Sherred v Queensland Building Services Authority
[2013] QCAT 585
| CITATION: | Sherred v Queensland Building Services Authority [2013] QCAT 585 |
| PARTIES: | Frank Raymond Sherred (Applicant) |
| v | |
| Queensland Building Services Authority (Respondent) |
| APPLICATION NUMBER: | OCR066-12 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 5 September 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Susan M Burke, Member |
| DELIVERED ON: | 25 October 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The decision of the Queensland Building Services Authority dated 6 February 2012 not to categorise the Applicant as a permitted individual for a relevant event be confirmed. |
| CATCHWORDS: | Permitted Individual – where licensee bankrupt – whether licensee took reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the bankruptcy Queensland Civil and Administrative Tribunal Act 2009 ss 18, 19, 20, 24 Younan v Queensland Building Services Authority [2010] QDC 158 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Sherred in person |
| RESPONDENT: | represented by Ms De Luchi on behalf of Robinson Locke Litigations Lawyers |
REASONS FOR DECISION
On 1 February 2012, the Applicant (Mr Sherred) applied to the Queensland Building Services Authority (the Authority) to be categorised as a permitted individual pursuant to s 56AD(1) of the Queensland Building Services Authority Act 1991 (QBSA Act).
On 6 February 2012, the Authority delivered its decision (the Authority’s decision) in which the Authority refused to categorise Mr Sherred as a permitted individual in relation to his bankruptcy on 23 November 2011.
This application[1] arises as a result of the Authority’s decision dated 6 February 2012.
[1]Application to review a decision dated 2 March 2012 as amended by order of the Tribunal on 14 May 2012.
This application seeks to review the Authority’s decision, being a reviewable decision pursuant to s 86(1)(J) of the QBSA Act.
The power of the Tribunal to exercise its review jurisdiction is triggered by an application to review a reviewable decision pursuant to s 87 of the QBSA Act and s 18(2) of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
Sections 19 and 20 of the QCAT Act set out the powers conferred on the Tribunal in review proceedings including the requirement that the Tribunal must hear and decide the review of the reviewable decision by way of a fresh hearing on the merits.
Section 24(1) of the QCAT Act further sets out the functions of the Tribunal in a proceeding for a review of a reviewable decision:
24Functions for review jurisdiction
(1)In a proceeding for a review of a reviewable decision, 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 the directions the tribunal considers appropriate.”
Accordingly, the Tribunal must consider all the material before it and take into account the requirements set out in ss 56AD(8), 56AD(8A) and 56AD(8B) of the QBSA Act in making its own determination as to whether Mr Sherred should become a permitted individual pursuant to s 56AD(1) of the QBSA Act.[2]
[2] Hyde v QBSA [2003] QBT 30 at [50].
The tests set out in s 56AD(8) of the QBSA Act must be satisfied before the Tribunal can exercise its power to substitute its own decision for the Authority’s decision.
Background
Mr Sherred has been a licensed builder since 1962.
In about August 2004, Mr Sherred was engaged by Ms Colene Hughes (the owner) on behalf of Queensland Estate Housing Project to undertake the construction and alterations to a dwelling at 38 Moores Pocket Road, Tivoli (the Moores Pocket Road dwelling). The work to be performed and contract price are set out in a quotation no. 12177-B dated 23 August 2004 provided by Mr Sherred to the owner. No written contract has been provided to the Tribunal although there is material to suggest that a written contract was entered into between the parties.[3]
[3]See [4] of the Statement of Claim filed on behalf of the Authority on 17 December 2010 and amended on 22 July 2011.
The Statement of Claim filed on behalf of the Authority to recover a debt alleged to be due and owing to the Authority pursuant to s 71(1) of the QBSA Act states that the contract was between Quality Estates Housing Project ACN 061 038 159 and Total Building Group Pty Ltd ACN 089 156 927, an entity of which Mr Sherred was a director.
The building work involved an alteration to the ground floor of the column elevated veneer house structure with slab on ground, ground enclosure and new small rear addition with a new kitchen.
The construction plans were prepared by Knight Consulting Pty Ltd as approved plans.
Work commenced in late August 2004 and from a very early stage the relationship between Mr Sherred and Ms Hughes deteriorated. Work continued intermittently on site with various disagreements interrupting work from time to time.
On 7 July 2005, the Authority issued to Mr Sherred a Direction to Rectify No. 28005. The notice advised Mr Sherred that he had 28 days in which to undertake the rectification work necessary to address the issues listed in the direction. The direction also stated that Mr Sherred had the right to appeal the Authority’s decision under ss 101 and 102 of the Commercial and Consumer Tribunal Act 2003 (the predecessor to the present QCAT Act).
A further Direction to Rectify No. 28276 was issued on 7 October 2005.
An application to review the Directions to Rectify was not made by Mr Sherred within the 28 day time period specified in the notice and an application to enlarge the time for compliance with the directions was dismissed by the Tribunal on 11 April 2006. Mr Sherred’s application did not challenge the need for rectification of the works but rather sought an extension of time in which to carry out those works.[4] No appeal in relation to that decision was made by Mr Sherred.
[4] Sherred v QBSA [2006] QCCTB 58 at [33].
A Scope of Works Schedule was forwarded by the Authority to Mr Sherred in February 2006 and an application to review the Scope of Works was commenced by Mr Sherred. The complaints regarding the Scope of Works centred on the amounts claimed for each item of work.
In May 2006, Mr Sherred sought advice from Winchester Young + Maddern solicitors regarding issues in dispute with the owner and the Authority. Evidence of this advice is provided in letters from the solicitors between May and November 2006.
By letter dated 4 July 2006, the Authority advised Mr Sherred that an insurance claim by Ms Hughes had been approved in the sum of $150,337.75. By letter dated 22 July 2010, the Authority sought to recover the amount of the insurance claim from Mr Sherred.
At all times, Mr Sherred disputed the claim.
By letter dated 21 March 2011, the Authority notified Mr Sherred pursuant to s 56AF of the QBSA Act that it considered Mr Sherred to be an excluded individual for a relevant event. The relevant event was the appointment on 28 February 2011 of a liquidator of Total Building Group Pty Ltd, a company of which Mr Sherred was a director. On 20 April 2011, Mr Sherred made an application to be categorised as a permitted individual in relation to that event. The Authority refused the application and advised Mr Sherred on 18 July 2011 that his licence had been cancelled.
The bankruptcy entered into by Mr Sherred on 23 November 2011 was considered by the Authority to be a “second relevant event” for the purposes of its consideration of Mr Sherred’s application to become a permitted individual.
The Legal Framework
Part 3A of the QBSA Act is entitled ‘Excluded and permitted individuals and excluded companies’ and comprises ss 56AB to 56AH.
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 a bankrupt (relevant bankruptcy event); and
(b)5 years have not elapsed since the relevant bankruptcy event happened.
(2)…………
(3)If this section applies to an individual because of subsection (1), the individual is an excluded individual for the relevant bankruptcy event.
Section 56AD of the QBSA Act relevantly provides:
56AD Becoming a permitted individual
(1)An individual may apply to the authority, in the form approved by the Board, 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.
…………..
(8)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.
(8A)In deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of a 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 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;
(f)making appropriate provision for Commonwealth and State taxation debts.
(8B)Nothing in subsection (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 resulted in the happening of a relevant event.
The relevant event referred to in s 56AD(8) refers to the relevant event identified in s 56AC of the QBSA Act.
In Younan v QBSA [2010] QDC 158,[5] McGill DCJ stated that the Authority is required to have regard to the action taken by the individual and identified those matters set out in s 56AD(8A).
[5]The decision of McGill J was upheld in the Court of Appeal in Younan v Queensland Building Services Authority [2011] QCA 1 per McMurdo P, Fraser JA and Cullinane J.
His Honour identified the principles to be taken into account in satisfying the criteria in s 56AD(8)[6]:
[24]It is immediately apparent that these are all concerned with the prudent management of a company as an ongoing business, or even, in the case of (b), something which is to be done before one conducts business or enters into financial or business arrangements. In other words, the focus of this subsection is on prevention rather than dealing with problems after they have arisen, except in the case of (c), which is obviously concerned with a situation where a problem has arisen outside the control of the individual in question………..
[26]The section speaks about taking reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. 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 in 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………
[37]……..An application to be categorised as a permitted individual must under s 56AD(3) include the reasons why the authority should categorise the individual as a permitted individual for the relevant event. Further, 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 out 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 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.
[6]Younan v Queensland Building Services Authority [2010] QDC 158 at [24], [26] and [37].
Thus the issues to be decided under s 56AD(1) of the QBSA Act are as follows:
a)identification of the “relevant event”;
b)identification of the circumstances that resulted in the happening of the relevant event;
c)analysis of whether the Applicant took all reasonable steps to avoid the coming into existence of those circumstances;
d)if the threshold issue is satisfied, should the Tribunal’s discretion be exercised to classify the Applicant as a permitted individual.
The Evidence
Mr Sherred gave evidence at the hearing. He relied upon the material filed with his application and the following documents:
a)a statement of events by FR Sherred dated 12 January 2012;
b)a statutory declaration of FR Sherred dated 23 January 2012;
c)statement of FR Sherred dated 30 May 2012;
d)response to the Authority’s decision by FR Sherred dated 19 July 2013;
e)bundle of documents dated 26 July 2013.
The Authority relied upon the following material:
a)a document entitled “Respondent’s Objections to Evidence dated 4 September 2013”;
b)Statement of Reasons of Natasha Dennis dated 20 April 2012;
c)Statement of Evidence of Natasha Dennis dated 27 April 2012;
d)QBSA bundle of documents dated 20 April 2012.
The Authority relied upon the evidence of Ms Natasha Dennis, the senior compliance officer who reviewed and processed Mr Sherred's application to become a permitted individual.
The Relevant Event
It is not disputed that the relevant event for the purpose of s 56AD of the QBSA Act was Mr Sherred entering into bankruptcy under the Bankruptcy Act 1966 on 23 November 2012 (Bankruptcy Number: QLD 5626/11/0 [estate 1]).
The “Notification of Bankruptcy – Debtor’s Petition” indicates that the only creditor at the relevant time was the Authority. The amount of the debt was $231,249.00.
Circumstances that Resulted in the Happening of the Relevant Event
A builder may only be categorised as a permitted individual if he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the bankruptcy.[7]
[7]Cats v QBSA [2008] QCCTB 22 at [13].
The requirement that “all reasonable steps” be taken does not mean all possible steps but rather only reasonable steps.[8]
[8]Hyde v QBSA [2003] QBT 30 at [53].
What steps are considered to be reasonable must be assessed taking into account the position of a reasonable builder in the shoes of the Applicant.[9]
[9]Hyde v QBSA [2003] QBT 30 at [58] to [60]; Darvill v QBSA [2008] QCCTB 35 at [42]; Gary Morrison Constructions Pty Ltd v QBSA [2012] QCATA 77 at [11].
The reasonable steps to be taken are those taken to avoid the coming into existence of the circumstances which resulted in the bankruptcy not the bankruptcy itself.[10]
[10]Dellaway v QBSA [2007] QCCTB 181 at [7].
In order to assess whether reasonable steps have been taken by the builder it is necessary to embark on an investigation of the nature of the harm, the foreseeability and degree of risk of its happening and the measures reasonably available for preventing or averting.[11]
[11]Rich v State of Queensland & Ors; Samin v State of Queensland & Ors [2001] QCA 295 per McPherson JA .
It is not a question of whether Mr Sherred did everything possible to prevent the circumstances from arising or whether they would have arisen if he had acted differently.[12] The reasonableness of his behaviour must be assessed by reference to what was known by Mr Sherred at the relevant time (that is, prior to the relevant event) without the benefit of hindsight.[13] Thus in determining what steps were reasonable it is a question of what was reasonable for the individual concerned in the circumstances in which he found himself with the information he had at the time.[14]
[12]Younan v QBSA [2010] QDC 158 at [25].
[13]Younan at [26].
[14]Younan at [26].
It is necessary to look at the individual facts on a case by case basis and assess the individual circumstances of the Applicant.[15]
[15]Darvill v QBSA at [42]; Hyde v QBSA at [57].
At the time of his bankruptcy, Mr Sherred was indebted to one creditor, the Authority, as a result of the works carried out at the Moores Pocket Road dwelling.
The debt to the Authority arose solely from the events which occurred in 2005/2006 in relation to the building works at the Moores Pocket Road dwelling.
The Authority, in written and oral submissions, summarised the circumstances resulting in the relevant event as follows:
a)Cause #1: Failure to pay the amount claimed by the Authority pursuant to s 71 of the QBSA Act. This arose from the payment made by the Authority pursuant to the insurance claim and letters of demand forwarded to Mr Sherred in July 2006.
b)Cause #2: Failure by the Applicant to complete the rectification work required in the Directions to Rectify issued in 2005.
c)Cause #3: The defective work performed by the Applicant pursuant to the contract regarding work carried out at the Moores Pocket Road dwelling.
The Authority further submitted that:
a)Mr Sherred has not provided any financial information dating from the period around July 2010. Further, Mr Sherred has not provided any information declaring his personal financial position at any stage nor taken any reasonable steps since 2010 to pay the sum owed to the Authority or to negotiate payment with the Authority or to put in place plans for repayment of the amount owed;
b)Directions to Rectify were issued by the Authority in 2005. Once issued, it would have been a reasonable step had Mr Sherred disputed the Directions to Rectify and applied within the required time for a review of the directions. Whilst Mr Sherred did make an application to the Tribunal, such application was for an extension of time. It was not an application to review the merits of the directions;
c)at no time did Mr Sherred dispute that the works required rectification. A reasonable step would have been to complete satisfactory building work. Mr Sherred’s application for an extension of time to review the directions as opposed to an application to review the merits of the Directions to Rectify is not a reasonable step to prevent the circumstances resulting in the relevant event.
Mr Sherred gave evidence, both in his statements and orally, that the circumstances which resulted in the happening of his bankruptcy were largely caused by the unreasonable demands by the Authority and the Authority’s failure to accept the certification of the works by three competent engineers. Mr Sherred further stated that as Ms Hughes was an employee of the Authority he felt that he was being treated unfairly by the Authority.
It is obvious from both the evidence provided on behalf of the Authority and Mr Sherred that the relevant circumstances which lead to the happening of the relevant event were those associated with the construction of the Moore Pocket Road dwelling, the necessity for rectification of the works to be carried out, Mr Sherred’s failure to address the rectification works identified in the Directions to Rectify or to challenge those directions and Mr Sherred’s failure to address the debt owed to the Authority for the necessary rectification works.
The reason why Mr Sherred did not take any reasonable steps to prevent the circumstances which lead to the happening of his bankruptcy was because at all times he did not accept that he was in debt to the Authority. In oral evidence, he admitted that he did not take any steps to put his finances in order because he did not think the Authority would pursue him. Further, he did not file a defence in response to the Statement of Claim filed on behalf of the Authority which purported to recoup the moneys which had been paid out by the Authority under the statutory insurance scheme.
Mr Sherred admitted that he did not take any steps to put aside moneys to cover any debt owed to the Authority because he did not believe any debt was valid. Mr Sherred believed at all times that the works had been certified as complete and that no rectification works were necessary.
Factors to be Considered under s 56AD(8A) of the QBSA Act
Section 56AD(8A) provides a non-exhaustive list of matters which must be taken into account in determining whether an individual should become a permitted individual.
Under s 56AD(8A) the following factors are to be considered in assessing whether the individual took all reasonable steps to avoid the coming into existence of the circumstances which resulted in the happening of the relevant event:
a)Keeping proper books of account and financial records
No evidence was provided by Mr Sherred which supported the conclusion that proper books of account and financial records were kept by him.
b)Seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business
No evidence was provided by Mr Sherred indicating that he had sought financial advice or legal advice before entering into financial or business arrangements or conducting business. The only evidence of legal advice being sought by Mr Sherred related to the dispute with Ms Hughes, the terms of the subsequent mediation agreement between the parties and the directions issued by the Authority.
c)Reporting fraud or theft to police
There is no evidence that fraud or theft was an issue prior to the relevant event and thus the obvious conclusion is that neither fraud nor theft was a factor requiring reporting to the police.
d)Ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees
There is no evidence that any issue regarding guarantees was a circumstance leading to the happening of the relevant event.
e)Putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts
No evidence was provided indicating that Mr Sherred put in place appropriate credit management for amounts owing to him. No evidence was provided indicating that Mr Sherred was owed moneys by creditors and that he was taking reasonable steps to recover those amounts.
f)Making appropriate provision for Commonwealth and State taxation debts
The Australian Taxation Office was not a creditor at any relevant time or before the happening of the relevant event. There is no evidence that any debt to the Australian Taxation Office was a circumstance leading to the happening of Mr Sherred’s bankruptcy.
Discretion
Subsection (8B) of s 56AD enlivens a discretion in the Tribunal to consider matters other than those contained in subsection (8A) of s 56AD.
For this purpose, it is incumbent on the Tribunal to take into account the objects of the QBSA Act.
Section 3 of the QBSA Act provides, amongst other things, that the objects of the QBSA Act include:
a) the regulation of the building industry:
i)to ensure the maintenance of proper standards in the industry: and
ii)to achieve a reasonable balance between the interests of building contractors and consumers.
Part 3 of the QBSA Act [16] provides that a licence may be issued by the Authority authorizing the licensee to carry out all classes of building work or to carry out building work of one or more classes specified in the licence. The criteria for granting licences, renewal of licences and all other matters relevant to the licensing system are set out in Part 3 of the QBSA Act.
[16]QBSA Act ss 30 to 56A.
The explanatory notes to the introduction of Part 3A of the QBSA Act 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’. The purpose of the introduction of Part 3A was to ensure that the relevant event, namely entering into bankruptcy, was totally outside the responsibility of the individual concerned to address the common practice of devising “phoenix companies” as a method of avoiding financial responsibilities.
There is no evidence that Mr Sherred was involved in any such conduct. Section 56AD(8A) as part of Part 3A of the QBSA Act sets out strict criteria which must be considered before other matters may be taken into account pursuant to subsection (8B).
The evidence is clear that Mr Sherred, unfortunately, failed to take any steps to avoid the circumstances which resulted in his bankruptcy because he did not believe he was in default in any way.
Having been satisfied that Mr Sherred has not taken the reasonable steps which the legislation specifically provides should be taken into account in order to prove that reasonable steps were taken to avoid the circumstances resulting in his bankruptcy, it is not necessary for me to consider whether the discretion should be exercised to categorise Mr Sherred as a permitted individual.
Mr Sherred has failed to satisfy the Tribunal that he took the steps set out in s 56AD(8A) which would have supported the conclusion that all reasonable steps had been taken to avoid the coming into existence of the circumstances which resulted in the happening of Mr Sherred’s bankruptcy.
In the circumstances, I am satisfied that the decision of the Authority to refuse Mr Sherred’s application to become a permitted individual should be confirmed.
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