QBCC v Em Signs (Vic) Pty Ltd
[2013] QCAT 738
| CITATION: | QBCC v EM Signs (Vic) Pty Ltd [2013] QCAT 738 |
| PARTIES: | Queensland Building and Construction Commission (Applicant) |
| V | |
| EM Signs (Vic) Pty Ltd (Respondent) |
| APPLICATION NUMBER: | OCR226-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Gordon |
| DELIVERED ON: | 18 February 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. EM Signs (Vic) Pty Ltd must pay a penalty to the Queensland Building and Construction Commission in the sum of $12,000 by 4:00pm on 28 March 2014. 2. There is no order for costs. |
| CATCHWORDS: | Exceeding Annual Allowable Turnover – two breaches over four years – warning after first breach – mid to large sized company – no submissions by licensee - appropriate penalty |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
EM Signs (Vic) Pty Ltd was granted a licence on 27 July 2004 by the Queensland Building Services Authority (now the Queensland Building and Construction Commission) in the class of Builder – Open, restricted to Commercial Awnings and Sign Erection Only.
At the time of the annual renewal of such licences, the Commission determines the licensee’s turnover limit for the year ahead.
The turnover limit is called the Allowable Annual Turnover. It is calculated by the Commission from the licensee’s net tangible assets. The higher the assets, the greater the turnover is allowed to be. If the licensee exceeds the turnover limit beyond a 10% leeway allowed under the Financial Requirements for Licensing then this is a breach of the licence unless the licensee first provides the Commission with appropriate financial information. The financial information which would be required is an Independent Review Report or Audit Report. With this information, the Commission could consider increasing the turnover limit.
The aim of this system is to ensure that builders do not over-stretch financially so that they are able to honour their commitments to consumers, contractors and suppliers. This is achieved by ensuring that the licensee has sufficient financial “cushion” should it encounter problems in the year in question.
If there is a breach of the licence conditions, this permits the Commission to take disciplinary action.[1] Such proceedings fall to be determined by QCAT as part of its original jurisdiction[2]. The maximum penalty for a corporation is an amount equivalent to 1,000 penalty units for each disciplinary offence.[3] The value of a penalty unit is currently $110: therefore the maximum penalty which may be imposed is $110,000.
[1]Because it is a breach of sections 89(a) and 89(k) of the Queensland Building Construction and Commission Act 1991 (Qld).
[2]QBCC Act ss 88 to 91.
[3]Ibid s 91(3)(b).
The disciplinary proceedings
There are two breaches which have resulted in these disciplinary proceedings against EM Signs.
The first was exceeding the turnover limit in the year 1 July 2007 to 30 June 2008. In that year the company’s turnover limit was $640,841 but the actual turnover was $1.675m, an excess of 161.4%. The company did not notify the Commission nor seek its approval before this happened. Because of this breach, the Commission issued a warning letter on 22 December 2008. I refer to the terms of that letter later in these reasons.
In the year 1 July 2010 to 30 June 2011 the company’s turnover limit was $4.23m but the actual turnover was $8.21m, an excess of 94.31%. The company did not notify the Commission nor seek its approval before this happened. This was a second breach and resulted in the Commission bringing these proceedings before the Tribunal on 6 September 2013.
On 3 October 2013 the Tribunal made a directions order and the order recited that proper grounds existed for taking these disciplinary proceedings against EM Signs in the circumstances because of these two breaches. In its submissions the Commission says that this order was made by consent, however this does not appear on the order. I can see from the attendance sheet that EM Signs did appear at that hearing. Since this decision has already been made by the Tribunal there is no need for me to revisit that matter. I shall take it that proper grounds exist for taking these disciplinary proceedings and I need consider only the question of penalty.
Directions were given at that hearing on 3 October 2013 for submissions to be filed by both sides as to penalty and costs. The Commission did so, but EM Signs did not.
Penalty
Certain matters are listed as relevant to penalty in QBSA v Built Qld Pty Ltd [2005] CCT L018-05 and I shall consider these in turn.
Duration of the business. EM Signs has held its licence since 27 July 2004. The greater the length of a time a licensee has been operating, the more it is to be expected that the licensee should be aware of the turnover rules and adjust procedures to comply with them. Therefore a long duration of business would be an aggravating factor.
Whether the breach is an isolated incident. The fact that there were two breaches, separated by a period of time and seemingly unrelated demonstrates that the breaches are not isolated incidents.
Clearly it is right to take account of the warning issued on 22 December 2008 in respect of the breach which had occurred in the year 1 July 2007 to 30 June 2008. That warning explained that there could be serious consequences for breaches including a fine, suspension or cancellation of the licence or being required to stop work until the breach was rectified.
It might be thought that the Commission cannot now take disciplinary action for this breach because it decided not to do so in 2008. However, the warning letter explained that although no action was going to be taken over the breach at that time, if there was another breach then action would be taken for this breach and all other breaches identified. This is what has happened in this case.
Whether there is a satisfactory explanation for the breach. There are no submissions from EM Signs. I can see nothing in the papers which explain why the company exceeded the turnover limit. Accordingly there are no mitigating factors under this head.
Whether the breach is likely to re-occur. In the absence of submissions from EM Signs this cannot be considered. I can see nothing in the papers which assists.
Size of the business. EM Signs had an annual turnover limit in the year 1 July 2012 to 30 June 2013 of $11.78m. It is clear that the business of the company has enlarged rapidly. The Commission characterises it as a mid to large sized business.
The amount by which the turnover limit was exceeded or by which the net tangible assets fell below the limit. This is an important factor in most cases. This is because this percentage will usually reflect the level of risk to which the business has exposed its consumers, contractors and suppliers. And it is the avoidance of this risk to which these rules are aimed.
Other points of mitigation or aggravation. In my view it is an aggravating factor that EM Signs ignored the order for directions made on 3 October 2013 in which it was ordered to file and serve its submissions on penalty and costs by a certain date. EM Signs attended that directions hearing and received a copy of the order. It made no further contact with the Tribunal. This demonstrates either that it is very disorganised or that it is disinterested, or both. If such submissions had been made it would have been an opportunity for EM Signs to demonstrate to the Tribunal contrition for the offence and an understanding and acceptance of the need for these rules.
It is necessary in mitigation to take into account that no breach occurs if the turnover limit is exceeded by no more than 10%.
Conclusion as to penalty
The Commission has provided me with a number of comparative cases. QBSA v Flowtech Pty Ltd [2013] QCAT 157 concerned two occasions when the turnover limit was exceeded by a mid to large sized business, the first time by 136% and the second by 77% the following year. The penalty was $7,500 plus costs of $1,500.
Then there is QBSA v Battaglia Industries Pty Ltd [2012] QCAT 3. Like the instant case, this involved two breaches spanning more than one year, it was the first time disciplinary action of this type had been taken against the company and a warning letter was sent after the first breach. However, the amount of the breach in percentage terms was greater than in the instant case at 364% and 144%, and the company was classified as a small business. The penalty was $11,000 plus costs.
QBSA v Classic Brick & Block Pty Ltd [2011] QCAT 130 concerned two breaches of exceeding the turnover limit by 401% and 19.7% respectively. A warning letter was sent after the first breach. The company was classified as a small business – there was a penalty of $10,000.
In QBSA v Bencee Pty Ltd [2013] QCAT 687, which was published after the Commission made its submissions in this case, a company of similar size to EM Signs exceeded its turnover limit by 46.5% and after a warning letter, by 76.6% two years’ later. The company demonstrated in its submissions an insight into its responsibilities. A penalty of $11,000 was imposed and costs of $1,500 were awarded.
It is to be noted that the penalties imposed in the earlier of these previous cases must be viewed in the light of the increase in the value of the penalty unit on 21 August 2012 by 10% from $100 to $110.[4] This means that if these cases had been heard today, the penalty would probably be higher.
[4]Section 34 of the Penalties and Sentences and Other Legislation Amendment Act 2012 (Qld) amending section 5 of the Penalties and Sentences Act 1992 (Qld).
In my view it is right to have regard to the maximum penalty which can be imposed and the value of a penalty unit, as at the date of assessment of the penalty, not at the date of the breach. Therefore I agree with the Commission’s submissions that consistent with previous QCAT decisions a penalty range of $7,000 to $12,000 is indicated in the circumstances of this case.
The most important points of aggravation in this case are the length of time the licence had been held, the period over which these breaches occurred, the size and resources of EM Signs, the level of the excess over the turnover limit in both cases, the fact that despite the warning a second breach occurred, and the lack of submissions so that there is no indication of contrition or understanding of responsibilities.
Because there are no submissions, I cannot see any mitigating factors. It is true that EM Signs accepted at an early stage that there were grounds for discipline, but I do not think there was any available argument to the contrary since the breach is a technical one which does not require proof of knowledge or intent. Whilst the delay in bringing these disciplinary proceedings might have been argued, the Commission have some explanation for this, and I cannot see that EM Signs has been prejudiced by the delay.
In the circumstances I think that the appropriate penalty must be on the high end of the range and so I order a penalty of $12,000.
The Commission do not apply for costs. In the circumstances I shall say no order as to costs.
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