Beerepoot v Queensland Building and Construction Commission [2015] QCAT 524

CITATION: Beerepoot v Queensland Building and Construction Commission [2015] QCAT 524 PARTIES: Paul Antony Everard Beerepoot (Applicant) v Queensland Building and Construction Commission (Respondent) APPLICATION NUMBER: OCR219-14 MATTER TYPE: Occupational regulation matters HEARING DATE: 26 August 2015 HEARD AT: Brisbane DECISION OF: Member Hanly DELIVERED ON: 4 December 2015 DELIVERED AT: Brisbane ORDERS MADE: 1. The decision of the Queensland Building and Construction Commission dated 29 August 2014, which refused to categorise Paul Antony Everard Beerepoot as a permitted individual, is confirmed. CATCHWORDS: Application to be categorised as a permitted individual; Queensland Building and Construction Commission Act 1991, s56AD APPEARANCES: APPLICANT: Mr Beerepoot appeared on his own behalf RESPONDENT: Queensland Building and Construction Commission was represented by Mr Malcolm Robinson, of Robinson Locke Litigation Lawyers REASONS FOR DECISION -- 1 of 8 -- 2 [1] Mr Beerepoot was a licenced builder. He entered into bankruptcy under the Bankruptcy Act 1966 on 2 November 2010. [2] On 25 August 2014, Mr Beerepoot applied to the Queensland Building and Construction Commission (QBCC) to be categorised as a permitted individual.1 [3] QBCC refused Mr Beerepoot’s application on 29 August 2014. He then sought a review of that decision. This Tribunal is required to consider the matter afresh, and to determine it on its merits. In doing so, the Tribunal is required to make “the correct and preferable decision”.2 [4] The Tribunal may categorise Mr Beerepoot as a permitted individual only if it is satisfied that he “took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.”3 The “relevant event” referred to in section 56AD(8) refers to the relevant event set out in section 56AC. [5] It is necessary, therefore, for the Tribunal to decide the following issues: a) What is the “relevant event”? b) What were the circumstances that resulted in the happening of the relevant event? c) Did Mr Beerepoot take all reasonable steps to avoid the coming into existence of those circumstances? d) If the threshold issue is satisfied, should the Tribunal exercise its discretion to classify Mr Beerepoot as a permitted individual? [6] In determining what those reasonable steps are, the Tribunal must make that assessment “by reference to what was known by (Mr Beerepoot) at the time, without the benefit of hindsight.”4 It is also not a question of whether Mr Beerepoot did everything possible to prevent the circumstances from arising, or whether they would have arisen if he had acted differently.5 What is the “relevant event”? [7] The “relevant event” is Mr Beerepoot’s bankruptcy. What were the circumstances that resulted in the happening of the relevant event? [8] Mr Beerepoot stated in the Statement of Affairs lodged with his Debtor’s petition [BOD p112] that the cause of his bankruptcy was business related, 1 S56AD(1) Queensland Building and Construction Commission Act 1991 (QBCC Act) 2 S20 Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act) 3 S56AD(8) QBCC Act 4 Younan v QBSA [2010] QDC 158 at para [26] 5 ibid -- 2 of 8 -- 3 because there was an “inability to collect debts due to disputes, faulty work or bad debts.” It is necessary to put that statement into an historical perspective. [9] Mr Beerepoot was a director of a company, AMS Construction (Qld) Pty Ltd, which was placed into administration on 13 July 2009 (the company event). [10] AMS Construction (Qld) Pty Ltd (AMS) started trading on 1 July 2006 and registered the trading name AMS Constructions. Prior to that time, the trading name of AMS Constructions was used by the Beerepoot Family Trust with, firstly, Mr and Mrs Beerepoot as trustees, and later with Myraul Pty Ltd as trustee. [11] Mr Beerepoot stated that at the time AMS started trading, the family trust owned several items of plant and equipment as well as vehicles. That plant and equipment was required to continue the business in the name of AMS.6 [12] Shortly before the company event, Mr Beerepoot made payments from company funds to the family trust, to his wife, and to two commercial entities, each of which was for debts in connection with the family trust. He stated that these payments were for payouts and repayments to settle accounts due at that time, and would have been made at the end of the financial year had the business kept going or not. He said he had recognised the payments as pending, and the payments had been budgeted for.7 [13] It is not evident from the financial records before the Tribunal where the payments had been budgeted for. [14] The first payment, on 24 June 2009, was for $32,000.00 to the family trust. This was repayment of the value of a tip truck and trailer, owned by the family trust, which had been used as trade-ins on the purchase of a new tip truck in the name of AMS. [15] The second payment on 24 June 2009 was for $20,082.39 to BMW Australia and was the balloon payment under a hire purchase agreement for a BMW which had been purchased by AMS (then trading under the family trust) in 2003. [16] The third payment on 24 June 2009 was for $20,887.90 to All Commercial Finance and was the balloon payment under a hire purchase agreement for a 5T excavator. A 3T excavator owned by the family trust had been traded for the 5T excavator purchased by AMS in 2004. [17] By 24 June 2009, Mr Beerepoot was aware that AMS was engaged in insolvent trading. He said he had not been aware of this until Ian Hughes told him that no outstanding monies would be released.8 6 Exhibit 5 p145 7 Ibid p145 8 Ibid p106 -- 3 of 8 -- 4 [18] Mr Beerepoot contends that his bankruptcy was directly connected to the company event. [19] Mr Beerepoot’s claim in his Statement of Affairs that he was unable to collect debts due to disputes, faulty work or bad debts is, on the evidence, related to the company event.9 [20] Mr Beerepoot stated that the liquidator was reluctant to pursue several large debtors of AMS, seemingly on the basis that the costs of doing so outweighed the potential benefits.10 [21] At the time of his bankruptcy, Mr Beerepoot listed creditors totalling $77,381.0011 and assets totalling $23,518.00.12 One of his creditors, Macquarie Equipment Rentals, was owed a total of $28,468.00. [22] On those raw figures, Mr Beerepoot could not pay out Macquarie Equipment Rentals. However, an examination of Mr Beerepoot’s asset position at earlier times reveals additional information. [23] On 10 November 2009 Pearce & Heers, the liquidators of the company, wrote to Myraul, making a claim alleging that Myraul had received preferential payments totalling $72,969.00.13 [24] Two further payments from company funds totalling $84,946.00 were made to Mrs Beerepoot on 24 June 2009 and 7 July 2009. The total sum paid to Mrs Beerepoot and to the family trust just weeks before the company went into liquidation was $106,946.00, which the Administrator’s Report to Creditors identified.14 [25] In one of his written statements and at the hearing, Mr Beerepoot admitted that the company had made the preferential payments, although he explained his rationale for doing so.15 His explanation did not change the nature of the payments. [26] The Administrator’s Report further stated that Myraul owed $739,922.00 to the company.16 Mr Beerepoot claimed that the debt was actually owed by the company to Myraul, but he did not provide any evidence to support this assertion. [27] Mr Beerepoot contended that the Administrator did not understand the building estimating and administration software used by the company, because unless the program had been “rolled over” the Administrator could not review the Profit and Loss Statement and the Balance Sheet. He claimed that the figures for 2007 had been “rolled over” but that the 2008 9 Exhibit 1 – Statement of Mr Beerepoot dated 19 December 2014 - 2nd page 10 Op cit – Exhibit 5 p106 11 ibid p126 12 Ibid p121 13 Ibid p147 14 Ibid p88 15 Exhibit 3 – Statement of Mr Beerepoot dated 25 May 2015 – 3rd page 16 Op cit BOD p77 -- 4 of 8 -- 5 and 2009 years had not. On this basis, Mr Beerepoot stated that the Administrator’s figures for the past 3 years were incorrect. [28] The Tribunal considers that if the “rollover” had not occurred, then logic would dictate that Mr Beerepoot would not have been able to review the financial statements either. [29] In any event, it does not appear from any of the evidence adduced that the claims by the liquidator were incorrect. [30] After AMS went into liquidation, Mr Beerepoot retained solicitors to defend various claims that the liquidator made. He gave evidence that the solicitors advised him “if he spent a small amount of money, perhaps the liquidator would go away”. An initial estimate of the costs involved was $5,000.00. The costs ultimately reached $25,000.00, and that firm of solicitors became a creditor in his bankruptcy. [31] On 22 December 2009 Mr Beerepoot’s solicitors wrote to the solicitors retained by the liquidator.17 The letter concerned proceedings instigated by the liquidator in support of a caveat over the family home, owned by Mrs Beerepoot. That home had supported the guarantees given by Mrs Beerepoot for the business conducted by AMS. The letter contained an offer to pay the liquidator $265,000.00, so it is evident that further claims had been made by the liquidator in excess of the sum of $72,969.00 referred to in the liquidator’s letter dated 10 November 2009.18 [32] During this process, the family home, which was valued at between $1.1 million and $1.2 million, was sold. The sale realised a little over $910,000.00. There were two caveats over the property. Although the home was in Mrs Beerepoot’s name, the proceeds of sale were disbursed to accounts for the benefit of both Mr and Mrs Beerepoot. [33] Mr Beerepoot then obtained advice from another lawyer, who recommended that he lodge a Debtor’s Petition. What were the causes of the relevant event? [34] There were several causes of the bankruptcy, which included the pursuit of unpaid debts owed to Macquarie Equipment Rentals and the various claims of the liquidator for the preferential payments and uncommercial transactions. [35] AMS owed Macquarie Equipment Rentals $28,400 and Mr Beerepoot had guaranteed the debt. [36] The claims by the liquidator were for at least $265,000.00 having regard to that sum being offered as settlement by Mr Beerepoot’s solicitors on 22 December 2009. 17 Ibid p160 18 Ibid p147 -- 5 of 8 -- 6 [37] Mr Beerepoot made preferential payments to his wife and the family trust for $106,946.00, thereby depriving the company of that amount of money. [38] Further sums amounting to $40,969.00 were paid to BMW Australia and All Commercial Finance. These were deemed by the liquidator to be uncommercial transactions recoverable from the directors or their related entities.19 [39] The total sum of $147,915.00 taken from AMS to the benefit of Mr Beerepoot and his wife exceeded the amount that AMS owed to guarantee creditors. [40] The family trust also owed AMS $739,922.00. [41] It is evident that if the preferential payments had not been made, the liquidator would not have had to make claims seeking to void those payments, and Mr Beerepoot would not have incurred legal fees of $25,000 resisting the claims. [42] Mr Beerepoot therefore set in train a series of events which had a domino effect. Did Mr Beerepoot take all reasonable steps to avoid the circumstances causing the relevant event coming into existence? [43] Mr Beerepoot gave evidence that after AMS went into liquidation, he was not working for several months, until March 2010. During this time, his wife was diagnosed with cancer. They had to have money for living expenses, which included paying rent and buying a car. [44] Mr Beerepoot had some cash (approximately $30,000.00) which he had accumulated over about 10 years, which he described as his “emergency money”. The cash was kept in a tin in his garage. He used this money for these living expenses. [45] Mr Beerepoot did not apply this cash, or any of the $106,946.00 which had been paid directly to the Beerepoot family, to the payment of the company’s creditors. Instead, Mr Beerepoot compounded his problems by attempting to resist the claims, and accumulated a further debt to his solicitors of $25,000.00. [46] Mr Beerepoot also gave evidence that, although the amount owed to his creditors was $77,381.00, his wife owed considerably more to her creditors. He decided that he did not want his wife to be the only one to go into bankruptcy, so he thought that he should show marital solidarity by doing the same. However, the ramifications for Mr Beerepoot were considerably more serious in terms of his future livelihood. Further factors for consideration under s.56AD(8A) [47] Mr Beerepoot obviously gave guarantees from time to time (Macquarie Equipment Rentals being one), but there was no evidence provided by him as to the precise nature of those guarantees, nor whether there were sufficient assets to cover the liabilities under the guarantees. 19 Ibid p88 -- 6 of 8 -- 7 [48] Ultimately, when called upon to honour the guarantees, he was unable to do so. [49] Mr Beerepoot also obtained advice from at least two solicitors after AMS went into liquidation, and before he entered bankruptcy. [50] He also gave evidence that when he first set up the business he was given erroneous advice, which caused him to establish the business in one way, only to be told later by the (then) Queensland Building Services Authority that it needed to be changed. He did not give much detail about the particulars of this change, other than to say that it entailed, amongst other things, a transfer of the family home from the family trust to Mrs Beerepoot’s name. That transfer cost him a significant sum in stamp duty, which in turn made him decide not to transfer assets owned by the family trust to the business, to avoid having to pay more stamp duty. [51] Mr Beerepoot gave scant evidence about the advice given at the time of the company event and the relevant event. [52] The actions taken by the first firm of solicitors to resist the claims of the liquidators seems to fly in the face of the evidence, which was that Mr Beerepoot acknowledged that he had made the preferential payments, and also that the company had traded whilst insolvent, however belatedly Mr Beerepoot had come to that realisation. [53] By resisting the claims, Mr Beerepoot ran up almost $25,000.00 in fees, which he then could not pay. [54] This history indicates that Mr Beerepoot failed to take certain steps, such as : a) Obtaining appropriate financial or legal advice before entering into the various financial or business arrangements he conducted, such as making payments from the company to his wife and the family trust, and b) Ensuring that the guarantees he provided were covered by sufficient assets to cover the liability under the guarantees, and that c) Mr Beerepoot entered into the financial arrangements that led directly to his bankruptcy by the making of preferential payments to his wife and the family trust, which were used for personal living expenses and dissipated, so that when demand was made on him by the liquidator, he was unable to reimburse the monies. [55] Considering all of the evidence, the Tribunal is satisfied that Mr Beerepoot did not take all reasonable steps to avoid his bankruptcy. Is the Tribunal required to exercise its discretion? [56] Having found that Mr Beerepoot failed to take all reasonable steps to avoid the coming into existence of the circumstances that resulted in his bankruptcy, there is no basis upon which the Tribunal may exercise a discretion to categorise him as a permitted individual. -- 7 of 8 -- 8 The PEOLA Amendments [57] The Tribunal notes that the QBCC Act was amended in certain respects from 10 November 2014. In summary, those amendments relate to multiple relevant events where the events arose from the “one set of circumstances”. [58] Mr Beerepoot contends that the company event and his bankruptcy are “tightly linked” and “should be considered as the result of the same circumstances”.20 [59] The question arises as to whether the amendments can be applied retrospectively, since Mr Beerepoot’s application to be categorised as a permitted individual was refused on 29 August 2014, prior to the commencement of the amendments. [60] Given the Tribunal’s findings in relation to Mr Beerepoot’s evidence, and in particular that the company event and his bankruptcy did not arise from the one set of circumstances, it is not necessary to consider those amendments any further. [61] The Tribunal’s decision is that the decision made on 29 August 2014 to refuse to categorise Mr Beerepoot as a permitted individual is confirmed. 20 Ibid p107 -- 8 of 8 --