McClintock v Queensland Building Services Authority
[2012] QCAT 366
| CITATION: | McClintock v Queensland Building Services Authority [2012] QCAT 366 |
| PARTIES: | Peter Cyril McClintock (Applicant) |
| v | |
| Queensland Building Services Authority (Respondent) |
| APPLICATION NUMBER: | GAR006-10 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 8 December 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Dr B Cullen, Member |
| DELIVERED ON: | 10 August 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. Mr McClintock’s application to become a permitted individual is dismissed. 2. The decision of the Queensland Building Services Authority refusing to categorise Mr McClintock as a permitted individual is confirmed. |
| CATCHWORDS: | OCCUPATIONAL REGULATION – Application to Queensland Building Services Authority to be categorised as apermitted individual – refusal – review – Applicant did not take all reasonable steps to avoid relevant event – decision of the Authority confirmed Queensland Building Services Authority Act 1991, s 56AD(1) McClintock v Queensland Building Services Authority [2011] QCATA 310 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr M J Taylor, Counsel, instructed by Hallett Legal Pty Ltd |
| RESPONDENT: | Mr G Thomson, Counsel, instructed by Robinson Locke Litigation Lawyers Pty Ltd |
REASONS FOR DECISION
Procedural History
The Applicant, Peter McClintock, is a registered builder, and was a former director of Crescent Couriers Pty Ltd (“Crescent”), a company that manufactured lattice, and did both fencing and residential construction work.
Mr McClintock resigned his directorship of Crescent on 15 April 2007, leading to his commencing applications for review of two decisions made by the Queensland Building Services Authority (“QBSA”) – (1) a review of the decision that Mr McClintock was an influential person vis-à-vis Crescent and therefore an “excluded individual”; and (2) a review of the decision of the QBSA refusing to categorise Mr McClintock as a “permitted individual”.
Basic chronology of events:
June 2006 Mr McClintock began having marital problems June/September 2006 Crescent ceased trading January 2007 Marital separation 31 March 2007 Mr McClintock says that all trade creditors of Crescent were paid by this date 15 April 2007 Mr McClintock resigned as director of Crescent; appointment of new director, Mr Damon Hughes March-April 2008 ATO issue arose May 2008 Family Court property settlement 1 July 2008 Appointment of administrator (Mr Jonathan Paul McLeod) to Crescent
Excluded Individual Matter (QR127-09)
On 16 July 2008, the Queensland Building Services Authority (“QBSA”) proposed to cancel Mr McClintock’s QBSA license, as the QBSA considered him to be an “excluded individual” within the meaning of s 56AF of the Queensland Building Services Authority Act 1991 (“the Act”). The QBSA’s basis for the proposed exclusion was that Mr McClintock was “a director, secretary or influential person” at the time of, or within one year of, an Administrator being appointed for Crescent.
In his application for review of the QBSA’s excluded individual decision, Mr McClintock asserted that he was not an influential person at the time or within one year of the event, and that ASIC records clearly demonstrate this to be the case. The excluded individual matter has already been heard and determined by the Tribunal. On appeal[1], the Tribunal affirmed the decision made by Member Allen that Mr McClintock was an influential person, and therefore the QBSA’s decision to categorise him as an “excluded individual” was correct.
[1] McClintock v Queensland Building Services Authority [2011] QCATA 310.
In reaching the decision that Mr McClintock was properly an excluded individual, the learned Senior Members found that[2]:
“… given the level of Mr McClintock’s shareholding, he was clearly in a position to control the affairs of the company if he so wished. There is no evidence that Mr McClintock attempted to exert influence over Mr Hughes’ conduct of the company even though he was in a position to do so by removing him. However, Mr Hughes was answerable to Mr McClintock for his actions.
Even though Mr McClintock was of the opinion that the company was finished and he had no reason to influence the conduct of its affairs he was in a position to do so, if he so chose. He is therefore caught by the definition of influential person.”
[2] Ibid, at paragraphs 41-42.
Permitted Individual Matter (GAR006-10)
Following the Tribunal’s decision with regard to the “excluded individual” matter, a decision must now be made with respect to the QBSA’s refusal to categorise Mr McClintock as a “permitted individual”.
On 20 October 2011, Senior Member Oliver ordered that the transcript evidence and exhibits in QR127-09 will be the evidence in GAR006-10. The permitted individual matter came before me for hearing on 8 December 2011, and post-hearing submissions were subsequently filed by both parties.
Legal Framework
In order to satisfy the test to be a “permitted individual,” Mr McClintock must demonstrate that he took “all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event”.[3] The relevant event was the appointment of Mr McLeod as administrator to Crescent.
[3] Queensland Building Services Authority Act 1991, s 56AD(8).
There are several matters that must be considered in making a determination as to whether Mr McClintock took “all reasonable steps”. These matters are set out in section 56AD(8) of the Act:
(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 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 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.
The factors contained in s 56AD(8) are not exhaustive; s 56(8B) of the Act provides that the QBSA is able to consider other factors it considers relevant in deciding whether Mr McClintock took all reasonable steps:
(8B) 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.
Mr McClintock claimed to know little of his own business affairs in the hearing before me, claiming reliance upon his long-term and trusted accountant, Mr Ian Ahrens, for such matters. I was left with the overall impression that Mr McClintock had manufactured a case theory that he was simply too plain minded to understand such matters as he was just “a builder”. I found Mr McClintock entirely unhelpful as a witness, and quite frankly, unbelievable. Mr McClintock claimed that he did not even know what a balance sheet was, claimed not to read documents that were presented to him by others to sign, and deflected all responsibility to Mr Ahrens.
Equally, Mr Ahrens was unimpressive. Although Mr Ahrens initially purported to give evidence from the neutral perspective of an independent accounting expert, it was abundantly clear that he was anything but neutral. Mr Ahrens has, in allowing numerous sets of quasi-legal submissions to be made on his (or his firm’s behalf) in support of Mr McClintock, muddied the waters in respect of any independence he might otherwise have been seen to possess. Additionally, in his cross-examination, Mr Ahrens admitted that his evidence was intended “to assist” his long-term client, Mr McClintock.
What I found most striking about Mr Ahrens’ evidence was his response to the questions I put to him, about whether the raising of a debt by Crescent owing to Mr McClintock was motivated by a desire for Mr McClintock to achieve a strategic advantage over the former Mrs McClintock in their family law property proceedings. Mr Ahrens all but admitted that this was the purpose; and also responded to me that:
“You’ve never met Allison McClintock.”
I took this to mean that Mr Ahrens and Mr McClintock had found managing the former Mrs McClintock’s property expectations in a divorce settlement to be difficult. All the more reason for Crescent to have been motivated to suddenly amend its accounts in 2008, in the midst of contested Family Court property proceedings.
Mr McClintock’s unpaid entitlements in Crescent
Mr McClintock and Mr Ahrens both gave evidence that the reason Crescent was placed into administration was because the accounts of Crescent were amended in 2008 to reflect a debt on the books of $2,057,373.60.[4] Tellingly, the debt that was drawn up was in favour of Mr McClintock, and was based upon an assessment by Mr Ahrens as to the value of Mr McClintock’s services to Crescent over a period of several preceding years. I have difficulty imagining why the newly appointed director, Mr Hughes, would create a 2-million-plus liability, out-of-the-blue, in favour of Mr McClintock, if not on Mr McClintock’s instructions.
[4] Exhibits 1 and 2, Balance Sheet dated 30 June 2008.
The evidence before me leads to the inescapable conclusion that Mr Hughes was not an arm’s length director of Crescent, but rather, was installed as a puppet, with Mr McClintock continuing to pull the strings behind the scene. Other than the obvious difficulty imagining why Mr Hughes would suddenly ledger such a large debt, except upon Mr McClintock’s instructions, there are several additional matters that lead to this view:
·Mr Hughes was an employee of Mr McClintock’s accountant, Mr Ahrens.[5] Mr Ahrens admits that he intended to assist Mr McClintock, and his less than charitable comments in relation to Mr McClintock’s ex-wife suggest that he did not have the character of neutrality that is important where genuine expert witnesses are concerned;
·Mr Hughes did not take any actions in relation to Crescent except upon instruction by Mr Ahrens, and was therefore exercising no independent thought in his directorship of Crescent[6]; and
·Mr Ahrens gave evidence that he compensated Mr Hughes for the “risk” he faced as Crescent’s director from his practice.[7]
[5] Transcript from 12 November 2012 QCAT hearing, T-87, T-106, T-110 and T-114.
[6]Transcript from 12 November 2012 QCAT hearing, T-56, T-87, T-92, T-106, T-110, and T113-T114.
[7] Evidence of Ian Ahrens at 8 December 2011 QCAT hearing.
The simple fact of the matter before me is that Crescent was placed into liquidation as a consequence of the unpaid entitlements owed to Mr McClintock. Mr McClintock has not demonstrated that he took all reasonable steps to avoid the appointment of an administrator to Crescent. The obvious reasonable step for Mr McClintock to have taken in advance of Crescent’s administration would have been to waive the unpaid entitlements drawn up in his favour, belatedly. Mr Ahrens conceded that this would have been a reasonable step on two occasions; firstly in the hearing before Member Allen on 12 November 2012[8], and again in his evidence before me on 8 December 2011.
[8] Transcript from 12 November 2012 QCAT hearing, T-52.
Mr McClintock did not take this step, which arguably created a more favourable position for him in his then-ensuing, and based upon Mr Ahrens’ comments, strained family law property proceedings. How is this so? The starting point in determining a division of assets in family law proceedings is the identification of the property pool. In creating a large liability, Mr McClintock effectively created a position that left him no worse off financially (in the sense that he had ignored the “unpaid entitlements” he had for many years), and which diminished the overall property pool left for division between himself and the former Mrs McClintock. The upshot of this sort of financial “restructuring”, which is commonplace in family law proceedings, is that Mr McClintock was able to create financial leverage vis-à-vis his ex-wife, which he could then utilise to his benefit. Whether or not he did so is immaterial; what matters here is the position that Crescent was placed in as a consequence of these steps. I note that neither Mr McClintock nor Mr Ahrens offered any real alternative explanation for the drawing up of the liability in Mr McClintock’s favour at a juncture simultaneous with his divorce.
I do not accept the submissions of Mr McClintock’s counsel that in raising this debt, Mr McClintock effectively exposed himself to a claim by his ex-wife for a portion of his “asset” in the unpaid wages. This could only have been the case in circumstances where it would have been reasonable to think that Crescent might be in a position to pay these wages; clearly it was not. Moreover, in his evidence before me, Mr Ahrens appeared to concede that these steps were taken to avoid the difficulties faced as a result of Mr McClintock’s expectations in the family law proceedings.
Another reasonable step for Mr McClintock to have taken, if there was legitimacy to the unpaid entitlements drawn up in his favour would have been to leave assets in Crescent, in order to ensure that these entitlements could be met. The decision maker, Natasha Dennis, points out in her statement that Crescent’s working capital ratio was low, indicating a risk of insolvency.[9] Ms Dennis also expresses concern in relation to the low working capital ratio that in the year ending 30 June 2006, assets totalling $1,201,269.71 “disappeared” from Crescent’s balance sheet, as did plant equipment and motor vehicles totalling more than $70,000.00 in value.
[9] Exhibit 2, Statement of Natasha Dennis dated 20 July 2009.
Either way, Mr McClintock could have taken the reasonable step of (1) waiving his unpaid entitlements in Crescent; or (2) ensuring that Crescent was properly capitalised during the time he was a director, in order to be in a position to meet a demand for payment of his wages. Mr McClintock took neither of these steps, and therefore cannot be said to have taken “all reasonable steps”. I do not propose to consider all of the further matters in relation to the Employee Entitlement Scheme that led to taxation issues with the Australian Tax Office, or GST-debts, for the simple reason that I have found the evidence in relation to the unpaid entitlements issue to be overwhelming.
Orders
Mr McClintock’s application to become a permitted individual must fail for the foregoing reasons, and is dismissed.
The decision of the Queensland Building Services Authority refusing to categorise Mr McClintock as a permitted individual is confirmed.
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