Ibrahim v Queensland Building Services Authority

CITATION:

Ibrahim v Queensland Building Services Authority [2012] QCAT 544

PARTIES:	Hamdy Ibrahim (Applicant)
v
Queensland Building Services Authority (Respondent)

APPLICATION NUMBER:

OCR213-11

MATTER TYPE:

Building matters

HEARING DATE:

23 October 2012

HEARD AT:

Brisbane

DECISION OF:

R F King-Scott, Member

DELIVERED ON:

1 November 212

DELIVERED AT:

Brisbane

ORDERS MADE:

1. The decision of the Respondent is confirmed.
2. Application dismissed.

CATCHWORDS:

PERMITTED INDIVIDUAL – Whether applicant took all reasonable steps to avoid the coming into existence of the circumstances leading to the relevant event – Bankruptcy arising out of construction of own home

Queensland Building Services Authority Act 1991, s 56AD

APPEARANCES and REPRESENTATION (if any):

APPLICANT:

In person

RESPONDENT:

Ms J Stroud solicitor for the Respondent

REASONS FOR DECISION

This is an application by Hamdy Abdel Rahaman Mohammad Ibrahim to review a decision of the respondent, Queensland Building Services Authority [“the Authority”] to refuse his application to be categorised as a permitted individual under s 56AD of the Queensland Building Services Authority Act 1991 [“QBSA Act”].
Mr Ibrahim was categorised as an excluded individual because he took advantage of the laws of bankruptcy. He was declared bankrupt on 11 March 2011.

Background and Lead up to the Relevant Event

Mr Ibrahim held a licence issued pursuant to the QBSA Act in the class of wall and floor tiler. He traded under the business name Hamdy’s Go Tiles. Mr Ibrahim’s allowable turnover category was $100,000 per annum.[1] I am advised that this means that the annual turnover of his business did not exceed $100,000. Indeed, he gave evidence that in 2007 it was $70,000 and in 2008 between $70,000 and $100,000 per annum. Obviously, his disposable income would be significantly less. No documentation of his earnings was ever produced to the Authority or to the Tribunal.
[1] Regulation 33 QBSA Regulation 2003.
In 2007, Mr Ibrahim bought land at 28 Ballah Crescent, Highland Park. He said he paid $295,000. The deposit of 20% [$59,000] he paid, the rest was borrowed from a finance company referred to as Sovereign. He did not, at the time, own any other significant assets.
In 2008, he entered into a Low Doc loan[2] with RAMS Home Loans. He said he borrowed 90% of the price of building the home. The contract price was $386,000. The finance, therefore, would have been $347,400. At the same time, he appears to have rolled over the Sovereign debt of $236,000, resulting in a total debt, at that stage, of $583,400. The loan was an interest-only facility.
[2]I am advised that this is a facility for self-employed persons and requires less documentation but more in the way of security such as mortgage insurance and higher fees.
The contract is found in the documents filed in the Tribunal and is a Master Builders’ Residential contract dated 26 June 2008. The builder is described as Ashraf Khauly. Mr Ibrahim says he paid $19,300 deposit and the remainder was to be funded by the RAMS loan.
On the morning of the hearing, Mr Ryan, a Senior Compliance Officer with the Authority, carried out a search of the QBSA records and discovered a second contract between Mr Ibrahim and the builder, Home Zone Constructions Pty Ltd, which is a company in which the licensed builder is Mr Ashraf El Chauly, who I understand is one and the same person as the builder in the first contract.
Mr Ibrahim’s explanation was difficult to understand. Initially, he appeared confused and then prevaricated. Firstly, he said he did not remember the second contract, and that he worked with the first contract. Cross-examination of Mr Ibrahim by the Authority’s solicitor failed to clarify the matter any further. Indeed, it seems that there may have been even a third contract.
The Home Zone Construction contract was for a lesser sum of $298,000. Mr Ibrahim said its purpose was to reduce the insurance. I take that to mean the Home Owner’s Warranty scheme operated by the QBSA. However, the reduction in the construction price here would be minimal so far as the premium was concerned.
There are significant differences between the first and second contracts. The first contract provided that the builder supplied all materials, fixtures and fittings etc; the second contract was nowhere near as extensive.
Mr Ibrahim said in the statement he filed in the Tribunal, that he got into financial difficulties during the digging stage. The builder advised him that the rock was ‘very strong’ and a bigger digger would be required. That being the case, it would not be possible to put in the retaining wall or the swimming pool after the home was built as the bigger digger could not get onto site after the house was constructed. Mr Ibrahim was in Egypt at the time and when advised of this by the builder, said he had no choice but to give the builder the go-ahead. He was shocked on his return to find that it had cost $100,000. I should interpolate here, that is not apparent from the documentation provided.
Attached to the second contract was a declaration signed by Mr Ibrahim identifying a considerable number of items that the builder would not be responsible for. They were:
a)        Metal roofing;
b)        Waterproofing;
c)        Rendering;
d)        Plastering;
e)        Indoor stairs;
f)        Painting;
g)        All doors and timbre (sic) windows;
h)       Tiling;
i)        Kitchen;
j)        Swimming pool and retaining wall;
k)        All handrails for balcony and swimming pool;
l)        Opening in roof attic;
m)       Driveway;
n)       Front fence;
o)        Air conditioning;
p)        All PC items for bathroom and electrical appliances;
q)        Landscaping.
Mr Ibrahim agreed with all of those items, save the reference to retaining wall and pool, which he said must be a mistake.
Mr Ibrahim said, at one stage, that he had run out of funding by the time he got to the framing stage. The cost, in relation to the first contract of the framing stage, was $96,500 plus the deposit of $19,300. It seems strange that he could have been in such difficulties at such an early time. Mr Ibrahim could only explain it as a cost blow-out.
Mr Ibrahim’s evidence was completely unsatisfactory and unconvincing when asked to explain the contracts and his inability to meet the costs of construction in the early stages.
Using the best evidence available from documents and Mr Ibrahim’s evidence, it appears at the lock-up stage Mr Ibrahim had incurred the following debts:
a)           RAMS – $664,434;
b)           Capital Corp – $150,000;
c)           S Walker – private lender – $50,000;
d)           Loans from friends and family – $15,000;
e)           Trade creditors – $40,000 to $50,000;
f)            Amount still owing to builder – $50,000.
TOTAL: $929,000 to $979,000.
It seems Mr Ibrahim’s plans were to commence construction and when partially constructed to make a further application to RAMS Home Loans to extend his finance based on the increased value of work completed. Unfortunately, he said RAMS changed their policy and would not advance him further finance. He had to look elsewhere.
He went to Capital Corp. Mr Ibrahim resorted to this financier when he could find no one else. He was lent $150,000 at a rate of interest of 59.6% per annum. When cross-examined about this excessive interest rate, he said, as I understand his evidence, that it was only to be for a short period and he thought it would be manageable.
Mr Ibrahim obtained several valuations of the property that ranged in the region of $850,000 to $950,000 and even higher. The property was surrendered by Mr Ibrahim to RAMS who ultimately sold it for $503,000 in June 2011.
Mr Ibrahim blames his financial demise on the high interest rates, blow-out in costs of construction of his home and a forced sale of his property in a poor market. He claims he should not have been penalised by loss of his licence when his financial demise did not arise from his activities as a tiler.
Mr Ibrahim says that he approached the Authority before his bankruptcy to enquire as to what consequences the bankruptcy would have on his licence. He says he was told his licence would not be affected if he proved he had tried to avoid his bankruptcy. I suspect that Mr Ibrahim may not have fully understood the advice he received. In any event, by this stage, his bankruptcy was inevitable.
Mr Ibrahim seems to be of the view that he only had to show that he could not have avoided bankruptcy and not the real question in issue which was, could he, by taking all reasonable steps, avoid the coming into existence of the circumstances that resulted in his bankruptcy.[3]
[3] Section 56AD(8) QBSA Act.
Section 56AD requires the Authority, and in its shoes, the Tribunal to:
a)    identify the ‘relevant event’;
b)    identify the circumstances that resulted in the happening of the relevant event;
c)    consider whether the applicant took all reasonable steps to avoid the coming into existence of those circumstances; and,
d)    if the above is satisfied, whether the discretion should be exercised in the applicant’s favour.
In deciding whether the applicant took all reasonable steps to avoid the coming into existence of those circumstances, the Tribunal must have regard to Mr Ibrahim’s actions and/or omissions in relation to:
a)    keeping proper books of account and financial records;
b)    seeking appropriate financial or legal advice before entering into financial business arrangements or conducting business;
c)    ensuring guarantees were validly covered by sufficient assets to cover the liability under the guarantees;
d)    putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts.[4]
[4] Section 56AD(8A) QBSA Act.
The Tribunal is also entitled to regard other matters in deciding whether Mr Ibrahim took all reasonable steps to avoid his bankruptcy.
In the well known case, in this area of the law, of Younan v QBSA [2010] QDC 158, which went on appeal – Younan v QBSA [2011] QCA 1 – Judge McGill provided some guidance as to how the Tribunal should approach the matter.
He said:
It is immediately apparent that these are all concerned with the prudent management of a company as an ongoing business, or even, in the case of (b), something which is to be done before one conducts business or enters into financial or business arrangements. In other words, the focus of this subsection is on prevention rather than dealing with problems after they have arisen ...[5]
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.[6]
[5] At [24].
[6] At [26].
Might I say at the outset that Mr Ibrahim has not helped himself in his application. He has provided no records in relation to his income, he has provided no material in relation to his bankruptcy. No material was obtained from the Official Trustee in Bankruptcy. Some documentation would have been provided by Mr Ibrahim to his trustee, and his trustee in turn would have provided material to Mr Ibrahim such as a list of his creditors etc; none was provided to the Authority.
It is apparent from the cross-examination that he sought no legal or accounting advice during any time of the construction or subsequently, until bankruptcy was imminent. The only advice he sought was from financial brokers in respect to refinancing his growing debt.
Mr Ibrahim made no allowance for taxation. Indeed, there was an outstanding debt to the Australian Taxation Office with a threat of litigation.
When asked by the Tribunal where this information was, Mr Ibrahim said he did not realise that he had to provide it. I have to say I find it incomprehensible that in the course of this matter it was not made apparent to Mr Ibrahim that this information was relevant and required. Indeed, a reading of the Statement of Reasons and Mr Ryan’s statements (both provided to Mr Ibrahim) clearly set out this deficiency in Mr Ibrahim’s application. I do not accept that Mr Ibrahim did not understand the importance of this material. I draw an inference from the fact that it was not provided, that it is material that would not have assisted his application.
Although the construction of the home was not part of Mr Ibrahim’s business as a tiler, he was actively involved, particularly in the latter stages in sub-contracting part of the works and in carrying out the tiling work himself. In doing so he incurred considerable debts that remained unpaid. In my opinion, Mr Ibrahim cannot divorce the debts he incurred in building his home from his business as a tiler as a basis for his application to become a permitted individual.
He demonstrated very poor financial management and responsibility. It is extraordinary that Mr Ibrahim undertook the construction of a seven bedroom, four bathroom, home with swimming pool and luxurious fixtures and fittings on a modest income and with no other substantial assets. The exercise was fraught with failure from its beginning. Suffice it to say that Mr Ibrahim has not satisfied the Tribunal that he took all reasonable steps to avoid the coming in to existence of the circumstances that led to his bankruptcy.
The decision of the Authority is confirmed. The Application is dismissed.

[2012] QCAT 544

1 November 2012