Macdonald v Queensland Building Services Commission
[2013] QCAT 702
| CITATION: | Macdonald v Queensland Building Services Commission [2013] QCAT 702 |
| PARTIES: | Jamie Christopher Rory Macdonald (Applicant) |
| v | |
| Queensland Building Services Commission (Respondent) |
| APPLICATION NUMBER: | OCR317-12 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 23 September 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Howe |
| DELIVERED ON: | 12 December 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The decision of the Commission of 10 September 2012 to categorise Mr MacDonald as an “excluded individual” pursuant to s 56AC(2) and s 56AC(4) of the QBSA Act is set aside. |
| CATCHWORDS: | Excluded individual – whether a shareholder an influential person – actual influence and control – lack of influence or control – potential to influence Queensland Building and Construction Commission Act 1991 ss 56AC(1)(a), 56AC(2) and (4) |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Ms AC Freeman of Counsel, instructed by Gadens Lawyers |
| RESPONDENT: | Mr Formby of Counsel for Queensland Building and Construction Commission |
REASONS FOR DECISION
Background
Mr and Mrs Macdonald operated a concreting business through Ozmac Concrete Constructions Pty Ltd (Ozmac Concrete). Mr Macdonald held and holds a QBSA concreting licence, as too did Ozmac Concrete until 2012. Mr Macdonald was the nominee for Ozmac Concrete’s licence.
Mr and Mrs Macdonald say they became estranged in late 2010.
On 1 April 2011 Mr Macdonald ceased to be a director of Ozmac Concrete, which changed its name to “ACN 131 999 285 Pty Ltd” on 17 June 2011.
Ozmac Concrete had liquidators appointed on 22 May 2012.
The Commission determined the appointment of liquidators constituted a relevant company event pursuant to s 56AC(1)(a) of the Queensland Building and Construction Commission Act 1991 (the “QBCC Act”, at the time of hearing Queensland Building Services Authority Act 1991).
At the time of liquidation Mr Macdonald retained a 50% shareholding in Ozmac Concrete. The Commission concluded Mr Macdonald was accordingly an influential person as provided for in s 56AC(2)(c) of the QBCC Act.
By a decision made on 10 September 2012 the Commission accordingly determined Mr Macdonald was an “excluded individual” pursuant to s 56AC(4) of the QBCC Act.
Mr Macdonald has applied to the Tribunal for a review of that decision.
Findings
I have had the benefit of hearing Mr and Mrs Macdonald give evidence. I conclude they are truthful witnesses.
I find as to the following facts and sequence of events.
Mr and Mrs Macdonald did become estranged in late 2010[1]. For a number of years prior to that they ran a concreting business in which Mrs Macdonald attended to the “paperwork” and Mr Macdonald did the actual concreting work. Mr Macdonald did not involve himself in the “paperwork”.
[1] Ex10 annexure SJM-3; Ex8 annexure SM1.
Consequent to their estrangement they decided to run separate businesses. Mrs Macdonald kept Ozmac Concrete and arranged small concreting jobs under $3,300, which was under the threshold value of “building work”[2] and therefore outside regulation by the Commission. She did not need any licence to do that work.
[2] Queensland Building and Construction Commission Regulation 2003 s 5.
Mr Macdonald continued to work for Ozmac Concrete until approximately February 2011. He asked his wife to remove his name as nominee for Ozmac Concrete from the Commission record, but she didn’t do that.
On 1 April 2011 Mr Macdonald resigned as a director of Ozmac Concrete. He continued to hold a 50% shareholding in Ozmac Concrete “for family reasons”[3] however the couple intended Mr Macdonald would have no say in the running of the company. That was the course proposed by Mrs Macdonald’s accountant[4] and she accepted that advice. Her accountant did not advise her however that the retained shareholding could be viewed as retaining an influence over the company.
[3] Ex 8 at [14].
[4] Ex 8 attachment SM1 letter Paul Scott, Accountant, to BSA dated 19 September 2012.
On 6 April 2011 Mrs Macdonald was informed by her accountant the Australian Tax Office (ATO) was auditing Ozmac Concrete.
In June 2011 Mrs Macdonald arranged with an accountant to set up limited liability companies for her and her estranged husband, Ozmac Holdings Pty Ltd and Ozmac Constructions Pty Ltd with a view to separating their business interests. Mr Macdonald engaged his own accountant and bookkeeper.
In or about July 2011 the ATO determined Ozmac Concrete owed tax of $262,250.19 due to the incorrect categorization of employees as independent contractors.
In September 2011 the ATO found a superannuation debt was also owed by the company to those people deemed employees.
Mrs Macdonald sought advice from a financial consultant on 17 November 2011 without involving Mr Macdonald.
On 25 November 2011 Mr Macdonald applied for a corporate concreting licence for Ozmac Holdings Pty Ltd. The wrong fee was paid via Mrs Macdonald’s credit card.
The application was returned to Ozmac Holdings Pty Ltd on 30 November 2011 requiring certain changes and full payment.
The application was resubmitted to the Commission on 12 December 2011 with a change in payer to “Ozmac Construction” but again bearing Mrs Macdonald’s signature.
In or about February 2012 the Macdonalds discovered their accountant had made an error setting up their respective corporate trading vehicles. They had intended “Ozmac Construction Pty Ltd” to be Mr Macdonald’s company, and Ozmac Holdings Pty Ltd, Mrs Macdonald’s. The accountant had got it all wrong and reversed that order. They resigned from their erroneous directorships and exchanged shareholding and were appointed directors to the correct companies.
After that, the applicant to the Commission for a corporate licence became Ozmac Construction Pty Ltd. Payment this time was by cheque drawn on the account of Ozmac Services Pty Ltd (Mrs Macdonald’s second company) signed by Mrs Macdonald.
In the meantime, Mrs Macdonald had instructed her accountant to challenge the decision of the ATO concerning Ozmac Concrete’s tax liability but the challenge failed. In February 2012 the ATO gave notice that recovery steps would be implemented. Mrs Macdonald proposed a repayment plan but it was rejected by the ATO. Mr Macdonald took no part in the negotiations with the ATO.
On 28 April 2012 both Macdonalds signed a letter addressed to the Commission requesting that Ozmac Concrete’s licence be cancelled ‘due to lack of trade and change of Directors’.
In May 2012 Mrs Macdonald advised Mr Macdonald of her intention to liquidate Ozmac Concrete. Mr Macdonald opposed that course, given the possible adverse consequences with respect to his BSA licence. He discussed the matter with a friend, a lawyer, and concluded his licence might be in danger and informed his wife it was best to simply pay the ATO debt.
The couple argued strongly and on more than 1 occasion about this but in the end Mrs Macdonald decided to do things her way in any case. She was running Ozmac Constructions, not Mr Macdonald, and she decided she could not pay the ATO debt. The company had negligible assets.
Liquidators were appointed on 22 May 2012.
At the time of liquidation Mr Macdonald still retained a 50% shareholding in Ozmac Concrete. As such the Commission determined Mr Macdonald was an influential person with respect to Ozmac Concrete at the time the liquidators were appointed and therefore an excluded person for that relevant company event.
On 22 August 2012 the Commission was contacted by telephone concerning renewal of Mr Macdonald’s licence. The renewal fee was paid using Mrs Macdonald’s credit card.
As at the date of hearing, Mr and Mrs Macdonald still resided at the same address but were living apart.
The Law
A person is not entitled to a Commission licence if he is an excluded individual for a relevant company event[5]. A person who is a director or shareholder or an influential person for the company at the time of the relevant company event is an excluded individual.
[5] QBCC Act s 31(1)(e).
Under the QBCC Act[6] “influential person” for a company is defined as ‘an individual, other than a director or secretary of the company, who is in a position to control or substantially influence the conduct of the company’s affairs, including, for example, a shareholder with a significant shareholding, a financier or a senior employee’.
[6] QBCC Act Schedule 2.
The relevant company event here was the appointment of liquidators to Ozmac Concrete on 22 May 2012. Mr Macdonald was not a director or secretary of that company at the time of the relevant company event however he held a 50% shareholding in Ozmac Concrete.
The View of the Commission
The Commission says there is only one issue to be determined here, whether or not Mr Macdonald was an influential person in relation to Ozmac Concrete in the period of 12 months prior to that company’s liquidation.
The Commission concedes it ‘does not challenge the proposition that Mr Macdonald was not a director’ in that period. I take that to mean they do not argue that Mr Macdonald was a shadow director of the company during the relevant period.
The Commission does maintain however that there was an ongoing business relationship between Mr and Mrs Macdonald after their estrangement and during the relevant period. They say that was demonstrated by such things as Mrs Macdonald’s establishment of a new company vehicle for Mr Macdonald to run his business, her payment of his licence fees and her use of the Ozmac Concrete email address for the benefit of Mr Macdonald’s company.
The Commission also says that the history of this matter is to be understood as an attempt to restructure the companies when the ATO debt occurred. Mr Macdonald ceased his directorship on 1 April 2011. On 6 April 2011 Mrs Macdonald was advised by her accountant the ATO was auditing Ozmac Concrete. In or about July 2011 the ATO made an adverse finding against Ozmac Concrete. Ozmac Concrete continued in existence until May 2012 to ensure Mr Macdonald was not a director within 12 months of liquidation and therefore clearly caught by s 56AC(2)(c)(ii). However by retaining a 50% shareholding he is in any case caught as an influential person within that 12 month period.
Mr Macdonald is caught by s 56AC(2)(c)(ii), says the Commission, because the issue under that provision is not whether Mr Macdonald actually exercised power because of his influence, but whether he was in a position to do so. That he did not actually do so is irrelevant. He could have influenced decisions in the company if he had chosen to.
Mr Macdonald’s Position
Mr Macdonald says his relationship with his wife broke down at the end of 2010. His wife ran Ozmac Concrete after that. He resigned his directorship in the company in April 2011. From that point on, despite maintaining a 50% shareholding in the company he had no control or influence over the company. He had a no real involvement with the ATO investigation into the affairs of the company.
He disputed his wife’s decision to liquidate the company in May 2012 but she took that course despite his opposition. Both Mr and Mrs Macdonald say Mr Macdonald exercised no influence or control over the affairs of Ozmac Concrete in the 12 months preceding that company’s liquidation.
Influential Person
Any relevance that the Macdonalds decided to restructure their companies because of the potential ATO debt must be limited to its efficacy in showing or establishing that Mr Macdonald was an influential person during the period of 1 year prior to the relevant event. Other than that it is irrelevant, though if it was necessary to come to a conclusion on this point I would not subscribe to the contrivance proposition suggested by the Commission.
Similarly evidence of legal advice sought post liquidation is only relevant in so far as it shows or suggests that Mr Macdonald was an influential person during that same period.
I conclude, having heard from both Mr and Mrs Macdonald, that Mrs Macdonald is clearly the dominant person in the personal relationship between those parties.
That conclusion has significant ramifications in the determination of this matter.
I also conclude that the personal relationship between the parties flowed over to and likewise reflected the business relationship between them and Mrs Macdonald dominated the business affairs of the two.
Her ascendency is clearly evidenced by her decision over the objections of Mr Macdonald to place Osmac Concrete in liquidation. I accept he opposed that course but she overruled him. His objection to liquidation is well able to be understood. He feared the consequences of that step for his licence, and those fears have indeed been justified.
At its highest the Commission's view of Mr Macdonald's involvement in the decision making in respect of Ozmac Concrete must be that Mr Macdonald acquiesced in the decisions made by Mrs Macdonald. There is no suggestion he did in fact make any actual decisions during the relevant period. But Mr Macdonald did not acquiesce – he opposed, fruitlessly.
The Commission says however, it is not whether Mr Macdonald exercised control and influence over the company, but whether he was in a position to do so.
The expression “influential person” is defined in Schedule 2 of the QBCC Act: ‘influential person, for a company, means an individual, other than a director or secretary of the company, who is in a position to control or substantially influence the conduct of the company’s affairs, including, for example, a shareholder with a significant shareholding, a financier or a senior employee’.
In McClintock v Queensland Building Services Authority [2011] QCATA 310, Mr McClintock was a significant shareholder in the company concerned there holding 99% of the shares. As such the Commission said given his significant shareholding he was in a position to control or substantially influence the conduct of the company's affairs. Nothing more needed to be proven. By reason of the shareholding Mr McClintock could call meetings of the company whenever he chose and remove and appoint directors. He could influence the decisions of the company through the directors.
The Appeal Tribunal concluded however that it was necessary to consider the facts of particular cases.
The Appeal Tribunal commented:
Generally there would need to be some evidence of the individual’s position within the company to establish they were in fact in a position to exercise the necessary control…. In Nation v QBSA[7] the chairperson said: ‘the BSA's decision relied on the applicant being a substantial shareholder. The fact that the definition of influential person includes by way of example a person who has a substantial shareholding is not determinative of the issue. It does not mean that in every case a substantial shareholder is an influential person.’[8]
[7] (2006) QCCTB 114.
[8] At [37] and [39].
I agree that it is not in every case that a substantial shareholding will, without more, translate to the shareholder being an influential person for the purpose of s 56AC(2)(c).
Here Mr Macdonald held 50% of the shares in Ozmac Concrete, not 99%. Mrs Macdonald held the other 50%. If the shareholders could not agree on a course of conduct they would generally be in deadlock. There is no material before me to suggest the company structure provided otherwise. They were potentially in deadlock over the decision to liquidate Ozmac Concrete. Mr Macdonald clearly failed to exercise any shareholding influence in order to resist Mrs Macdonald's decision, as director, to liquidate the company.
The steps taken by Mrs Macdonald such as seeking legal advice concerning Mr Macdonald’s position, instructing accountants to set up new corporate business entities for both of them, her decision to liquidate Ozmac Concrete and her dealings on behalf of her husband with the Commission show her consistent dominant position in the personal and business relationship between the marital partners.
But this matter concerns Mr Macdonald position as an influential person, not Mrs Macdonald. All the evidence led in this matter in fact suggests, concerns and points to Mrs Macdonald’s sole influence in the affairs of Ozmac Concrete.
In this matter before me I conclude Mr Macdonald neither understood he had potential as a shareholder to exert influence or control over the affairs of Ozmac Concrete during the relevant period, nor had the relationship capacity to influence or oppose his wife, the director’s, decisions concerning that company. Mrs Macdonald refused to be influenced by her estranged husband in the business decisions of Ozmac Concrete during the relevant period.
Accordingly I find Mr Macdonald was not an influential person for the company during the period of 1 year before the relevant company event.
As such I determine that the decision of the Commission of 10 September, 2012 to categorise Mr Macdonald as an “excluded individual” pursuant to s 56AC(2) and s56AC(4) of the QBCC Act should be set aside.
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