on Lot 1. It was through no fault of the Company or Mr Fuge that sufficient income was not generated to satisfy the loans.
The principal debt of the company was interest and even though a large amount of interest, $300,000 was quarantined from loan monies, this was quickly used to satisfy interest payments in the absence of any income from the sale of the properties.
Despite not being able to generate any income, I am satisfied that reasonable steps were taken to generate income through the attempted sale of properties.
Without engaging in an exercise of hindsight, the way the loans from Bank of Queensland were set up with a quarantined loan account for interest, was a reasonable way to manage the finance facility at that time.
Did the Company take all reasonable steps to avoid the appointment of the Controller
I have come to the conclusion that the Company has, in the circumstances, taken all reasonable steps to avoid the circumstances resulting in the appointment of a Controller. At the commencement of this project, the Company had sufficient assets to meet its liabilities, had no reason to anticipate the turn of events which occurred in 2008 with the onset of the global financial crisis and it is as a direct result of that financial instability that the properties were devalued and not sold in a timely fashion. This was beyond the control of Mr Fuge and I therefore am satisfied that in respect of this event he should be categorised as a permitted individual.
Did Mr Fuge take all reasonable steps to avoid bankruptcy?
Once the Company was in default of its obligations under the loan agreement and as Mr Fuge was not only a primary debtor of the Bank of Queensland, and under guarantees it was inevitable that, after the realisation of securities upon the appointment of the Controller, and there was a shortfall of $1.55 million that Mr Fuge was going to be called upon to pay that amount. Already Supreme Court proceedings had been issued against him and there was no defence, as he readily acknowledged, to those proceedings. The circumstances that lead to the bankruptcy were clearly as a result of all of the matters upon which the Controller was appointed and therefore, having found that Mr Fuge took reasonable steps to avoid those circumstances, it follows that he has taken all reasonable steps to avoid the circumstances that resulted in his bankruptcy.
It is argued that the proceedings brought by W & D Investments against Mr Fuge and the consent judgment is also a circumstance, which must be considered. I take a different view. Once the Bank of Queensland commenced proceedings against Mr Fuge and his liability to the bank crystallised it seems bankruptcy was inevitable and it is this debt that was the catalyst, which resulted in the bankruptcy event. Although there was no real satisfactory evidence explaining the W & D Investments proceeding against Mr Fuge it made, in my opinion, little difference in the ultimate outcome.
Mr Fuge should be categorised as a permitted individual for the bankruptcy event.
Conclusion
Having come to the view that Mr Fuge should be categorised as a permitted individual for both the Company event and the personal bankruptcy event, the order of the Tribunal will be that the Commission’s decisions of 2 November 2012 and 6 May 2013 are set aside and instead, there will be a decision that Mr Fuge is categorised as a permitted individual in respect of both events.
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