Jasch v Queensland Building and Construction Commission
[2014] QCAT 98
| CITATION: | Jasch v Queensland Building and Construction Commission [2014] QCAT 098 |
| PARTIES: | Mr Gregory John Jasch (Applicant) |
| v | |
| Queensland Building and Construction Commission (Respondent) |
| APPLICATION NUMBER: | OCR022-11 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 26 November 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Allen |
| DELIVERED ON: | 20 March 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. Mr Gregory John Jasch is categorised as a permitted individual in respect of the bankruptcy event of 2 September 2010. |
| CATCHWORDS: | OCCUPATIONAL REGULATION – REVIEW – Permitted Individual – bankruptcy – directors guarantees – prior company event – reasonable steps required where individual also subject to being an excluded individual as result of the same circumstances Queensland Building and Construction Commission Act 1991 ss 56AC, 56AD, 58, 59 Younan v Queensland Building Services Authority [2010] QDC 158 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Gregory John Jasch was represented by Mr Frigo of Counsel instructed by Pott’s Lawyers. |
| RESPONDENT: | The Queensland Building and Construction Commission was represented by Mr Cole, in-house lawyer |
REASONS FOR DECISION
Introduction
Mr Jasch was a successful builder in the Mackay region who operated through his family company Beckwith Constructions Pty Ltd. In 2009 the company got into financial difficulty and ultimately went into liquidation, administrators first having been appointed on 19 October 2009. Following the failure of the company several creditors pursued Mr Jasch under director’s guarantees to recover monies owed to them by the company. This lead to a sequestration order being made against Mr Jasch in the Federal Magistrates Court on 2 September 2010.
There are provisions in the legislation which regulate the construction industry to ensure that where an individual[1] or company[2] has been subject to an insolvency event that individual or in relation to the company event an individual who was a director, secretary or influential person of the company is excluded from holding a licence unless they can show they should be a permitted individual.[3] If an individual becomes an excluded individual as a result of a company event the company becomes an excluded company.[4]
[1]Queensland Building and Construction Commission Act 1991 s 56AC(1).
[2]Queensland Building and Construction Commission Act 1991 s 56AC(2).
[3]Queensland Building and Construction Commission Act 1991 s 56AD.
[4]Queensland Building and Construction Commission Act 1991 s 56AC(7).
Mr Jasch was advised by the Commission that he was considered to be an excluded individual as a result of Beckwith Constructions going into administration on 20 October 2009. He made an application to the Commission to be classified as a permitted individual on 24 November 2009 which was refused by the Commission on 26 November 2009. He then made an application to the Tribunal to review that decision. He subsequently withdrew his application to review on the basis that he be granted a site supervisors licence.
Mr Jasch remains an excluded individual in respect of the company event and was not eligible to hold a builders licence for a five year period from the date of that event. His bankruptcy is a second event which brings into play provisions of the Act dealing with permanently excluded individuals.[5]
[5]Queensland Building and Construction Commission Act 1991 ss 58 and 59.
The Commission refused to categorise Mr Jasch as a permitted individual in respect of his personal bankruptcy by letter dated 10 January 2011 and he has made application for the Tribunal to review that decision. If Mr Jasch is unsuccessful on review he will be a permanently excluded individual and will never be able to hold a contractors licence again.
Legislation
When reviewing a decision the Tribunal does so by way of a fresh hearing on the merits[6] in accordance with the QCAT Act and the legislation under which the decision was made[7]. As it is a review by way of fresh hearing the Tribunal is not bound to find any error in the original decision. The Tribunal must make the correct and preferable decision[8] in regard to the application and the Commission role is to assist the Tribunal to do so.
[6]Queensland Civil and Administrative Tribunal Act 2009 s 20(2).
[7]Queensland Civil and Administrative Tribunal Act 2009 s 19.
[8]Queensland Civil and Administrative Tribunal Act 2009 s 20(1).
When determining whether an excluded individual should be given the status of permitted individual the Tribunal must have regard to the following matters set out in s 56AD of the QBCC Act:-
(8) The commission may categorise the individual as a permitted individual for the relevant event only if the commission 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.
(8A) 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 event, the commission 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 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.
(8B) Nothing in subsection (8A) prevents the commission 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.
The requirements of the section were considered by McGill DCJ in Younan v Queensland Building Services Authority[9]. The application of the test in s 56AD(8) was described by Judge McGill as follows:-
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.
[9][2010] QDC 158.
Judge McGill also made the following observations in regard to how s 56AD(8A) should be applied to the circumstances of individual cases:-
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, except in the case of (c), which is obviously concerned with a situation where a problem has arisen outside the control of the individual in question.
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.
The circumstances that led to the Relevant Event
The relevant event in this case is the making of the sequestration order against Mr Jasch on 2 September 2010. The circumstances that led to the relevant event are that a judgment was made against Mr Jasch by Bunnings Group Limited and BBC Hardware Limited in the amount of $20,765.77 which he did not pay. The debt according to the statement of claim filed in the Magistrate Court was for monies owed by Beckside Constructions Pty Ltd to the other companies. Beckside Constructions had not paid these debts and Mr Jasch was liable for them under director’s guarantees which he had given on 19 January 2005.
The amount of the debt was $18,415.49. At the time of the sequestration order Mr Jasch’s statement of affairs showed total unsecured creditors of $1,926,044.00 the majority of which resulted from claims made under guarantees given by Mr Jasch for debts owed by Beckside Constructions. While the amount of $18,415.49 seems relatively small Mr Jasch stated at the hearing that if he had paid those debts another creditor would have brought a claim which he would not have been able to pay and so he had no option but to allow himself to be declared bankrupt as a result of the creditors petition by Bunnings and BBC Hardware.
Clearly the fact Beckside Constructions went into administration and was then liquidated had the effect of enabling creditors of the company to exercise their rights under directors guarantees granted by Mr Jasch to call on him to pay the amounts owed to them by Beckside Constructions. Mr Jasch has already become an excluded individual as a result of the insolvency of Beckside Constructions.
He acknowledged at the hearing that one of the circumstances which led to the happening of that event was the failure of the company to recover sums owing to it from GAP Developments Pty Ltd. This was exacerbated by an arrangement whereby Backside Investments Pty Ltd, an associated entity, had agreed to purchase an industrial unit in a complex built by Beckside Constructions for GAP Developments via a contract without a finance clause. The lack of a finance clause in the contract was against legal advice given at the time the contract was entered. At this point in time Beckside Investments did not have the funds to complete the contract. This resulted in GAP Developments refusing to make progress payments totalling $1,400,000.00 to Beckside Constructions. The consequential affect on cash flow meant that Beckside Constructions could not pay its own creditors resulting in the administrators being appointed to the company.
Reasonable steps
Much of the material filed in regard to this application and the evidence at the hearing centred on the events with respect to Beckside Constructions and whether the steps taken by Mr Jasch in his role as director of the company were reasonable steps. Mr Frigo for Mr Jasch submitted that these matters had already resulted in Mr Jasch being an excluded individual for the company event and should not be canvassed again in respect of his personal bankruptcy. It was acknowledged that there are provisions in the Act which deal with two events resulting from the same circumstances which did not apply because they are limited to situations where there has been two bankruptcy events[10] or two company[11] events.
[10]Queensland Building and Construction Commission Act 1991 s 56AD(5).
[11]Queensland Building and Construction Commission Act 1991 s 56AD(6).
In this case there has been one company event and a subsequent bankruptcy event. Yet they both result form the same overall set of circumstances and Mr Jasch has been penalised by being excluded from holding a licence for a period of 5 years in respect of the company event. If he is found to be an excluded individual for the bankruptcy event he will be permanently excluded and these are truly not two separate sets of circumstances which have resulted in insolvency for the same individual in respect of separate relevant events that should receive the harsher sanction of a lifetime ban.
The material presented in regard to the matters which the Tribunal might consider in respect of reasonable steps which relate to the business carried on by Beckside Constructions have been considered by the Commission and it refused to categorise Mr Jasch as a permitted individual in regard to the company event. Mr Jasch sought the Tribunal’s review of that decision and he ultimately accepted that he should be an excluded individual in regard to that event. The Tribunal does not consider that those matters should be reconsidered in regard to the second event as Mr Jasch has already been subject to sanction in respect of that event.
For the purpose of this review the Tribunal considers that the only steps under s 56AD(8A) which are relevant for consideration are those relating to seeking appropriate financial or legal advice, guarantees and provision for income tax. The Tribunal has had a previous case[12] with similar circumstances and Member Le Mass determined that in the circumstances there were no reasonable steps open to the licensee and he was granted the status of a permitted individual.
[12]Smith v Queensland Building Services Authority [2012] QCAT 58.
In this case the evidence is that the ANZ bank as a secured creditor had effective control of the proceeds of sale of all assets which Mr Jasch had at his disposal including a boat which he states was valued at $300,000.00 and these proceeds were being used to pay down liabilities owed to the bank and not available to creditors of the company and ultimately those creditors became creditors of Mr Jasch when the directors guarantees he had granted were exercised.
As there was a cash flow crisis as a result of the failure to recover progress payments owed by GAP Developments the company could not pay its creditors and it went into administration. That company event has been dealt with by Mr Jasch becoming an excluded individual and him not obtaining permitted individual status.
The guarantees the subject of the creditors petition were granted in 2005 and Mr Jasch filed a copy of personal bank statement which showed that at that time he had monies deposited to his joint bank account with his wife in the amount of $277,000.00. Beckside Constructions had successfully traded between 2003 and 2008 and during that period there is no reason to consider that there were not sufficient funds held by Mr Jasch to cover the guarantees that he had given.
Mr Jasch confirmed at the hearing that he had not obtained legal advice in respect of the various directors’ guarantees he had given for suppliers. The Tribunal considers that as the amount of exposure in respect of each one was relatively small that he was not required as a reasonable step to get such legal advice.
Mr Jasch provided copies of his income tax returns for the period 2005 to 2009 which showed that he had substantial income in those years and that he had engaged an accountant to ensure that his tax liabilities were met. There was no personal debt owed to the Australian Taxation Office by Mr Jasch at the time of his bankruptcy.
At the time calls were being made for payment under the director’s guarantees Mr Jasch was not in a position to take any further steps as he had no assets available to meet those demands and it was reasonable not to take any further steps. This includes not obtaining any further legal advice in regard to defending the creditor’s claim which ultimately resulted in the relevant event.
The Tribunal is satisfied that at the time the guarantees were given and until the events resulting in the company event Mr Jasch was in a position to meet his liabilities under the guarantees. That he had obtained appropriate accounting and legal advice and made provision for taxes. He had therefore taken all reasonable steps to avoid the coming into existence of the circumstances that led to the relevant event of his personal bankruptcy.
On this basis the Tribunal orders that Mr Jasch be categorised as a permitted individual in respect of the bankruptcy event of 2 September 2010.
0
2
0