Webster v Queensland Building Services Authority
[2010] QCAT 465
•22 September 2010
CITATION:Webster v Queensland Building Services Authority [2010] QCAT 465
PARTIES: | GLENN DANIEL WEBSTER |
| V | |
| QUEENSLAND BUILDING SERVICES AUTHORITY | |
APPLICATION NUMBER: | QR087-09 |
MATTER TYPE: | Administrative review matters |
HEARING DATE: | 18 May 2010 |
HEARD AT: | Brisbane |
DECISION OF: | Mr Paul Favell |
DELIVERED ON: | 22 September 2010 |
DELIVERED AT: | Brisbane |
ORDERS MADE: | The Tribunal orders that the decision of the Building Services Authority to refuse the application to be categorised as a Permitted Individual be confirmed. |
CATCHWORDS: | Review of a refusal of an application to be categorised as a permitted individual pursuant to section 56AD(1) of the Queensland Building Services Authority Act 1991. |
APPEARANCES AND REPRESENTATION: | Applicant Mr Webster Respondent Ms Hunt |
REASONS FOR DECISION
Introduction
On 28 May 2009 a decision was made by the Building Services Authority to refuse an application by the applicant to be categorised as a Permitted Individual pursuant to s56AD(1) of the Queensland Building Services Authority Act 1991 (“the Act”).
Factual Background and Claims
The Applicant holds a licence in the class of Builder Restricted to Shopfitting, grade of Nominee Supervisor.
The Applicant was the sole Director of Australian Fitout Services Pty Ltd (“AFS”) between 9 March 2005 and 20 February 2009.
AFS held a licence in the class of Builder Restricted to Shopfitting.
The relevant event occurred on or about 20 February 2009, it being the entering into bankruptcy of Glenn Webster and the appointment of the Official Trustee in Bankruptcy to the Applicant’s bankrupt estate.
The Building Services Authority claims that the event:
(a)Comprised the Applicant’s entry into bankruptcy within the meaning of section 56AC(1)(a) of the QBSA Act on or about 20 February 2009;
(b)Occurred less than five (5) years ago for the purposes of section 56AC(1)(b) of the QBSA Act; and
(c)Was a “relevant bankruptcy event” within the meaning of section 56AC(1) of the QBSA Act and therefore a “relevant event” within the meaning of section 56AD(1) of the QBSA Act.
The BSA therefore claims that the Applicant became, on or about 20 February 2009, an “excluded individual” for the Event within the meaning of section 56AC(3) of the QBSA Act.
On 2 March 2009 the Building Services Authority sent the Applicant a ‘Notice of Reasons for Proposed Cancellation of Licence’ citing a failure to comply with a licensee’s financial requirements and the bankruptcy of the Applicant in their reasons. This letter informed the applicant of the proposed order that they be deemed an excluded individual and informed them of their rights to apply to be categorised as a permitted individual.
On or about 11 March 2009 the BSA received the applicant’s application to be categorised as a permitted individual citing the following reasons for the relevant event:
(a)Under pricing or unprofitable building contracts;
(b)Unprofitable business arrangements;
(c)Adverse legal action;
(d)Economic conditions affecting the industry;
(e)Inability to recover amounts owing;
(f)Insufficient working capital;
(g)Money owed to related entities;
(h)Fraud or theft; and
(i)Other family issues.
On 23 March 2009 the Building Services Authority informed the applicant via a letter that the application to be categorised as a permitted individual had been refused. The BSA said that they were not satisfied that the applicant took all reasonable steps to avoid the circumstances that resulted in the relevant event. The BSA also notified the Applicant of their right to make an application to the Tribunal for a review of the decision.
The applicant applied to the tribunal on 9 April 2009.
Applicant’s claim
The Applicant indicated that he first became aware of the cause of the Relevant Event in August 2007.
The Applicant indicated that when he started the company in 2005, he worked with his brother who “manipulated me and my company by fraud, doing deals with clients behind my back, not doing his job properly (project managing), influencing staff to leave, threats and improper behaviour”.
The applicant claims that he took reasonable steps to avoid the relevant event including:
(a)The introduction of Robert Morton Jones as a business partner who injected cash into AFS to assist with the payment of the increasing debts; and
(b)Entering into a payment agreement with Queensland Administration over a six month period for the payment of the $200,000 debt that AFS had accrued.
(c)The introduction of a lawyer to work in the business and who brought in contracts, laws and regulations that the Applicant claims were previously lacking.
15. The Applicant claims he began to obtain more work in July / August 2008, however this required more machinery to be purchased and the Applicant states that “…it was good, but it was not going to pay off the ever increasing debt…”.
16. The Applicant contends he used all of his personal credit cards to pay company debts.
Respondent’s response and counterclaim
The respondent considers that the issue under consideration in this matter was whether or not all reasonable steps were taken to avoid the existence of circumstances that resulted in the happening of the relevant event.
The relevant circumstances in considering whether all reasonable steps were taken include the following:
(a)The Applicant has failed to provide any documentary evidence of action taken against his brother in relation to the allegations of fraud;
(b)The Applicant failed to provide any information as to the nature or impact of the adverse legal action alleged and further failed to define if this alleged action was against AFS or him personally;
(c)The Applicant has failed to provide any evidence as to what, if any, legal, professional or financial advice he sought in relation to his financial situation;
(d)The Applicant has failed to provide any documentary evidence as to the steps he took in relation to the recovery of bad debts;
(e)The Applicant has failed to provide the Authority with clear information and documentary evidence as to whether the circumstances resulting in his bankruptcy were due to the financial situation of AFS; or were due to personal circumstances: or were a combination of both; and
(f)The Applicant has failed to provide documentary evidence or proper explanation as to the effect that the financial status of AFS had on his personal financial status.
The respondent submits that as a result of the above, all reasonable steps were not taken by the applicant.
The respondent further submits that the Applicant failed to take any or all of the steps referred to in section 56AD(8A) of the QBSA Act, most relevantly:
(a)Failing to seek appropriate financial and legal advice before entering into financial or business arrangements or conducting business; and
(b)Failing to ensure guarantees were covered by sufficient assets to cover the liability under the guarantees.
Accordingly, the respondent claims that section 51AD(8) had not been satisfied.
The BSA claims this is not a case where the circumstances that resulted in the happening of the Event were entirely outside the responsibility of the Applicant but were in fact the result of the Applicant’s poor understanding as to how the business was structured and operated and a series of very poor decisions made on the Applicant’s part. For this reason the applicant’s application to be categorised as a permitted individual was rejected.
The respondent seeks that the Tribunal confirm the decision under review.
Legislation
The respondent relied on s 56 of the Act in its decision to refuse to categorise the applicant as a Permitted Individual.
The respondent relies on s 56AC of the Act which provides:
“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)[Not relevant]
(3)If this section applies to an individual because of subsection (1), the individual is an excluded individual for the relevant bankruptcy event.”
26. Section 56AD(1) of the Act provides:
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.
27. Section 56AD(3) of the Act provides:
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.
28. Section 56AD(8) of the Act 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.
29. The “relevant event” referred to in s 56(8) refers to the Relevant Event identified in s 56AC.
30. Section 56AD(8A) provides a non-exhaustive list of the circumstances which the Authority may have regard for the purposes of Section 56AD(8) of the Act as follows:-
“In deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted ion 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 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;
(f)making appropriate provision for Commonwealth and State taxation debts.”
31. Section 56AD(8B) of the Act provides:
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.
32. Section 56AF of the 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.
33. The term “licensee” is defined in Schedule 2 of the QBSA Act to mean a person who holds a licence.
34. Section 56AF(3) of the Act states that the Authority must cancel the individual’s licence by written notice given to the individual if:
(a)the individual has not already applied to be categorised as a permitted individual for the relevant event and the individual does not apply for the categorisation within twenty-eight (28) days after the Authority gives the individual the written notice under subsection (2); or
(b)the individual has already applied to be categorised as a permitted individual for the relevant event, or the individual applies for the categorisation within the twenty-eight (28) day period outlined in Section 56AF(3)(a) of the Act, but-
(i)the Authority refuses the application; and
(ii)either of the following applies-
a. the period for applying for a review of the decision to refuse the application has ended and no application for review has been made;
b. an application for review has been made and the Authority’s decision is confirmed or the application is not proceeded with.
35. The respondent contends that the issues for decision in relation to the application pursuant to s 56AD(1) are:
(a)Identification of the “Relevant Event” for the purposes of S.56AD(1);
(b)Whether the Applicant took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the Relevant Event, as required by S.51AD(8); and
(c)If yes, should discretion be exercised to classify the Applicant as a permitted individual, also required by S.51AD(8).
Reasons
36. Glenn Daniel Webster (the applicant) came to Australia from Yorkshire in 2004 on holidays and decided to stay. He is now a resident of Australia. On 9 March 2005 he incorporated Australia Fitout Services Pty Ltd which obtained a licence from the Queensland Building Services Authority (the Authority) in the class of Builder Restricted to Shopfitting. On 12 March 2005 the Authority granted the applicant a licence in the class of Builder Restricted to Shopfitting grade of Nominee Supervisor.
37. The applicant had approximately $35,000 to set up the business and bought a second hand edge bander and saw and signed a 3 year lease in a factory and set about building up business.
38. The applicant commenced a shop fitting business as Australian Fitout Services using funding provided by the applicant. In the first year of the business operation he employed his brother Tony Webster who despite benefiting from his brothers help and employment stole materials, gave clients incorrect information, did outside work and generally became a burden for the business.
39. In the first two years of operation the business had difficulty in having money owed to it paid. It in turn accumulated about 50 creditors who were collectively owed about $250,000.
40. The applicant engaged Queensland Administration Services in about April 2007 and a statement of affairs was undertaken. After examination of that statement a plan to pay off creditors was put into place and the agreement was sought from creditors to pay the debts over time. Nearly all of the creditors agreed to the plan.
41. Mr Morton Jones did not have a background in shop fitting but after he was shown a business plan indicating a potential for profit when a business was run efficiently he became very excited. Although he was aware of the debts owed by the company he said he would help clear the debts and with his knowledge, skills, and education he would do the letter writing and the administration of the business.
42. In or about July 2007 the applicant reached an agreement with Robert Miller Morton-Jones which was set out in a two page document which was not executed and is attachment 6 to exhibit 1. The agreement provided for Australian Fitout Services Pty Ltd as trustee for the Webster Property Trust and Robert Morton-Jones to be partners in the business of Fitout Services to be carried on under the name of Australian Fitout Services at shop 2/7 Wrights Place Labrador. The partners were to contribute equally to the partnership. Ownership in Australian Fitout Services was to only pass to Robert Morton-Jones when $250,000 had been paid in full for 50% share in Australian Fitout Services. The agreement contemplated Robert Morton-Jones lending $250,000 to Australian Fitout Services Pty Ltd as trustee for the Webster Property Trust and for the partnership to finance repayments of that loan until the borrowings were repaid.
43. On or about 13 July 2007 Patricia Morton-Jones and Robert Miller Morton-Jones borrowed $149,650.54 from Columbus Capital Pty Ltd. The applicant gave oral evidence that about that time Robert Morton-Jones paid $150,000 into the account of Australian Fitout Services Pty Ltd but that later another account was set up to allow the partnership to function.
44. The evidence of the applicant concerning the operation of partnership was confused and indicated a lack of a full understanding of the distinction between the company and the partnership.
45. Prior to the partnership commencing the applicant has been in receipt of advice from Adam Sandbrock a migration lawyer who advised on setting up a trust, a company and a partnership. The applicant gave evidence that the partnership agreement (unsigned) was drafted by CG Accountants. The applicant also had advice from an American lawyer Jonathon who was engaged to give advice to the company concerning contracts and debt recovery. On other occasions another lawyer gave advice concerning debt recovery. On two occasions debt recovery in respect of debts owed by Top One and Ridge Jewelers Underwood was taken to the Small Claims Court.
46. Before the partnership began the applicant had employed a project manager who along with the applicant actively pursued outstanding debts. The evidence demonstrating such activity was lacking in further detail.
47. In the first year and a half of the operation of the partnership the business had three or four good regular leads from architects and designers and an opportunity to do bespoke joinery. The project manager did the extra work of estimating and running of the factory because of that opportunity and the applicant ran the shop fitting and estimating part of the business. Mr Morton-Jones did the contracts and necessary paper work.
48. At that time the applicant had some private issues with his partner and was concerned with meeting the criteria for his business visa and his residency status. He became a resident in November 2008.
49. The applicant gave evidence that at this time he was “outcast” from everyone and he says Mr Morton Jones had a plan which involved the applicant walking away from the business. On 7 January 2009 Mr Morton Jones by a letter of that day (annexure 3 to schedule 1) posed two options for the applicants consideration.
50. Before those options were put up work had slowed or stopped. The applicant wanted Mr Morton-Jones to estimate shop fit outs so that the applicant could be on site running jobs. The applicant was using his visa cards to pay for materials, bills and other things for the business. Some statements (attachment 10 to exhibit 1) show business type expenses being paid on credit cards. The applicant is his oral evidence estimated that about 70% of his credit card debt at the time of his bankruptcy was business expense.
51. While the applicant was using his credit cards to pay business expenses and debts in an endeavour to keep the business trading Mr Morton-Jones refused to put more money into the business.
52. The $150,000 paid to the company was used in part to reduce the company’s debts and to invest in machinery and new premises. The debts owed by the business were reduced to $50,000 approximately. The lease which the partnership entered into was guaranteed by the applicant and Mr Morton-Jones.
53. The applicant wanted to reduce staff so as to reduce the expense to the business over the slow period but Mr Morton-Jones refused to agree to reduce the staff numbers. The applicant gave evidence that Mr Morton-Jones insisted on keeping the staff because if they left he would have no ability to continue the business himself because he lacked the appropriate skills. The applicant’s evidence included a contention that Mr Morton-Jones was not bringing any jobs to the business and was not collecting debts owed to the business. The applicant was chasing debts and was being chased for debts. One such instance involved him being threatened at knife point at his home.
54. Prior to the applicant resigning as director of the company on 27 January 2009 the applicant found that Mr Morton-Jones had a client put money owed to the business into his personal account. At that time the applicant had not been paid for six weeks.
55. Mr Morton-Jones at that stage offered to pay the applicant six weeks wages in return for the applicant leaving the business. The applicant sought advice from Mr Will Hawney from Queensland Administration Services who advised resigning as director of the company and deregistration of the company. The company was voluntarily deregistered on 17 February 2009.
56. On 20 February 2009 a debtors petition was filed and a statement of affairs filed. The applicant is an undischarged bankrupt. The statement of affairs showed the debts owed to credit card providers, finance companies, the Deputy Commissioner of Taxation, landlords, Sensis Pty Ltd and WorkCover.
57. The Applicant gave evidence that the following debts were in respect of debts of the company:
Deputy Commissioner of Taxation $7,500
Deputy Commissioner of Taxation $15,500
Sensis Pty Ltd $313
Sensis Pty Ltd $14,518
WorkCover Queensland $3,131
58. The test to be applied to the review is that set out in s. 56AA(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.”
59. Section 56AD(8A) provides for a number of matters to which attention must be paid when 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”. Section 56AD(8B) allows for other relevant factors to be considered.
60. I accept the evidence of Mr Webster and the evidence which he called, however the evidence is not such which could allow a conclusion that Mr Webster exercised prudent management. It cannot be concluded that Mr Webster ensured keeping proper books of account and financial records or put into place appropriate credit management for amounts owing. In my view he did not take reasonable steps for the recovery of outstanding debts.
61. I accept that Mr Webster sought some form of financial and legal advice concerning the operation of the business but I am not satisfied he sought and obtained appropriate advice before entering into the arrangements I have set out herein. By his own admission there had been theft which was not reported to the police. He did not make appropriate provision for Commonwealth taxation debts.
62. In Younan v Queensland Building Services Authority [2010] QDC, McGill 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.[1] 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.[2]”
[1] Randel v Brisbane City Council [1984] 2 Qd R 276 at 278; NF v State of Queensland [2005] QCA 110 at [29]; Royal North Shore Hospital v Henderson (1986) 7 NSWLR 283 at 299 per Mahoney JA; N v State of Queensland [2004] QSC 290.
[2] Roads and Traffic Authority of NSW v Dederer [2007] QCA 42 at [18]; Hegarty v Queensland Ambulance Service [2007] QCA 366 at [49], [109].
63. The relevant event here is the entering into bankruptcy of Glen Webster and the appointment of the Official trustee. The circumstances that resulted in the happening of the relevant event are the circumstance summarised in paragraph 9 herein. I am not satisfied that the applicant took all reasonable steps to avoid the relevant event and I confirm the decision of the Building Services Authority to refuse the application to be categorised as a Permitted Individual.
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