Smith v Queensland Building Services Authority
[2012] QCAT 58
•17 February 2012
| CITATION: | Smith v Queensland Building Services Authority [2012] QCAT 58 |
| PARTIES: | Mr Daniel John Smith (Applicant) |
| v | |
| Queensland Building Services Authority (Respondent) |
| APPLICATION NUMBER: | OCR251-10 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 30 September 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | William LeMass, Member |
| DELIVERED ON: | 17 February 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The applicant be categorised as a permitted individual pursuant to section 56AD of the Act for this application. |
| CATCHWORDS: | Permitted individual Queensland Building Services Authority Act 1991, s 56AD |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Daniel John Smith was represented by Ms M Campbell, Solicitor and Mr G Thomson, of counsel |
| RESPONDENT: | Queensland Building Services Authority was represented by Mr B Cole, Solicitor |
REASONS FOR DECISION
Relevant Background
Mr Smith was born in 1972 in Roma, Queensland and completed his carpentry trade there. He worked in building following that date both here and overseas and ultimately worked in Brisbane for Hutchinsons Builders as a foreman and was involved in substantial civil building works. In July 2003 he set up his own building company with himself as sole director and traded, successfully, until the financial year 2008.
To the extent it is relevant at this time Mr Smith suffered serious ill health. His Doctor, Dr Simon Fleming, advises in correspondence as follows:
“This man underwent a renal transplant on the 1st March 2005 which failed and he recommenced dialysis in February 2008. He received a deceased donor transplant again on 25th May 2009. He is under close clinical follow up at the moment seeing me every fortnight.”
Further Dr Fleming says:
“On 25th May 2009 he was able to come off dialysis when he received his second cadaveric renal transplant. He was hospitalised for a week initially post operatively but had to attend for some hours each day for some 2-3 months. Obviously during this period of time he was unfit to carry out his normal work duties.”
Dr Fleming also notes that on 3 December 2008 Mr Smith was required to have his thyroid gland removed.
The company financial problems
The company between 2007 and 2009, provided quotes and entered contracts for two large jobs being:
§ The Stableton job on 15 September 2007 in the sum of $1,392,693; and
§ The Birdwood Terrace job in the sum of $1,198,555.
The Stableton job was practically complete on 8 September 2008 and a final invoice issued for $54,201, uncontroversial payments should have been made because of two 5% retentions for this job of approximately $34,000 each so, $122,000 was owing to the company. A year later and just prior to liquidation an invoice issued for variations and the second retention in the sum of $264,852. The total sum owing to the company then being $299,348, none of which was ever collected.
With respect to the Birdwood Terrace job an invoice issued for the month of January 2009 and was unpaid, work was suspended. That invoice was subsequently paid and work continued but the sum of $81,000 being the February 2009 invoice was not paid.
The administration of these claims was problematic for the company and its cash flow. There is much correspondence and reference in statements as to advice from solicitors, the making of claims, the validity of those claims and the involvement of the Building Services Authority (BSA).
With respect to the recovery of these monies and Mr Smith’s involvement with his solicitors, Mr Smith says compounding errors caused the loss of these funds as follows:
a) With respect to the Stableton job he had been obtaining the final certificates and when received he held them awaiting payment.
b) Without his knowledge his solicitors delivered the certificates to the client’s solicitors in exchange for payment but the payment was never made and advice was subsequently received that they would not be paid.
c) Further errors are documented in exhibit 1 at BJS5, correspondence from Smith Lawyers to himself dated 15 July 2008.
“As indicated to you recently we had been under the impression that our agents in Surfers Paradise serving the payment schedule had attended to it on Friday 4 July 2008. Unfortunately for all concerned, despite advising us that they had attended to it, they had not.”
d) As a result of this the effect of serving a payment schedule under the Building and Construction Industries Payments Act 2004 is that payment would have been received, failure to serve the schedule within time meant that leverage was lost and a judgment ultimately obtained by the Stapleton owners against Mr Smith’s company which lead to the winding up of the company.
e) With respect to the Birdwood Terrace job, following non payment of the February invoice a complaint was made by the home owners to the BSA. It issued directions to rectify effective or incomplete building work. This was disputed by Mr Smith but ultimately never resolved.
The first event
The company could not collect its debts or pay its creditors and in July 2009 there was a meeting in Mr Smith’s family and they advanced approximately half a million dollars to prop up his business. Also at this time he changed accountants and solicitors, which may have been too late.
Mr Smith obtained the assistance of the accountant, Mr James Whitelaw of HWM Partners. Exhibit 4 to Mr Smith’s affidavit is the statement of Mr James Whitelaw where he says at paragraph 3:
“The applicant approached our office in or around June 2009 seeking our assistance in relation to the position of DJ Smith Constructions Pty Ltd (“the company”) and himself personally.”
In August 2009 HWM Partners made a without prejudice offer to the creditors which was not accepted, the company was ultimately wound up. Mr Whitelaw says at paragraph 11, the purpose of the 11 August 2009 letter was to obtain consent from the company creditors to assist the company to continue to trade and take further steps to make attempts to recover outstanding monies. However the company was placed in liquidation before the proposal could be fully actioned. Two days prior to the company winding up Mr Smith sold his family home and all available proceeds went to the mortgagee, National Australia Bank, and to secured creditors.
The second event
The winding up did not result in further funds being available to creditors and the liquidators did not pursue payment from company debtors. Unsatisfied creditors then pursued Mr Smith for his personal guarantee. Petitions for the sequestration of Mr Smith were filed in the Federal Magistrates Court by various parties from April 2010 and ultimately orders were made on 13 July 2010. This bankruptcy was ultimately annulled on 9 December 2010. This fact does not assist Mr Smith, see decision of Justice Wilson in Meredith.[1]
[1] Queensland Building Services Authority v Meredith [2010] QCATA 50.
The law
This is an application to review a decision of the Queensland Building Services Authority (“the Authority”) to refuse to categorise the applicant as a permitted individual pursuant to section 56AD of the Queensland Building Services Authority Act 1991 (“the QBSA Act”).
The Tribunal must act in accordance with the objects of the QBSA Act including those set out in section 3(a)(ii):
“To achieve a reasonable balance between the interests of building contractors and consumers.”
Categorisation as a permitted individual
Section 56AD of the QBSA Act provides:
“(8) 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.”
Section 8(8A)(a)2(f) sets out the matters which “the Authority must have regard to action taken by the individual” and section 8(b) says that:
“Nothing in (8A) prevents the Authority from having regard to other matters for deciding whether the individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.”
So the consideration of matters which may be taken into account is very broad.
Practitioners in this area are indebted to Judge McGill for his decision in Younan v Queensland Building Services Authority[2] focussing our attention upon the test in section 56AD(8):
“This requires first, the identification of the relevant event.”
§The relevant event in this case is the bankruptcy of the applicant arising on 13 July 2010
§Secondly the identification of the circumstances that resulted in the happening of the relevant event. Only then can one assess whether “the individual took all reasonable steps to avoid the coming into existence of the circumstances..”
[2] [2010] QDC 158.
The central issue in this matter is the identification of those circumstances.
The respondent Authority contends in its case, that the circumstances are:
1. There was a great delay between the Stableton construction and the issue of an invoice for variations of sums of some 12 months and for large sums of money.
2. There was little motivation shown by the applicant to collect the variations in the Birdwood Terrace construction.
3. Lengthy delays took place whilst the applicant’s lawyers were instructed to institute proceedings to recover monies and ultimately no proceedings were ever issued before winding up.
4. Pre winding up there were insufficient assets to cover the company guaranteed debt.
The circumstances referred to in the paragraph above are all in time, prior to the first event and are circumstances leading to the first event for which a penalty upon the applicant has already been imposed. With respect to the circumstances leading up to the second event and the reasonable actions of the applicant there is not a lot to be said. Mr Smith’s actions are as follows:
1. In paragraph 28 of exhibit 1 of the statements of Mr Smith he says:
“During the period between the company event and the personal event I sought the following advice.
I engage Sawford Voll Lawyers to undertake an assessment of my litigation matters and provide advice on whether I was in the position to recover monies.”
Further at paragraph 30 of exhibit 2 Mr Smith states:
“In financial year 2008/2009 the sum of $28,870.41 was spent on legal fees and in the financial year 2009/2010 the sum of $81,810.90 was spent with lawyers.”
The circumstances of the second event which arise after September 2009 are as follows:
Mr Smith is no longer director of this company and without power to require it to take action against creditors.
§He is personally without funds and under no obligation to contribute his creditors apply for and are successful in his bankruptcy.
§He subsequently arranges a meeting of creditors, his wife contributes funds and he reaches a compromise annulling his bankruptcy.
What are the reasonable steps taken by Mr Smith in relation to these circumstances?
The difficulty in this case is in drawing the line between those circumstances giving rise to the first and second events particularly when that very subject is provided for in section 56AC(5) where a person is forgiven of the second event where both events are “flowing from what is in substance the one set of circumstances.” Counsel for Mr Smith has submitted that he has fallen in a lacuna between the legislation because whilst both events may well flow from what is in substance the one set of circumstances. Section 56(5) and (6) only applies to two bankruptcy events or two company events not a mixed event.
This has been considered in the matter of Anderson by Senior Member O’Callaghan where she says, “I accept the Authority’s submission that subsection 5 refers to bankruptcy matters and subsection (6) to company matters. There is no section which refers to a mixed event.”[3] With respect to Counsel it is not a lacuna indeed each matter must be judged upon its individual circumstances.
[3] [2010] QCAT 390.
The Authority for such proposition was visited by Member Oliver (as he then was) in Morsali-Yekan v Queensland Building Services Authority[4]. To paraphrase that matter Member Oliver found that whilst the actions of the builder were reasonable in relation to the first (company) event, but the builder’s actions were far from reasonable in relation to the second (bankruptcy) event where between those events the builder gambled away substantial sums.
At paragraph 80 “a reasonable and prudent man in the position of the applicant would not have spent over $100,000 in a period of 7 days gambling at casinos.”
[4] [2008] QCTB 237.
The circumstances that resulted in the happening of the relevant event are the circumstances in which Mr Smith finds himself post September 2009 set out in paragraph 24 above. They are not the circumstances as outlined by the respondent as being those matters necessarily leading to the first event.
It could be said that Mr Smith took no reasonable steps at all because all he did was seek advice and actually achieve nothing. Mahoney JA in Royal North Shore v Henderson[5] at 299 says:
“The phrase reasonable steps may have at least two significations. A particular step not taken may not fall within reasonable steps because in the circumstances it was not reason to expect the plaintiff to take any steps at all.”
[5] (1986) 7 NSWLR 283.
Mr Smith finds himself post September 2009, essentially powerless to take any steps to prevent his creditors applying for his bankruptcy. It is an event which flowed from the winding up of his company in circumstances where he could not contribute further funds to satisfy his creditors. He took no steps at all to prevent these circumstances arising because indeed there was none he could take. Having identified the circumstances and the reasonable steps I find that upon a consideration of all the evidence the applicant took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event and therefore the applicant should for that event be categorised as a permitted individual.
The order of this Tribunal is that:
1. The applicant be categorised as a permitted individual pursuant to section 56AD of the Act for this application.
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