Queensland Building Services Authority v Geocal Constructions Pty Ltd
[2010] QCAT 460
•21 September 2010
| CITATION: | Queensland Building Services Authority v Geocal Constructions Pty Ltd [2010] QCAT 460 |
| PARTIES: | Queensland Building Services Authority |
| v | |
| Geocal Constructions Pty Ltd |
| APPLICATION NUMBER: | OCR129-10 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | Decision on the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Peta Stilgoe |
| DELIVERED ON: | 21 September 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The respondent pay the applicant a penalty of $6000 plus $1000 on or before 13 October 2010. |
| CATCHWORDS : | EXCEEDING ANNUAL ALLOWABLE TURNOVER – where AATO significantly exceeded – where respondent did not take into account income earned from sale of units Queensland Building Services Authority v Colorin Australia Pty Ltd Queensland Building Services Authority v Jeodon Pty Ltd |
APPEARANCES and REPRESENTATION (if any):
This matter was heard on the papers in accordance with section 32 of the
Queensland Civil and Administrative Tribunal Act 2009.
REASONS FOR DECISION
In the 2007-08 year, Geocal Constructions Pty Ltd (“Geocal”) had an Allowable Annual Turnover (“AATO”) of $716,681. Geocal’s actual turnover that year was $8,913,761, exceeding the AATO by $8,197,080 or 1,143.8%. Geocal did not notify the Authority that it was likely to exceed the AATO, nor did it obtain the Authority’s consent to exceed the AATO.
The parties agree, and the tribunal accepts, that proper grounds exist for taking disciplinary action against Geocal for breaching sections 89(a) and/or 89(k) of the Queensland Building Services Authority Act (“the Act”). Pursuant to section 91(3)(b) of the Act, the tribunal may impose a penalty of an amount not more than 1000 penalty units.
Relevant factors for consideration in determining penalty
The Authority has directed the tribunal’s attention to Queensland Building Services Authority v Built Qld Pty Ltd[1] which lists the relevant factors to be taken into account when determining a penalty for exceeding the allowable AATO. As to each of those factors:
a)Geocal was registered as a company on 24 July 2002. The Authority issued a licence to Geocal on 25 November 2004. It has been trading for some time without incident.
b)There is no suggestion that the breach is anything other than an isolated incident.
c)Geocal says there are a number of factors that contributed to its breach of the AATO. Some of these factors are familiar; Mr Callianiotis, the sole director was not monitoring the turnover of the company as he was more involved in the day-to-day construction work of the company and Geocal did not have sufficient accounting procedures in place that would have flagged a potential breach of the AATO.
d)Unusually, the main reason for the breach was that Geocal was able to sell units that it had constructed as part of a speculative development. The sales revenue totalled $7,330,547, almost 90% of the amount by which Geocal exceeded its AATO. Geocal also says it included other non-construction turnover in its accounts. As the Authority has pointed out, clause 1.6 of the Financial Requirements for Licensing Policy defines “annual turnover” as “the total revenue derived by the Licensee from all sources”.
e)The breach is not likely to recur. Geocal has put in place an administrative regime that monitors compliance with the Authority’s requirements. Mr Callianiotis has restructured his business affairs, separating the non-construction businesses and placing them into different entities.
f)There is no doubt that the amount by which the AATO was exceeded, both in money and percentage terms, was significant.
[1] [2005] QCCTB 152
Authority’s submissions
The Authority urges a significant penalty in the range of $7000 to $8000:
a)The bulk of the unit sales occurred in October 2007. In November 2007, the time when Geocal renewed its licence, it was clearly foreseeable that it would breach its AATO.
b)Even excluding the revenue from unit sales, Geocal still exceeded its AATO by $866,533, or 120%.
c)Geocal did not regularly monitor its turnover, as the Commercial and Consumer Tribunal suggested that a licensee should[2].
d)Geocal should be characterised as a large-sized business. Its current AATO is set at $12,000,000.
e)The penalty should act as a deterrent to both Geocal and other licensees. Therefore, the penalty should not be insignificant to the benefit gained by Geocal and should not simply be factored into Geocal’s business practices.
f)The penalty should reflect the primary purpose of the financial requirements which is to avoid situations where licensees trade beyond their means and are unable to honour their obligations to consumers, contactors and suppliers.
[2] Queensland Building Services Authority v Janda Commercial Pty Ltd [2009] QCCTB 241 at paragraph 6
The Authority referred the tribunal to the following cases:
Case $ over AATO % over AATO Penalty QBSA v Built[3] $3,537,258 1,000 $6000 QBSA v Colorin[4] $8,217,861 3,287 $2500 QBSA v Jeodon[5] $2,303,433 3,071 $5,000 QBSA v Jordan[6] $3,542,992 1,515 $3,500 QBSA v West[7] $2,727,264 1,090 $6000 [3]supra
[4] Queensland Building Services Authority v Colorin Australia Pty Ltd [2004] QCCTB169
[5] Queensland Building Services Authority v Jeodon Pty Ltd [2006] QCCTB 13
[6] Queensland Building Services Authority v Jordan Constructions Co Pty Ltd [2007]Q CCTB 131
[7] Queensland Building Services Authority v West Plumbing Maintenance Pty Ltd [2005] QCCTB 182
The Authority submits that Geocal’s breach is in terms similar to, but more serious than, the breaches in QBSA v Built and QBSA v West. It further submits that the penalty must be adjusted to reflect the increase in the value of a penalty unit from $75 to $100.
The Authority distinguishes QBSA v Colorin on the basis that the company obtained turnover from various industries not connected with construction.
Geocal’s submissions
Geocal accepts that the primary purpose of these proceedings is to protect the public and uphold the statutory regulatory scheme. It also accepts that the penalty must act as a deterrent to Geocal and other licensees. Geocal urges the tribunal to impose a penalty of between $4000 and $6000 and has submitted these factors as relevant matters in mitigation:
a)It has been operating for a significant period of time with no previous breaches.
b)Mr Callianiotis spent most of his time managing the construction work, rather than the business administration. He accepts that he did not have the advanced skills necessary to ensure compliance with the Authority’s requirements.
c)Mr Callianiotis believed the AATO related only to construction turnover. Geocal’s AATO for the 2006-07 year was $10,506,912. It deliberately reduced its AATO in the next financial year because there was not much construction work left on the speculative unit development.
d)The sale of the units, in fact, improved Geocal’s net asset position so that it was less likely to trade beyond its means and place itself in a position where it was unable to meet its obligations to consumers, contractors and suppliers.
e)Mr Callianiotis has restructured and put measures in place to ensure that Geocal does not exceed its AATO in the future.
In addition to the cases referred to the tribunal by the Authority, Geocal submits that the following cases are relevant:
Case $ over AATO % over AATO Penalty QBSA –v FDC[8] $129,149,827 256 $8000 plus $1000 costs QBSA –v Sunland[9] $28,000,000 689 $7000 QBSA –v Marveldale[10] $4,307,838 474 $4000 QBSA –v Mine-Con[11] $2,033,715 711.2 $3500 [8] Queensland Building Services Authority v FDC Construction & Fitout Pty Ltd [2009] QCCTB 16
[9] Queensland Building Services Authority v Sunland Constructions Pty Ltd [2004] QCCTB 49
[10] Queensland Building Services Authority v Marveldale Pty Ltd [2006] QCCTB 67
[11] Queensland Building Services Authority v Mine-Con Plumbing Pty Ltd [2009] QCAT 32
In particular, it urges the tribunal to apply the same principles as were applied in QBSA v Colorin. It is apparent that Geocal’s choice of cases relies upon the assumption that the tribunal should ignore profit on the sale of the units when considering the extent to which it exceeded the AATO.
Considerations
10. Geocal’s position falls somewhere between that of QBSA v Colorin and QBSA v Jordan.
11. In Colorin the company had earned income from electrical contacting, mechanical contacting and ladies fashion. The company had correctly estimated its income from electrical contracting but had not made any allowance for the significant income from mechanical contracting. The proportion of income attributable to ladies fashion was not mentioned in the tribunal’s decision. Mrs Spender accepted the special circumstance that the electrical contracting income did not exceed the AATO and imposed a modest penalty. In the same way, Geocal did not make allowance for the income potential from the sale of the units.
12. Jordan obtained its licence for one building project, which was always going to result in a breach of the AATO. Geocal’s sale of the units was always going to result in a breach of the AATO although I accept Mr Callianiotis’ statement that he was not aware that he was required to account for this income when assessing his AATO.
13. The irony of Geocal’s situation is not lost on me. In breaching the AATO, Geocal was, in fact, in a better position to meet the objects of the legislation in that it would be better able to meet the demands of its creditors.
14. I note that more significant penalties have been imposed in situations where the excess income was derived from contracting work. This is entirely appropriate as the breach occurred as a result of the core trading activities of the companies concerned.
15. The AATO is a very blunt instrument, as it assumes that an increase in turnover will have a corresponding increase in trade creditors and risk. As this case demonstrates, that is not always the case.
16. In those circumstances, bearing in mind the increase in the value of a penalty unit, and that Geocal’s monetary breach is much higher than in Jordan, I consider a penalty of $6000 is appropriate.
17. I order that Geocal pay the Authority $6000 plus $1000 costs, within 21 days of today’s date.
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