QBSA v Flowtech Hydraulics Pty Ltd
[2013] QCAT 517
| CITATION: | Queensland Building Services Authority v Flowtech Hydraulics Pty Ltd [2013] QCAT 517 |
| PARTIES: | Queensland Building Services Authority |
| v | |
| Flowtech Hydraulics Pty Ltd |
| APPLICATION NUMBER: | OCR076-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Bevan Hughes, Member |
| DELIVERED ON: | 2 October 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. That Flowtech Hydraulics Pty Ltd pays to the Queensland Building Services Authority a penalty of $7,500 by 4pm on 4 November 2013. 2. That Flowtech Hydraulics Pty Ltd pays to the Queensland Building Services Authority its costs fixed at $1,500 by 4pm on 4 November 2013. |
| CATCHWORDS: | Exceeding Annual Allowable Turnover – where significantly exceeded – two breaches in consecutive years – delay in prosecuting – risk to public – period of licence - costs Queensland Building Services Authority Act 1991 ss 89(a) and (k), 91(3) Queensland Building Services Authority v Alternate Dwellings Pty Ltd [2011] QCAT 460 Queensland Building Services Authority v C-View Windows Pty Ltd [2011] QCAT 211 Queensland Building Services Authority v Classic Brick & Block Pty Ltd [2011] QCAT 130 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
REASONS FOR DECISION
What is this Application about?
Flowtech Hydraulics Pty Ltd exceeded its Allowable Annual Turnover (AATO) in two consecutive financial years. In 2009-10, Flowtech exceeded its AATO by $14,558,739 or 135.72 percent. In 2010-11, Flowtech exceeded its AATO by $12,841,183 or 77.1 percent.
By failing to notify or obtain the consent of the Queensland Building Services Authority, Flowtech breached its builder licence requirements. The requirements help to ensure that builders trade within their means and are able to honour their commitments to consumers, contractors and suppliers.
The Authority therefore applied for sanctions against Flowtech.
The Tribunal makes the following orders by consent:
a) that Flowtech contravened sections 89(a) and (k) of the Queensland Building Services Authority Act 1991 in the 2009-10 licence year by exceeding its Allowable Annual Turnover (AATO) by $14,558,739 or 135.72 percent, without first notifying the Queensland Building Services Authority that it was likely to exceed its AATO or obtaining the Authority’s approval; and
b) that Flowtech contravened sections 89(a) and (k) of the Queensland Building Services Authority Act 1991 in the 2010-11 licence year by exceeding its Allowable Annual Turnover (AATO) by $12,841,183 or 77.1 percent, without first notifying the Queensland Building Services Authority that it was likely to exceed its AATO or obtaining the Authority’s approval.
The Tribunal must then determine penalty. The Tribunal may impose a penalty of an amount up to $110,000.[1] The Authority contends that the appropriate penalty is ‘in the range of $11,000’[2]. Flowtech contends that it is ‘in the range of $2,500 to $5,000’.[3]
What is the appropriate penalty?
[1]Queensland Building Services Authority Act 1991 s 91(3) and Penalties and Sentences Act 1992 s 5.
[2]Applicant’s Submission on Penalty and Costs at paragraph 45.
[3]Respondent’s Submissions on Penalty at paragraph 11.
What are the relevant factors?
The Tribunal has considered the following relevant factors in determining the penalty for exceeding the allowable AATO[4]:
a) Flowtech has been established in the hydraulic plumbing industry since 1972 and first procured its licence with the Authority in 1993;
b) there were two breaches occurring in consecutive years;
c) the breaches arose from Flowtech’s ‘unpredicted and unprecedented growth in revenue experienced during the 2009 and 2010 operating years coupled with a failure in its own internal procedures…’[5];
d) Flowtech has taken steps to prevent the breaches from recurring, including employing an in house chief financial officer and implementing recommendations from an independent business review conducted in May 2012;
e) as of 9 July 2013, Flowtech had issued capital of $408,217. Flowtech can be characterised as a medium size business;
f) Flowtech exceeded its AATO by $14,558,739 or 135.72 percent in 2009-10 and by $12,841,183 or 77.1 percent in 2010-11; and
g) both breaches followed a warning letter in 2006.[6]
[4]Queensland Building Services Authority v Built Qld Pty Ltd [2005] QCCTB 152.
[5]Respondent’s Submissions on Penalty, unnumbered paragraph.
[6]Applicant’s Submission on Penalty and Costs at paragraphs 20 and 42 that Flowtech exceeded its AATO by $4,833,977 or 48.33% for year ended 31 December 2005.
What are comparable previous decisions?
The Tribunal considered comparable previous decisions in the attached schedule. These include and go beyond decisions cited by Flowtech.
How does the present application compare with the previous decisions?
Flowtech cites Project Coordination[7], Bellero[8], McLucas[9] and Williams[10] to support its range.
[7]QBSA v Project Coordination (Australia) Pty Ltd [2004] QCCTB 61.
[8]QBSA v Bellero Constructions Pty Ltd [2004] QCCTB 60.
[9]QBSA v McLucas Pty Ltd [2005] QCCTB 111.
[10]QBSA v James L. Williams Pty Ltd [2004] QCCTB 106.
Williams is distinguishable because it did not involve consecutive breaches.
McLucas is distinguishable because the licensee was the first business venture operated by an inexperienced husband and wife team.
Project Coordination and Bellero involve consecutive breaches. In Project Coordination, the licensee’s penalty was $1,000 higher. The difference with Bellero was its size and standing.[11] Both decisions are otherwise economic with their reasoning.
[11]QBSA v Project Coordination (Australia) Pty Ltd [2004] QCCTB 61 at paragraph 13.
More recent and expansive authorities with consecutive breaches are Classic Brick[12], C-View[13], Uniport[14], Todd’s Plumbing[15] and Battaglia[16].
[12]QBSA v Classic Brick & Block Pty Ltd [2011] QCAT 130.
[13]QBSA v C-View Windows Pty Ltd [2011] QCAT 211.
[14]QBSA v Uniport Australia Pty Limited [2011] QCAT 612.
[15]QBSA v Todd’s Plumbing Pty Ltd [2011] QCAT 622.
[16] QBSA v Battaglia Pty Ltd [2012] QCAT 3.
Uniport attracted the highest penalty of $13,500. Uniport is distinguishable as too high because the licensee committed four breaches and as a large company was expected to provide leadership within the industry.[17]
[17] QBSA v Uniport Australia Pty Limited [2011] QCAT 612 at paragraph 20.
Battaglia attracted a penalty of $11,000. Battaglia is distinguishable as too high because the licensee received repeated warnings.
Classic Brick attracted a penalty of $10,000. Classic Brick is distinguishable as too high because the licensee knew of the first breach and had ample warning of the second breach.
Todd’s Plumbing attracted a penalty of $6,000. Todd’s Plumbing is distinguishable as too low. This is because the breach was substantially less in the second year (percentage and amount) and the monetary amounts of the breaches in the present case are exponentially higher.
Flowtech’s submissions focused on the Authority’s delay in prosecuting the breaches. The Authority filed its application on 13 March 2013, two years after Flowtech reported the later breach. The Authority’s submissions do not address the delay.
As a statutory authority, the Authority has competing demands on its limited resources. It cannot be expected to immediately review information provided to it by all its licensees. It must prioritise.
The delay of two years is evidence that the Authority did not consider expediently prosecuting Flowtech to be a priority. The purpose of disciplinary proceedings is to protect the public rather than punish wrongdoing. It is therefore reasonable to infer that the Authority did not consider Flowtech to be a substantial risk to the public. This is consistent with Flowtech’s Net Tangible Assets at the time of the breaches.[18]
[18] Affidavit of Gregory Clyde Leggett, Chartered Accountant sworn 20 June 2013.
In C-View, the Tribunal applied the Authority’s torpidity to mitigate the penalty to $8,000.[19] The licensee had committed four breaches. Flowtech committed two breaches. The breaches are fewer; the penalty must similarly be lower.
[19] QBSA v C-View Windows Pty Ltd [2011] QCAT 211 at paragraphs 29 and 35.
The penalty range is therefore $6,000 to $8,000.
Bellero and Mainbrace attracted penalties of $7,000. Both are distinguishable as too low. In the present case, the percentage breach in the first year is seven times higher than Bellero. Mainbrace involved a single breach.
At the time of the first breach, Flowtech had been licensed for 17 years, substantially longer than the licensees in most of the previous decisions. Although the breach was not intentional, the licensee should know better.
The appropriate penalty is therefore $7,500.
Should Flowtech pay the Authority’s costs?
The Authority also seeks its costs fixed at $1,500.
The Tribunal has refused to award costs where the Authority was not represented by external lawyers but by its own legal staff.[20] However, the Tribunal usually awards a ‘modest amount’ of costs if the Authority succeeds in disciplinary proceedings.[21]
[20]See for example QBSA v Coastal Interior Linings Pty Ltd [2010] QCAT 165; QBSA v Todd’s Plumbing Pty Ltd [2011] QCAT 622.
[21]See for example QBSA v Battaglia Industries Pty Ltd [2012] QCAT 3; QBSA v Gartess Pty Ltd [2011] QCAT 42; QBSA v C-View Windows Pty Ltd [2011] QCAT 211; QBSA v Phoenix Constructions Pty Ltd [2010] QCAT 542; QBSA v Geocal Constructions Pty Ltd [2010] QCAT 460; QBSA v M & R Hudson Plumbing Pty Ltd [2010] QCAT 623.
The Authority has succeeded. Although it used its own legal staff, this does not mean that costs have not been incurred. It pays its legal staff. They expended time and resources to prepare the application. As Flowtech notes in its submissions, the Authority has other functions. Using its legal staff to prepare disciplinary proceedings comes at the cost of not using its legal staff to assist with those other functions, including educative functions to assist the industry as a whole.
The amount sought is not unreasonable given the volume of the material and the resources that would have been expended to consider and prepare that material.
The Tribunal therefore also orders that Flowtech pay to the Authority its costs of $1,500.
What are the appropriate Orders?
The Tribunal orders that Flowtech pay to the Authority the amount of $7,500 plus $1,500 costs by 4pm on 4 November 2013.
Schedule
| Case Name and citation | Breach Amount ($) | Breach (% of AATO) | Years licensed | Penalty | Relevant Factors |
| QBSA v Bellero Constructions Pty Ltd [2004] QCCTB 60 | N/A but “significant” | 18% 171% | N/A | $7,000 | Not deliberate |
| QBSA v Project Coordination (Australia) Pty Ltd [2004] QCCTB 61 | N/A but “significant” | 69.5% - 242% 80% - 131% | N/A | $6,000 | Not deliberate Steps to prevent recurrence Substantial size and standing of licensee |
| QBSA v James L. Williams Pty Ltd [2004] QCCTB 106 | $19,637,894 | 42% | N/A | $5,000 | Not deliberate Isolated Steps to prevent recurrence Proud history of licensee (130 years) |
| QBSA v McLucas Pty Ltd [2005] QCCTB 111 | $457,620 $445,650 | 69% 28% | N/A | $1,200 | Small business Inexperience of licensee Rapidly expanding business No consumer suffered Steps to prevent recurrence |
| QBSA v Mine-Con Plumbing Pty Ltd [2009] QCAT 32 | $2,133,715 | 711.2% | Four | $3,500 | Medium business Young but not new company Time and cost benefits of non-compliance Public not at high risk Significant NTA not ground for non-compliance Early admission No history of previous offences Minimal explanation |
| QBSA v Northstar Plumbing Pty Ltd [2009] QCAT 33 | $892,588 | 892.6% | Four | $800 | Moderate business Isolated breach Clerical error Steps to prevent recurrence No obligation on Authority to instruct |
| QBSA v Grasstree Landscaping Design Pty Ltd [2010] QCAT 89 | $1,818,802 | 606.3% | One | $4,000 | Substantial breach Deter other licensees |
| QBSA v Coastal Interior Linings Pty Ltd [2010] QCAT 165 | $6,787,774 | 226.3% | 13 | $4,000 | No material risk as sufficient NTA Failure by Authority to be astute rejected |
| QBSA v Geocal Constructions Pty Ltd [2010] QCAT 460 | $8,197,080 | 1,143.8% | Five | $6,000 | Isolated incident Steps to prevent recurrence Significant breach Increase in turnover did not increase risk – sale of one project only |
| QBSA v Phoenix Constructions (Queensland) Pty Ltd [2010] QCAT 542 | $6,009,618 | 36.3% | 16 | $5,000 | Large business Isolated incident Steps to prevent recurrence Significant amount but not significant percentage Ability to pay for advice but did not – disregard for obligations |
| QBSA v M & R Hudson Plumbing Pty Ltd [2010] QCAT 623 | $708,079 | 236% | Four | $4,000 | Isolated incident Personal and health issues of Director |
| QBSA v Gartess Pty Ltd [2011] QCAT 42 | $1,354,822.83 | 286.9% | Two | $4,500 | Small business Steps to prevent recurrence Unanticipated and unexpected growth Inexperienced Director |
| QBSA v Mainbrace Constructions (NSW) Pty Ltd [2011] QCAT 93 | $18,255,935 | 12.8% | Four | $7,000 | Substantial business Not isolated incident – two previous breaches |
| QBSA v Classic Brick & Block Pty Ltd [2011] QCAT 130 | $1,204,359 $217,415 | 401% 19.7% | Two | $10,000 | Medium business Breaches in two consecutive years demonstrates lack of consideration No steps to prevent recurrence |
| QBSA v C-View Windows Pty Ltd [2011] QCAT 211 | $3,491,568 $4,217,017 $4,427,011 $772,185 | 294.82% 305.3% 226.4% 20.1% | One | $8,000 | Not deliberate Breaches in four consecutive years Considerable breaches Reasonable explanation Licensee relied on professional advice Steps taken to prevent recurrence No history of previous offences Authority delay of four years to review compliance Licensee cooperated with process |
| QBSA v Alternate Dwellings Pty Ltd [2011] QCAT 460 | $4,729,832 | 157.65% | One | $3,000 | Not deliberate Satisfactory explanation No history of previous offences Large amount and percentage but no danger to public as sufficient NTA |
| QBSA v Uniport Australia Pty Limited [2011] QCAT 612 | $423,589 $3,365,502 $15,813,437 $1,500,035 | 21.4% 350.7% 1,193.3% 12.5% | One | $13,500 | Large business with responsibility to lead industry Breaches in four consecutive years Incorrectly monitored turnover Steps taken to prevent recurrence No risk as sufficient NTA Licensee cannot ignore Authority publications Breaches significant and continuing |
| QBSA v Todd’s Plumbing Pty Ltd [2011] QCAT 622 | $905,550 $295,148 | 301.8% 16% | One | $6,000 | Medium business High growth without appropriate mechanism Steps taken to prevent recurrence Breach much less in second year |
| QBSA v Battaglia Pty Ltd [2012] QCAT 3 | $1,093,408 $2,018,009 | 364.5% 143.99% | N/A | $11,000 | Substantial breaches Licensee repeatedly warned |
| QBSA v Silverback Constructions Pty Ltd [2013] QCAT 222 | $3,222,761 | 1074% | Three | $4,800 | Medium business No history of offences No explanation Breach not likely to recur Licensee warned High percentage |
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