Roberts v Queensland Building and Construction Commission (No 2)
[2014] QCAT 344
| CITATION: | Roberts v Queensland Building and Construction Commission (No 2) [2014] QCAT 344 |
| PARTIES: | Anthony Philip Sydney Roberts (Applicant) |
| v | |
| Queensland Building and Construction Commission (Respondent) |
| APPLICATION NUMBER: | OCR121-13 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 22 April 2014 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Howe |
| DELIVERED ON: | 19 June 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | The decision of the Queensland Building and Construction Commission made on 12 April 2013 to refuse to categorise the applicant as a permitted individual is confirmed. |
| CATCHWORDS: | Permitted individual – whether individual took all reasonable steps – matrimonial breakdown – financial advice – failure to take advice – failure to show took all reasonable steps Queensland Building and Construction Commission Act 1991 (Qld) ss 56AC, 56AD(8) Younan v QBSA [2010] QDC 158 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Anthony Philip Sydney Roberts represented himself |
| RESPONDENT: | Queensland Building and Construction Commission represented by Ms Heywood |
REASONS FOR DECISION
The Application
Anthony Roberts was a director of Roberts Family Homes Pty Ltd (the company) when administrators were appointed to the company on 28 March 2006 (the relevant event).
In result, on 5 May 2006 the Queensland Building and Construction Commission (the Commission) advised Mr Roberts he was an excluded individual pursuant to s 56AC of the Queensland Building and Construction Commission Act 1991 (QBCC Act).
Mr Roberts entered into bankruptcy on 30 May 2008 (the second event). On 18 July 2008 he applied to become an excluded individual for the second event but the Commission refused that application.
On 25 March, 2013 Mr Roberts applied to the Commission to be categorised as a permitted individual for the relevant event. That application was also refused on 12 April 2013 and Mr Roberts has now applied to the Tribunal for review of that latter decision.
Circumstances Resulting in the Happening of the Relevant Event
By s 56AD(8) of the QBCC Act the Commission may categorise an individual as a permitted individual for a relevant event only if the Commission is satisfied that the individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.
The relevant event was the appointment of administrators to the company on 28 March, 2006.
According to Mr Roberts the circumstances that caused the happening of the relevant event were:
(a) domestic discord or relationship breakdown;
(b) underpricing and unprofitable building contracts;
(c) sickness or injury; and
(d) other family issues.
According to the Commission, the circumstances that caused the happening of the relevant events were:
(a) poor business management;
(b) the company operating with increasing losses over consecutive years;
(c) the company carrying out work outside of its scope, namely the Town of Seaside project, without seeking appropriate advice; and
(d) allowing the company to become involved in family or personal proceedings at a time when the company was itself in a vulnerable position.
Background
Mr Roberts has worked in the building industry since the age of 15. He and his wife were directors of Roberts Family Homes Pty Ltd. He started the company in 1998. His wife became a director in 1999. He separated from his wife in 2001. They divorced in 2004. His wife remained a director until 14 March 2005.
Town of Seaside
Mr Roberts identifies one amongst other significant causes of the relevant event as under-pricing and unprofitable building contracts. He points to work he did at the Town of Seaside project at Marcoola in about 2003. That work involved construction of terrace houses. He had never done that sort of job before. It required a lot of timber work rather than brick or brick veneer work in which he was experienced. His evidence was that timber work is not common in Queensland any more unless building a purpose-built Queenslander or something similar. He completed eleven contracts there. Overall he says he lost money.
He said it was the labour cost that was the problem. He hadn't foreseen that issue at time of contracting. By the time he realised it was a problem he had signed up to eleven contracts. The timber construction was labour intensive and what labour was available at the time was unreliable. Whereas he initially allowed $18,000 to $20,000 for the labour cost of a terrace house, it ended up costing more like $40,000 to $50,000[1]. Whereas his usual contract time would be 16 weeks the terrace houses required approximately 24 weeks[2].
[1]Transcript (T)1-30 LL21-22.
[2]T1-31 L9.
Mr Roberts agreed that in order to satisfy the developers and keep prices down he under-quoted[3]. He only made a minimal profit on two of the eleven houses. Some came close to breakeven, but there were losses on the rest[4]. He recognised the problem after building the fifth or sixth house but he had already contracted for the eleven and was obliged to finish them. Mr Roberts evidence is that, given the building contracts were standard REIQ, there was no need to take legal or financial advice on them.
[3]T1-31 LL39-41.
[4]T1-32 LL6-11.
He has not provided particulars of the small profits made on two of the contracts, nor the extent of the losses on others. He also said by the late 1990s he was building approximately 80 to 100 houses annually. Given the company tax returns in respect of the period 1999 to 2003 show progressive increases in income, it would seem logical that he was building a significant number of houses of a type of which he was familiar at or about the same time as working on the Town of Seaside project. Particulars of other work being done at that time have not been provided. Accordingly it is difficult to assess what impact, if any, the Town of Seaside contracts had on the profitability of the company overall.
Business Management
The Commission asserts the company failed because of poor business management. As stated, there has been very little financial documentation produced. That was always going to be a problem, and particularly a problem for Mr Roberts, given the delay on his part in making this application. A number of the company's income tax returns in respect of the years 1999 through to 2003 have been produced however. Four out of the five years of returns show the company made losses. There were significant loans to shareholders noted in the returns. Mr Roberts was unable to recall details of those loans. In balance of those drawings from the company however, as it were, he did recall moneys paid into the company by family members. He remembered a sum of approximately $440,000 paid into the company from the proceeds of sale of a property at Kallangur owned by his brother, father and himself. He also thought there was perhaps money paid into the company from the sale of a display home. Regardless, the 2003 return shows that even after excluding loans to shareholders, the company suffered a loss in excess of $410,000. As at the date of appointment of the company administrators, $476,327.76 was owing to trade creditors[5]. Additionally at that time there were tax debts due of $157,039.53. Mr Roberts agreed in cross-examination that he had made no provision for the tax debts and in fact he was not aware until making this application that the company had not lodged returns for the 3 years preceding the appointment of the administrators[6].
[5]Exhibit 11 145.
[6]T1-53 LL25-46.
The available tax returns would seem to indicate a company with insufficient current assets (eg cash) to cover current liabilities in most of the fiscal years concerned. That would indicate the company was undercapitalised. Undercapitalisation is a warning sign which often suggests major financial problems in small businesses.
Mrs May, a bookkeeper, gave evidence. She had been asked to look at the company's finances or at least some of its financial paperwork in 2002. At that time she was employed by Shell Company of Australia Ltd as a credit analyst. She concluded at the time that the business had extensive cash flow problems. Though Mr Roberts had plenty of work, she noticed there was a significant delay in paying creditors. She told Mr Roberts at that time that his company had extensive cash flow problems. Her evidence was that she did not have access to the company’s taxation returns when doing that assessment.
Mr Roberts says he employed Mr Geoffrey Harper, Mrs May's father, to help him in his business when he realised there were problems with his business. Mr Harper started working for Mr Roberts in 2001 but left some time before 2003. According to Mr Harper, his primary role was to man the office and perform various tasks associated with sales to customers and sundry other jobs, all administrative.
Employing Mr Harper in 2001 and 2002 and having Mrs May come in to look at the books for a couple of hours one day in 2002 appears to be the total of Mr Roberts endeavours to address a problem he himself identified at the time facing his business[7]. No particulars of any advice given by Mr Harper has been provided. Mr Harper’s evidence however was that he resigned from the company because his advice on how to run the business was causing problems between Mr Roberts and his then wife Karen[8].
[7]Exhibit 9 182 (Answer 5 particulars in the application to be categorised as a permitted individual).
[8]Exhibit 5 [6].
Mr Roberts said when he first started the company he utilised the services of an accountant, Mr Vincent. According to Mr Roberts, Mr Vincent moved on, and it is not clear how long he stayed advising Mr Roberts. Mr Roberts said he used other accountants to obtain appropriate advice and placed complete trust in them, but he gave no details about what advice if any was sought nor any information about any advice given, whether he acted on advice given, or considered the advice but rejected it.
Marriage Breakdown
Mr Roberts says the principal factor which caused the happening of the relevant event was the breakdown of his marriage[9]. He separated from his wife in 2001. They divorced in 2004. The matrimonial property proceedings were finalised in 2006. According to Mr David Roberts, the applicant’s brother, there were serious marriage problems between the two in 1999 affecting the running of the business and that was why he left the business and resigned his position as director of the company in November 1999. That the marital problems were affecting the company’s business were therefore readily apparent for at least 8 years before the occurrence of the relevant event.
[9]T1-63 L13.
Other Factors
He also points to sickness and injury as circumstances contributing to the happening of the relevant event. In 2004 he underwent knee surgery which resulted in post-operative infection. He was bedridden for over 2 months and then on crutches and he was unable to directly supervise building work, particularly the Town of Seaside projects. Also in that year his father was diagnosed with cancer.
Conclusion as to Circumstances Resulting in the Happening of the Relevant Event
On the limited information available I conclude that the principal circumstances that resulted in the happening of the relevant event was the failure to take appropriate financial and corporate guidance and advice on the management of the business. The necessity of appropriate financial planning should have been apparent given the annual financial figures showed ongoing increasing annual trading losses. What advice was given, namely that of Mrs May in 2002, appears to have been ignored or at least not acted on. The matrimonial problems were a factor contributing to the occurrence of the relevant event, however they were a very obvious problem for a very long time and their relevance as a factor resulting in the happening of the relevant event lies as much in the failure to address them as a problem for the company as their apparent financial drain on the company’s resources.
Took All Reasonable Steps
The responsibility of showing that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event rests with Mr Roberts:
…subsection (8) authorises the characterisation of an individual as a permitted individual only if the authority is satisfied of the relevant matter on the basis of the application, that is to say on the basis of the case made by the applicant. It follows that if relevant considerations are not addressed by the applicant, so that the applicant fails to show in a relevant respect that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event, then the application will fail.[10]
[10]Younan v QBSA [2010] QDC 156 at [37].
Ms Skelton, Mr Roberts’ partner, deposes that she tried but was unable to obtain additional documentary evidence concerning the company’s finances. Mrs Karen Roberts had nothing, and the company’s former accountants (unnamed) had had a change of partners and could not assist. It is clear that the taxation returns for the years 2004, 2005 and 2006 were never finalised and therefore were never available anyway. No other financial records of the company have been provided.
Given the dearth of evidence submitted by Mr Roberts I am unable to conclude that Mr Roberts took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. He sought very little financial advice in circumstances where a reasonable person would have done so. He does not appear to have had any business plan in place despite a business which in 2003 had an income of $7,992,250. Given the company failed to lodge taxation returns for the years 2004 to 2006 there was little to no involvement in the financial affairs of the company of the company accountants Mr Roberts said he relied on.
The marital problems were obvious and obviously affecting the company given Mr Harper and his brother both withdrew from the company because of them. Yet there is no evidence of any legal advice being sought to resolve that problem as it related to the company.
As such, Mr Roberts’ application must fail and the decision of the Commission made 12 April 2013 to refuse to categorise the applicant as a permitted individual for the relevant event must be confirmed.
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