Queensland Building Services Authority v Peninsula Construction Group (Qld) Pty Ltd

[2009] QCAT 26

CITATION: Queensland Building Services Authority v Peninsula Construction Group (Qld) Pty Ltd [2009] QCAT 26

PARTIES:              Queensland building Services Authority

v

Peninsula Construction Group (Qld) Pty Ltd

APPLICATION NUMBER:            QD028-09

MATTER TYPE:   Building matters

HEARING DATE:   8 December 2009

HEARD AT:   Brisbane

DECISION OF:   Ms S. Gardiner

DELIVERED ON:   8 December 2009

DELIVERED AT:   Brisbane

ORDERS MADE:                1.        The respondent pay the applicant the   the sum of eight thousand dollars ($8,000.00)   by way of penalty by 4.00pm on 15 January   2010.

2.        That each party bear their own costs.

CATCHWORDS:  Penalty – breach of condition on licence and failure to notify -  exceeding allowable annual turnover – medium sized interstate company – substantial breach – Authority failing to act on breach

APPEARANCES and REPRESENTATION (if any):

This matter was heard on the papers by agreement between the parties.

REASONS FOR DECISION

History of the Application

1. Peninsula Construction Group (Qld) Pty Ltd is a Victorian based construction company registered on 1 June 2006.  It has been licensed with the Queensland Building Services Authority (QBSA) – the licensing authority for builders in Queensland - with a licence (“Builder – open”) since 27 July 2006.    Peninsula Construction forms part of a substantially larger group of companies held by New World Holdings Pty Ltd and shares three directors with that company (Messrs Sam Fink, David Goldberger and David Wieland). David Goldberger and David Wieland are also directors of other building companies licensed with the QBSA.

1. Peninsula Construction was licensed in Queensland in 2006 in anticipation of working in this jurisdiction.  Since that time, the company has completed two major projects:

• Brisbane BMW starting in about June 2007 and reaching practical completion in January 2008; and

• Westside BMW started in about July 2007 and reaching practical completion in August 2008.

The company is not currently involved in any major projects other than minor works arising from the projects listed above.

1. The QBSA licensed Peninsula Construction in the 2006-07 year on the basis of the company’s application stating that its annual turnover would not exceed $250,000 for the 12 month period of the licence.  In a letter to the company dated 27 July 2006 confirming the license it noted that “it is a breach of a license condition to exceed the Allowable Annual Turnover by more than 10% during the licensing period without reference to the Authority” .  Further in the same letter the Authority noted that a breach of this condition “creates grounds for cancellation or suspension of a licence pursuant to Section 48(h) of the Act.  The Act in question is the Queensland Building Services Authority Act 1991.

1. The actual annual turnover for Peninsula Construction Group (Qld) Pty Ltd for the 2006-07 financial year is agreed between Peninsula Construction and the QBSA as being $1,157,801 – substantially more than the licensed $250,000 and representing an increase of 363.1%.

1. On 6 August 2007 the accountants for the Peninsula Construction submitted a report dated 27 July 2007 to the QBSA showing the company’s actual turnover.  On 7 August 2007, the QBSA issued a renewal of Peninsula Construction’s license with an Allowable Annual Turnover of $1,541,148.00 for the 2007-08 license year.  The letter again referred to the 10% variation condition.

1. The actual annual turnover for Peninsula Construction Group (Qld) Pty Ltd for the 2007-08 financial year is agreed between Peninsula Construction and the QBSA as being $9,317,499, again, substantially more than the licensed amount and representing an increase of 504.6%.  This actual amount was again reported by the accountants for the company to the QBSA in a report dated 22 August 2008 received by the QBSA on 24 September 2008.  

1. On 23 June 2009, a senior compliance officer of the QBSA reviewed both years and determined that Peninsula Construction Group (Qld) Pty Ltd had breached the conditions of its license in both years by exceeding the Allowable Annual Turnover by more than 10% in each year.

The Application

1. On 17 August 2009, the QBSA filed an Application for a Disciplinary Proceeding in the Commercial and Consumer Tribunal (the forerunner of this Tribunal) seeking disciplinary action against Peninsula Construction because of the breaches listed above and seeking the imposition of a penalty pursuant to section 107(2)(b) of the Commercial and Consumer Tribunal Act 2003 and the QBSA’s costs of and incidental to the application.

1. A direction hearing was listed before the then Commercial and Consumer Tribunal on 14 September 2009 but was vacated when that Tribunal received a request for consent orders between the parties by way of a consent notice dated 11 September 2009.

10. In essence, the parties agreed that there had been a breach and that proper grounds existed for taking disciplinary action by the QBSA against Peninsula Construction Group (Qld) Pty Ltd for contraventions of sections 89(a) and 89(k) of the Queensland Building Services Authority Act 1991 for both the 2006-07 and the 2007-08 financial years.

11. The parties sought the Tribunal determine the penalty against Peninsula Construction on the papers and consented to a timetable for submission in that regard. Orders in the terms of the consent notice filed by the parties were made by the Commercial and Consumer Tribunal on 14 September 2009.

12. On 1 December 12009 the previous Commercial and Consumer Tribunal became part of the Queensland Civil and Administrative Tribunal (QCAT) under the Queensland Civil and Administrative Act 2009.  However under that Act, the transitional provisions under sections 266 and 268 apply to these proceedings and QCAT will decide this matter as if the QCAT Amendment Act had not been enacted.

The Determination on Penalty

13. Section 107(2)(b) of the Commercial and Consumer Tribunal Act 2003 allows a penalty for a corporation of up to 1000 penalty points (one penalty point being equal to $100 currently).  This Tribunal is guided by the relevant factors enunciated in  Queensland Building Services Authority v Built (Qld) Pty Ltd [2005] CCT LO18-05 at paragraph 45 when determining the quantum of the penalty in matters involving a breach of the allowable annual turnover. The factors usefully stated in this earlier decision are:

·      the length of time the company has been in business;

·      whether the breach was an isolated incident or whether there has been more than one breach, for example in successive years or otherwise;

·      a satisfactory explanation for the occurrence for the breach or breaches;

·      whether the breach is likely to reoccur, that is to say whether the systems (if any) that failed the company have been, or were being, reviewed and some explanation as to the nature of the remedies being applied to the systems;

·      the size of the company, both relative to the size of the breach and generally;

·      the amount by which the allowable annual turnover was exceeded, both in monetary and percentage terms; and 

·      whether the company had been involved in previous offences of this nature or other offences against other statutory obligations, and/or failure to comply with statutory standards.

14. The QBSA submits that:

·      the company, registered in 2006, is a medium sized business and forms part of a large group of 86 companies with three common directors with the larger holding company.  Although  recently registered the directors have experience in dealings with the QSBA and in reality, is a sophisticated company which has not provided an explanation of the breach;

·      it is difficult to determine if it is likely that the breach will occur again;

·      both breaches were substantial - $907,801 or 363.1% in the first year and $7,776,351 or 504.6% in the second year;

·      the company mush have known of the breach and if somehow unaware, the monitoring systems were manifestly inadequate.  It should probably be seen as a deliberate breach.  The deterrence effect is unlikely if an insignificant penalty is disproportionate  to the benefit gained;

·      the primary purpose is to avoid situations where companies trade beyond their means.  The company traded in breach of its license and may have put other parties at risk;

·      the role of the regulator is undermined when companies breach the financial conditions of their licenses.  The penalty ordered must deter breaches both by the is company and other companies, encouraging full awareness of obligations.

15. The company submits that:

·      of the two directors with experience in other companies in the jurisdiction, one company has not operated for many years and the management of the other is entirely separate to Peninsula Construction;

·      the breach was an oversight and not deliberate.  The company first became aware of the breach on receiving the application in 2009.  There have been no other offences or failure to comply with statutory obligations;

·      the management team is based in Victoria where no equivalent licensing obligation exists and while having some experience with the requirements of the QBSA, the experience was not extensive and not “second nature”;

·      The company has taken steps to ensure that the breaches will not occur again, has informed the management team and accountants and has established a compliance procedure;

·      The company’s net tangible assets increased significantly during the course of the relevant financial years and therefore the allowable annual turnover is a conservative figure;

·      Peninsula Construction is part of a group of companies controlled by David Goldberger and David Wieland, with limited risk of insolvency and the breaches did not put any parties at risk;

·      Peninsula Construction takes its statutory obligation seriously and regrets it breach.

Discussion of Submissions on Penalty and Quantum

16. Although the company was only registered in 2006, the Tribunal accepts that this fact alone does not describe the entire story.  Peninsula Construction is part of a much wider group of companies controlled by clearly experienced directors who, although having limited experience in this jurisdiction, are clearly not new to the roles and responsibilities of a directorship. This Tribunal would expect that in the furtherance of their professional and legal responsibilities as company directors, that when they enter a new jurisdiction, they would ensure, through proper process and procedure that all the statutory requirements of that jurisdiction are met.  This should extend to ensuring that professional accounting advice is knowledgeable of the requirements of the jurisdiction, no matter where they are located.

17. The Tribunal accepts that the breach by the company was not deliberate.  The Tribunal does not find a satisfactory explanation for the delay by the QBSA in advising the company of its breach or of the continuance of issue of the second year’s license once the reports from the company’s accountant had been received.  The renewal notice issued by the QBSA dated 7 August 2007 acknowledges the increased allowable annual turnover for the second year without comment on the breach of the first year.  No correspondence was received by the company from the QBSA about this apparent breach of the license conditions until the application was filed and served. 

18. However, ignorance of its responsibilities is not a sufficient or satisfactory explanation for the breaches by the company.  The Tribunal is however satisfied that procedures have been put in place to ensure that there is no reoccurrence for this company and perhaps for any other companies in the group when working in this jurisdiction. 

19. The turnover of this company for these two years in question shows it to be a significant licensee during that period.  The Allowable Annual Turnover breach in both monetary and percentage terms was substantial although the Tribunal acknowledges that the QBSA did enter into any correspondence with the company about the apparent breach of the license conditions when renewing the company’s license in the second year. Peninsula Construction regrets it breach and there have been no other offences or failure to comply with statutory obligations.

20. The Tribunal accepts the substantial nature of the breach both in monetary terms and percentage terms, particularly in the second year and the need for deterrence in matters such as this.  However the he Tribunal also accepts that the QBSA, by taking no steps to raise the breach with the company after the first year, contributed to the level of the breach in the second year.

21. The QBSA seeks a penalty in the range of $9,000 to $11,000 likening the circumstances in this matter to those in Queensland Building Services Authority v CEG Group Ltd [2006] CCT QD004-06.  Peninsula Construction submits the penalty should be in the range of $4,000 to $6,000.

22. The Tribunal is satisfied that because of the substantial nature of the breach, the need for deterrence in these matters for both this company and others and the importance of licensees providing correct financial information, that the penalty should be at the higher end of the range but will ameliorate the quantum because of the inaction by the QSBA in the second year. The penalty will be set by this Tribunal at $8000 to be paid by 4.00pm on 15 January 2010.  Because of a level of inaction on both sides, the Tribunal considers it appropriate that each party bear their own costs.

Order of the Tribunal

1. The respondent Peninsula Construction Group (QLD) Pty Ltd pay the applicant, the Queensland Building Services Authority the sum of eight thousand dollars ($8,000.00) by way of penalty by 4.00pm on 15 January 2010.
2. that each party bear their own costs.