Rohde v Queensland Building Services Authority
[2011] QCAT 516
•28 October 2011
| CITATION: | Rohde v Queensland Building Services Authority [2011] QCAT 516 |
| PARTIES: | Mr Grantly John Rohde |
| v | |
| Queensland Building Services Authority |
| APPLICATION NUMBER: | GAR030-10 / OCR176-10 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 12 May 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Mr Mark Plunkett, Member |
| DELIVERED ON: | 28 October 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The Tribunal orders that the decisions of the Queensland Building Services Authority to refuse the application to be categorised as a Permitted Individual be confirmed. |
| CATCHWORDS: | Application to be categorised as a permitted individual – refusal – review Queensland Building Services Authority Act 1991, s 56AD(1) |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Applicant: No appearance by applicant who made submissions in writing |
| RESPONDENT: | Queensland Building Services Authority represented by Ms Jodie Stroud |
REASONS FOR DECISION
Mr Grantly John Rohde (the applicant) is a builder and the sole director of Seasun Constructions Pty Ltd (the company) through which he conducted his building business which specialised in the design and the building of homes including major renovations and extensions.
The Queensland Building Services Authority (the respondent) is the regulator set up under the Queensland Building Services Authority Act 1991 (“the QBSA Act”)
In or about 2008 the applicant decided to expand his business to include contracting with property developers by undertaking multi-unit residential projects.
The applicant and the company soon began accumulating significant unpaid trade debts owing to those who supplied goods and services for the projects.
Owing to the unpaid debts and personal guarantees given on behalf of the company the applicant was declared bankrupt and the company was put into liquidation and wound up.
On 2 November 2009 a trustee in bankruptcy was appointed for estate of the applicant.
On 16 April 2010 liquidators were appointed to wind up the company.
As a consequence pursuant to s 56AD(1) of the QBSA Act on 14 January 2010 and on 17 June 2010 the respondent decided to refuse to categorise the applicant as a permitted individual.
The applicant made application to the Queensland Civil and Administrative Tribunal (the Tribunal) to review the two decisions.
[10] On the eve of the hearing by an email dated 11 May 20011 the applicant advised the respondent that he would not be attending “as the costs to do so is prohibitive and unnecessary” stating that he was “grossly unprepared for the matter” and he did not “see any point.”
[11] The applicant expressed the view that the decisions of the respondent had “destroyed the career of a man who honestly did everything in his power to do the right thing by everyone.”
[12] The applicant stated that he did not have the financial capacity to secure legal representation and to prepare for the hearing. He stated that he had limited funds and access to legal resources to make out his case.
[13] Nevertheless the applicant asserted that he “did undertake everything necessary to avoid the happenings of the events, despite the fact that my ill prepared documentation does not reflect this” and he submitted that a life long disqualification was grossly unjust because the two separate matters were inter-related arising from the one event.
[14] In the result the applicant advised that he was withdrawing his application to be categorized as a permitted individual.
[15] The applicant said the matter had “turned into a witch hunt” and asserted that he had been “treated unjustly and that a grave injustice has been served in this matter”, requesting that his trade contractors and supervisor’s licences be maintained.
[16] However the application to this Tribunal was not withdrawn and the matter proceeded to be heard in the applicant’s absence.
The Review by the Tribunal
[17] The QBSA Act regulates the building industry to ensure the maintenance of proper standards in the industry and to achieve a reasonable balance between the interests of building contractors and consumers.
[18] This is sought to be achieved by licensing and regulation of builders by the respondent.
[19] Of statutory concern is the security of payment in the building and construction industry.
[20] The QBSA Act makes provision to prevent people who take advantage of the laws of bankruptcy, or people associated with a failed company, from holding a BSA contractor or nominee supervisor’s licence, or being in a position to control or influence a BSA-licensed company for a period of five years. A person involved in two insolvency events faces life exclusion.
[21] A person becomes an “excluded individual” if the individual becomes bankrupt or otherwise takes advantage of bankruptcy laws by entering into a Part IX agreement or Part X arrangement or agreement under the Bankruptcy Act 1966 (each of these is a ‘relevant event’), or is a director, secretary or influential person of a company at any time up to a year before the company has a provisional liquidator, liquidator, administrator or controller appointed, or is wound up or ordered to be wound up (each of these is a ‘relevant event’).
[22] An influential person for a company means “an individual, other than a director or secretary of the company, who is in a position to control or substantially influence the conduct of the company’s affairs, including, for example a shareholder with a significant shareholding, a financier or senior employee.”
[23] However in order to ameliorate against any undue harshness by inflexible application of automatic exclusion, a person may apply to the respondent to be excused for the event by becoming a “permitted individual”.
[24] To be a “permitted individual”, the person has to prove they took all reasonable steps to avoid the causes of the relevant event, or that it was entirely outside the responsibility of the individual concerned, and they could not have avoided the relevant financial failure. Examples include:
a)a spouse absconded with an individual’s assets;
b)the individual has been the victim of fraud or defalcation by, for example, a partner or spouse; or
c)a financial failure was due to a natural disaster, against which it was not possible to insure.
[25] The Tribunal in the exercise of its review jurisdiction under s 19 of the Queensland Civil and Administrative Tribunal Act 2009 (“QCAT Act”):
a)must decide the review in accordance with the Act and the enabling Act under which the reviewable decision being reviewed was made;
b)may perform the functions conferred on the Tribunal by the Act or the enabling Act under which the reviewable decision being reviewed was made; and
c)has all the functions of the decision-maker for the reviewable decision being reviewed.
[26] The Tribunal may inform itself in any way it deems appropriate (s 28(3)(c) of the QCAT Act) and the Tribunal must ensure, so far as practicable, that all relevant material is disclosed to the Tribunal: s 28(3)(e) of the QCAT Act.
[27] The Tribunal, standing in the shoes of the respondent, must act in accordance with the objects of the Act as set out in section 3 which include a requirement “to achieve a reasonable balance between the interests of building contractors and consumers”: s 3(a)(ii).
[28] The Tribunal may:
a)confirm or amend the decision; or
b)set aside the decision and substitute its own decision; or
c)set aside the decision and return the matter for reconsideration to the decision maker for the decision with directions the Tribunal considers appropriate: s 24(1) of QCAT Act.
The QBSA Act
[29] Part 3A of the QBSA Act is entitled “Excluded and permitted individual and excluded companies”, and comprises sections 56AB to 56AH (inclusive).
[30] Section 56AC of the QBSA Act provides:
56AC Excluded individuals and excluded companies
(1) This section applies to an individual if--
(a) after the commencement of this section, the individual takes advantage of the laws of bankruptcy or becomes bankrupt (relevant bankruptcy event); and
(b) 5 years have not elapsed since the relevant bankruptcy event happened.
(2) This section also applies to an individual if--
(a) after the commencement of this section, a company, for the benefit of a creditor--
(i) has a provisional liquidator, liquidator, administrator or controller appointed; or
(ii) is wound up, or is ordered to be wound up; and
(b) 5 years have not elapsed since the event mentioned in paragraph (a)(i) or (ii) (relevant company event) happened; and
(c) the individual--
(i) was, when the relevant company event happened, a director or secretary of, or an influential person for, the company; or
(ii) was, at any time after the commencement of this section and within the period of 1 year immediately before the relevant company event happened, a director or secretary of, or an influential person for, the company.
(3) If this section applies to an individual because of subsection (1), the individual is an excluded individual for the relevant bankruptcy event.
(4) If this section applies to an individual because of subsection (2), the individual is an excluded individual for the relevant company event.
(5) An excluded individual for a relevant bankruptcy event (the first event) does not also become an excluded individual for another relevant bankruptcy event (the other event) if the first event and the other event are both consequences flowing from what is, in substance, the one set of circumstances applying to the individual.
(6) An excluded individual for a relevant company event (the first event) does not also become an excluded individual for another relevant company event (the other event) if the first event and the other event are both consequences flowing from what is, in substance, the one set of circumstances applying to the company.
(7) A company is an excluded company if an individual who is a director or secretary of, or an influential person for, the company is an excluded individual for a relevant event.
[31] At the material time, section 56AD(1) of the QBSA Act enacted as follows:
“An individual may apply to the authority to be categorised as a permitted individual for a relevant event if the individual has been advised by the authority, or has otherwise been made aware, that the authority considers the individual to be an excluded individual for the relevant event.”
[32] Section 56AD(3) of the QBSA Act enacts as follows:
“If the individual applies, the application must include the reasons why the authority should categorise the individual as a permitted individual for the relevant event”.
[33] Section 56AD(8) of the QBSA Act enacts as follows:
“The authority may categorise the individual as a permitted individual for the relevant event only if the authority is satisfied, on the basis of the application 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.”
[34] Section 56AD(8A) of the QBSA Act enacts as follows:
“In deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event, the authority must have regard to action taken by the individual in relation to the following:
a) keeping proper books of account and financial records;
b) seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business;
c) reporting fraud or theft to the police;
d) ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees;
e) putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts; and
f) making appropriate provision for Commonwealth and State taxation debts.”
[35] Section 56AD(8B) of the QBSA Act enacts as follows:
“Nothing in sub-section (8A) prevents the Authority from having regard to other matters for deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that result in the happening of a relevant event.”
[36] Section 56AF of the QBSA Act sets out the procedure to be followed by the Authority if the Authority considers that an individual who is a licensee is an excluded individual for a relevant event.
[37] Section 3 of the Act provides, among other things, that the objects of the Act are:
a)The regulation of the building industry to;
i) ensure the maintenance and proper standards in the industry; and
ii) achieve a reasonable balance between the interests of building contractors and consumers.
[38] Part 3 of the Act (which includes all the sections above) establishes a licensing system and authorises the Authority to issue licenses authorising the carrying out and supervising of all classes of building work.
[39] Part 3A of the Act was introduced in 1999. The explanatory notes state that “a major deficiency with the existing regulatory structure has been the ability of defaulting contractors to restructure their corporate structure to re-emerge as a “phoenix” company following cancellation of a licence”.
[40] Part 3A of the Act was designed to remove individuals who have demonstrated their incapacity to manage finances within the building industry for a period of five (5) years.
[41] The test to be applied to the review is that set out in s 56AD(8) which provides:
“The Authority may categorise the individual as a permitted individual for the relevant event only if the Authority is satisfied on the basis of the application 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.”
[42] In Younan v Queensland Building Services Authority [2010] QDC, McGill SC DCJ said:
“The test in s 56AD(8) requires first, the identification of the relevant event; second, the identification of the circumstances that resulted in the happening of the relevant event; third, a consideration of whether the relevant individual took all reasonable steps to avoid those circumstances coming into existence; and, if satisfied of that, fourth, a decision whether to categorise the individual as a permitted individual. What were reasonable steps depended on what was reasonable for the individual concerned in the circumstances in which he found himself, with such information as he then had. It is not a question of whether he did everything possible to prevent these circumstances from arising, or whether they would not have arisen if he had acted differently. The reasonableness of his behaviour must be assessed by reference to what was known by him at the time, without the benefit of hindsight.”
The relevant events
[43] The company went into liquidation with the applicant as its sole director. Although the applicant contended the insolvency arose because it was unable to recover a debt owing for construction activity performed, the evidence showed that the company was insolvent as early as 18 February 2009 and the liquidation resulted from the company’s inability to pay creditors for monies owing for goods and services supplied to the company before December 2008.
[44] The company had entered into a contract to complete a 3 x 2 storey duplex blocks at Creekside Esplanade, Cooloola Cove and began to experience financial difficulties in October 2008 as a result of slow payments and a failure to receive progress claims which resulted in a settlement agreement which incurred losses to the company of $150,000. Between February 2008 and August 2008 all progress payments were paid in full. While progress payments were received in August and September 2009, the payments were substantially short of the full claim by tens of thousands of dollars. The November progress claim of $86,254.00 was not paid at all. Eventually the applicant suspended works and terminated the contract.
[45] The respondent criticised the applicant for continuing work when progress payments had not been made. This “ultimately resulted in the company making a substantial loss which in turn resulted in non-payment to subcontractors engaged by the applicant.”
[46] The respondent submitted this took place, “in circumstances where non-payment was directly affecting not only the company’s financial position but that of the subcontractors, it would have been reasonable for the Applicant to aggressively pursue payment”.
[47] The amount owing by the Company to creditors as at December 2008 was in excess of $500,000. While on the applicant’s material the balance of monies owed under the contract owing was $195,186, in an unsigned agreement dated 4 December 2008 the company agreed that only $57,853.00 was owing under the contract. There was no explanation for this reduced sum and there is also no evidence any financial or legal advice was sought by the applicant. The respondent submitted that it was not reasonable for the applicant to accept such a reduced amount (if in fact it was reduced) without firstly obtaining financial or legal advice.
[48] The applicant continued to carry out works at a time when he knew or ought to have known that the company did not have the financial capacity to do so in an expectation that the company would eventually be able to trade out of its financial difficulties or obtain an eventual investment by a third party to rescue the company. Such reliance was unreasonable given that the level of indebtedness to trade creditors deterred such investors from proceeding. Ultimately this resulted in further debts being incurred, with trade creditors being left out of pocket. At least thirteen legal proceedings were commenced against the applicant and/or the company by trade creditors for recovery of monies owed.
[49] The total debt to creditors was in excess of $1,000,000 including approximately $470,000.00 owed to a host of trade creditors and banks with $38,952.46 owed to the Deputy Commissioner of Taxation.
[50] This amount does not include debts claimed by Bunnings Pty Ltd or Boral Bricks Pty Ltd, who commenced legal proceedings against the applicant. A dozen creditors also commenced legal proceedings to recover trade debts.
[51] The applicant’s inability to be able to pay guarantees given by him in his capacity as director of the company was the cause of his bankruptcy.
[52] The applicant gave a director’s guarantee in ten instances from June 2007 to October 2008 for suppliers of construction materials.
[53] The respondent submitted that the guarantees were given in circumstances where the applicant failed to seek appropriate financial or legal advice, or to ensure that they were covered by sufficient assets to meet any liabilities that may arise under the guarantees. The applicant was said to have expressed this as preposterous notion that a director would have sufficient assets to cover the average monthly turnover of the company.
[54] The Tribunal is satisfied there was poor business management by the applicant, including:
a)failing to carry out due diligence prior to entering into business contracts;
b)failing to enter into written contracts;
c)suspending works under contracts and/or terminating contracts not in accordance with the contractual provisions and/or without first obtaining professional advice;
d)continuing to incur debt and/or credit of the company at a time when the applicant knew or ought to have known the company did not have the financial capacity to make payment.
[55] The Tribunal is satisfied that there was a failure by the applicant to seek appropriate financial or legal advice particularly, with respect to:
a)providing guarantees;
b)entering into contracts;
c)recovering monies owed;
d)suspending works under contracts;
e)terminating contracts;
f)legal proceedings commenced against the company.
[56] In relation to the matters which the legislation has, in section 56AD(8A), expressly stated that the Tribunal must have regard in deciding whether reasonable steps were taken to avoid the circumstances that led to the event[1], the Tribunal is not satisfied that the applicant took all reasonable steps to avoid the circumstances that resulted in the event.
[1]Kent v Queensland Building Services Authority CCT QR059-08 as cited in Henley v Queensland Building Services Authority [2010] QR113-09 at 69.
[57] The Tribunal accepts the submissions of the respondent with respect to those factors set out at section 56AD(8A) of the QBSA Act.
[58] There were limited financial documents in particular, financial documents prior to the financial year ending 2008.
[59] The Tribunal is not satisfied that the company (or the applicant) ensured that proper books of account and financial records of the company were kept or by “seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business”.
[60] The applicant failed to seek appropriate financial or legal advice with respect to:
a)providing guarantees (in particular financial advice with respect to personal guarantees);
b)entering into contracts (in particular the Cooloola Cove Project and the Hervey Bay Project);
c)recovering monies owed (in particular Cooloola Cove Project and the Hervey Bay Project);
d)suspending works under contracts (in particular the Cooloola Cove Project and Hervey Bay Project);
e)terminating contracts (in particular the Cooloola Cove Project and Hervey Bay Project); and
f)carrying out business in general (in particular failing to obtain appropriate financial advice as to the solvency of the Company and carrying out reasonable due diligence prior to entering into a business contract).
[61] The applicant failed to put in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts (in particular the Cooloola Cove Project and Hervey Bay Project) by not “putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts” and by not “making appropriate provision for Commonwealth and State taxation debts.”
[62] The applicant failed to make appropriate provision for taxation debts in the sum of $38,952.46.
[63] The Tribunal is satisfied that the applicant failed to take all reasonable steps to avoid the circumstances coming into existence because, inter alia, that the applicant in his capacity as director:
a)failed to ensure that proper books of account and financial records of the company were kept;
b)failed to seek appropriate financial or legal advice before entering into financial or business arrangements or conducting business;
c)failed to ensure guarantees provided were covered by sufficient assets to cover the liability under the guarantees;
d)failed to put in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts.
[64] The Tribunal is also satisfied that had the applicant taken all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the event then the discretion should not be exercised to categorise the applicant as a permitted individual because of:
a)the substantial level of trade creditors as the event;
b)the period of time over which the company’s trade creditor debt accumulated;
c)the fact that such debt was accrued as a direct result of the applicant’s decision to continue to trade the company at a time that the applicant knew, or ought to have known, that the company did not have the financial capacity to pay its trade creditors;
d)the failure by the applicant to enter into written contracts (in particular the Cooloola Cove display home); and
e)the failure by the applicant to enforce or adhere to contractual obligations (in particular written notice to suspend works or terminate the contract (in particular to the Cooloola Cove and Hervey Bay projects)).
[65] The order of the Tribunal is:
a)the application for review is dismissed;
b)the decisions of the respondent of 14 January 2010 and 17 June 2010 are confirmed.
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