Queensland Building Services Authority v Gartess Pty Ltd
[2011] QCAT 42
•7 February 2011
| CITATION: | Queensland Building Services Authority v Gartess Pty Ltd [2011] QCAT 42 |
| PARTIES: | Queensland Building Services Authority |
| v | |
| Gartess Pty Ltd |
| APPLICATION NUMBER: | OCR187-10 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Roxanne Clifford, Member |
| DELIVERED ON: | 7 February 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | Gartess Pty Ltd is ordered to pay to Queensland Building Services Authority the penalty of $4,500.00 plus $300.00 costs by 4.00pm on 31 March 2011. |
| CATCHWORDS : | Penalty – breach of condition on licence – exceeding allowable annual turnover – small company – significant excess – section 91(3)(b) of the Queensland Building Services Authority Act 1991 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Robert Lovrincevic, in-house lawyer of Queensland Building Services Authority |
| RESPONDENT: | David John Brotchie, Duffield and Associates Solicitors |
REASONS FOR DECISION
Background
By referral of a disciplinary matter to the Tribunal on 28 July 2010 the Queensland Building Services Authority (the QBSA) alleges that in the 2008-09 licence year Gartess Pty Ltd (Gartess) breached a condition of its licence, provided in clause 2.3 of the Financial Requirements for Licensing policy, by exceeding their Allowable Annual Turnover (AATO) by more than 10% without first providing the QBSA with new financial information substantiating that the licensee had sufficient Net Tangible Assets (NTA) to support a higher level of turnover.
Specifically, the QBSA claims Gartess exceeded the AATO by 286.9%. The QBSA states Gartess was previously warned about the consequences of this type of breach when Gartess exceeded the 2007-08 AATO by 71.7%.
Gartess’s Independent Review Report certified that its Net Tangible Assets (NTA) as of 30 June 2009 was $157,023.00.
Gartess has held a licence issued by the QBSA since November 2007.
Legislation
The most relevant provisions for the purpose of this proceeding relate to the Queensland Building Services Authority Act 1991 (QBSA Act) which at:
- section 88 provides for the QBSA to apply to the Tribunal to conduct a proceeding to decide whether proper grounds exist for taking disciplinary action;
- sections 89(a) and 89(k) provides that proper grounds exist if a licensee contravenes a requirement imposed under the QBSA Act or if a licensee contravenes a condition of its licence respectively; and
- section 91(3) which provides that the Tribunal may make an order imposing a penalty against a corporation of up to an amount equivalent to 1,000 penalty units.
Decision 15 September 2010
By consent order, the Tribunal made a decision on 15 September 2010, amongst other directions, that:
Proper grounds exist for taking disciplinary action against Gartess Pty Ltd (the respondent) in that the respondent contravened sections 89(a) and 89(k) of the Queensland Building Services Authority Act 1991 in that during its 2008-09 licence year, the respondent exceeded its Allowable Annual Turnover by one million, three hundred and fifty four thousand, eight hundred and twenty two dollars and eighty three cents ($1,354,822.83) or 286.9% without first notifying the Authority or obtaining the Authority’s approval.
Evidence
The following documents were considered:
Form 22 Application or Referral – disciplinary proceeding, and attachments including ‘Financial Requirements for Licensing’ policy document, filed 28 July 2010;
Affidavit of Michelle Ann Lockton sworn 27 July 2010;
Affidavit of Gary Walter Kuhn sworn 29 October 2010;
Affidavit of Theresa Kuhn sworn 29 October 2010;
Application for decision/order by consent filed 7 September 2010;
Decision/Order of the Tribunal 15 September 2010;
QBSA submissions dated 22 September 2010; and
Gartess Pty Ltd submissions dated 29 October 2010.
Submissions by the QBSA
Penalty
The QBSA submits the purpose of regulating a licensee’s turnover is to avoid situations where licensees trade beyond their means and are unable to honour their responsibilities to consumers, contractors and suppliers.
The QBSA’s role as regulator is undermined when the licensee breaches its license conditions and may put other entities at risk.
[10] The QBSA notes the primary purpose of disciplinary proceedings is to protect the public and uphold the statutory scheme and thus any penalty should be in the nature of deterrence rather than punishment.
[11] The QBSA cites the Queensland Building Services Authority v Built Qld Pty Ltd[1] matter regarding the relevant factors to be taken into account when determining penalty for a licensee exceeding its AATO.
[1] [2005] CCTLO18-05 at paragraph 45.
[12] These considerations are:
The length of time the licensee has been in business;
Whether the breach was an isolated incident or whether there was more than one breach;
Whether there is a satisfactory explanation for the breach;
Whether the breach is likely to reoccur;
The size of the business/company relative to the size of the breach and generally;
The amount by which the AATO was exceeded in monetary and percentage terms;
Whether the licensee has been involved in previous events of this nature, or other offences against the statutory obligations and or failure to comply with the statutory standards.
[13] Specifically, the QBSA notes Gartess was registered as a company [ACN 127 582 423] in November 2007 and issued a licence, Builder-Low Rise, Carpentry and Joinery, by the Authority also in November 2007 and so has been operating as a company for some three years.
[14] The QBSA further notes Gartess exceeded its AATO in 2007-08 by 71.7% and although it had decided not to take action it gave notice to Gartess that action would be taken if other breaches were identified. Gartess had responded it had calculated its AATO from the wrong dates.
[15] The QBSA submits Gartess should put in place ongoing accounting and business forecasting measures to ensure the breach does not occur again. The QBSA submits a moderate penalty should encourage Gartess to take such action and encourage compliance with the scheme.
[16] The QBSA claims Gartess is a moderately sized business and for the 2009-10 financial year the AATO is set at over three million dollars and its Net Tangible Assets (NTA) certified at $157,023.00.
[17] The QBSA submits the most significant aspect of Gartess’s breach is the amount by which the AATO was exceeded, 286.9%, and that this is almost 29 times over the allowable leeway of 10%. Moreover, this is aggravated by the fact this is Gartess’s second recorded failure to comply with the licensing provisions.
[18] The QBSA outlined a number of cases in which to draw a comparison[2] and concluded a penalty in the range of $5,000-$6,000.00 would be appropriate in the current circumstances.
[2] Queensland Building Services Authority v Mena [2005] CCT LO1905; Queensland Building Services Authority v G & T Roofing Pty Ltd QD031-09 (unpublished); Queensland Building Services Authority v Dilizio Painting Pty Ltd [2009] CCT QD021-09.
Costs
[19] The QBSA submits pursuant to section 102 of the Queensland Civil and Administrative Tribunal Act 2009 (the QCAT Act) it seeks costs of and incidental to disciplinary proceedings and seeks costs for the fixed sum of $300.00.representing the costs of the Application fee.
Submissions by Gartess
Penalty
[20] Relying on the relevant considerations outlined in the case of QBSA and Build Qld Pty Ltd and noting that they are not exhaustive, nor independent of each other and are interrelated Gartess firstly claims it was registered as a company on 17 September 2007 and issued with a license from the Authority on 14 November 2007. Gartess submits it had been trading as a company at the time of the 2008-09 breach for less than two financial years and was in its early stages of its building trade.
[21] In relation to the 2007-08 excess turnover, which Gartess submits is not part of this proceeding, Gartess notes it had only been trading approximately one year, was at its very early stages of its building trade and lacked business experience.
[22] Gartess notes there has been no breach of the AATO conditions or any other requirements in the 2009-10 licensing period.
[23] Gartess submits that the breaches of the AATO were the result of unanticipated and unexpected growth which took the Director by surprise. The company was in its infancy and the Director was inexperienced in the building trade and never operated his own business before. The Director and his wife were overwhelmed by paperwork and directed their attention to performance of quality work, maintenance of cash flow and prompt payment of creditors.
[24] Gartess claims that after the 2007-08 breach it contacted its accountants and relied on their advice that the breach would be fixed and it could continue to build.
[25] Gartess has now changed its accounting firm to one that has significant experience providing advice to builders. Furthermore the business has put in place a system whereby the office manger will meet quarterly with the accountants to discuss and measure its compliance with its obligations. Gartess also stated it has put in place a spreadsheet which will allow it to more readily track its financial progress and has implemented a policy of considering its AATO prior to taking on new clients.
[26] Gartess submits it is a small proprietary company with a sole director, secretary and member. It employs 2 staff, the Director and his wife, the office manager. Gartess notes it completed three buildings in 2007-08, and 6 buildings in the 2008-09 and 2009-10 years. Although Gartess concedes its size and lack of experience does not excuse the breach it submits is a mitigating factor when putting the breach in context.
[27] Gartess concedes that the amount by which the AATO was exceeded was significant.
[28] Gartess submits it has not been subject to any building disputes or other disciplinary proceedings and claims that no party has suffered any loss whatsoever as a result of the financial breach.
[29] Gartess distinguishes its circumstances to the cases the QBSA cited in relation to appropriate penalty. In particular, in relation to QBSA and Mena Gartess says in that matter the breaches occurred at non-consecutive years which it submits indicates Mena failed to put in place business practices that ensured no further breaches occurred. Gartess as noted above has made such changes. Gartess notes in the QBSA and Dilizio case that company had been trading for six years and the breach occurred in its sixth year not in its starting years as in the current circumstances.
[30] In the matter of QBSA and Sunland Constructions[3] Gartess notes breaches over 41% and 689% of the AATO with a penalty of $7,000.00. Gartess submits Sunland Constructions is a significant company with a long trading history and a multimillion dollar turnover with breaches recorded in non-consecutive years.
[3] Queensland Building Services Authority v Sunland Constructions Pty Ltd [2004] QCCTB 49.
[31] Gartess submits that its circumstances are more analogous to those in the case of QBSA and McLucas[4]. In that case the respondent was a small business in its infancy with unexpected growth and with consecutive breaches of 68% and 29%. The penalty imposed was $4,000.00.
[4] Queensland Building Services Authority v McLucas Pty Ltd [2005] QCCTB111.
[32] Gartess finally submits given the above cases a $4,000.00 penalty is appropriate.
Costs
[33] Gartess relies on section 100 of the QCAT Act that which states that unless otherwise provided by this Act or an enabling Act each party to a proceeding must bear its own costs. Gartess submits the QBSA Act does not provide for costs except in a ‘building dispute’, which this proceeding is not, and submits that there is no interests of justice consideration to make an order for costs and the QBSA has not established any interests of justice reason.
Findings and conclusions
[34] Gartess was issued with a licence by the QBSA on 14 November 2007. Gartess is in my view properly characterised as a small family company that in its infancy exceeded its AATO in the first two years of operation. Although it was somewhat slow to respond to early warnings by the QBSA about the consequences of such action I am satisfied that it has now changed to accountants more familiar with the building industry reporting requirements and has implemented procedures which will diminish the risk of reoccurrence. The AATO has not been exceeded in the recent reporting year.
[35] It was however determined by the Tribunal on 15 September 2010 that proper grounds exist for disciplinary action against Gartess for contravention of section 89(a) and/or section 89(k) of the QBSA Act.
[36] In the 2008/2009 licence year Gartess exceeded the AATO by $1,354,822.83 or 286.9% without first notifying the QBSA or obtaining the QBSA’s approval. This is nearly 29 times the allowable leeway of 10% and I am of the view this considerable departure from the allowable leeway should be given appropriate weight in determining the penalty notwithstanding the mitigating factors Gartess has submitted.
[37] The purpose of disciplinary proceedings is to protect the public rather than to punish wrongdoing. It is appropriate that licensees are deterred from breaching the statutory requirements not just so that the general integrity of the scheme is maintained but to ensure that the financial backing represented by their licence is real and not fictional.
[38] On consideration of the cases submitted by the parties and noting that the penalty band width in those cases is narrow, I am of the view, given the small size of the company and recognition of its early trading days balanced against the significant departure from the allowable leeway, that the appropriate penalty is $4,500.00 for this matter.
[39] I am also satisfied that in disciplinary proceedings such as these whereby the QBSA is obliged to bring the application, has been represented by in-house legal officers and the parties have by consent of the Tribunal conceded that a breach exists it is appropriate for the QBSA to recover the application costs of $300.00.
[40] I order that Gartess Pty Ltd pay the Queensland Building Services Authority the penalty of $4,500.00 plus costs of $300.00 on or before 4.00pm on 31 March 2011.
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