Henley v QBSA
[2010] QCAT 242
•7 June 2010
| CITATION: | Henley v Queensland Building Services Authority [2010] QCAT 242 |
| PARTIES: | Mr Robert James Henley |
| v | |
| Queensland Building Services Authority |
| APPLICATION NUMBER: | QR113-09 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 11 May 2010 |
| HEARD AT: | Cairns |
| DECISION OF: | Mr Mark Johnston |
| DELIVERED ON: | 7 June 2010 |
| DELIVERED AT: | Cairns |
| ORDERS MADE: |
The decision of the respondent dated 6 April 2009 refusing to categorize the applicant as a permitted individual is confirmed.
Any party who seeks costs will file in the registry one copy and deliver to the other party one copy of written submissions by, 4 p.m. on 18 June 2010.
Any party that wishes to file written submissions in reply will file in the registry one copy and deliver to the other party one copy of written submissions by, 4 p.m. on 25 June 2010.
Any application for costs will be determined by the Tribunal on the papers, unless a party request in writing to be heard.
| CATCHWORDS : | Building Licenses, Cancellation of building Licences, Excluded Individuals, Appointment of Administrators Queensland Building Services Act s56 AD(1) Queensland Civil and Administrative Tribunal Act s 24 |
APPEARANCES and REPRESENTATION
| APPLICANT: | Mr Carman, Solicitor, appeared for the Applicant |
| RESPONDENT: | Ms Campbell, Legal Officer employed by the Queensland Building Services Authority on behalf of the Respondent. |
REASONS FOR DECISION
The applicant was a director of a building company, Navywich Pty Ltd (“Navywich”) and was the holder of a builder’s license.
On 25 September 2008 Korda Mentha Liquidators were appointed as Liquidator of Navywich.
It was not disputed that the appointment of a Liquidator was the relevant company event as defined in section 56 AC (2) of the Queensland Building Services Act (“the Act”).
On 9 October 2008 the applicant was informed by the respondent that he had been classified as an excluded individual pursuant to section 56 AC(2) and (4) of the Act.
On 5 November 2008 the applicant applied to the respondent pursuant to section 56 AD (1) of the Act to be characterized as a permitted individual for the relevant company event.
On 6 April 2009 the respondent decided to refuse to categorize him as a permitted individual.
On 13 May 2009 the respondent cancelled the applicant's license.
Mr. Henley seeks an Order from the Tribunal to set aside the decision of the respondent.
This application is made pursuant to section 56AD of the Act and Chapter 2, Part 1, Division 3 of the Queensland Civil and Administrative Tribunal Act 2009 (“the QCAT Act”).
10. The Tribunal has power pursuant to section 24 of the QCAT Act to: confirm; set aside or substitute another decision; and set aside the decision and return the matter to the state agency with such directions as the Tribunal considers appropriate.
Relevant Legislation
11. The Act expressly provides, so far as relevant:
Section 56 AD of the Act provides:
(1) An individual may apply to the authority, in the form approved by the Board, to be categorized as a permitted individual for a relevant event if the individual has been advised by the authority, or has been otherwise been made aware, that the authority considers the individual to be an excluded individual for the relevant event.
(2) The authority may categorize the individual as a permitted individual for the relevant event only if the authority is satisfied, on the basis of the application, that the individual took all reasonable steps to avoid coming into existence of the circumstances that resulted in the happening of the relevant event.
In deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event, the authority must have regard to the action taken by the individual in relation to the following-
(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 liability under the guarantees;
(e)putting in place appropriate credit management and taking reasonable steps of recovery of the amounts;
(f)making appropriate provisions for Commonwealth and State taxation debts.
Nothing in subsection (8A) prevents the authority from having regard to other matters for deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.
The Evidence
12. In addition to the written material contained on the Tribunal file, all of the parties attending the hearing were given the opportunity to express their views. These views, where specifically relied upon by the Tribunal, are discussed below.
Mr. Henley
13. On 28 August 1995 Navywich was registered with himself as the sole Director. His accountant had outlined to him the serious obligations that were involved in operating as a company director. On 6 February 1997 he appointed Glenn Michael Smith as a co-director. His evidence was that Navywich operated two teams. He operated his team out of Kowanyama on the western side of the Cape and Mr. Smith operated the second team out of the Cooktown area on the eastern side of the Cape.
14. His wife Lyndel Henley acted as bookkeeper up to 2003 and after that she was assisted by a lady Ms Wendy Elliott. The company kept a set of books of account in Cairns at 5 Marsh Street, Woree, Cairns. The company utilized the MYOB accounting software for the business. The company issued cheque-books to each of the directors so that they could write cheques. Credit facilities will put in place which included: BP fuel card; the credit facility at Cairns Hardware; and another at the Steel Barn. His wife had responsibility for the invoice book to facilitate jobs for freight transfers and earthmoving works.
15. Mr. Smith was responsible for the day-to-day running of the company and ran it from his office.
16. In November of 2005 the applicant heard rumors from the publican at Kowanyama that Mr. Smith was doing jobs for cash. His wife subsequently contacted him over a contract for the Fenton’s in Cooktown. She had been chasing payment from Mrs. Fenton only to be told by Mrs. Fenton that she had made a payment to Navywich to a Mr. G. Morris. The applicant produced evidence from Mrs. Fenton to confirm this state of affairs.
17. Mr. Henley indicated that it was around this time that the company started to have cash flow problems. He informed the Tribunal that he subsequently became aware that Mr. Smith had undertaken a significant amount of work the payments were which had not gone through Navywich's accounts. He made reference to a letter from the Cook Shire Council written on 24 May 2007 which sets out the jobs undertaken by Navywich in the Cooktown area. He told the Tribunal that he was unaware of five of the jobs on the list provided by the Council. His attention to this activity came about because an officer of the council was highly suspicious of the activities of Mr. Smith and warned him that he needed to be careful to regarding Mr. Smith's activities. He stated that he had a number of discussions with Mr. Smith during November 2005 about the liquidity of the company. During those discussions they looked at the various options and agreed to sell some of the assets to pay outstanding debts.
18. In his written statement that paragraphs 21 to 23 he outlines how the company’s Mack truck was sold at a “ vastly reduced price” and ended up being owned by a company operated by Mr. Smith's brother and sister.
19. In paragraph 24 of his statement he states that the company's plant and equipment at Kowanyama was removed. His evidence is that he reported the matter to the police and that he confronted Mr. Smith about his actions and was told by Mr. Smith that he had taken the plant and equipment is payment of moneys that were owing to him. Mr. Henley estimated that the assets taken by Mr. Smith were valued at $177,468.
20. He told the Tribunal that he had attempted on numerous occasions to try and arrange a meeting with Mr. Smith without success. He states that Mr. Smith delivered a handwritten letter to his wife proposing to resign as Director. In February 2006 engaged Gayler Cleland to act as Mr. Smith had changed the passwords to the company's accounts and his wife was not able to access the company accounts.
21. He states in paragraph 32 of this statement that Mr. Smith was continuing to incur significant credit charges against the company's credit facilities.
22. Mr. Henley told the Tribunal that for the period from the middle of 2006 through to the end of 2007 the company continued to experience difficulties servicing debts. It was during that period that the Australian Taxation Office sought tax payments for the Superannuation Guarantee Charge covering the period from 1 October 2004 to 28 November 2007.
23. He told the Tribunal that on 2 October 2006 he organized a second mortgage in the sum of $215,000 on the family home and organized the sale property in Chillagoe and used the proceeds to pay off creditors and part of the monies owed to the Australian Taxation Office. The Australian Taxation Office was not prepared to enter into discussions with him and issued a statutory demand and subsequently applied to have a liquidator appointed.
24. He stated that he had not discussed with Mr. Smith his resigning -that he simply found out by letter that he was pulling the pin. He spoke to his accountant and was told to go on see a lawyer. He was receiving telephone calls from a local lawyer Mr. Luckbir Singe who was representing Mr. Smith. When he met with the man and gave him the company paperwork he was told that he needed to get legal advice.
25. Mr. Henley was unable to give a plausible explanation of the actions of Mr. Smith. He stated that they had discussions about the orderly sale of assets and that he relied on Mr. Smith to do the right thing. His evidence is that he effectively blamed Mr. Smith for taking a significant part of the company's assets by theft and fraudulent means. He told the Tribunal that had relied on Mr. Smith to sell the plant and equipment because he had more knowledge and contacts in relation of those affairs.
26. He states that when they were moving pallets from the depot to give vacant possession to incoming purchaser he says that he tried to sort out issues with Mr. Smith and his brother but could make no progress.
27. In relation to the statutory demand his evidence was that he had seen the accountant who told him that the company had $400,000 with tax credits and that these could be offset against the outstanding tax. He offered no evidence apart from his own to support this contention.
Mrs. Lynda Henley
28. She was employed by Navywich to look after administration, accounts payable and receivable, invoicing to Navywich as the Cairns Depot at 5 Marsh Street, Woree.
29. The books and accounts were kept and profit and loss and balance statements prepared by an external accountant.
30. In November 2005, she told Robert Henley, her husband that there was not enough income to cover the liabilities which Navywich owed. He contacted Mr. Smith in this regard.
31. In November 2005 she received a telephone call from Mrs. Daphne Fenton in response to a monthly statement questing final payment of a Navywich tax invoice totaling $15,745.50. Mrs. Fenton informed her that she had been told by Mr. Smith to make out a bank cheque in the sum of $12,500 as his half share in a property in Cooktown from a Mr. G Morris. That was several other Cooktown building projects at the time for which no payment has been received by Navywich.
32. Mr. Smith called in to Navywich’s depot and passed on to her a handwritten letter with his formal offer to separate from Navywich. Due to all uncertainty within the company at this time, this placed a large strain on her and her marriage and Robert Henley and she separated temporarily.
33. From January 2006 to May 2006, Mr. Smith began separating and selling Navywich company assets. At no time was any of Navywich's existing accounts payable, being addressed.
34. Robert Henley felt a duty of care to clear all of all existing Navywich accounts so they (the applicant and herself) sold a property which they owned in Chillagoe and raised money on a second mortgage on our home to pay out the trade suppliers.
Mr. Nolan
35. He is employed by Korda Mentha - they were appointed by Order of the Supreme Court on the application of the Australian Taxation Office on September 2008. The primary duty of the liquidator is to pursue assets for the betterment of all creditors. Mr. Henley has provided the state of affairs and co-operated with a liquidator. However they had been unable to locate any assets belonging to Navywich. They had a series of allegations from Mr. Henley about the whereabouts of assets and the company's legal entitlement to those assets. However the majority of the company's assets were rearranged before their appointment and this has made recovery of assets very difficult. This point was made to Mr. Henley by the Official Liquidator Mr. Bill Buckby in his letter of 1 September 2009 who indicated:
The other problem I currently face is insufficient evidence and documentation. Even if there were funds to engage the solicitor, I would most likely be advised that there is no viable course of action, given the lack of evidence and passage of time since the alleged events took place. In addition to the above, I note that the Electricity Credit Union hold a fixed and floating charge over the company, therefore any assets recovered would be dealt with pursuant to this security first and foremost.
36. They have written to Mr. Smith however the only response of a received is an unsigned piece of paper dated 14 April 2009 in which Mr. Smith makes a variety of allegations. These include: that the money from the Fenton’s totalling $12,500 was set off by him for rental arrears to himself by Navywich; that there were particular arrangements in relation to several of the jobs; that when he left the Company the clients had a standing balance owing to the company of over $15,000 and that all other progress claims were paid direct to the company account; and finally that a balance of $23,500 was payable to him for rental monies promised by the company.
37. Mr. Nolan was not aware of any tax credits or other basis for the company not to pay the monies outstanding to the Australian Taxation Office. They have only received financial records up to year-ended 2006. They have not received financial for the 2007 and 2008 years. In relation to the solvency of the company it recorded a loss in 2005 year of 417,000 and a loss in the 2006 of $17,000. This would have raised concerns about the solvency of the company and it is possible that the company was not a going concern. The existence of financials for the 2007 and 2008 years would have been very useful in making those determinations.
38. When asked whether the company was able to pay its debts when due Mr. Norton stated that the gross assets were only slightly less than the liabilities so that it may have been able to meet its debts when they were due.
Applicants Submissions
39. Mr. Carman referred the Tribunal to the decision of Anderson v Queensland Building Services Authority [2002] QBT 60 (22 March 2002). This was a decision which the Tribunal was satisfied that the applicant had taken all reasonable steps to prevent the appointment of a receiver. In this case a comment from Mrs. Roney in Q 099 - 01 O'Connell v Queensland Building Services Authority was adopted namely:
In approaching the question of whether all reasonable steps have been taken to avoid the relevant, one puts oneself in the shoes of, in this case, the applicant, his experiences, his education and his knowledge of the world.
40. Mr. Carman acknowledged that Section 56 AD (8A) had been inserted since the Anderson decision.
41. He accepted that the onus was on the applicant to demonstrate that he had taken all reasonable steps. He pointed out that the approach of the Tribunal in Anderson was to step into the shoes of the applicant and view is decision-making “from his experiences, his education and his knowledge of the world”. In this regard Mr. Henley is a 44 year old man with a wife and three children. He left school halfway through grade 9 absconded from home to work as a ringer. He obtained plumbing qualifications and was licensed as a plumber at age 23. He has worked in remote areas and has taken his duties extremely seriously.
42. Mr. Carman submitted that Mr. Henley had taken all reasonable steps. He made reference to Mahoney J in Royal North Shore v Anderson (1986) 7 NSWLR 283 who made reference to the term “ reasonable steps” saying “ the phrase ‘ reasonable steps’ may mean that a particular step not taken may not fall within ‘ reasonable steps’ because in the circumstances, it was not reasonable to expect the plaintiff to take any steps at all; or remain not fall within the phrase because, they could reasonably be expected to take some steps, the step in question could not reasonably be expected of him”.
43. Mr. Carman submitted to the Tribunal that Mr. Henley took a “hands on role” in dealing with the circumstances in which the company found itself. This involved taking out a second mortgage over the family home and paying the proceeds from the same and of the sale of the Chillagoe property to creditors or efforts to do his best to remedy the situation the company found itself in.
Respondent’s submissions
44. Ms Campbell submitted that the Tribunal should ignore the Anderson decision because it was a 2002 decision when there was no legislative guide. Section 56 (8A) sets out over list of the circumstances which the Authority and the Tribunal must have regard to reviewing the determination whether Mr. Henley took all reasonable steps. The test is quite clear from the decision in Younan v Queensland Building Services Authority [2010] QDC. The applicant bears the onus of establishing that he took all reasonable steps to avoid coming into existence of the circumstances that resulted in the liquidator being appointed.
45. Ms Campbell submitted that Mr. Henley had failed to provide sufficient evidence on review to meet the evidentiary burden. In these proceedings he has filed material that is still referring the material which has not been presented. His evidence is that Mr. Smith was responsible for much of the company's problems but without corroborating written documentation it is unclear the effect that Mr. Smith had. The liquidator has not been able to pursue any of the assets of Navywich despite the allegations from Mr. Henley. The onus on Mr. Henley was to prove his case.
46. In relation to section 56AD(8A) which talks about keeping proper books and financial records Navywich failed to produce to the liquidator, to the authority, or to be Tribunal accounts for the 2007 year and the 2008 year. It is clear that in 2005 and 2006 Navywich was trading at an operating loss. Mr. Henley has made allegations of misappropriation but has not provided any paperwork to back up those claims. This situation is similar to the matter of Webster v Queensland Building Services Authority QCCTB 145(18 June 2009) where suggestions of fraud were not supported by evidence, the Tribunal should not be satisfied that the applicant in these proceedings had substantiated such allegations, or demonstrated the proper steps were taken to stop the theft or recover misappropriated funds. The applicant has failed to demonstrate the removal of $20,000 by Mr. Smith from the company affected the ability of Navywich to pay its debts, if at all. The applicant has failed to demonstrate how the alleged actions of Mr. Smith in 2005/2006 affected the financial status of Navywich and the subsequent liquidation in September 2008.
47. Ms Campbell submitted that Mr. Henley had not provided supporting documentation to support his claims. His evidence was that he was aware that fraud had occurred but failed to take steps to stop further recurrences. In the matter of Eliaba v Queensland Building Services Authority [2009 QCCTB 235, Ms Schafer determined that the applicant could not be categorized as a permitted individual due to his inability to account the company's financial position, which was considered damning of his conduct as a Director. At paragraph 47, Ms Schafer commented:
48. Had the applicant proper books of accounts and financial records it would have been plain that the company was unable to pay its debts as they fell due.
49. The respondent submits that the Tribunal should follow the reasoning in Eliaba in the current matter, as the applicant has clearly unable to recount explain the true nature of Navywich's financial position even though there were proper accounts.
50. In relation to 56AD (8A)(e)-putting in place appropriate credit management for accounts owing and taking reasonable steps recovery of amounts Ms Campbell submitted that the applicant had failed to provide any documentary evidence or explanation as to how Navywich was ensuring that its debts were being paid as and when they became due. The applicant failed to provide any explanation or documentary evidence in relation to the steps put in place to recover bad debts. The applicant has failed to ensure the proper books of records were being kept, especially following the resignation of Mr. Smith, resulting in the applicant being unable to satisfy himself that Navywich was able to pay its debts as and when they fell due.
51. In relation to 56AD (8A) (f)-making appropriate provision for Commonwealth and State taxation debts. Ms Campbell submitted that the Australian Taxation Office filed a winding up application on the basis of an unsatisfied Creditors Statutory Demand for the amount of $87,313.98 dated 7 May 2008. The debt related to amounts owing for superannuation and general taxation debts. The applicant has failed to provide evidence as to the steps he took to address the outstanding taxation liabilities or explain why they were allowed to accrue. The Tribunal should follow the decision in Spasevski v Queensland Building Services Authority [2010] QCAT 121 (16 April 2010) where the applicant did not make provision for taxation debts and the authority's decision was confirmed. The Tribunal took the view that the failure to make adequate provision of taxation debts was demonstrative of the applicant’s failing to take all reasonable steps.
52. Miss Campbell submitted that there was no basis to overturn the decision of the authority. She referred the Tribunal to the decision of Younan v Queensland Building Services Authority a district court decision of His Honor McGill DCJ in which the correct statutory test was considered. Miss Campbell accepted that it stood in the applicant's favor they had taken out a second mortgage over the family home and had sold the Chillagoe property to pay creditors.
Decision
53. In Younan v Queensland Building Services Authority His Honor McGill DCJ comments on subsection 56AD (8A) in these terms:
[24] It is immediately apparent that these are all concerned with the prudent management of the company as a going business, or even, in the case of (b), something which is to be done before one conduct business or enters into financial business arrangements. In other words, the focus of this subsection is on prevention rather than dealing with problems after they have arisen, except in the case of (c), which is obviously concerned with the situation where a problem has arisen outside the control of the individual in question…
[25] The section speaks of taking reasonable steps to avoid coming into existence of the circumstances that resulted in the happening of the relevant event. The test in section 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 categorize the individual as a permitted individual.
54. Mr. Henley stated in his evidence that his accountant had filled him in a on the serious responsibilities of being a director. It is useful to look briefly at the duties that are placed on directors in the context of this matter.
55. The Corporations Act 2001 requires all companies to keep written financial records that correctly record and explain their transactions and financial position and performance. In addition, the financial records must enable true and fair financial statements to be prepared and they must be able to be audited for all companies requiring audit. Financial records must be kept for seven years. The statutory duties not to trade while insolvent and to prepare true and fair financial statements give rise to personal liability. Breaches of duty about insolvent trading apply only to directors, not officers. Directors should ensure: the highest calibre of staff are employed; the company audit processes are defined and accurate; reports are accurate and timely; independent professional advice is obtained in the event of any concerns the directors have. It is crucial that directors understand what is required by the law and ensure the rigorous and transparent processes are in place so that effective decision-making can take place. If a Director has difficulty understanding the financial records than he needs to get advice because the onus is on him at all times to have a good understanding of the financial position of the company.
56. A director should be vigilant to observe signs of insolvency. The earlier warning signs or signals are detected and acted upon, the more likely it is that the company will be able to survive. Some warning signals are: evidence of breakdowns in internal controls; financial reports not been provided to directors; evidence of worsening financial situation such as high and increasing gearing; deteriorating profitability or continuing trading losses and selling of significant assets to help provide needed a finance; evidence of negligent or incompetent management and lack of risk management planning.
57. Directors can reduce the risk of trading while insolvent by the conduct of board meetings and provision of reports to the board should assist this. Individual director should obtain information about the company's operations and be active at board meetings. The Australian Securities and Investments Commission Practice Note 22 mentions the following for directors to consider in forming their opinion as to the company’s solvency: review of profit and cash flow forecasts; ability to realize current assets, particularly inventories and receivables; ability to meet suppliers credit terms; removal of financial support by major lenders; and effects of contingent liabilities.
58. The Tribunal finds that no financial accounts were prepared for Navywich for the 2007 and 2008 financial years because they have not been produced.
59. The applicant could not explain how a debt of $87,313.98 came to be owing to the Australian Taxation Office. The statement of Rudy Laverdure of the Australian Taxation Office and the accompanying schedule shows that the Superannuation Guarantee Charge for the quarter commencing 1 October 2004 and for the quarter commencing 1 January 2005 and of the quarter commencing 1 April 2005 were all outstanding.
60. The Tribunal cannot see how if proper accounts were being kept how these obligations to the Australian Taxation Office could have been missed. Mr. Henley contends that he was told by his accountant that he had tax credits and offsets the amount. The Tribunal does not accept this evidence and instead accepts the evidence of Mr. Nolan that these monies are owed and that he has no knowledge of the tax credits or any set off.
61. The Profit and Loss Statement for the year ended 30 June 2006 shows that in 2005 Navywich made a loss before income tax of $417,102.44. This compared with an operating profit of $223,671.31 for the 2004 a turnaround of some $640,000. This should have been of great concern to the applicant. The applicant was unable to explain to the Tribunal how this operating loss occurred or what steps he took to address the circumstances the company found itself in.
62. The Balance sheets for the year ended at 30 June 2006 shows a decrease in the total assets from $837,914.80 to $262,085.96. This should have rung warning bells for the directors of Navywich. Mr. Henley in his evidence stated that the company owned a shed worth over $500,000 and had $400,000 in tax credits. It is clear to the Tribunal that if the company had been keeping proper accounts and financial statements that Mr. Henley would have seen major changes in the cash flow of the Company and a significant trading losses occurring; and the large deterioration in the asset base of the company.
63. Mr. Henley's evidence is that the company assets were either sold at lower than market values or taken by Mr. Smith or his associates. Even if the Tribunal accepts the evidence that $20,000 was taken by Mr. Smith and the evidence that Mrs. Fenton paid $12,500 to Mr. Morris. These are still only small amounts in the context of the total debts that were incurred.
64. The Tribunal is not satisfied that the applicant took appropriate steps such as putting better debt recovery procedures in place; ensuring that the Company was adequately capitalized; ensuring that there was appropriate cash flow and properly supervising the operations of the corporation and its trading. Although suggestions of theft were made that was a lack of evidence with respect to such a suggestion and the impact upon the company's trading. The evidence of the profit and loss statement and balanced statement should have been indications to the applicant that procedures should have been put in place immediately to put the company on better footing.
65. It stands to the credit of the applicant and his partner that they had raised a second mortgage on their home and had sold a block of land that they owned in Chillagoe. However this goes to show how badly the company had gone and reflects on the applicant's business acumen. The applicant was trying to put out fires. The Tribunal is not satisfied that the applicant was a prudent business manager. The reason for this would In part appear to be the fact that the applicant worked in a remote community and had his hands tied managing his crew. The other crew was outside his supervision and effectively operated independently. He was not in a position to fill his duties as director because he didn't have the time and appeared wholly dependent on the support of Mr. Smith on the one hand and his accountant on the other.
66. The point is that the affairs of the Company were not properly managed and as a consequence the substantial wealth of Navywich and the applicant was largely dissipated and lost. The focus of the Tribunal is on how the company got in to this situation. Much of the evidence related to the steps the applicant look after the company got into significant financial troubles.
67. The applicant has firstly not demonstrated to the satisfaction of the Authority or the Tribunal how an apparently profitable enterprise became highly unprofitable. Secondly the actions of the applicant after the Company had got into serious financial troubles appeared to be largely fruitless. The assets of the company was sold at significantly lower values than estimated by the applicant; assets were allegedly taken from the company and never returned; or were otherwise unaccountable because of inappropriate payment practices. The Tribunal notes that the applicant did not call his accountant to give evidence or provide any written report relating to Navywich's financial affairs which might have backed up some of the allegations that Mr. Henley had made.
68. The Tribunal applauds Mr. Henley's efforts to pay creditors from his own resources. The Tribunal is satisfied that the applicant was trying to address the debts but the scope of the losses were outside his ability to meet and the Australian Taxation Office were apparently unwilling to negotiate terms so that his efforts came up short and Navywich was placed in liquidation. The Tribunal has taken into account the applicant's efforts to meet Navywich's debts as a significant factor in his favor pursuant to section 56 AD (8B).
69. In relation to the failure to pay the taxation Tribunal agrees with the reasoning of Mrs. Schaefer in Kent v Queensland Building Services Authority CCT QR059 -08 that: the failure to pay taxation is a matter which the legislation has, in section 56AD (8A), expressly stated that the Tribunal must have regard, in deciding whether reasonable steps were taken to avoid the circumstances that led to the bankruptcy. Persons engaged in the building industry… have a responsibility to make provision for the taxation so sufficient funds are available when taxation is due to be paid.
70. The same position should be adopted for the liquidation of Navywich. The failure to make provision for taxation expenses was the reason why the company was placed in liquidation. The Tribunal finds it Navywich was placed in liquidation because of unpaid taxation debts in excess of $87,000.
71. The Tribunal is not satisfied that the affairs of Navywich were managed prudently by the applicant. The Tribunal is of the view that the applicant must satisfactorily address all the matters set out in section 56 AD (8A) in order for the applicant to successfully argue that the applicant has taken all reasonable steps to avoid the coming into existence of the circumstances that resulted in the relevant event. The Tribunal is not satisfied that the reasons set out above that the applicant has demonstrated he has taken all reasonable steps to avoid the coming into existence of the circumstances that resulted in the relevant event.
72. The Tribunal accepts the respondent’s submission that if the Authority’s decision is confirmed that the Tribunal does not have to consider the License Cancellation Decision.
73. The Tribunal accordingly makes the following orders:
(a)The decision of the respondent dated 6 April 2009 refusing to categorize the applicant as a permitted individual is confirmed.
(b)Any party who seeks costs will file in the registry one copy and deliver to the other party one copy of written submissions by, 4 p.m. on 13 June 2010.
(c)Any party that wishes to file written submissions in reply will file in the registry one copy and deliver to the other party one copy of written submissions by, 4 p.m. on 20 June 2010.
(d)Any application for costs will be determined by the Tribunal on the papers, unless a party request in writing to be heard.
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