Queensland Building Services Authority v Thomas & Coffey Limited - [2013] QCAT 630

CITATION:

Queensland Building Services Authority v Thomas & Coffey Limited [2013] QCAT 630

PARTIES:	Queensland Building Services Authority (Applicant)
v
Thomas & Coffey Limited (Respondent)

APPLICATION NUMBER:

OCR154-13

MATTER TYPE:

Occupational regulation matters

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Member Gordon

DELIVERED ON:

21 November 2013

DELIVERED AT:

Brisbane

ORDERS MADE:

1. Thomas & Coffey Limited pay the Queensland Building Services Authority a penalty of $20,500 by 4:00pm on 8 January 2014.

2. Each party pays its own costs of and incidental to the proceedings.

CATCHWORDS:

Exceeding Annual Allowable Turnover – falling below required amount of Net Tangible Assets – three breaches spanning several years - substantial company – second offence - appropriate penalty

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
QBSA v Thomas and Coffey Ltd [2006] QCCTB 66
QBSA v Battaglia Industries Pty Ltd [2012] QCAT 3
QBSA v Uniport Australia Pty Ltd [2011] QCAT 612
Queensland Building Services Authority v Megasealed Bathrooms Aust. Pty Ltd [2013] QCAT 512

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

Thomas & Coffey hold licences from the Queensland Building Services Authority in the classes of Builder – Open, General Building, House Building, Plumbing and Drainage, and Gasfitting. These licences are renewable each year.

At the time of renewal of such licences, the QBSA determines the licensee’s turnover limit and the net tangible assets required of the licensee for the year ahead.

The turnover limit is called the Allowable Annual Turnover. It is calculated by the QBSA from the licensee’s net tangible assets. The higher the assets, the greater the turnover is allowed to be. If the licensee exceeds the turnover limit beyond a 10% leeway allowed under the Financial Requirements for Licensing then this is a breach of the licence unless the licensee first provides the QBSA with appropriate financial information. The financial information which would be required is an Independent Review Report or Audit Report. With this information, the QBSA could consider increasing the turnover limit.

It is also a breach of the licence to allow the net tangible assets to decrease too much without taking appropriate action. Under the Financial Requirements for Licensing, licensees must not allow their net tangible assets to decrease by more than 10% for more than one month unless they provide the QBSA with appropriate financial information within 30 days of the end of the one month period.

The aim of this system is to ensure that builders do not over-stretch financially so that they are able to honour their commitments to consumers, contractors and suppliers. This is achieved by ensuring that the licensee has sufficient financial “cushion” should it encounter problems in the year in question.

If there is a breach of the licence conditions, this permits the QBSA…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] QCAT 630
Decision Date

CaseChat Overview and Summary

In the matter of Queensland Building Services Authority v Thomas & Coffey Limited, the Queensland Civil and Administrative Tribunal (QCAT) considered an application by Thomas & Coffey to vary the terms of its building licensing. The dispute centred on breaches by Thomas & Coffey of the licensing conditions relating to turnover and net tangible assets. The Tribunal was tasked with determining whether the breaches were serious enough to warrant the cancellation of the licence, and if not, what the appropriate penalty should be.

The central legal issues before the Tribunal involved assessing the seriousness of the breaches and determining an appropriate penalty. This required consideration of several factors including the duration of Thomas & Coffey's business operations, whether the breaches were isolated incidents, the adequacy of the explanation provided for the breaches, and the likelihood of recurrence. The Tribunal also had to consider the size of Thomas & Coffey as a business.

The Tribunal concluded that Thomas & Coffey, having operated for a significant period, should have had systems in place to prevent such breaches. The breaches were not isolated, as there had been previous disciplinary actions against the company. The explanation provided by Thomas & Coffey for the breaches was found to be unsatisfactory, as it did not adequately explain why the changes had such significant effects on the company's financials. The Tribunal was also concerned about the likelihood of future breaches despite the company's claims of having safeguards in place. Finally, the size of the business, being a publicly listed company with substantial turnover, was considered a significant factor in the penalty assessment.

The Tribunal ordered that Thomas & Coffey's licence be suspended for a period of six months, with the condition that the company must maintain a minimum net tangible asset value of $400,000. This decision balanced the need to penalise the company for its breaches while also considering the long-standing nature of its business and the steps it had taken to mitigate future breaches.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Duration of business. Thomas & Coffey is a long standing business having held house building and general building licences since 1977. Whilst every licensee should be aware of the turnover and net tangible asset rules it would be an aggravating factor that the business had been operating for such a long time because it would be expected that processes were in place to avoid breaches occurring. Whether the breach is an isolated incident. It cannot be said that the breach is isolated. The QBSA has previously taken disciplinary action against Thomas & Coffey for four previous breaches. The first was an excessive decrease in net tangible assets in the 2001-2002 financial year. The second and third were exceeding the turnover limit and an excessive decrease in net tangible assets in the 2003-2004 financial year. The fourth was exceeding the turnover limit in the 2004-2005 financial year. For these breaches, Thomas & Coffey was ordered to pay a penalty of $10,000 in 2006[4]. Whether there is a satisfactory explanation for the breach. The QBSA say that Thomas & Coffey has not given a satisfactory explanation for the breaches. I agree. In its evidence submitted by Pieter Scholtz the Chief Financial Officer, Thomas & Coffey’s explanation for the excessive turnover and reduction in net tangible assets is said to be “a series of gains, losses and structural changes”. These changes are said to be inevitable because they were “unexpected losses or unavoidable in the sense that they were gains made by (Thomas & Coffey) in the interests of both (Thomas & Coffey) and its shareholders”. There is no other explanation and so it appears from this evidence that the breaches were the foreseeable results of the activity of the business. Whether the breach is likely to re-occur. In the years in question, Thomas & Coffey had financial systems in place which should have been capable of monitoring and forecasting turnover and producing monthly reports. It is said in Thomas & Coffey’s submissions that the system alone was ineffective in identifying the effect of the “gains, losses and structural changes” referred to by Mr Scholtz upon the company’s licence. I assume that what is meant here is that the Thomas & Coffey had no warning about how those changes would affect turnover and net tangible assets. Why this would be so is unexplained in the evidence from Thomas & Coffey. It appears that Thomas & Coffey has decided to protect its licence from such effects in the future by forming a fully owned subsidiary company for its Queensland operations which has a separate licence. It is said that this entity is therefore not subject to the type of changes experienced by the larger company and is less likely to be in breach. Exactly why this is so is not explained sufficiently in the evidence and in the submissions. Size of the business. Thomas & Coffey is a publicly listed company with a turnover of $251m in 2012. This is therefore a significant factor in this case.