Queensland Building Services Authority v Megasealed Bathrooms Aust. Pty Ltd
[2013] QCAT 512
| CITATION: | Queensland Building Services Authority v Megasealed Bathrooms Aust. Pty Ltd [2013] QCAT 512 |
| PARTIES: | Queensland Building Services Authority (Applicant) |
| v | |
| Megasealed Bathrooms Aust. Pty Ltd (Respondent) |
| APPLICATION NUMBER: | OCR078-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Virginia Ryan, Member |
| DELIVERED ON: | 3 October 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. That Megasealed Bathrooms Aust. Pty Ltd pays to the Queensland Building Services Authority a penalty of $15,000 by 4pm on or before 30 November 2013. 2. That Megasealed Bathrooms Aust. Pty Ltd pay the Queensland Building Services Authority its costs fixed at $1,500 by 4pm on or before 30 November 2013. |
| CATCHWORDS: | OCCUPATIONAL REGULATION MATTERS - Exceeding Annual Allowable Turnover - where significantly exceeded - four breaches in consecutive years - three timely warnings - length of period of licence - costs Queensland Building Services Authority Act 1991 ss 89(a) and (k), 91(3) Queensland Building Services Authority v Built Qld Pty Ltd [2005] QCCTB 152 |
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
Basis of the Application
The Building Services Authority applied to the tribunal for sanctions against Megasealed Bathrooms Aust. Pty Ltd for breaches of its licence requirements.
In four consecutive years, Megasealed exceeded its Allowable Annual Turnover (AATO) as follows[1]:
[1]Table taken from Applicants submissions paragraph 35. A definition of AATO can be found in the Queensland Building Services Authority Regulation 2003, Schedule 3.
| Year | AATO | Actual turnover | Excess $ | Excess % |
| 2007-08 | $5,459,508 | $8,227,444 | $2,767,936 | 50.69% |
| 2008-09 | $3,402,363 | $9,058,491 | $5,656,128 | 166.2% |
| 2009-10 | $5,823,148 | $10,870,993 | $5,047,845 | 86.6% |
| 2010-11 | $2,588,536 | $13,296,157 | $10,707,961 | 413.6% |
Megasealed did not obtain the consent of the Authority to exceed the AATO in any of those years, failing therefore to comply with its builder licence requirements. The requirements are in place in order to manage and minimise financial risk to consumers, contractors and suppliers by ensuring that builders trade within their means and are able to honour their commitments.
On 11 July 2013, the tribunal directed that proper grounds existed for taking disciplinary action against Megasealed for the contravention of sections 89(a) and/or (k) of the Queensland Building Services Authority Act 1991 in each of the 2007-08, 2008-09, 2009-10 and 2010-11 years by exceeding its AATO by more than 10% without first notifying the Queensland Building Services Authority that it was likely to do so or obtaining the Authority’s approval.
What is the appropriate penalty?
The tribunal must determine the penalty for the breaches. The tribunal may impose a penalty of an amount up to $110,000.[2] The Authority contends that the appropriate penalty is in the range of $18,000 to $20,000. Megasealed made no concrete submission on the appropriateness of a penalty or the amount of the penalty. Its relevant submissions are summarised below.
[2] Queensland Building Services Authority Act 1991 s 91(3); Penalties and
Sentences Act 1992 s 5.
What are the relevant factors?
The tribunal has considered a number of factors established as relevant to its determination of the penalty for exceeding the AATO[3]. The Authority's submissions addressed each of these factors. Megasealed's submissions were framed as 'points for consideration' in a letter from the National Finance Manager. The tribunal has not had the advantage of submissions from any of the directors of the company. Neither did Megasealed make a recommendation as to penalty, other than by implication; it indicated it 'was extremely shocked by the orders sought by the Building Services Authority in the range of $18k - 20k, plus the Authority's costs of $1,500'.
[3] Queensland Building Services Authority v Built Qld Pty Ltd [2005] QCCTB 152.
The factors and relevant submissions considered were:
(a)The length of time the company has been in business: It was not disputed that Megasealed Bathrooms Aust. Pty Ltd was registered in 1997 and was licensed in Queensland by the Authority on 24 May 1999 in the classes 'Waterproofing' and 'Wall and Floor Tiling'.
(b)The number of breaches: There were four breaches occurring in consecutive years, each of which was notified to Megasealed by letters issued on 22 December 2008, 10 August 2011 and 28 October 2011[4] . Each warning letter referred specifically to the particular breach and indicated that no further action would be taken on that occasion, whilst providing a warning of the potential consequences of any further breach. Standard warnings were also provided in licence renewal notices to Megasealed[5]. The Authority argued that the repeated breaches added significantly to the seriousness of the case. Megasealed argued hat the Authority took too long to react to the breaches and that ‘Earlier advice of the breaches would have eliminated the continuation of this failure to report to the BSA, and therefore reduced our pending liability’. [6]
(c)The explanation for the breaches: Megasealed claimed the reporting was not deliberate but as a result of 'regular staff turnover'. It further claimed that the Authority should only review the QLD turnover rather than the national turnover of the company, as it has offices in four other states. The Authority referred to the core concept that 'A licence is a privilege not a right...'[7] and went on to submit that any reliance by Megasealed on misunderstanding should be mitigated by the clarity of the definition of AATO in the Authority's financial materials, and the fact that Megasealed had been advised professional accountants.
(d)Whether the breach is likely to recur: The Authority argued that Megasealed has not demonstrated the measures it has taken to avoid a future breach. Megasealed has now applied for and been granted an increased AATO based on NTA. Mr Geller, for Megasealed's accountants, Hurwitz Geller Pty Ltd, indicates[8] that that firm is responsible for the completion of the relevant forms for the Authority annually, and that 'the current Financial Controller and our office are aware of the above problem, we will ensure that in future, the company gets the required authority on an annual basis'. The system for ensuring this was not described.
(e)Size of Megasealed's business: Since the breaches, Megasealed's AATO has increased and the Authority indicates it was seventeen million, six hundred and forty-two thousand, nine hundred and fifty-eight dollars ($17,642,958) based on NTAs of seven hundred and five thousand, seven hundred and nineteen dollars ($705,719) as at August 2013. Megasealed can be characterised as a large business. The Authority submitted that for effective deterrence, the penalty should be so significant as not to be able to be merely incorporated in a licensee's ordinary business practice. Megasealed submitted that 90% of the jobs undertaken were for less than $1,000, and that the Queensland arm of Megasealed was currently loss making and the Authority should review only Queensland turnover.
(f)Size of breaches of AATO: Megasealed exceeded its AATO by $2,767,936 or 50.69% percent in 2007-08, by $5,656,128 or 166.2% percent in 2008-09, by $5,047,845 or 86.6% in 2009-10, and by $10,707,961 or 413.6% in 2010-11. The Authority argued that the breaches well exceeded the acceptable margin of 10%. Megasealed submitted that no-one had suffered loss or damage as a result of the breaches.
(g)Previous warnings: Warning letters were issued by the Authority on 22 December 2008, 10 August 2011 and 28 October 2011[9] noting the breach, informing Megasealed that the Authority had decided to take no action and providing a warning of the potential consequences of any further breach. Standard warnings were also provided in licence renewal notices to Megasealed[10]. The Authority urged the tribunal to see these as an aggravating circumstance. Megasealed argued that the warnings were not taken into account due to internal staff changes and procedures, and somewhat anomalously also queried why the Authority had taken so long to react to the breaches.
[4] Affidavit of Michelle Ann Lockton ('Affidavit of MAL') sworn 12 March 2013, paragraphs 42-44.
[5] Ibid, such as exhibit 'MAL-14'.
[6] Applicants Submissions, at paragraph 9.
[7] Queensland Building Services v Dilizio Painting Pty Ltd [2009] CCT QD021-09 at paragraph 6.
[8] Respondent's Statement dated 25 June 2013 ('Respondents Statement'), introduction and final paragraph.
[9] Affidavit of MAL, paragraph 42-44.
[10] Ibid, such as exhibit 'MAL-14'.
Discussion of submissions
The tribunal finds that Megasealed had been in business for a substantial period within the Queensland regulatory environment. It is a large business and its AATO has more than tripled since the year of the first breach since 2007/08. It has a broad area of operation in Australia, and is professionally advised on financial matters by a firm of accountants. This was not a case of a new business and novice directors, conducted without professional guidance.
That there were four consecutive breaches, the first occurring after Megasealed had been operating under its Queensland licence for some ten years is significant and takes this matter into the category of the most serious of cases of its type. The tribunal acknowledges that there was no actual damage as far as the tribunal is aware, and that Megasealed appears to have sufficient assets to support its' growing turnover. However, self-assessment of the level of financial risk is not an option for the licence holder; the Authority must make that assessment, and the licence holder must accede to that.
Megasealed has been less than whole hearted in accepting responsibility for the breaches and has continued to attempt to sheet home responsibility for the breaches elsewhere. However, internal issues such as staff changes and communication must be secondary to the priority the licensee is required by its licence to give to financial accountability requirements.
If it is the case that as a matter of Megasealed's internal procedures, the financial reporting requirements for it's Queensland licence were met by the national office, or by a separate firm of accountants, then it was and remains the responsibility of Megasealed to manage its' internal communications. As was canvassed by the learned member in QBSA v Peninsula Construction Group (Qld) Pty Ltd[11], it is a legitimate expectation that in accord with the professional and legal responsibilities of company directors, the directors of Megasealed would use proper process and procedure to ensure compliance with statutory requirements in any jurisdiction in which it operates. So, although the task may be delegated, the responsibility for compliance remains always with the licensee.
[11] [2009[ QCAT 26 ('Peninsula').
Whilst perhaps descriptive of what occurred, as Megasealed itself indicates, its' internal staff changes were no excuse. The licensing requirements are too important to be vulnerable to such changes. In any event, the statement from Mr Geller of Hurwitz Geller Pty Limited indicates that that accounting firm has acted as the accountants for Megasealed for ten years, which period includes the four years in which the breaches occurred. The breaches were all significant in amount and percentage. The respondent did not give sufficient attention to the license requirements in respect of the AATO.
With respect to Megasealed's claim that only the Queensland turnover should be considered, as the learned member said in QBSA v Uniport Australia Pty Limited[12]:
It is unanswerable that the various publications issued by the Authority specify that AATO must be calculated by reference to all revenue generated, regardless of where the work is carried out, where the licensee is located or from which source the revenue is generated.
[12] [2011] QCAT 612 at [15].
In any event, the tribunal cannot see that Megasealed can resile from its' own practices; the annual turnover reported to the Authority by Megasealed in Independent Review Reports for the four relevant years was the total turnover for the company and not merely the Queensland component [13].
[13] See for example MAL-9 exhibited to the Affidavit of MAL.
The tribunal is satisfied that Megasealed is now aware of the issue, and has undertaken to act correctly in future. However, Megasealed appears to the tribunal to continue to see itself as being a special case to which the regulatory scheme should not really apply; for example, it emphasised that whilst it 'falls under the building industry we do not actually build but rather do refurbishment services and maintenance/repair work'. The seriousness of its failure appears not to have been fully accepted by Megasealed.
The letters of warning from the Authority were forwarded to Megasealed's Queensland office, in a timely fashion. For example, the warning letter relating to the 2007-08 period was dated 22 December 2008, and the Independent Review Report for the period was signed on 27 October 2008. Further, there was an attempt made by Megasealed, in an application signed by Mr Geller, the accountant who had personally signed each of the Independent Review Reports, to upgrade the AATO for the 2010-11 year. The Authority responded by letter dated 30 November 2010[14] to the Sydney office of Megasealed indicating there were further requirements to be met, but Megasealed did not pursue the application. Megasealed was thus aware that exceeding the AATO was a concern. In the light of these warnings, the tribunal was confounded by Megasealed's claim that their failure to report to the Authority would not have continued if they had received earlier warnings. The tribunal considers the warnings were timely. The crux of the matter is that, warning or no, the licensee is at all times responsible for early assessment of an increase in annual turnover over AATO, and early reporting to the Authority.
[14] Ibid, see 'MAL-19'.
How does the present application compare with the previous decisions?
In deciding the appropriate penalty, the tribunal must consider the relative seriousness of Megasealed's breaches in the context of the range of penalties set in decided cases. The Authority cites QBSA v Uniport Australia Pty Limited[15], QBSA v Battaglia Industries Pty Ltd [16], and QBSA v Classic Brick & Block Pty Ltd[17] to support its penalty range. Megasealed did not refer the tribunal to any decided cases.
[15] [2011] QCAT 612('Uniport').
[16] [2012] QCAT 3 ('Battaglia').
[17] [2011] QCAT 130 ('Classic Brick').
The tribunal has also considered a number of other decisions, summaries of which appear in the schedule.
In Battaglia[18], there were two breaches and one warning and the penalty was set at $11,000. It is distinguishable from Megasealed by the number of breaches and warnings. Classic Brick [19]concerned two breaches, and attracted a penalty of $10,000, the warning to the licensee of the breach and the lack of steps to prevent recurrence being seen as significant.
[18] [2012] QCAT 3.
[19] [2011] QCAT 130.
The tribunal has considered decisions where lower penalties applied. QBSA v Todd’s Plumbing Pty Ltd[20] attracted a penalty of $6,000 for two consecutive breaches where the second was much lower than the first and both were lower in monetary amount than those of Megasealed. The tribunal in Battaglia[21] observed that, between 2009 and 2011, the majority of single breaches attracted a penalty of $4000-$7,0000 and of dual offences, a penalty of $8,000 to $10,000. Inflation would increase those significantly.
[20] [2011] QCAT 622 ('Todd's').
[21] [2012] QCAT 3 [12].
There were four breaches, commencing in 2005-06 in QBSA v C-View Windows Pty Ltd[22], however, the Authority delayed in picking up the breaches until May 2010.The tribunal took into account the delay; had the licensee been warned earlier, it would have ensured the further breaches did not occur. The penalty was $8,000 rather than that requested by the Authority, a range of $16,000 to $20,000.[23] That the warnings to Megasealed did not have the effect anticipated by the tribunal in C-View[24] lends weight to the Authority's submission that the licensee's failure to act on three warnings is an aggravating factor.
[22] [2011] QCAT 211.
[23] Ibid, paragraphs 29 and 35.
[24] Ibid 211.
Of the three cases cited by the Authority, Uniport[25] attracted the highest penalty, $13,500. The licensee had committed four breaches, was a large company expected to provide leadership within the industry, and no warnings had been issued by the Authority.[26] The tribunal in Uniport [27] found its breaches more serious than those in Peninsula[28] but declined to apply a simple arithmetical approach to penalty urged on it by the Authority ie. twice the breaches therefore twice the penalty[29]. It found Uniport's breaches more akin to those in QBSA v Thomas and Coffey Ltd[30], where there were four breaches, two concerning reductions in NTA, and two concerning exceeding AATO. The penalty applied in that case was higher in real terms than in Peninsula[31].
[25] [2011] QCAT 612.
[26] Idem, at paragraph 20.
[27] Idem.
[28] [2009] QCAT 26.
[29] Idem, at paragraph 6.
[30] [2009] CCT QD024-09 ('Thomas & Coffey').
[31] [2009] QCAT 26.
Megasealed can be distinguished from others based on number of breaches (QBSA v Phoenix Constructions (Queensland) Pty Ltd[32]) whether warnings were given (C-View[33]), years the licence was held for (Todd’s Plumbing[34]), experience of directors (QBSA v. Gartess Pty Ltd[35]). Whilst Uniport[36] is comparable to the Megasealed situation, these factors lead the tribunal to conclude it is of greater seriousness:
· Megasealed's length of time in the Queensland regulatory environment. Uniport had held a licence in Queensland for a year. Megasealed had held a licence in Queensland for over ten years at the time of the first breach;
· The substantial nature of the breaches both in monetary terms and percentage terms;
· The number of breaches;
· The number of warnings. No warnings were provided for Uniport's four breaches. The tribunal accepts that the repeated warnings provided to Megasealed add to the seriousness of these breaches. Three specific warnings were issued and four general warnings in licence renewal letters, all of which were timely and which were not responded to;
· The ready availability of clear information as to a licensee's responsibilities to monitor and report changes in, amongst other things, annual turnover, and the fact that professional financial advice was taken. The unsuccessful attempt to update the AATO in one year indicated the company was in fact aware of the AATO requirements;
· It was a large business;
· Rigorous procedures to ensure future compliance have not been demonstrated to the tribunal; Megasealed's accountants provided an assurance that breaches will not occur again. Uniport was able to show it had in place forecasting to prevent any future breaches;
· Uniport accepted that it had the responsibility for ensuring that it complied with the AATO requirements. Megasealed has acknowledged that it has fallen foul of the Authority's requirements but continues to maintain that the Authority's practices have been lacking. Megasealed's equivocal acceptance of both the need and responsibility for compliance with the Queensland licence requirements is of concern.
[32] [2010] QCAT 542.
[33] [2011] QCAT 211.
[34] [2011] QCAT 622.
[35][2011] QCAT 42.
[36] [2011] QCAT 612.
The tribunal accepts the Authority’s submission that the penalty should provide incentive to comply with the licence requirements, and be a sufficient deterrent against indulging in financial risk beyond their capacity to meet their liabilities for both Megasealed and other licensees. The tribunal also acknowledges that the penalty is not intended to be punitive[37]. Guided by the penalties and reasoning in the decisions cited, the tribunal finds that a penalty of $15,000 should be applied.
[37] [2012] QCAT 3 at [15].
Should Megasealed pay the Authority’s costs?
The Authority also seeks its costs fixed at $1,500. Megasealed made no submissions as to costs.
Section 100 of the QCAT Act is provides that each party must bear their own costs. Section 102(3) sets out discretionary factors for consideration.
The proceedings arose as a result of Megasealed's multiple failures, and the Authority's action was commenced as a result of its obligatory statutory role. The Authority has been wholly successful. I am not persuaded that each party must pay its own costs.
The amount sought is $1,500.00, the maximum allowed for disciplinary proceedings under Schedule 2 Part Two of the Justices Act Regulation 2004. The tribunal is satisfied that $1,500.00 is reasonable for the work undertaken in the proceeding by the Authority.
What are the appropriate Orders?
The tribunal orders that Megasealed pay to the Authority the amount of $15,000 plus $1,500 costs on or before 4pm on 30 November 2013.
Schedule
| Case Name and citation | Breach Amount ($) | Breach (% of AATO) | Years licensed | Penalty | Relevant Factors |
| 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 industry leadership responsibility Four breaches in consecutive years Did not monitor turnover properly Steps taken to prevent recurrence Low risk, sufficient NTA Authority publications essential Breaches significant and continuing |
| QBSA v Battaglia Industries Pty Ltd [2012] QCAT 3 | $1,093,408 $2,018,009 | 364.5% 143.99% | Not known | $11,000 | Substantial breaches Repeated warnings |
| QBSA v Classic Brick & Block Pty Ltd [2011] QCAT 130 | $1,204,359 $217,415 | 401% 19.7% | Two | $10,000 | Medium business Two breaches consecutive years Insufficient monitoring 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 Four breaches consecutive years Significant breaches Reasonable explanation Relied on professional advice Steps taken to prevent recurrence No previous offences Four year delay by Authority to review compliance Licensee cooperated fully |
| QBSA v Phoenix Constructions (Queensland) Pty Ltd [2010] QCAT 542 | $6,009,618 | 36.3% | 16 | $5,000 | Large business One breach Steps to prevent recurrence Significant amount, not percentage Did not take obligations sufficiently seriously. Did not seek advice |
| QBSA v Gartess Pty Ltd [2011] QCAT 42 | $1,354,822.83 | 286.9% | Two | $4,500 | Small business Steps to prevent recurrence Unexpected growth Inexperienced Director |
| QBSA v Todd’s Plumbing Pty Ltd [2011] QCAT 622 | $905,550 $295,148 | 301.8% 16% | One | $6,000 | Medium business High growth unexpected growth Steps taken to prevent recurrence Breach less in second year |
| QBSA v Peninsula Construction Group (Qld) Pty Ltd [2009[ QCAT 26 | $907,801 $7,776,351 | 363.1% 504.6%Q | Two | $8,000 | Large breaches increasing in second year Short registration period, part of a larger group Steps taken to prevent recurrence |
| QBSA v Thomas and Coffey Ltd [2006]] CCT QD003-06 | Decrease in NTAs of $3,740,000 or 72.3% Decrease in NTAs of $887,000 or 15% $56,885,998 $52,532,633 | 61% 62% 48.5% | Not known | $10,000 | Four breaches in two years Two decreases in net tangible assets, two exceeding AATO Steps taken to prevent recurrence |
2
8
0