Pearce v Queensland Building Services Authority
[2011] QCAT 8
•4 January 2011
| CITATION: | Pearce v Queensland Building Services Authority [2011] QCAT 8 |
| PARTIES: | Mr Ronald Benjamin Pearce |
| v | |
| Queensland Building Services Authority |
| APPLICATION NUMBER: | GAR050-10 |
| MATTER TYPE: | General Administrative Review |
| HEARING DATE: | 19 October 2010 |
| HEARD AT: | Cairns |
| DECISION OF: | Ms Joanne R Browne |
| DELIVERED ON: | 4 January 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
| CATCHWORDS : | Queensland Building Services Act 1991, section 56AD “permitted individual”, whether the applicant took all “reasonable steps” to avoid coming into existence of the circumstances relating to the relevant event. |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT : | Mr Ronald Benjamin Pearce, self represented |
| RESPONDENT: | Queensland Building Services Authority represented by Ms Jodie Stroud |
REASONS FOR DECISION
Introduction
1.This is an application to review a decision of the Queensland Building Services Authority (“the QBSA”) made on 19 January 2010 to refuse to categorise Mr Pearce as a “permitted individual” for the “relevant event” on the basis that the QBSA is not satisfied that Mr Pearce took all reasonable steps to avoid the circumstances that resulted in the “relevant event”, pursuant to section 56AD of the Queensland Building Services Authority Act 1991 (“the QBSA Act”).
2.The application filed 12 February 2010 sets out the grounds upon which Mr Pearce seeks to rely in respect of the QBSA decision.
3.Mr Pearce is a 72 year old pensioner who has been working in the plumbing and building industry for over 50 years and has held licences issued by the QBSA in the class of “Builder – Open” and “Plumbing and Drainage”. It is his wish to continue working as a handyman and as an experienced commercial and industrial plumber to “regain a basic income, have a lifestyle and satisfy [his] ITSA obligations”.[1] In his application, Mr Pearce seeks a review of the decision made on the basis that the QBSA failed to take into account “all the efforts [he] made to deal [with his] circumstances and the successes [he] had dealing with debts and creditors whilst under hardship, including periods of hospitalisation, forced out of work and dealing with the protracted process of the [Commercial and Consumer Tribunal]”[2]. Furthermore Mr Pearce seeks to have the Tribunal set aside the decision of the QBSA and order that his application to be categorised as a “permitted individual” be granted.
[1] Email to the Tribunal dated 5 April 2010 attaching copy letter from Mr Ron Pearce (the applicant) to the QBSA dated 5 April 2010 and later filed in the Tribunal on 6 April 2010.
[2] Application to review a decision filed 12 February 2010, p4.
4.The parties filed various documents to be relied upon prior to the hearing and additional material was tendered at the hearing. Mr Pearce relies on various written statements filed and oral evidence was given by him at the hearing.
5.The QBSA relies upon its statement of reasons delivered pursuant to section 21 of the Queensland Civil and Administrative Tribunal Act 2009 (“the QCAT Act”) and additional material including documents produced in response to a notice to produce documents issued by the Tribunal to the Insolvency Trustee Service of Australia (“ITSA”). Ms Stroud appeared as legal representative for the QBSA, having been given leave to appear in the proceedings. Oral evidence was given at the hearing by Ms Natasha Dennis of the QBSA at the request of Mr Pearce.
Background
6.On 16 December 2009 the QBSA having found that on 4 November 2009 Mr Pearce entered into bankruptcy under the Bankruptcy Act 1966, sent a letter notifying Mr Pearce as to section 56AF(2) of the QBSA Act, that he was considered to be an “excluded individual” pursuant to section 56AC because of the “relevant event”.
7.On 18 January 2010 Mr Pearce provided a written application to the QBSA pursuant to section 56AD(1) of the QBSA Act for him to be categorised as a “permitted individual”.
8.It is not disputed by Mr Pearce that the “relevant event” was the presentation of a debtor’s petition under the Bankruptcy Act 1966 on
4 November 2009.
9.In the application (under section 56AD(1)) to the QBSA Mr Pearce sets out grounds as to the “main cause” of the relevant event including excessive interest payments on loan monies or capital losses on repayments; adverse legal action; inability to recover amounts owing; and sickness or injury. Mr Pearce’s application was refused and a decision was subsequently made on 19 January 2010 which is the subject of the review by this Tribunal.
10.The Queensland Civil and Administrative Tribunal (“QCAT”) has jurisdiction to review the decision made by the QBSA by virtue of section 18 of the QCAT Act.[3]
[3] An application having been made by the applicant pursuant to sections 86(1)(j) and 87 of the QBSA Act. The QCAT Act confers certain powers to the Tribunal in determining the application for review and as to the orders to be made under section 24(1).
The relevant law
11.The relevant section of the QBSA Act, section 56AD(8) provides that:
“The authority may categorise the individual as a permitted individual for the relevant event only if the authority 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”.
12.Section 56(8)(A) sets out matters that the QBSA may consider in determining whether Mr Pearce took “all reasonable steps”:
“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”.
Section 56(8)(B) provides that:-
“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”.
13.The QBSA refers the Tribunal to the decision in Younan v QBSA[4] in relation to determining the “criteria” in section 56AD(8)(A) of the QBSA Act, also referred to in a former decision of the Tribunal in Andersen v Queensland Building Services[5]. The decision in Andersen summarises the relevant findings in the Younan decision.
[4] [2010] QDC 158.
[5] [2010] QCAT 426.
What were the circumstances that resulted in the happening of the relevant event?
14.The Tribunal accepts the respondent’s written submissions in relation to the relevant criteria to be applied in determining whether Mr Pearce took all “reasonable steps” as set out in the decision of Younan and summarised in the decision of Andersen; and whether the QBSA should exercise the discretion under section 56AD(8) in Mr Pearce’s favour.
15.Mr Pearce made oral submissions at the hearing that there were a considerable number of issues that had to be dealt with by him and he dealt with them in the most “appropriate manner”. It is his submission that he has done everything to avoid the event (i.e. entering into bankruptcy) and the QBSA has obtained documents from the Supreme Court of Queensland in relation to a settlement that he negotiated with an unsecured creditor, Secure Funding Pty Ltd which supports his contention. Mr Pearce also submits that he has responded to the ITSA’S request to sell properties and there are no further investigations by the ITSA in relation to dealings.
16.Ms Stroud on behalf of the respondent submits that the QBSA is governed by the appropriate legislation, the QBSA Act and is not satisfied that Mr Pearce kept proper books of accounts or obtained advice and made proper provision of the state taxation of debts.
17.The issues raised by Mr Pearce to be considered by the Tribunal took place over several years from 2006 to 2009 (inclusive), and have been summarised as follows:
(i)Debt owed by Amity Airways Pty Ltd for servicing of an aircraft in 2006;
(ii)Refinancing of properties resulting in outstanding interest payments on various loans;
(iii)Legal proceedings commenced in the former Commercial and Consumer Tribunal (“the CCT”) for termination of a building contract;
(iv)Supreme Court of Queensland proceedings commenced against the applicant; and
(v)Sickness or injury.
(i)Debt owed by Amity Airways Pty Ltd for servicing of an aircraft in 2006
18.In 2006 an aircraft owned by a company Amity Airways Pty Ltd of which Mr Pearce was a Director, was sent for a regular one hundred (100) hourly service which was estimated by Mr Pearce to cost approximately $3,500.00 to $4,000.00. However, the company Amity Airways Pty Ltd was issued an account for approximately $73,000.00.[6] During his oral evidence Mr Pearce confirmed that he had purchased the aircraft in 1981 together with his wife for the purpose of conducting various air and chartered company tours around North Queensland and the aircraft was worth approximately $40,000.00. Profits earned from the chartered tours were used to pay for the operating costs of the aircraft. Following a marriage separation between Mr Pearce and his ex-wife in 2004 the aircraft was used for seasonal tours and recreational pursuits. Mr Pearce gave evidence that he did not expect to receive an excessive bill for the service of the aircraft however he had expected to pay for parts and labour anticipated by him to be in the amount of $30,000.00.
[6] Applicant’s Statement dated 24 September 2010, Exhibit 20.
19.During cross-examination of Mr Pearce by Ms Stroud various questions were asked about the circumstances surrounding the service of the aircraft in particular whether it was viable to have the aircraft serviced given that it was twenty five (25) years old at the relevant time. Mr Pearce gave evidence that he was of the opinion that the aircraft was in good condition and he had sufficient funds in the bank to pay any bill. Mr Pearce also gave evidence that upon receipt of the service bill he obtained independent legal advice from his solicitor who advised him that he had to pay the bill. Mr Pearce entered into a Bill of Sale by way of security pursuant to a Deed dated 3 August 2007 between himself and Hinterland Aero Engineering Pty Ltd whereby the aircraft[7] was assigned as security for payment of the principal sum of $73,011.10. Mr Pearce was required to pay the sum of $25,000.00 as a partial payment upon signing and the principal sum and interest by monthly instalments of a minimum of $3,000.00. Mr Pearce later entered into a Deed of Sale and Release on 12 June 2009 between Amity Airways Pty Ltd, Hinterland Aero Engineering Pty Ltd and himself (as the former owner) for amounts owed by him pursuant to the original Deed dated 3 August 2007.[8]
[7] Described as “Piper Cherokee 6 Aircraft Registration Number VH-PDF”.
[8] For service work performed on the aircraft up to and including 10 June 2009.
20.During cross-examination Mr Pearce gave evidence that he had money available to personally make three (3) payments before defaulting on the deed and these payments totalled $25,000.00 leaving an amount of $48,000.00 owing. Mr Pearce states that he did not have $73,000.00 to meet service debts at the time he entered into the Bill of Sale however he was not involved in the operation of the aircraft which had missed a season to operate. Mr Pearce agreed during cross-examination that he was personally responsible for the debt.
21.The Tribunal accepts the evidence given by Mr Pearce in relation to the Amity Airways Pty Ltd debt finds that he was personally responsible for the debt and obtained appropriate advice in relation to the amount owing.
(ii)Refinancing of properties resulting in outstanding interest payments on various loans
22.Mr Pearce had an investment property at 17 Barossa Close, the QBSA having issued a Certificate of Insurance in respect of “residential construction work” on 22 July 2003.[9] Mr Pearce became the registered proprietor of the Barossa Close property on 19 April 2004 and states that he used the funds from the sale of a former property to pay for the development.
[9] Statement dated 24 September 2010, Exhibit 20. See also Case Summary filed by the QBSA and Overview Document filed by Mr Pearce (annexure “SOR4” to Exhibit 1).
23.Mr Pearce became the registered proprietor of a property at 3 East Park Ridge Street, Whitfield on 11 January 2005 and on 24 May 2005 the QBSA issued a Certificate of Insurance in respect of “residential construction work” to be undertaken. Mr Pearce also became the registered proprietor of a property at Fitzmaurice Drive on or about 15 August 2005 and on 7 October 2005 the QBSA issued a Certificate of Insurance in respect of “residential construction work”. Mr Pearce states in the material lodged with the QBSA in support of his application that “the prospects looked good so I built 3 East Park Ridge followed by 69 Fitzmaurice, intended as further investment properties. ‘My retirement plan’.” [10] Mr Pearce later transferred ownership of East Park Ridge on 1 March 2007 and ownership of Fitzmaurice Drive on 4 May 2007.
[10] Attachment SOR4 referred to in Exhibit 1 at page 23.
24.The circumstances surrounding the refinancing of the properties owned by Mr Pearce are relevant to the issues to be determined by the Tribunal as Ms Stroud argues that Mr Pearce took the steps of selling certain properties and refinancing one of his loans (relating to Barossa Close) without first obtaining appropriate financial or legal advice.
25.Mr Pearce in his statement dated 24 September 2010 states that the refinancing of Barossa Close at a lower interest rate with Secure Funding (Liberty Finance) Pty Ltd (on 2 May 2007) together with the balance of the sale of the two (2) properties (East Park Ridge and Fitzmaurice Drive) then “had [him] back in a good financial position so after being approached to build a home by the Caswell’s [he] agreed to do so”.[11] During cross-examination by Ms Stroud oral evidence was given by Mr Pearce that he did not recall whether legal action had been threatened by Latrobe Financial which resulted in the sale of East Park Ridge.[12] Mr Pearce admitted that he was unemployed at the time the East Park Ridge property was sold and that he had sought advice from his solicitor who was acting in relation to the sale of the properties and his accountant CA Accounting Services in relation to financial advice. Mr Pearce was vague however about specific advice sought and when he did in fact seek advice and simply stated that he has purchased and sold several properties and had received all the advice he needed. Mr Pearce gave oral evidence that he intended to meet the loan repayments which were approximately $2,500.00 per month. Ms Stroud referred Mr Pearce to the updated liability statement from Latrobe Financial[13] dated 13 February 2007 which showed the loan balance as at 31 January 2007 in the amount of $484,091.31. The statement shows Mr Pearce was approximately $15,000.00 in arrears and shows late payment fees. Mr Pearce during cross examination did not agree with Ms Stroud’s suggestion that the liability statement was evidence that he was behind in his payments and argued that it was necessary to refer to the “detailed accounts”. Mr Pearce denies that the properties were sold by him because he was in arrears in his loan repayments and states that the properties were for sale anyway however he was unable to recall the date that the properties were put on the market. Mr Pearce did agree that he was relying on a quick turn around, that is for the properties to sell within a relatively short period after being listed for sale, and that he was unable to continue in his employment and was unable to meet the loan repayments. When queried by Ms Stroud about whether Mr Pearce had a “contingency plan in place” Mr Pearce stated that there was the potential for the Fitzmaurice Drive property to generate a lot of work and income. However, he did not have the funds to meet the monthly repayments on the loan at the time the Fitzmaurice Drive property was sold.
[11] Exhibit 20 page 3.
[12] Mr states that he later entered into a settlement in relation to the development of the property by way of a deed dated 16 June 2009 in respect of a contract for the construction of a residential house dated 8 May 2008.
[13] Attachment “RP19A(c)” to Exhibit E19, applicant’s statement dated 27 August 2010.
26.During cross examination Ms Stroud referred Mr Pearce to an email included in his material sent by Lee Noble (financial broker) dated 10 July 2010. The email states that work was undertaken for Mr Pearce in the capacity as a finance broker including the submission of an application and the requirement to sign forms.[14] Ms Stroud argues that the email confirms Lee Noble acted as a finance broker on three (3) transactions and that Mr Pearce signed a statement to the effect that he was aware that he was borrowing the funds and was in a position to “afford the loans”. Mr Pearce did not accept Ms Stroud’s suggestion that the email from Lee Noble indicates that they simply acted as the finance broker and argues that his solicitor was acting generally, not just in relation to the purchase of the properties. Ms Stroud also referred Mr Pearce to documents filed in relation to Supreme Court proceedings in particular an affidavit filed by Mr Pearce. Mr Pearce prepared an affidavit sworn 20 March 2009 filed in the Supreme Court of Queensland in relation to proceedings commenced by Secure Funding Pty Ltd. Mr Pearce in paragraph three (3) of the affidavit states that he did not fill out the application for finance and only “signed it in good faith believing it to be the same personal mortgage loan as it replaced and did not have the opportunity to obtain legal advice.” Mr Pearce during cross examination gave evidence that he “in retrospect was speaking to his solicitor for all the matters”. When questioned by Ms Stroud as to whether he was “changing his story” Mr Pearce replied that he did not remember details and was trying to get the Supreme Court to look at all aspects of the charges in relation to the claim by Secure Funding Pty Ltd. Mr Pearce also argues that he did not think Secure Funding Pty Ltd should have lent him the money given that the term of the loan was for twenty (20) years and he would have to sell properties to pay the loan out. He also denies that the previous loan arrangement had an increase in rates as a result of default payments.
[14] statement dated 27 August 2010 (Exhibit 19 attachment “RP7A”).
27.Mr Pearce was also cross-examined about the payout to Latrobe Financial in particular an amount for a protection fee and whether Mr Pearce sought advice in relation to the payment made. The core protection fee referred to in the Latrobe Financial statement dated 2 May 2007 is in the amount of $13,377.25.[15] Mr Pearce gave evidence that he was unable to “battle with these people” and he did make attempts to find out about fees and charges however he was unable to get a response. He believed that his financial advisor Lee Noble was dealing with the matter. Mr Pearce was also questioned about the funds borrowed in the amount of $460,000.00 of which $400,000.00 was paid to Latrobe Financial. Mr Pearce initially gave oral evidence that he borrowed the extra $60,000.00 to use towards “general living and refinance” and some of the money was used towards the Caswells’ contract however when further questioned about this Mr Pearce did not accept that the extra money was borrowed to commence work on the Caswells’ development and was unable to recall specifically what the $60,000.00 borrowed funds had been used for.
[15] Attachment “RP19C(1)” to Exhibit 19.
28.Mr Pearce was also cross-examined about his capacity to pay the Secure Funding Pty Ltd loan and he gave evidence that the property at Barossa Close which was tenanted would derive income in the amount of $500.00 per week (approximately) and that he also expected to earn income from the Caswell project and other “contracts pending”.
(iii)Legal proceedings commenced in the former Commercial and Consumer Tribunal for termination of a building contract
29.Mr Pearce states that following the refinancing of the Barossa Close property (2 May 2007) and the sale of his existing properties (on 1 March 2007 and 4 May 2007) he commenced building the Caswells’ house having entered into a contract with Mr and Mrs Caswell on 3 October 2007.[16] However, the contract could not be completed without engineering variations and some “items needing to be deferred due to weather and others brought forward to stabilise the high structure”.[17] The contract was terminated by the Caswells on or about 23 April 2008 and Mr Pearce states he was “knifed in the back,” a feeling which he likens to “Australia’s former Prime Minister Mr Rudd”.[18]
[16] to construct a house on the property at 75 Daphne Drive, Redlynch, statement dated 24 September 2010, Exhibit 20. The application filed in the former CCT dated 26 June 2008 (attachment ND 1 to Exhibit 2) refers to the total contract amount as $265,221.50 with an amount owing of $65,734.04 and work having commenced on 21 October 2007. The contract was terminated by the Caswells on 23 April 2008.
[17] Exhibit 20, p 3.
[18] Ibid.
30.The Caswells lodged a complaint with the QBSA in relation to the building work and the Authority issued a direction to rectify on 26 May 2008. On 3 July 2008 Mr Pearce commenced proceedings in the former CCT against the Caswells alleging amongst others, breach of contract and sought a claim for payment together with damages. The Caswells made a counter-claim for non-completion of the works and defective construction. The former CCT issued an order dated 28 August 2009 that Mr Pearce pay Mr and Mrs Caswell an amount of $53,329.00 for damages for negligence, Mr Pearce’s claim having been dismissed and the Caswell’s counter-claim allowed.[19]
[19] Reasons for Decision published on 28 August 2009 (attachment “ND 5” of Exhibit 2).
31.The QBSA by letter dated 15 June 2009 notified Mr Pearce that an insurance claim had been received from the Caswells and on 21 October 2008 the authority approved the works in the amount of $200,000.00 under the insurance provisions of the QBSA Act. Mr Pearce was notified that recovery of the money would be made against him by the QBSA. The $200,000.00 debt was later written off by the QBSA on 23 February 2010.[20] Mr Pearce argues that the QBSA’s actions in relation to recovery of the insurance claim ($200,000.00) were “unacceptable being unconscionable, and is not a judgment debt”.[21]
[20] Attachment “ND 6” to Exhibit 2.
[21] Ibid.
32.Mr Pearce has filed documentation in relation to the proceedings commenced in the former CCT including a copy of the submissions filed.[22] The former CCT decision sets out reasons for its decision.[23] The CCT found that Mr Pearce did not understand the difference between a provisional sum and a prime cost item and that Mr Pearce “thought they were the same”.[24] Mr Pearce was found to be “vague and general in his evidence” and that amongst others, the weight of the evidence on the issue of the defective work was “overwhelmingly in favour of the [Caswells]”.[25] The CCT notes the evidence given by the QBSA that the work performed by Mr Pearce was “of such a bad state the Authority gave serious consideration to demolishing the house and rebuilding it, rather than pay to have it rectified”. This was supported by other independent expert witnesses. The CCT found that Mr Pearce had no entitlement to payment beyond that which had already been paid and he had no entitlement to the claimed variations.[26]
[22] Exhibit 21.
[23] Reasons for Decision published on 28 August 2009 (attachment “ND 5” of Exhibit 2).
[24] As above at 17.
[25] As above at 36, 48.
[26] As above at 66.
33.Mr Pearce denied during cross examination that he was having trouble meeting his loan repayments at the time he entered into the contract with Mr and Mrs Caswell. Ms Stroud referred Mr Pearce to documents filed and tendered in particular a letter from Secure Funding Pty Ltd to Mr Pearce dated 29 September 2008 stating that he was in arrears in the amount of $11,707.16. Ms Stroud then questioned Mr Pearce about his ability to fund the building work to be undertaken in relation to the Caswells’ contract given that his loan repayments were in arrears. Mr Pearce states that he made approximately $75,000.00 profit from the sale of the Fitzmaurice Drive property but was unable to produce any relevant documents.
34.During cross-examination Mr Pearce gave evidence that he did not consult an accountant prior to entering into the contract with the Caswells as he says he was capable of considering the matter given that he had constructed several homes and flats in the past.
35.The material relating to the CCT proceedings does not assist the Tribunal in determining Mr Pearce’s current application. It is not the role of this Tribunal to revisit issues formerly dealt with in the CCT. The Tribunal must however consider the issues relating to the CCT proceedings in the context of the principles set out in the decision of Younan and whether Mr Pearce took preventative steps rather than dealing with problems after they had arisen where “the reasonableness of his behaviour must be assessed by reference to what was known to him at the time, without the benefit of hindsight”.[27] Given that Mr Pearce had loan repayments and outstanding debts at the relevant time it would be reasonable to expect that he would obtain financial and legal advice prior to entering into the contract with the Caswells and again prior to commencement of proceedings in the former CCT particularly in relation to his prospects.
[27] Younan at [26].
(iv)Supreme Court of Queensland proceedings commenced against the applicant
36.Mr Pearce refinanced his Barossa Street property with Secure Funding Pty Ltd in or about May 2007 having paid out LaTrobe Financial. Mr Pearce gave evidence that after refinancing with Secure Funding Pty Ltd there was a period of approximately four (4) months during which time he did not receive any income and was anticipating a return of income from his other projects.
37.Legal proceedings were later commenced in the Supreme Court of Queensland by Secure Funding Pty Ltd and judgment entered on 24 March 2009. The Barossa Close property was sold on 15 April 2009. Mr Pearce stated during cross examination that he challenged the claim made by Secure Funding Pty Ltd in relation to an amount to be discounted for mortgage protection. In particular Mr Pearce states that he was advised that he did not have mortgage protection and that he spoke to Legal Aid about the matter. The amount charged for mortgage protection was discounted off the final judgment amount claimed. Ms Stroud during cross-examination questioned Mr Pearce about the shortfall in the amount of approximately $72,000.00 which Mr Pearce says he negotiated with Secure Funding Pty Ltd to reach a settlement. Mr Pearce gave evidence that he believed at the time of refinancing with Secure Funding Pty Ltd he had a lot of “opportunities” and would be able to pay the $400,000.00 debt owing. The Barossa Close property was sold on 15 April 2009 for $460,000.00 which was $69,000.00 less than its market value and this shortfall in addition to charges claimed by Secure Funding Pty Ltd, agent’s commissions and other expenses led to an unsecured claim by Secure Funding Pty Ltd in the amount of $72,727.16.[28]
[28] Exhibit 20, p 4. Proceedings were also commenced by an entity called Crane Distribution against Mr Pearce in the Supreme Court of Queensland alleging monies owed on or about 12 January 2009.
38.Secure Funding Pty Ltd issued a Form 1 Bankruptcy Notice to Mr Pearce in the amount of $72,727.16.
(v)Sickness or injury
39.Mr Pearce was first referred for medical treatment on 10 April 2008 and was later hospitalised and underwent a medical procedure on 10 June 2008. During this period of hospitalisation and a short time later Mr Pearce states that he was unable to continue work as he was required to recuperate and this is supported by documentation provided by Mr Pearce’s treating medical practitioner.[29]
[29] Medical Certificate dated 16 August 2010 prepared by Dr Clare Harkins states that Mr Pearce is “unfit to continue in his usual occupation from 10 March 2008 to 16 March 2009 (inclusive), attachment “RP 12A” to Exhibit 19.
40.Mr Pearce during cross-examination by Ms Stroud stated that he was under a considerable amount of stress as a result of the Caswells’ contract and following his operation in June 2008 he went on holiday in July 2008 using funds from Centrelink for his pension to travel to Holland to visit friends for approximately six (6) weeks.
Did the Applicant take all reasonable steps to avoid the circumstances coming into existence?
41.During the hearing Mr Pearce cross-examined Ms Natasha Dennis of the QBSA about the documentation relied upon in relation to his application to be categorised as a permitted individual. Ms Dennis refers to a lack of evidence being provided by Mr Pearce in relation to advice he sought or received before entering into the Caswells’ contract and prior to termination of the contract. Furthermore, Ms Dennis states that Mr Pearce has not provided detailed particulars of the various loans which were “refinanced” and details of any advice obtained in relation to the loans.[30]
[30] Statement dated 2 August 2010 para 16 to 21, (Exhibit 2).
42.The Tribunal finds that based on the evidence given by Mr Pearce he was often relying on future prospects to finance existing and future transactions and there was a lack of evidence as to whether he obtained advice prior to entering into financial transactions such as the loan arrangement with Secure Funding Pty Ltd.
43.Mr Pearce claims that there were several factors which he considered collectively in arriving at the decision to lodge a petition that his estate be administered by ITSA. In particular the QBSA’s notification to seek recovery of the $200,000.00 approved under the insurance scheme; the Bankruptcy Notice issued by Secure Funding Pty Ltd in the amount of $72,727.16; and the dismissal of his claim by the CCT in relation to the Caswells’ proceedings. Mr Pearce states that after consultation with his Lifeline financial consultant he found that there was a “positive for all concerned ‘a way up’ if [he] was to lodge a petition and [his] estate be administrated by ITSA”.[31]
[31] Ibid.
44.A letter from a financial counsellor of Lifeline Community Care Queensland states that Mr Pearce attended meetings to discuss his court action commenced by Secure Finding Pty Ltd and that he had advised creditors he was awaiting a decision in the CCT. Mr Pearce owed Secure Funding Pty Ltd a large debt and after selling his house, he had no property or income, and debts that amounted to $314,000.00. The letter states “taking into consideration his age and potential to earn, plus the fact that he was already on the Aged Pension there were not many options open to Ron…[he] decided to petition for Bankruptcy.”[32]
[32] Letter from Ms Kerry Ahlberg dated 27 August 2010, Exhibit 19, attachment “RP 9A”.
45.Mr Pearce became a bankrupt on 4 November 2009, an application to become bankrupt having been filed on 29 October 2009. In the statement of affairs filed, Mr Pearce states that his occupation is “builder/plumber” and he has been unemployed for a period of one (1) year and five (5) months (i.e. since June 2008).[33] Mr Pearce identifies that he has previously been a bankrupt (in 1987) and that he has obtained information from a financial counsellor in relation to the application. Mr Pearce also claims under the heading “money owed to you” that Mr and Mrs Caswell owed an amount of $119,904.00 since 28 April 2008 which is “now nil”.[34] There are also approximately 28 “unsecured creditors” identified being debts incurred by Mr Pearce during a period from March 2007 to August 2009 (inclusive). Some of the creditors identified include engineers and “hardware”.[35] The total amount owed by Mr Pearce as per the creditors disclosed in the statement of affairs was $235,805.00 including an amount of $8,000.00 to the Australian Taxation Office for GST. A further report to creditors dated 12 October 2010 identifies additional creditors totalling $253,329.00 comprising of $53,329.00 in relation to the CCT proceedings and $200,000.00 in relation to the QBSA insurance claim.[36]
[33] Identified as Exhibit 5 (p 6) and forming part of the documents produced by ITSA to the Tribunal.
[34] Ibid, p 12.
[35] Ibid, p15.
[36] Exhibit 14.
46.Mr Pearce later states in a document to ITSA titled “response as required” that “all of the building material supplied” went into the Caswell development except “fill material” that went into the West Park Ridge Drive property. He also states that his business (trading as Freestyle Projects) has not been able to operate since 24 April 2008 “due to financial circumstances as a result of the termination of a building contract, dealing with commercial and consumer tribunal, [his] own health problems (hospitalisation), recuperation and little prospect of business under the present financial crisis. In fact all too risky”.[37]
[37] Exhibit 7, p 2.
47.Mr Pearce during cross-examination did not accept that the total sum owed by him as at 12 October 2010 in relation to all creditors is $489,134.00 on the basis that only the creditors listed by him in the application to ITSA should be accepted. Mr Pearce was also questioned about the list of outstanding accounts for building supplies referred to in the list of creditors in the ITSA documentation dating from December 2007. Mr Pearce gave evidence that he was keeping all creditors informed as to the “situation” and it was his intention to pay the money owing. Ms Stroud also questioned Mr Pearce about his capacity to pay the outstanding debts given that he only claimed $65,734.00 in relation to the Caswell contract and had a debt of $75,000.00 in relation to Amity Airways Pty Ltd. In particular Ms Stroud submits that even if Mr Pearce was successful with the CCT proceedings he would not have had sufficient funds to pay all existing debts. Mr Pearce argued in response that but for the extra fees charged in relation to the existing loans he would have had sufficient funds to pay the debts; and he would have sufficient funds with the sale of “other properties”.
Other Issues
(a) Keeping proper books of account
48.Mr Pearce kept accounts of his income and expenses which he used to complete his taxation returns by use of the ATO’s e-record system. In relation to the 2007 financial year Mr Pearce states that the documents were prepared and signed but the “accountant joined a large accounting firm and even though [he] paid funds in advance they did not lodge my return, ‘sending me a big bill instead’, big firm big bill, but little service!”.[38] Mr Pearce later prepared his own returns for the 2007 and 2008 financial years using the ATO Tax Packs and there being no tax debt he carried a loss forward to the next financial year. From mid 2008 Mr Pearce was not required to submit a tax return as he was in receipt of the aged pension. He did however keep “e-records” in anticipation of returning to active work.[39] Mr Pearce stated during cross-examination that he kept records and was capable of managing his debts up until the time when proceedings were issued against the Caswells.
[38] Ibid, p 5.
[39] Ibid. A copy of the “e-records” summary of income and expenses for 2007 -2008, 2008-2009 and profit and loss statements for 2006 and 2007 appear as attachments to Exhibit 19.
49.The Tribunal is not satisfied based on the material and evidence given that Mr Pearce kept proper accounts and finds that any accounts kept were clearly not adequate to enable him to properly manage his loan repayments and debts. There were finances to be managed by Mr Pearce during the years 2007 and 2008, such as money owing for aircraft service repairs, loan repayments and money owing to debtors. Mr Pearce has provided some explanation albeit inadequate in addressing the issue of whether he engaged accountants to keep and manage his accounts and taxation returns in that he claims his former accountant left to join another firm leaving him to prepare his own documentation. There is no evidence however as to how Mr Pearce managed his finances to ensure he was meeting all loan repayments and other debts at the relevant time other than giving evidence that he was relying on rental money and miscellaneous future prospects.
(b) Seeking appropriate financial and legal advice before entering into financial or business arrangements in conducting business
50.This issue is relevant to the Supreme Court proceedings having been commenced against Mr Pearce and the contract entered into between Mr Pearce and the Caswells. The Tribunal must consider whether Mr Pearce made reasonable attempts to obtain appropriate advice such as legal and financial advice prior to refinancing with Secure Funding Pty Ltd, entering into the Caswell contract and issuing proceedings against the Caswells in the former CCT. At the time of refinancing with Secure Funding Pty Ltd Mr Pearce owed money, for aircraft service repairs, to Latrobe Financial and various debts as evident from the ITSA documents. Mr Pearce on his own admission was relying on a quick turnaround in the sale of his properties. A similar argument was also advanced by Mr Pearce in relation to his capacity to pay the Secure Funding Pty Ltd debt. The Tribunal must be satisfied that Mr Pearce’s actions in entering into the Caswells’ contract were reasonable “by reference to what was known to him at the time” as set out in the decision in Younan. Prior to entering into the contract with the Caswells Mr Pearce had known to him significant loan repayments to Secure Funding Pty Ltd and outstanding debts. Mr Pearce argues that he was relying on rental income from Barossa Close and other “contracts pending” to pay the secure Funding Pty Ltd loan. It would therefore be reasonable to expect that Mr Pearce prior to entering into the Caswells’ contract would obtain financial and legal advice in relation to his ability to meet any additional financial obligations and his legal obligations in respect of those transactions. These issues would also be relevant factors to be considered by Mr Pearce prior to issuing proceedings in the former CCT. That is, obtaining financial and legal advice prior to commencing proceedings against the Caswells.
51.The Tribunal is not satisfied that Mr Pearce made reasonable attempts to obtain financial and legal advice prior to refinancing with Secure Funding Pty Ltd, prior to signing the Caswells’ contract and prior to issuing proceedings in the CCT. Mr Pearce has given contradictory evidence as to whether he obtained advice in relation to the refinancing of the Secure Funding Pty Ltd loan and Mr Pearce on his own admission states that he did not obtain advice prior to signing the Caswells’ contract.
c) Reporting fraud or theft to the police
52.This was not a relevant issue.
(d) Ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantee
53.This was not a relevant issue.
(e) Putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amount
54.This was not a relevant issue.
(f) Making appropriate provision for commonwealth and state taxation debt
55.This issue is addressed in paragraph (a) above.
Applicant’s general submissions
56.Mr Pearce refers to the findings of the former CCT as a contributing factor in his decision to apply for bankruptcy. He states:
“As a result of the CCT’s direction any chance of settling with unsecured creditors was forfeited and I had no alternative but to apply under the Act for ITSA’s administration, which after fully answering their concerns as to what led to my insolvency and what effort I made to rectify this they accepted.”[40]
[40] Attachment “SOR 4” to Exhibit 1.
57.Mr Pearce makes further general submissions in support of his application in particular that a five (5) year ban by the QBSA as an excluded individual would be “an extreme punishment on top of all [he] has suffered, without justification”.[41] Mr Pearce also argues that he has “tangible assets” since being bankrupt for a turnover of income to satisfy QBSA licence requirements.[42]
[41] “Summerary” (Exhibit 16) filed 11 May 2010, p 4.
[42] As above. Mr Pearce filed a statutory declaration dated 14 January 2010 which sets out his assets including “cash due from maintenance work jobs” totalling $29,940.00. See Attachment “SOR 10” to Exhibit 17. Mr Pearce has also filed an Independent Review Report prepared by Cairns Accounting Services Pty Ltd dated 5 July 2010 (attachment “RP 11” to Exhibit 17).
Tribunal Findings
58.The Tribunal finds that the circumstances that resulted in the happening of the event (entering into bankruptcy) were the following:
1.An inability to pay service costs for the aircraft (owed by Amity Airways Pty Ltd).
2.An inability to meet loan repayments for properties resulting in late penalty fees.
3.Legal proceedings commenced as a result of a failure to make loan repayments including judgment being entered in the Supreme Court of Queensland.
4.An order to pay the sum of $53,329.00 by the former CCT; and approval of a QBSA insurance payment in the sum of $200,000.00.
5.An inability to pay debts including unsecured creditors consisting of trade creditors, taxation liability (GST), credit card debts and judgment debts, evident from the ITSA documents.
59.On the evidence presented the Tribunal is not satisfied that Mr Pearce took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the presentation of a debtor’s petition under the Bankruptcy Act 1966. In particular there is insufficient material filed by Mr Pearce to support his submission that he obtained appropriate financial and legal advice in relation to certain transactions - refinancing of existing loans, signing the Caswells’ building contract and issuing CCT proceedings. The Tribunal is not satisfied as to the reasonableness of Mr Pearce’s actions in relation to the issues to be considered, namely the loan repayments resulting in Supreme Court proceedings, entering into the Caswells’ contract where such building work resulted in a claim being approved by the QBSA under the insurance scheme, issuing CCT proceedings resulting in an order to pay money, and other debts evident from the ITSA documents.
60.Mr Pearce has filed various statements which are lengthy and repetitive and these statements do not assist the Tribunal in considering the principles set out in Younan. The Tribunal observed Mr Pearce throughout the hearing to be disinterested and withdrawn. The Tribunal accepts that Mr Pearce has been unwell having undergone a medical procedure in 2008 however he was capable of travelling to Europe after his procedure for a six (6) week holiday. His medical condition would not explain his inability to recall certain events when questioned by Ms Stroud at the hearing about whether for example he did or did not obtain financial and legal advice before entering into the loan transaction with Secure Funding Pty Ltd given that he filed a sworn affidavit in the Supreme Court of Queensland which contradicts his evidence given at the hearing. There was also inconsistent evidence given by Mr Pearce about whether additional funds ($60,000.00) borrowed from Secure Funding Pty Ltd were used to fund the Caswells’ building project. Mr Pearce firstly gave evidence that some of the additional funds were used towards the Caswells’ project and later stated during cross-examination that he simply did not recall what he had used the additional funds for.
61.The Tribunal accepts the submission made by Ms Stroud that based on the information provided by Mr Pearce he relies on the findings of the former CCT as being a catalyst for the event that resulted in the decision to enter into bankruptcy and that even if he had been successful in the CCT proceedings he would not have had sufficient funds at the time to pay all his creditors. Mr Pearce had a significant number of debts as at the date of bankruptcy and clearly was reliant on “future opportunities” to manage his debt without obtaining appropriate legal and financial advice. In relation to the health issues raised by Mr Pearce, the Tribunal accepts the submissions made by Ms Stroud that based on the material filed, Mr Pearce was already experiencing difficultly in paying his debts in particular loan repayments prior to undergoing a medical procedure.[43] Mr Pearce by way of response to the submissions made by Ms Stroud at the hearing states that it was his expectation that people would advise him as to particular transactions, for example Lee Noble who were acting on his behalf. Mr Pearce argues that nothing could have been done better in relation to the management of his financial affairs. The Tribunal does not accept the submissions made by Mr Pearce and is not able to satisfy itself as to the principles set out in Younan, that is whether Mr Pearce took all reasonable steps to prevent the happening of certain events rather than “dealing with problems after they have arisen”.[44]
[43] The applicant was certified as being unfit to work from 10 March 2008 to 16 March 2008 and underwent a medical procedure on 9 June 2008 and later readmitted on 5 July 2008 and discharged on 9 July 2008 (attachments to Exhibit 19).
[44] Younan v QBSA [2010] QDC 158 at 24.
62.As the threshold issue has not been determined in Mr Pearce’s favour, it is not necessary to consider whether the discretion should be exercised to categorise Mr Pearce as a permitted individual. The appropriate order is that the reviewable decision made by the QBSA is confirmed and Mr Pearce’s application is dismissed.
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