Herrador v Queensland Building and Construction Commission
[2014] QCAT 665
•18 December 2014
| CITATION: | Herrador v Queensland Building and Construction Commission [2014] QCAT 665 |
| PARTIES: | Angel Herrador (Applicant) |
| v | |
| Queensland Building and Construction Commission (Respondent) |
| APPLICATION NUMBER: | OCR220-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 24 July 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Favell |
| DELIVERED ON: | 18 December 2014 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The Tribunal orders that the decision of the Queensland Building Services Authority to refuse the application to be categorised as a Permitted Individual be confirmed. |
| CATCHWORDS: | Application to be categorised as a permitted individual-refusal-review-S56AD(1) Queensland Building Services Authority Act 1991 S 56AC, s 56AD (1), (3), (8), (8A), (8D), s 56AF, s 86(1)(j), Part 3 and Part 3A of the Queensland Building Services Authority Act 1991 – s 9(1), s 19, s 20(2), Shi v Migration Agents Registration Authority (2008) HCA 31 – |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | John Gregg, Gregg Lawyers |
RESPONDENT: | Brendan Cole, In House Solicitors QBCC |
REASONS FOR DECISION
Mr Angel Herrador is a licensed builder who seeks a review of a decision by the Queensland Building Services Authority to refuse to categorise him as a “permitted individual”.
On 9 August 2013 the Authority refused to categorise Mr Herrador as a “permitted individual”.[1]
[1]Queensland Building Services Authority Act 1991 (Qld) s 56AD.
On 30 August 2013 Mr Herrador applied to the Tribunal to review the Authority’s decision to refuse to categorise him as a “permitted individual.”
Mr Herrador held a licence issued pursuant to the QBSA Act in the following classes:
(i).Builder/lowrise;
(ii).Painting and decorating;
(iii).Roof tiling and wall and floor tiling.
He was a director, secretary or influential person of Jar Render Paint and Texture Pty Ltd.
On or about 13 June 2013 Rajender Kumar Khatri and Michel John Griffin of Worrells Solvency and Forensic Accountants were appointed liquidators of the company (the event).
On 18 June 2013 the BSA sent a notice to Mr Herrador notifying him that:
(a)BSA considered him to be an excluded individual to be an excluded individual pursuant to section 56AC because of the event;
(b)the excluded individual was entitled to apply to BSA to be categorised as a “permitted individual” for the event, such application to be in writing in the form approved by the Queensland Building Services Board.
On or about 16 July 2013 the BSA received from Mr Herrador a written application made pursuant to section 56AD(1) of the QBSA Act seeking to be categorised as a “permitted individual”.
In the application he attributed the main cause of the event to an inability to recover amounts owing. He first became aware of the cause of the events in November 2009. He stated that he received advice on administration and its alternative from an accountant prior to the event.
The company had a loan outstanding from Hendon Homes Pty Ltd which was unpaid at the time of its liquidation in November 2009. In fact the money owing was categorised as a “loan” in the books but was a debt incurred because of work done by the applicant.
In the reasons provided by the QBSA it stated that there was a query as to why the loan had increased in value from 30 June 2010 and why it had not been written off as a bad debt when Hendon Homes was placed into liquidation or at the very least disclosed as a contingent asset.
The reasons say that the excluded individual did not provide any further information or evidence of the loan including when it was loaned to Hendon Homes, what was the purpose of the loan, what was the company’s financial position at the time of loaning the money or a copy of the loan agreement and its term.
Although the excluded individual or numerous attempts to recover the amount from Hendon Homes such as personal visits, notices of demand and letters of intention to take legal action he did not provide the QBSA with evidence to support those claims. There is now a letter from a former director of Hendon Homes confirming the same. He advised the QBSA that he consulted with his accountant after the liquidation of Hendon Homes and was advised to scale down the company’s operations to avoid any possibility of insolvent trading. He acted on that advice and brought the operations to a minimum. That statement is confirmed by a letter from Ram Karri of Neighbourhood Tax Agents and Accountants Pty Ltd.
The applicant also advised the QBSA that at the time of the event the company had a debt owing to the Australian Taxation Office and the company entered into a payment arrangement with the ATO which was met until December 2010 when the company could not meet its new 30 June 2010 BAS payment.
In the reasons the conclusion stated was:
BSA is not satisfied, on the basis of the PI application and the documents submitted with the PI application that the excluded individual
(a)took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the event;
(b)further, took any or all of the steps referred to in section 56AD(8A) of the QBSA Act.
The reasons for the decision given were:
(a)The excluded individual has failed to provide sufficient information or evidence to support that proper books of account and financial records were kept.
(b)The excluded individual has failed to provide any information or evidence relevant to the Hendon Homes loan, including when it was loaned, under what terms and any advice sought or received prior to the loan being made.
(c)The excluded individual has failed to provide any information or evidence to establish that appropriate credit management policies existed and that reasonable steps were taken for recovery of amounts.
(d)The excluded individual has failed to provide sufficient information or evidence to establish that appropriate provision was made for Commonwealth and State taxation debts. It is noted from the records provided that the company had entered into a payment arrangement for its outstanding taxation obligations in July 2010. However it appears that it was unable to provision for the debts it had occurred after 1 April 2010.
(e)There is no evidence provided that the excluded individual regularly monitored the company’s financial position to ensure that working capital was sufficient at all times. There is no evidence of any business plan or cash flow forecasts being undertaken on the company at the time.
(e)With the exception of advice after liquidation of Hendon Homes, there is no evidence of any legal, professional, accounting or financial advice sought or received by the excluded individual at any time prior to the event.
(f)There is no evidence provided of any negotiations attempted with creditors, any repayment arrangements entered into nor any advice sought or received in this regard.
(g)The excluded individual has not provided any evidence of the amounts owing to the company at any time, nor any steps taken to recover the monies owing including legal action taken or legal advice sought or received.
In the section of the application which requires a statement of why the applicant thinks the decision is wrong or not properly made, the following appears:
I am of the belief that the decision-maker failed to take into consideration the following:
(1) All creditors were paid except for the Australian Taxation Office.
(2)Professional advice was sought and I was advised to place the company into liquidation (creditors voluntary).
(3)The decision-maker failed to take into consideration the circumstances surrounding the monies owed by Hendon Homes.
(4)That I delayed the liquidation of the Company (Jar Render Paint and Texture ACN 112 283 2959) so that the majority of the creditors could be paid, even though I did not need to do this. It would have been more financially advantageous to myself to place the company into liquidation than when I did.
The respondent relied on s 56 of the Act in its decision to refuse to categorise the applicant as a Permitted Individual.
Section 56AC of the Act provides:
“Excluded individuals and excluded companies
(1) [not relevant]
(2) This section applies to an individual if –
(a) after the commencement of this section, a company, for the benefit of a creditor:
(i) has a provisional liquidator, liquidator, administrator or controller appointed; or
(ii) is wound up, or is ordered to be wound up; and
(b) 5 years have not elapsed since the event mentioned in paragraph (a)(i) or (ii) (relevant company event) happened; and
(c) The individual –
(i) was, when the relevant company event happened, a director or secretary of, or an influential person for, the company; or
(ii)was, at any time after the commencement of this section and within the period of 1 year immediately before the relevant company event happened, a director or secretary of, or an influential person for, the company.
(3) [not relevant]
(4) If this section applies to an individual because of the subsection (2), the individual is an excluded individual for the relevant company event.”
Section 56AD(1) of the Act provides:
An individual may apply to the authority, in the form approved by the Board, to be categorised as a permitted individual for a relevant event if the individual has been advised by the authority, or has otherwise been made aware, that the authority considers the individual to be an excluded individual for the relevant event.
Section 56AD(3) of the Act provides:
If the individual applies, the application must include the reasons why the authority should categorise the individual as a permitted individual for the relevant event.
Section 56AD(8) of the Act provides:
The authority may categorise 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 the coming into existence of the circumstances that resulted in the happening of the relevant event.
The “relevant event” referred to in s 56(8) refers to the Relevant Event identified in s 56AC.
Section 56AD(8A) provides a non-exhaustive list of the circumstances which the Authority may have regard for the purposes of Section 56AD(8) of the Act as follows –
“In deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of a relevant even, the authority must have regard to 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 the liability under he 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.”
Section 56AD(8D) of the Act provides:
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 a relevant event.
Section 56AF of the Act sets out the procedure to be followed by the Authority if the Authority considers that an individual who is a licensee is an excluded individual for a relevant event.
Section 3 of the Act provides, amongst other things, that the objects of the Act are:
(a) The regulation of the building industry to;
(i) ensure the maintenance and proper standards in the industry; and
(ii) achieve a reasonable balance between the interests of building contractors and consumers.
Part 3 of the Act (which includes all the sections above) establishes a licensing system and authorises the Authority to issue licenses authorising the carrying out and supervising of all classes of building work.
Part 3A of the Act was introduced in 1999. The explanatory notes state that “a major deficiency with the existing regulatory structure has been the ability of defaulting contractors to restructure their corporate structure to re-emerge as a “phoenix” company following cancellation of a licence”.
Part 3A of the Act was designed to remove individuals who have demonstrated their incapacity to manage finances within the building industry for a period of five (5) years.
In the second reading speech the Minister at the time said relevantly that the provisions of Part 3A of the Act (introduced in 1999) were “to prevent the re-emergence of the shonks through the device of “phoenix companies…and they will have to prove that they could not have avoided the relevant financial catastrophe. This is intended to mean that the relevant event was entirely outside the responsibility of the individual concerned. Examples might be that a spouse absconded with the individuals assets, or that a financial calamity was due to a natural disaster against which it was not possible to insure.”
The test to be applied to the review is that set out in s 56AD(8) which provides:
“The Authority may categorise 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 the coming into existence of the circumstances that resulted in the happening of the relevant event.”
In Younan v Queensland Building Services Authority [2010] QDC, McGill SC DCJ said:
“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.”
Section 56AD(8A) provided a number of matters to which attention must be paid when deciding whether an individual “took all reasonable steps to avid the coming into existence of the circumstances that resulted in the happening of a relevant event.
With respect to:
(a)keeping proper books of account – There is evidence that some proper books of account were kept;
(b)seeking financial or legal advice before entering financial arrangements of conducting business, - There is evidence of seeking advice from accountants and advice concerning the winding up;
(c)fraud or theft – There is no evidence of fraud or theft;
(d)ensuring guarantees are covered by sufficient assets to cover the liability – There are no relevant guarantees;
(e)proper credit management – The evidence of credit management comes from the applicant. He allowed Hendon Pty Ltd to run up substantial debt with whom he was a full time employee. He was made promises and commitments by Directors of Hendon. It was the company’s only debtor. His wife was keeping the books. The promises and commitments made on behalf of Hendon were not kept;
(f)appropriate provision for tax – The only method of paying tax was upon payment of the debt of Hendon. Arrangements were made with the tax office for a payment arrangement and such was put into place with some but not all payments made. The tax office did not prove in the liquidation.
The Tribunal is empowered by section 86(1)(j) of the Queensland Building Services Authority Act 1991 (Qld) and section 9(1) of the QCAT Act to review the decision.
The Tribunal may confirm or amend the decision; or set aside the decision and substitute its own decision or set aside the decision and return the matter for reconsideration with any appropriate directions.[2]
[2]QCAT Act s 24.
Section 19 of the QCAT Act requires the Tribunal to decide the review in accordance with the QCAT Act and the enabling Act. It has all the functions of the decision maker whose decision is under review and may perform the functions conferred on the Tribunal by the QCAT Act of the enabling Act.
The issues which require determination are:
(a)identification of the “relevant event”;
(b)identification of the circumstances that resulted in the happening of the relevant event;
(c)whether the individual took all reasonable steps to avoid the coming into existence of those circumstances; and
(d)whether the discretion to categorise the individual as a permitted individual should be exercised in favour of the individual.[3]
[3]Stevens v QBSA [2013] QCAT 4292 at [9].
The Tribunal stands in the shoes of the decision maker and must act in accordance with the objects of the QBSA Act[4] but hears and decides the review by way of a fresh hearing on the merits[5] with fresh evidence admissible.
[4]Shi v Migration Agents Registration Authority (2008) HCA 31 at [40] - [41].
[5]QCAT Act s 20(2)..
The review is a merits review with no onus of proof placed on any party to establish facts or make out a case for review.[6]
[6]Laidlaw v QBSA [2010] QCAT 70 at [22]-[25].
Here the ‘relevant event’ is the appointment of the liquidators.
The circumstances that resulted in the relevant event was the non-recovery of debts owed by Hendon Homes Pty Ltd which in turn resulted in an inability to pay outstanding debts and unpaid superannuation.
The matters set out above are matters are all concerned with the prudent management of a company as an ongoing business. The focus of the subsection is on prevention rather than dealing with problems after they have arisen.
I accept the evidence of Mr Herrador and the evidence which he called, however, the evidence is not such which could allow a conclusion that he exercised prudent management. It cannot be concluded that Mr Herrador ensured keeping proper books of account and financial records or put into place appropriate credit management for amounts owing. In my view the failure of Hendon to pay and make good its promises and representations and the way in which the company was managed were circumstances that resulted in the liquidation.
In my view Mr Herrador did not exercise reasonable control over the company and allowed it to trade such that the viability of the company was adversely affected, He did not take reasonable steps for the recovery of outstanding debts and he did not reasonably ensure proper credit management, or the proper keeping of books of account or appropriate provision for the payment of liabilities.
I accept that Mr Herrador sought some form of financial advice concerning the operation of the business but I am not satisfied he sought and obtained appropriate advice before entering into the arrangements I have set out herein. He did not make appropriate provision for Commonwealth taxation debts.
The circumstances that resulted in the happening of the relevant event are the circumstances summarised herein and the consequent inability to maintain liquidity. I do not consider that Mr Herrador is in the category of a “shonk” as the term was used in the reading speech but I am not satisfied that the applicant took all reasonable steps to avoid the coming into existence of the circumstances which gave rise to the relevant event and I confirm the decision of the Building Services Authority to refuse the application to be categorised as a permitted individual.
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