McLennan v Queensland Surveyors Board
[2013] QCAT 430
| CITATION: | McLennan v Queensland Surveyors Board [2013] QCAT 430 |
| PARTIES: | Bryan Robert McLennan (Applicant) |
| V | |
| Queensland Surveyors Board (Respondent) |
| APPLICATION NUMBER: | OCR007-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 26 July 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Mr Richard Oliver, Senior Member |
| DELIVERED ON: | 6 August 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The respondent’s decision made on 13 December 2012 is set aside and instead it be substituted with a decision that applicant’s consultancy endorsement be renewed. |
| CATCHWORDS: | Surveyors – where applicant a director of a company that went into liquidation – where company trading at a loss for a number of years – whether applicant discharged his duties as a director of the company – where applicant directed to attend a meeting with Board members – whether his overview of the company’s operations over a seven year period was sufficient evidence he did not meet the respondent’s Competency Framework – where the particulars of the Competency Framework were not put to the applicant – where applicant aware of financial difficulties and where shareholder supported the company – where Board of Directors of the company endorsed the actions of the managing director – where standard of proof considered. |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr McLennan was self represented |
| RESPONDENT: | Surveyors Board was represented by Mr Forbes, solicitor of DLA Piper, Lawyers. |
REASONS FOR DECISION
The applicant has been a licensed surveyor for in excess of 30 years. Until 6 December 2012, he held a cadastral endorsement and a consulting surveyor’s endorsement from the Surveyors Board of Queensland. Because Mr McLennan was a director of a company, Survtech Pty Ltd, that provided surveying services in Queensland that went into liquidation with a deficit of $533,498.00, the Board was concerned about Mr McLennan’s competency to hold a consulting endorsement.
After a meeting between two Board members and Mr McLennan convened under s 86 of the Surveyors Act 2003 and considering the circumstances of the liquidation of the company as set out in the liquidators report, the Board decided not to renew his consultancy endorsement. In a letter to Mr McLennan of 13 December 2013 the Board said that, in effect, Mr McLennan did not discharge his responsibility as a director to adopt sound business practices nor understand and monitor the financial performance of the company.
Subsequent to this decision, Mr McLennan filed an application to review the Board’s decision in the Tribunal on 9 January 2013. Mr McLennan raised a number of grounds in his application. He says that the evidence before the Board did demonstrate that he satisfied the Consultancy Endorsement Competency Framework. He also relies on evidence of Ian Matheson, who was the General Manager of Survtech who has produced a statement in which the circumstances of the failure of the company are set out; the fact that he has been granted full accreditation from the “Titles Office”, Department of Environment and Resource Management, pertaining to the quality of his surveys; he was mislead about the effect of the meeting with the Board and in a sense he is saying that he had not been fairly heard.
The central issue for consideration is whether Mr McLennan demonstrates sufficient knowledge and understanding to discharge his responsibilities as a director of a corporate entity and the operation of a consultancy business.
Section 163 of the Surveyors Act 2003 (the Act) makes provision for a review of the Board’s decision by QCAT. The function of the Tribunal in a review proceeding is to produce the correct and preferred decision by way of a fresh hearing on the merits.[1]
[1] Queensland Civil and Administrative Tribunal Act 2009 s 20.
The Board’s role under the Act is to ensure that registrants carry out surveying work in a professional and competent way. It is charged with upholding the standards of practice within the profession and to maintain public confidence in the profession.
Registrations are renewed each year and the registrant must satisfy the Board of relevant competency.[2] If the Board is satisfied, then it will issue an endorsement and the person is then a suitable person to hold registration.[3]
[2] Surveyors Act 2003 s 54.
[3] Ibid s 36.
Under section 56 of the Act the Board can either grant or refuse the application before renewal. The Board can only grant the application if it is satisfied that the applicant is eligible for the registration endorsement for which the application is made.
The Act requires the Board to establish a Competency Framework which sets out the qualifications, skills, knowledge and experience needed for registration as a surveyor. That Competency Framework is published on the Board’s website and Unit 1 sets out the framework for the professional practice for a “Consulting Surveyor”. It states:-
Surveyors with a Consulting Endorsement demonstrate a commitment to professionalism through their careers as professional surveyors. They must be able to provide leadership in promoting appropriate business and professional practice.
Unit 5 of the Competency Framework sets out certain elements that are evaluated in determining competency for the relevant endorsement. For clarity it is best to recite the Competency Framework for elements 5.2, 5.6 and 5.7 because they all relate to the operation of a consultancy practice.
Elements 5.2, 5.6 and 5.7 of the Competency Framework relevant provide that:
Element Descriptors 5.2 Adopt sound business practices including economic planning, financial management and compliance with legal requirements Applicants will need to demonstrate that they have:
(i) An understanding of an enterprise’s business needs
(ii) An understanding of the legal requirements for business operations
Applicants will need to demonstrate that they are able to:
(iii) Prepare and review budgets
(iv) Estimate job costs and evaluate financial returns
(v) Monitor and control costs against estimates or budgets
(vi) Assess market needs and implement marketing plans
(vii) Participate in risk management programs
(viii) Operate in accordance with a business plan
(ix) Provide and promote excellence in customer service
5.6 Apply self-management principles Applicants will need to demonstrate that they have programmed or have undertaken:
(i) Professional development in management skills
(ii) Personal development in leadership and teamwork
(iii) Personal development in lateral, analytical and creative thinking
Applicants will need to demonstrate that they are able to:
(iv) Set goals for personal, professional and business achievements
(v) Practice effective time management
5.7 Apply quality assurance principles Applicants will need to demonstrate that they are able to:
(i) Implement and maintain quality assurance programmes
(ii) Comply with the requirements of an accepted quality assurance programme
(iii) Contribute to internal auditing programmes
(iv) Take action to rectify non-compliance with agreed standards
Continually strive to improve performance
In the end, mainly having regard to what Mr McLennan said at the s 86 meeting as contained in the minutes, the Board decided he did not meet these competencies and refused him registration with a consultancy endorsement.
The evidence before this Tribunal includes the liquidator’s report, the minutes of the s 86 meeting that Mr McLennan had with the Board members on the 15th November 2012, the minutes of the Board meeting of 6 December and the evidence filed by Mr McLennan.
I should say something about the s 86 meeting. Section 86 is in Part 5 of the Act. Part 5 deals with “Complaints and investigations about a registrant’s professional misconduct”. That section gives the Board power to deal with a matter without a formal investigation of the registrant’s professional conduct. Subsection 1 provides:-
This section applies if the Board reasonably suspects a registrant has engaged in professional misconduct, whether or not a complaint under section 85 has been made about the registrant.
The Board can, under s 86(2), require a registrant to attend a meeting before the Board to answer questions about the registrant’s professional conduct. Subsection (5) provides that if a registrant attends a meeting the registrant is not required to answer a question if answering the question might tend to incriminate the registrant.
Those present at the meeting were Board Members, John Carroll (Complaints Convenor) and Dennis Gregor (Chief Examiner). There is no mention in the minutes, at the commencement of the meeting, by the Board members that the meeting was to consider whether Mr McLennan engaged in professional misconduct. There was no information given to Mr McLennan about his rights under subsection (5). There was also no mention specifically about the Competency Framework or that Mr McLennan’s answers would be assessed against that Framework. Obviously it is a very serious matter to consider refusing to renew Mr McLennan’s consulting surveyor’s endorsement, however, despite this there was no mention of this possible outcome depending on his answers when the meeting started. I will say more about this later in these reasons.
It is therefore understandable that Mr McLennan complains about the section 86 process. He says that he was asked to attend the meeting by the Board’s Executive Director, Murray Fox. He did not appreciate the seriousness of the meeting and was led to believe that it was “just a chat nothing more than that.”[4]
[4] Letter to QCAT 28 June 2013; annexure B – minutes of meeting page 1.
Mr Caroll, the complaints convener, did inform Mr McLennan in a very general way the purpose of the meeting. He said it was necessary to understand the “role of Survtech, how it got there and if there are any issues going forward in relation to, and this is for the Board to determine your capacity as a consulting surveyor”. The Board made it clear that they were looking at the “consulting side of things.”[5] Mr McLennan told the members that he intended renewing his consultancy endorsement but that it would depend on “what comes out of today”. The minutes also record that Mr McLennan gave a general description of his role as a director of Survtech and seemed to recognise, during the course of the meeting, that there was a question mark over whether or not the Board would renew his consulting endorsement because he said he was undecided whether he should apply for professional indemnity insurance, because “if the Board will not give me my consulting endorsement there is no point in doing it”.
[5] Minutes page 2.
Although the Mr McLennan cannot now say he did not know that his capacity as a consulting surveyor was under consideration, the Board members did not make it clear that the meeting under s 86 was to consider professional misconduct and one of the outcomes could result in his endorsement not being renewed. The point of this is that Mr McLennan says he did not realize the importance of the meeting, was rather casual in his response to the questions put to him, and said in the hearing that on reflection he would have been more thoughtful in responding to the questions about his involvement in Survtech. He also suggests that the meeting could be interpreted as a “form of entrapment” because he thought the meeting was to assess his professional competency, rather than his competency as a director, and how the business of Survtech was operated.
I find it difficult to fully accept this proposition. The minutes disclose that his professionalism as a surveyor was not in question. On page two of the minutes there was a brief discussion about the requisition rate of his surveys being very low at 2-3% with the issue of the meeting being identified as being “in relation to the business and the consulting part of that business”.
This leads me to the view that Mr McLennan certainly knew that the s 86 meeting was to discuss with him generally his directorship of Survtech as it related to his competency to hold a consulting endorsement but not to the extent that his renewal would be based on his answers to the Board members questions.
Therefore, it is fair to say, that describing the meeting as “basically an informal chat in general terms” set the tone of the meeting. It is evident on reading the minutes that the discussion was of a general nature and although Mr McLennan is critical of the Board’s reliance on the minutes, the fact is he did make some statements which could lead one to conclude he was not particularly active in the management of the company. I should also say that the only other information the members had before them was the initial report to creditors from the liquidators, Insolvency and Turnaround Solutions, so the information he provided would be important.
That Report showed the company made losses for the three consecutive years – 2009-2012 of $416,828.36, $198,329.07 and $175,644.52 respectively. Although up until 26 September 2012 it appears there was a profit with a gross income of $89,038.00. This last figure does not take into account outstanding benefits or loans payable both to the staff and directors as well as and a substantial debt to the Australian Tax Office of $293,700.00.
More importantly the balance sheet shows a deficiency in assets over liabilities for each of those years of $364,818.00, $553,347.00, $748,978.00 and $521,354.00. The last figure is for the year to date of 27 September 2012.
It is apparent that during the course of the s 86 meeting Mr McLennan made a concerted effort to provide, what I would describe, as an overview of how the business was conducted during his directorship in the period it sustained heavy losses of profit. His responses to questions, or statements, are very general and do not descend to any particularity about specific events or conduct. It seems to me that many of his responses are given with the benefit of hindsight rather than examining what he did specifically at any given point in time. Therefore it is necessary to look in an objective fashion at some of the critical aspects about how the business was conducted, having regard to the evidence of those associated with it, such as Mr Mathieson.
Mr McLennan was not only a director; he was also the consultant surveyor under whose registration the company was able to operate. A consultant surveyor is defined under the Act as a surveyor who holds a registration endorsement for carrying on a business providing surveying services. He provided those services together with a number of employed staff. The business was initially successful generating profits between 2005 to the end of the 2009 financial year[6].
[6] As per statement of Ian Mathieson: 2005/5-05 = $98,000; 05/06 = $117,000; 06/07 = $301,000; 07/08 = $193,000; 08/09 = $208,000.
Because of the global financial crisis business profitability, and presumably income, dropped significantly mainly because the development of land and housing construction slowed dramatically. Therefore, from the time Mr McLennan became involved in the business in 2004 until 2009 there is nothing to suggest that he did not discharge his duties as a director.
When the company ran into trouble in the 2009/2010 year as a result of the global financial crisis, Mr McLennan was instrumental in having Ian Mathieson appointed as Chairman of the Board and General Manager. He could see, as a director, that the day to day financial management of the company needed greater expertise than he, or his co-directors could offer. This demonstrates an insight into the needs of the business for tighter financial control at a time when the business was facing difficult times. Mr Mathieson’s role after his appointment was to manage the day to day operation of the company. He set about trying to downsize the company and reduce costs.
Mr Mathieson records in his statement that although the company was returning to surplus in the last half of 2010, profitability was again significantly affected by the 2011 January floods. The floods were followed by further heavy rain. All of this had a severe impact on cash flow. Steps were taken to reduce costs with staff taking time off without pay and, I infer, reducing staff numbers, because “a core of reliable and well-trained staff was retained as a minimum”. All of this was undertaken with the approval of the Board.
After these trying times, Mr Mathieson says that the majority shareholders agreed to support the Board, and provide financial support to the company. The company embarked on an intense marketing campaign and with the support and assistance of core staff, he believed the company would return to profitability. There were regular Board meetings during this period to discuss and monitor the financial position of the company. Mr McLennan was involved in these meetings.
An arrangement was made with the company’s major unsecured creditor, the Australian Taxation Office to reduce the tax liability from previous years. There was no default by the company to this arrangement. With this arrangement in place the Board, obviously conscious of its responsibility to ensure the company was, at all material times, solvent, affirmed the solvency of the company with the ongoing support of the majority shareholders. As there is no evidence to contradict this view, it seems to be the opinions about solvency were reasonably held at that time. He was a minority shareholder with 5%. 85% of the shares were held by Labib Abraham and Joumana Wilson with the remaining 10% held by Mr Mathieson, the General Manager.
It is also important to distinguish Mr McLennan’s role as a director and Mr Mathieson’s role as General Manager. Mr McLennan, at the s 86 meeting, told the members that Mr Mathieson had very tight financial control over the operation of the company and there was no financial delegation to him. I see nothing unusual about that. Mr McLennan’s role was to supervise the surveying work which was the core business of the company. As I said, it was Mr Mathieson’s role to manage the day to day operations of the company under the overall supervision of the Board of Directors. From what I can see in the material before me, this is exactly what occurred.
The complaint made against Mr McLennan is that he did not demonstrate an understanding of financial matters and there was a concern that he could not satisfactorily run a business if he was given the consulting endorsement. This is based on his comments at the meeting. There is no point in traversing all of the comments relied on by the Board as set out in the submissions, but some of the more significant ones are:
·He was naïve and accepted what was put to him.
·He is more of an entrepreneur than a solid business person.
·Realising by looking at the financials that the company owed a fair whack to the ATO.
·Ian wanted to go into liquidation sooner than later. I did not want to maybe I was a bit naïve but I thought we could trade out of it.
·I wanted to keep the staff employed as business was picking up all the time and we really thought that 2013 might have been a pretty good year. We just could not get there.
·….I was more concerned with whether the company could keep trading and look after clients and keep the staff employed.
·Three years of losses caused me concern and I discussed this with the Board but we felt we could inch back and get it back up again.
·I would have to say that due to a number of bad business decisions over the years I can’t retire.
·Could I say that maybe I was presented with things in a better light than they might have been, not lied to. If I had been a person with a more distrustful nature I might have, the alarm bells to me should have been when I saw that I was owed more than anyone else.
·Well that was another part of the debacle toward the end there. He [Labib Abraham, company director] was, in the lead up to the liquidation and for 3 weeks after, he was not even in the country. He was in Lebanon. Really, I was pretty well holding the can at the end.
The main elements of the Competency Framework that an applicant for endorsement must demonstrate include such things as:
·Adopt sound business practices including economic planning, financial management and compliance with legal requirements.
·Apply self management principles.
·Apply quality assurance principles.
As can be seen from the table above, in paragraph 11, each of these elements set out particulars of how they can be demonstrated. Mr McLennan was not asked specifically about the Competency Framework, was not given a copy of the document to be used as a point of reference nor was he asked any questions to ascertain whether he could demonstrate any knowledge of the particular elements referred to in the Framework. As the purpose of the meeting was to determine whether Mr McLennan was suitable for endorsement one could reasonably assume that his knowledge of the various competencies would be discussed in some detail. During the course of the s 86 meeting none of the elements or the particulars of the elements were addressed in any meaningful way and no perceived shortcomings on the part of Mr McLennan were put to him for a response. Rather, as he has said and what is obvious from reading the minutes, he gave a very brief overview of the operation of the business over a seven year period.
I therefore do not accept that his comments/responses relate to the elements of the Framework or demonstrate that Mr McLennan does not have the business acumen to run a business as suggested by the Board. The company operated successfully between 2005 and 2009, then fell into difficulties as a result of events outside his or the company’s control. Realising the need to engage someone with expertise to assist in resurrecting the business, the company employed Mr Mathieson. This in my view demonstrates that Mr McLennan was adopting sound business practices in the management of the business. Mr McLennan had also been a director of another company for many years prior to his involvement in Survtech.
Mr McLennan was not ignorant about the affairs of the company, knew there was significant debt but with the assistance of Mr Mathieson and the support of the majority shareholders took the view, reasonably in the circumstances, that the company could trade out. This view was obviously shared by all directors on the Board because the company continued to trade, even generated a positive cash flow between July and September 2012. But because the arrangements with the ATO could not be met, and according to Mr Mathieson it was unlikely the ATO would provide further accommodation, a decision was made to put the company into administration. It was then plain to the Board that the company could not pay that debt as and when it fell due, and was therefore insolvent. This action was entirely responsible and consistent with his duty as a director of the company.
Mr McLennan, during the interview with the Board members, gave an overview of the company’s operations during the period it was profitable and then during the period it experienced financial difficulties. He told the board members that he was acutely aware of the causes of the non profitability and together with the other directors put in place a strategy, which included employment of Mr Mathieson to return the company to profitability. The company entered into an arrangement with the Australian Tax Office in respect of a payment programme which meant the company could continue trade and maintain solvency. There was also the financial support provided by the majority shareholders.
It was only when this support was withdrawn and there was likely to be default in the payment to the ATO that the directors could clearly see the company was insolvent. Although Mr McLennan was naive in thinking that the company could continue to trade at this time, to try and preserve staff jobs and obligations to clients (which he ultimately met alone), this action was not instrumental in the company’s downfall.
Finally, if the Members of the Board were going to rely on the Competency Framework, then it was incumbent on them to put specific questions to Mr McLennan to gauge his response by reference to what was required by the Framework. Had this been done, there would have been a greater focus of what Mr McLennan was required to address to satisfy the Board that he held the relevant competencies.
In view of Mr McLennan’s very general overview of his involvement in the operations of the company and the evidence of Mr Mathieson I cannot be satisfied to the requisite degree,[7] having regard to the seriousness of the consequences of him not having his consultancy endorsement renewed, that the Board’s decision should be confirmed.
[7] Briginshaw v Briginshaw (1938) 60 CLR 336.
I therefore propose to set aside the decision of the Board and substitute it with a decision that Mr McLennan’s registration for consultancy endorsement be renewed.[8]
[8] Queensland Civil and Administrative Tribunal Act 2009 s 24.
0
2
0