Bradford v Queensland Building and Construction Commission [2015] QCAT 405

CITATION: Bradford v Queensland Building and Construction Commission [2015] QCAT 405 PARTIES: Mark Antony Bradford (Applicant) v Queensland Building and Construction Commission (Respondent) APPLICATION NUMBER: GAR408-13 MATTER TYPE: General administrative review matters. HEARING DATE: 27 August 2015 HEARD AT: Brisbane DECISION OF: Member Guthrie DELIVERED ON: 13 October 2015 DELIVERED AT: Brisbane ORDERS MADE: 1. The reviewable decision to refuse to categorise Mr Bradford as a permitted individual is confirmed. CATCHWORDS: PERMITTED INDIVIDUAL – Whether applicant took all reasonable steps to avoid the coming into existence of the circumstances leading to the relevant event – Queensland Building and Construction Commission Act 1991 s 56AD Building and Construction Industry Payments Act 2004 (Qld) Queensland Building and Construction Commission Act 1991 (Qld), s 56AD Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 20, s 21 Subcontractors’ Charges Act 1974 (Qld) Abigroup Contractors Pty Ltd v ABB Services Pty Ltd [2004] NSWCA 181 Dellaway v QBSA [2007] QCCTB 181; cited Delonga v QBSA [2004] QCCTB 26 (29 October 2004); cited Hyde v QBSA [2003] QBT Q72-02; cited -- 1 of 28 -- 2 Laidlaw v QBSA [2010] QCAT 70 Queensland Building and Construction Commission v Mudri [2015] QCATA 78 Sinclair Scott & Co v Naughton (1929) 43 CLR 310 Younan v Queensland Building Services Authority [2010] QDC 158; cited REPRESENTATIVES: APPLICANT: Mr Mark Bradford represented by Mr Lindsay Bowden of Counsel, instructed by QBM Lawyers RESPONDENT: Queensland Building and Construction Commission represented by Ms Jodie Stroud, solicitor Queensland Building and Construction Commission REASONS FOR DECISION [1] The applicant was the sole director of BBC Concrete Pty Ltd (‘the company’ or ‘BBC’) when administrators were appointed on 6 September 2013. The Queensland Building and Construction Commission (‘the QBCC’) notified the applicant that it considered him an excluded individual for a ‘relevant company event’. [2] An excluded individual may apply to the QBCC to be categorised as a permitted individual for the relevant event.1 Mr Bradford’s application to the QBCC to be categorised as a permitted individual was refused on 17 October 2013. Mr Bradford applied to the Tribunal for review of the QBCC’s decision. [3] The decision of the QBCC is a reviewable decision for applying the Queensland Civil and Administrative Tribunal Act 2009 (‘the QCAT Act’) to the proceeding. The purpose of the review of a reviewable decision is to produce the correct and preferable decision. The Tribunal must hear and decide a review of a reviewable decision by way of a fresh hearing on the merits.2 Applicable Law [4] An individual may apply to the QBCC to be categorised as a permitted individual for a relevant event under s 56AD(1) of the Queensland Building and Construction Act 1991 (‘the QBCC Act’). An application must include the reasons why the individual should be categorised as a permitted 1 Queensland Building and Construction Commission Act 1991 (Qld) s 56AD. 2 QCAT Act s 20. -- 2 of 28 -- 3 individual for the relevant event: s 56AD(3). The QBCC may categorise the individual as a permitted individual by virtue of s 56AD(8): …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.3 [5] In Younan v Queensland Building Services Authority,4 McGill DCJ said that, in determining whether all ‘reasonable steps’ were taken, consideration should be given to what action was taken at the relevant time and what was reasonable in all the circumstances without the benefit of hindsight. McGill DCJ said: 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. [6] All reasonable steps does not mean all possible steps.5 Relevant steps are those taken to avoid the coming into existence of the circumstances that resulted in the relevant event, but not the relevant event itself.6 The test of reasonableness has been considered an objective one to be applied having regard to the actual circumstances of the applicant.7 A wide enquiry is appropriate which includes the manner in which the applicant conducted the business.8 In Younan v Queensland Building Services Authority the court confirmed that approach: 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 those 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….9 [7] As the court observed, the focus of s 56AD is concerned with the prudent management of a company as an ongoing business, or prevention rather than dealing with problems after they have arisen.10 Matters to be considered [8] Section 56AD(8A) sets out matters to which the QBCC and therefore the Tribunal on review must have regard in deciding whether an individual took ‘all reasonable steps’. The matters set out in s 56AD(8A) are: 3 QBCC Act s 56AD(8). 4 [2010] QDC 158. 5 Hyde v QBSA [2003] QBT Q72-02 [52-53]. 6 Ibid, [38-40]. 7 Delonga v QBSA [2004] QCCTB 26 (29 October 2004) [33]. 8 Dellaway v QBSA [2007] QCCTB 181 (12 December 2007) [7]. 9 Ibid, [26]. 10 Ibid at [23]-[25]. -- 3 of 28 -- 4 (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. [9] In essence, s 56AD(8B) provides that other matters can be considered for deciding the question. Information an Applicant must give the Tribunal [10] While there is generally no onus of proof in the review jurisdiction11 in the absence of sufficient information from an applicant a decision-maker will be unable to make a decision to categorise the person as a permitted individual. Role of the QBCC in review proceedings [11] Section 21(1) of the QCAT Act, provides that in a proceeding for the review of a reviewable decision, the decision-maker must use his or her best endeavours to help the Tribunal so that it can make its decision on the review. The respondent adopts a model litigant role and does not adopt an adversarial approach. The issues [12] Accordingly, the issues for consideration by the Tribunal are as follows: (1) The identification of the relevant event; (2) The identification of the circumstances that resulted in the happening of the relevant event; (3) A consideration of whether the applicant took all reasonable steps to avoid those circumstances coming into existence including identification of the steps taken by Mr Bradford and whether they were reasonable;12 (4) And, if satisfied in relation to (3), a decision about whether to exercise the discretion to categorise the individual as a permitted individual. The evidence [13] Mr Bradford provided four written statements to the Tribunal with annexures and was cross-examined at the hearing. At all relevant times, Mr Tom Voyce held the position of Contract Administrator with BBC. It was his role to source projects, attend to contract negotiations and monitor the 11 See discussion in Laidlaw v QBSA [2010] QCAT 70. 12 Queensland Building and Construction Commission v Mudri [2015] QCATA 78. -- 4 of 28 -- 5 performance of all of BBC’s contracts. He was also responsible for issuing payment claims under the contracts and for following up unpaid claims.13 At all relevant times, Mr Philip Vanderburg held the position of Workplace, Health and Safety Officer with BBC. Mr Voyce and Mr Vanderburg gave evidence at the hearing and were available for cross-examination. Mr Voyce and Mr Vanderburg gave their evidence in compliance with Notices to Attend issued by the Tribunal. [14] The respondent provided an Index of Documents and three affidavits of the original decision-maker, Ms Natasha Dennis. Identification of the relevant event [15] There is no dispute that the relevant company event is the appointment of administrators to BBC, which occurred on 6 September 2013 while Mr Bradford was a director of the company, and the Tribunal so finds. Identification of the circumstances that resulted in the happening of the relevant event [16] BBC was a sub-subcontractor on the Gladstone Liquefied Natural Gas Plant project. BBC was subcontracted to McNab Constructions Australia Pty Ltd (‘McNab’) to complete the concrete works (‘the McNab project’). The project involved the construction of substantial buildings and facilities on Curtis Island. The principal contractor was Bechtel Australia Pty Ltd (‘Bechtel’). Mr Bowden, for the applicant, submitted that the failure of the McNab project led to the lack of cash flow, which ultimately led to the appointment of the administrators.14 Indeed, Mr Bowden submitted that this one contract was the sole cause of the commercial failure of BBC.15 [17] In his application to the QBCC to be categorised as a permitted individual, Mr Bradford indicated that the main cause of the relevant event was the inability of the company to recover amounts owing to it. He also indicated that he first became aware of the cause of the relevant event or, alternatively the date it should reasonably have come to his attention was 3 September 2013. He indicated that other significant contributing causes of the event were the debt owed to the Australian Taxation Office (‘the ATO’) and insufficient working capital.16 Background and corporate history [18] The applicant held and holds a licence in the class of concreting. [19] Based on Mr Bradford’s written statement dated 2 February 201517 and the ASIC Historical extract for the company as at 17 January 201418 and there being no contradictory evidence before it, the Tribunal finds that: 13 Exhibit 1, paragraph [21]. 14 Submission of the applicant at paragraph [56]. 15 Submission of the applicant at paragraph [22]. 16 Exhibit 8, at pp 25 to 29 (inclusive). 17 Exhibit 3, paragraphs [3], [4], [6], [7], [9], [10]. 18 Exhibit 1, annexure “MB-1”. -- 5 of 28 -- 6 a) Bosform was a group of companies owned by the Bos family. Some of the Bosform entities owned the office premises from which BBC operated. b) For approximately 16 years prior to the incorporation of BBC Mr Bradford worked for the Bos family as senior site foreman of Clonmel Pty Ltd trading as Remo Concrete Constructions. Mr Craig was a senior manager and was intending to retire. c) In about 2005, a succession plan would see a new entity BBC incorporated which would trade as Remo Concrete Constructions with Mr Bradford and Mr Craig to each hold 20% stakes and Mr and Mrs Bos to hold the remaining 60%. Over the following five years the other directors would retire and Mr Bradford would take over each of their interests for $0.00. d) BBC was incorporated on 11 July 2005. e) By about mid 2010 Mr and Mrs Bos decided not to retire and required some payment for their share of the company, which Mr Bradford negotiated to $720,000. f) In about 2011, Bosform put up bank guarantees to builders so that the company could get cash retention monies returned which were used to pay out Mr and Mrs Bos. Other money also had to be used. As part of putting up those guarantees, Bosform required BBC to share their premises and required rent and payment for shared services. g) Mr and Mrs Bos ceased as directors on 25 June 2011. Mr Craig ceased as a director on 30 June 2009. Mr Bos ceased as a secretary of the company on 2 October 2012 when Mr Bradford was appointed. h) As at 1 October 2012, Mark Bradford Investments Pty Ltd was the only shareholder. i) BBC shared some staff with Bosform including Mr Hennie du Preez, Ms Hayley Banks and Ms Roberta Bright. Ms Banks was a full time employed Accountant and Ms Bright worked in payroll/bookkeeping. Mr du Preez had worked with Bosform for about seven or eight years. j) BBC also had dealings with Ms Leis of Price Waterhouse Coopers (‘PWC’). k) In addition to Mr Bradford, the staff of BBC included Mr Voyce, Mr Kane Norman, Operations Manager and Mr Vanderburg. Mr Blake Bradford, Mr Bradford’s son was an estimator. BBC also employed nine site foremen. Other staff were hired as and when needed for each contract. [20] Mr Bowden submits that the Tribunal must consider Mr Bradford’s 25 years experience in the concreting industry and 16 years working with Remo Concreting. Further, Mr Bowden submits that it is relevant to consider that BBC had been trading for a lengthy period before the troubles which led to its demise. -- 6 of 28 -- 7 [21] Mr Bradford was the sole director of BBC for a period of just over two years before the administrators were appointed. Indeed, for reasons that follow, the Tribunal considers the changes to the control of BBC from 2 October 2012 negatively impacted the financial position of BBC between October 2012 and 6 September 2013 (the relevant period). [22] The Tribunal accepts that BBC had adequate staff and access to accounting advice through Mr du Preez and his accounting staff and Ms Leis. The Tribunal also accepts that the other staff were appropriately qualified for their roles and Mr Bradford was entitled to rely on their expertise. The ATO Liability [23] In his first statement, Mr Bradford says that during 2012 and 2013, BBC expected, having regard to the number and contractual value of the contracts on foot at the time, that it would receive sufficient funds from the payment of issued claims and released retention monies to be in a position to pay its commonwealth and state taxation liabilities. In early 2013, with the unusually large number of days affected by inclement weather causing delays on the McNab project, the company had to pay wages for workmen on site but had not been paid by McNab. Mr Bradford says that at about that time, McNab owed BBC $405,000 and he arranged for Mr du Preez and Ms Leis to contact the ATO and arrange a repayment arrangement.19 [24] In January 2013, Ms Leis negotiated a payment arrangement with the ATO to commence from 28 February 2013. BBC paid the ATO as follows: 28/2/13 $50,000 27/3/13 $70,000 26/4/13 $70,000 27/5/13 $70,000 5/6/13 $160,000 [25] No other payments were made to the ATO in line with the repayment arrangement before the administrators were appointed. The Tribunal makes findings of fact accordingly. [26] By letter dated 27 May 2013, the ATO notified BBC that it had been classified as a large withholder of PAYG and so it was required to submit weekly PAYG payments commencing from 1 July 2013. [27] It is not disputed by Mr Bradford that he did not retain any amounts in order to pay the ATO. The Tribunal finds accordingly. [28] In cross-examination, Mr Bradford did not accept that he was using future money to pay past payments of PAYG tax. Mr Bradford said that unless he was a multimillionaire he could not pay the PAYG amounts until he received payment from McNab. 19 Exhibit 1, paragraphs [77] to [80]. -- 7 of 28 -- 8 [29] By letter dated 17 July 2013, the ATO notified BBC that its integrated account had an overdue amount of $548,359.26 and BBC was warned of intended debt collection action. The Tribunal finds accordingly. [30] On 19 August 2013, the ATO issued a ‘Notice of Director’s Liability to pay a Penalty’. The amounts detailed in the notice totalled $575,344 being the total of the unpaid amount of each taxation liability of BBC for particular withholding periods: 1 December 2012 to 31 December 2012 $ 3,657.00 1 March 2013 to 31 March 2013 $183,817.00 1 May 2013 to 31 May 2013 $220,414.00 1 June 2013 to 30 June 2013 $167,456.00 [31] Mr Bradford was unable to pay the outstanding taxation liability within the period stipulated in the notice, i.e. by 9 September 2013. The Tribunal finds accordingly. [32] The records relied on by Mr Bradford reflect that BBC met its payroll tax obligations up until June 2013. The Tribunal finds accordingly. Working capital [33] In the process of ‘paying out’ the retiring directors of BBC, the previous National Australia Bank overdraft facility was refinanced with Bendigo Bank. Bendigo Bank’s response to the application for finance dated 25 February 201320 sets out the details of the borrowers, facility and limits as follows: a) Mark and Deborah Bradford – residential home loan - $566,000 b) Mark and Deborah Bradford – residential home loan - $190,000 c) BBC trading as Remo Concrete Construction – overdraft facility - $250,000 [34] The general terms and conditions of the refinance offer from Bendigo included that the home loan facility of $566,000 was to reduce by $200,000 by 30 September 2013 with payment reductions to be staged in line with cash flow and return of retention as follows:  30/4/13 $75,000  30/6/13 $25,000  31/8/13 $50,000  30/9/13 $50,000 [35] While the Bendigo Bank offer states that Mr Bradford’s property at Biggera Waters was valued at $850,000, Mr Bradford gave evidence that he had no equity in either of his personally owned real estate assets. Bendigo Bank also expected as security a guarantee in favour of BBC Concrete Pty Ltd from Mr and Mrs Bradford and Mark Bradford Investments Pty Ltd. 20 Exhibit 4, annexure “MB-35”. -- 8 of 28 -- 9 [36] Emails from Bendigo Bank to Mr du Preez and Mr Bradford dated 6 March and 28 May 2013 respectively state: [On 6 March 2013] We need to be extremely confident in the fact that the Cash Flow of the business can sustain the requirements of the Business in addition to the agreed tax payment plan and the Home Loan reductions. My understanding is that the scenario is that BBC is using the funds set aside for the BAS payment to clear the extra $250K facility with NAB. Scheduled ATO payments Date Amount 28/02/2013 $50,000 28/03/2013 $70,000 28/04/2013 $70,000 28/05/2013 $70,000 + Normal March BAS Payment 28/06/2013 $70,000 28/07/2013 $70,000 28/08/2013 $20,000 + Normal June BAS Payment $420,000 The ATO payments will be in addition to the Debt reductions on the Home Loan of $200,000… [On 28 May 2013] …As per my email [in March] I went over above my authority level to allow the refinance without the tax due 28/02/2013 having been paid, on the clear understanding that the Cash Flow of the business was sufficient to allow you to meet the ATO payment schedule and the Home Loan Reductions. … …have failed to follow you up to arrange the Principal Debt reduction of $75,000 that was due as at 30/04/2013. We need to make arrangements now to have funds transferred to make the 1st of the due reductions.21 [37] According to BBC’s bank account statements the amount of $246,625.69 was drawn down on 28 March 201322. Payments of $75,000 were made in both May and June 2013.23 21 Exhibit 4, annexure “34”. 22 Exhibit 4, annexure “35”. 23 Exhibit 4 paragraph [58] and annexure “34”. -- 9 of 28 -- 10 [38] Mr Bradford’s evidence was that Mr and Mrs Bos had guaranteed an overdraft of $500,000 to $650,000 but, once he alone controlled BBC, he could only obtain an overdraft of $250,000. [39] The Tribunal finds that, at all relevant times, BBC’s total overdraft facility was $250,000, which was drawn down in late March 2013. The Tribunal finds that, at all relevant times, Mr Bradford had no equity in any of his personal assets. The Tribunal also finds that in 2013, BBC was required to make repayments to Bendigo Bank as outlined in Bendigo Bank’s email set out above. These payments were in addition to the payments BBC was to make to the ATO. Mr Bradford was aware of these circumstances at the relevant time/s. The McNab project and its impact on BBC’s cash flow [40] Mr Bradford says that BBC’s need to negotiate a repayment arrangement with the ATO in January 2013 and its inability to pay any amounts to the ATO after June 2013 was due to the company’s cash flow problems were caused by McNab’s failure to pay BBC’s payment claims in full in 2013. [41] The payment claims made by BBC to McNab for work they performed and the amounts McNab approved can be gleaned from the documents at “MB- 9” of Exhibit 1. Claim/approval Date Amount Claim 1 15/12/12 $59,640.66 Approved As at 19/1/13 $33,996.60 Claim 2 25/1/13 $139,580.10 Approved As at 19/2/13 $156,715.90 Claim 3 25/2/13 $271,012.50 Approved As at 14/3/13 $250,830.93 Claim 4 25/3/13 $463,285.91 (including variations totalling $167,935.50) Approved As at 15/4/13 $263,211.25 (variations mostly rejected by McNab) Claim 5 30/4/13 $631,632.07 Approved As at 15/5/13 $383,711.65 Claim 6/7 30/5/13 $535,755.98 Approved As at 17/6/13 ($495,612.19) Payment Claim 9 1/7/13 $628,409.69 Claim 10 30/7/13 $1,171,939.37 Claim 10 30/7/13 $575,347.43 Payment Certificate 8 (McNab) 26/8/13 ($189,636.48) -- 10 of 28 -- 11 [42] In his statement, Mr Bradford states that McNab paid $80,000 on 3 March 2013, $125,000 on 18 March and $125,000 on 27 March 2013.24 He further states that he was expecting to be paid $500,000 to $750,000 in April but in May, BBC received $380,000 of which $75,000 was used to pay Bendigo Bank. McNab did not pay BBC in June 2013.25 [43] The initial negotiations between BBC and McNab regarding the project commenced in October 2012. Mr Voyce was dealing with McNab’s Mr Matt Farmer with whom he had a good relationship. BBC had also worked with McNab on another project, the Village, Coorparoo and hoped to work on another stage of that project in the future. [44] At that same time, BBC had a number of other contracts on foot and significant sums of money tied up in retentions for those projects.26 [45] Originally, BBC provided a quote for three packages of work. On 23 October 2012, BBC quoted $1,825,000 plus GST to perform a revised package of work27 which was accepted by McNab. In an email dated 23 October 2012, Mr Farmer tells Mr Voyce: As agreed over the phone earlier, McNab and Remo will go into contract for the ‘Ground works’ and ‘Tilt panels’ on the GLNG – Curtis Island Project for a sum of $1,825,000. Obviously, there’s a bit of paperwork coming your way, but please accept this email as a Letter of Intent. Initially, could you please start with the attached two forms and get them to me tomorrow, which will then enable me to pass onto the relevant people in McNab for their approval so I can then send you your contract.28 … [46] Mr Voyce said that after receipt of this email he was under the impression that a contract would be forthcoming from McNab on that basis, that is, the scope or works and letter of intent that had been discussed. An email on 19 November 2012 from Mr Farmer states that McNab is waiting on Bechtel, to approve McNab’s subcontractors.29 [47] In an email dated 23 November 2012, Mr Farmer tells Mr Voyce that he has received approval to get BBC underway with BBC’s workforce to start on Temporary Work Permits.30 [48] On 4 December 2012, BBC mobilised four or five people to Curtis Island, prior to a formal written contract (including the scope of works) being completed between BBC and McNab. The Tribunal finds accordingly. [49] Mr Bradford said that at that stage there was one building platform ready. He said that all of BBC’s negotiations with McNab had been on the basis that they would do work on one building at a time. He referred to the initial mobilisation as a ‘soft start’ with a view to mobilising more workers in 24 Exhibit 4, paragraph [56]. 25 Ibid, paragraphs [58] and [59]. 26 Exhibit 1, paragraphs [24] and [25]. 27 Ibid, annexure “MB-6”. 28 Ibid. 29 Ibid. 30 Ibid. -- 11 of 28 -- 12 January 2013. He said that the soft start ran from 7 December 2012 to 20 December 2012. Between 23 December 2012 and 8 or 10 January 2013 work on site ceased. [50] BBC received the draft contract on 4 December 2012 which was also the date stipulated in the contract as the anticipated date for commencement. The date of practical completion was stated to be 12 April 2013. Claims were to be paid within 25 business days. The draft scope of works was dated 3 December 2012. Some handwritten amendments were made to the draft documents.31 Mr Voyce said he made the changes. [51] Mr Bradford said that while he mobilised his workers in the absence of a formal contract, he felt the letter of intent, emails and discussions between the parties meant there was an agreement in place. [52] Mr Bradford said that on 7 December 2012 he and Mr Vanderburg travelled to Curtis Island and met with Mr Farmer and Mr Brian Boyd of McNab. They went through the draft contract documents and highlighted the changes required to reflect the agreement that BBC considered had been reached in November 2012.32 Mr Farmer agreed that changes had to be made but, due to the number of changes, he said he would have to have them fixed up at head office and then the final version would be sent to BBC for signing.33 [53] Mr Farmer had a motorbike accident which meant that he was not back on site until about 24 January 2013.34 Mr Bradford said that Mr Kane Keefe, who took on Mr Farmer’s role in his absence, was not aware of the agreed changes to the scope of works. Mr Keefe wanted BBC to do work which was outside the agreed scope of works. While BBC performed the work, Mr Bradford said he believed BBC would be paid for any variations to the agreed scope of works. [54] Mr Voyce’s evidence regarding the impact of Mr Farmer’s absence was consistent with that of Mr Bradford. [55] A further meeting took place on 5 February 2013, attended by Mr Bradford, Mr Voyce, Mr Vanderburg and Mr Norman. Again, the scope of works issues were discussed.35 [56] On 13 February 2013, Mr Voyce signed the contract on BBC’s behalf, with Mr Bradford witnessing his signature. [57] Wet weather affected the site in January and February. Mr Bradford said that there were only about four working days in February. However, Bechtel acknowledged just two days of wet weather. That meant that BBC was not given an extension of time to complete its work. BBC had to pay its full-time employees despite them being unable to perform any work. Mr Bradford agreed in cross-examination that the wet weather cost him about $120,000. [58] Mr Voyce said that ‘at first McNab agreed to BBC doing one building at a time but that changed when they got behind due to rain delays.’ He said that 31 Ibid, annexure “MB-6”.. 32 Exhibit 4, paragraph [33]. 33 Ibid, paragraph [34]. 34 Ibid, paragraph [40]. 35 Ibid, paragraph [45]. -- 12 of 28 -- 13 McNab expected BBC to increase its labour above what was agreed pre- tender, effectively doubling or tripling its labour on site, which was not easy. He said that at the time of tender, mobilisation was clear. The temporary work permits would get the men on site and they would transfer to full work permits. He said that Bechtel decided that was no longer an option so the process of mobilising labour became more difficult. [59] Mr Bradford’s written statement reflects that in February/March 2013 McNab required seven buildings on site to be resourced regardless of the agreement that BBC complete one building at a time and that BBC had difficulty sourcing the necessary labour.36 [60] In cross-examination, Mr Bradford said he did not seek liquidated damages at that time because he believed the wet weather and an extension of time should have been allowed. He did not seek legal advice at that time. [61] While it was Mr Voyce’s and Mr Bradford’s evidence that the agreement with McNab was that BBC would complete work on one building at a time, the Tribunal could not locate any documentary evidence of BBC and McNab agreeing to that at any time before the contract was executed. The contract documents also do not reflect this. In an email dated as early as 26 February 2013, Mr Farmer indicates that the project was under-resourced by BBC from the start. He states: ‘the resource expectation was intended for 26 men to be onsite from day one.’37 [62] The Tribunal considers that there was clear dispute regarding BBC’s resourcing of the project prior to any formal contract being signed by McNab as well as issues regarding BBC’s scope of works. [63] Mr Bradford gave evidence that in March 2013 McNab wanted more and more men on site and more and more buildings started. He agreed that BBC tried to accommodate those demands. Mr Bradford’s evidence was that McNab agreed to source additional workers through QMC labour hire for BBC because McNab accepted that BBC had performed work outside its scope of works. [64] Mr Bradford’s evidence was that BBC verbally agreed to working on one or two extra buildings but there was no formal notification to accelerate the programme. The cost of the QMC labour hire arranged by McNab was $250,000. Mr Bradford said that those workers were kept on for two or three rotations and later, after the contract was terminated, McNab claimed the QMC labour costs as a back charge against BBC. [65] Mr Voyce’s evidence was essentially consistent with Mr Bradford’s evidence regarding the backcharging to BBC. Mr Voyce considered McNab used more men than required for the work and then charged BBC for it. He said BBC agreed because they felt they had no option. [66] Mr Bradford gave equivocal evidence about whether the contract at “MB-7” of Exhibit 1 reflected the terms of the final contract. A contract signed by both McNab and BBC is not before the Tribunal. Mr Bradford’s oral evidence was also somewhat equivocal about whether BBC had ever received a copy 36 Exhibit 1, paragraph [41]. 37 Exhibit 3, annexure “MB-18”. -- 13 of 28 -- 14 of the completed contract back from McNab. He said he might have received it after threatening, in late March, to demobilise from Curtis Island. In a letter to the QBCC Mr Bradford states that the contract arrived on 27 March for execution by BBC but it took a further two weeks to finalise and clarify all scope issues and terms before signed copies were completed. He further states that after the contract was signed, McNab claimed BBC was in breach of the contract.38 [67] The Tribunal finds, based on the evidence, that both parties executed the formal written contract no earlier than late March 2013. [68] Mr Bradford said that the threat to demobilise was made around the time that Mr Voyce spoke to a friend who was a lawyer. It was an informal discussion. Mr Bradford described it as an ‘off the record’ meeting. BBC did not pay for any legal advice. Mr Voyce could not recall when he spoke to a solicitor or what advice he received. The Tribunal finds that BBC did not seek formal legal advice on that occasion. [69] Mr Bradford said that in March and April 2013, BBC’s relationship soured with McNab. Mr Bradford said that he had a very heated discussion with the site foreman regarding the acceleration of the programme of work and, subsequently, he was told he could not contact the site foreman or the team on site anymore. [70] In late April 2013, McNab decided that BBC would not complete certain work. Dowells completed the work. McNab back charged the costs associated with the work to BBC. This caused considerable problems between the parties. Mr Voyce continued to contact McNab seeking clarification of those issues and copies of documentation relating to the work done by QMC and Dowells.39 [71] Mr Bradford gave evidence that he felt his workers had caught up by that stage and he believed BBC could get the work back. [72] A letter from McNab to BBC dated 9 May 2013 states that the decision to take part of the works out of BBC’s hands stands. The letter raises McNab’s concern that BBC was not performing and that the resourcing and quality issues were not satisfactory.40 [73] The Tribunal finds that resourcing of the project remained an area of ongoing dispute after the contract was completed. [74] Mr Bradford said that in May/June 2013, an employee at Dowells suggested that BBC might have a claim under the Building and Construction Industry Payments Act 2004 (Qld) (‘BCIPA’). Mr Bradford said that the employee told him that if he took that step, the relationship with McNab would go ‘pear shaped quickly’. [75] Mr Bradford’s statement indicates that when McNab owed BBC around $500,000 he considered issuing a sub-contractor’s charge. He had a meeting with Bechtel on the understanding that Bechtel had not been 38 Exhibit 1, annexure “MB-3”. 39 Exhibit 3, paragraph [41]. 40 Exhibit 1, annexure “MB-13”. -- 14 of 28 -- 15 paying McNab. However, at the meeting, Bechtel assured BBC that that was not the case, so BBC did not issue a sub-contractor’s charge.41 [76] On 3 July 2013, McNab informed BBC that McNab and Bechtel were in negotiations that were likely to end the subcontract on Curtis Island.42 Mr Bradford said that BBC ceased work on site sometime in July. His written statement says that in about August 2013 Bechtel advised BBC that it should demobilise.43 He said there were about six men on site at the time. [77] Meetings were held with McNab regarding the final payment to BBC. Mr Voyce and Mr Vanderburg attended the meetings. Mr Bradford said he did not attend those meetings because he hoped an amicable settlement could be reached and felt that was more likely in his absence. He had been told not to deal with Mr Boyd who would be attending those meetings. [78] Mr Bradford’s statement indicates that in mid-August 2013 BBC was given some of the QMC and Dowell’s time sheets and dockets which BBC had been trying to obtain for months.44 Mr Bradford’s statement indicates that in late August 2013, the company submitted an offer that McNab pay BBC $630,000. He states that the offer of $155,000 from McNab was received in September 2013.45 [79] Mr Bradford said, that following a meeting, Mr Voyce and Mr Vanderburg told him that BBC could expect to receive about $650,000 from McNab. [80] Mr Voyce said the meetings occurred over a six to eight week period and required the consideration of 60 to 80 variations. After a meeting Mr Voyce said he believed that McNab would pay a final payment to BBC $650,000 to $700,000. He and Mr Vanderburg were both confident of this and informed Mr Bradford that that would likely occur. When the payment did not come through at the end of the month, another meeting was held and that was when McNab offered $155,000. Mr Voyce said that after the offer from McNab, BBC started thinking about legal advice. [81] Mr Vanderburg recalled three meetings with McNab. He said that at the first meeting he and Mr Voyce mainly listened then went away and worked out the spreadsheets and came back with a figure. Originally, BBC was looking at claiming $1.1 million. [82] After the second meeting, he and Mr Voyce felt they had been assured that BBC would get $600,000. Their hopes were dashed at the final meeting. He said that there had been a discussion between Mr Bradford and Mr Voyce regarding a figure less than $600,000 that BBC would be prepared to accept but $155,000 was not enough. Consistently with Mr Voyce’s evidence, he said that the meetings occurred over a six to seven week period. Mr Vanderburg said the last meeting was only weeks before administration. [83] The Tribunal finds that Mr Bradford believed that McNab was likely to pay a final payment claim of about $600,000 in approximately early August 2013. 41 Exhibit 3, paragraph [40]. 42 Exhibit 1, annexure “MB-8”. 43 Exhibit 1, paragraph [53]. 44 Exhibit 3, paragraph [41.] 45 Exhibit 1 paragraph [56]. -- 15 of 28 -- 16 [84] Mr Bradford said that he was in contact with his financial team at PWC and with Mr du Preez. He said that in June or July 2013, Mr du Preez advised him to sue. He did not do so because BBC was engaged in negotiations with McNab at that time and he was concerned that if he took steps to sue, those negotiations would cease. In his statement, he says that he did not want to sue, as he believed McNab had a counter-claim.46 [85] According to the payment schedules completed by McNab, the reasons for the differences between the amount claimed by BBC and the amount paid by McNab, included work McNab regarded as incomplete, the claimed amount being too high for the work then completed or variations claimed by BBC that were not accepted by McNab. Some of the variations included back charges for labour performed by QMC and Dowells. In rejecting BBC’s claims, McNab referred to clauses in the sub-subcontract including clauses 24 and 25 (variations) and 27 (site cleaning) as well as the scope of works. [86] Documents before the Tribunal record that the back charges were $632,000 for Dowells, $267,000 for QMC and $45,000 for materials, a total of $944,000.47 Mr Bradford said he never agreed to that figure and believed it to be an extremely over inflated figure. He said he thought that about half of that figure would be more accurate and he used that figure to arrive at what he believed to be the amount owing to BBC by McNab at the conclusion of the contract. [87] Based on the payment claim documents, the Tribunal finds that from February / March 2013, McNab was not paying BBC’s payment claims in full. Further, there was dispute between BBC and McNab regarding BBC’s claims. [88] In his statement Mr Bradford says that, until the McNab project, BBC had not encountered any significant problems during the negotiation or contract management stages with other contractors that couldn’t be sorted out amicably and in a reasonably quick time frame.48 BBC had always dealt with ‘Tier 1’ companies. [89] Mr Bradford gave evidence that in 35 years in the industry he had never obtained legal advice on a contract before signing it. He acknowledged that a contract should reflect the agreement reached between the parties and that it has to be accurate because the parties are bound by its terms. He agreed that a number of changes were made to the agreement he felt had been reached with McNab by the end of November/early December 2012. [90] Mr Voyce said that he does a similar job for his current employer and no legal advice is sought there either but said that the director is a solicitor. [91] In cross-examination, Mr Bradford did not accept that it was reasonable for him to obtain legal advice before he mobilised his workers. He said it would probably have been reasonable to seek advice relating to McNab’s refusal to extend time. He did not consider that it was reasonable for him to seek legal advice regarding the acceleration of the programme of work or the alleged breach by McNab involving the use of Dowells and then back 46 Exhibit 2, paragraph [6]. 47 Exhibit 3, “MB-36”. 48 Exhibit 1, paragraph [64]. -- 16 of 28 -- 17 charging BBC. Mr Bradford said that BBC and McNab were trying to work this out and the back charge was just McNab’s verbally expressed view. He agreed that in hindsight it would have been reasonable to seek advice about recovering money owed to BBC by McNab. However, he said that he could not have done so in April 2013 as he was trying to maintain a working relationship with McNab. He was working on another project with McNab, the Village at Coorparoo, and hoped to work on other projects with them. Mr Bradford did not accept that his failure to seek legal advice contributed to the failure of the company. [92] In re-examination, Mr Bradford said that, at the time, he did not consider that McNab had breached the contract by varying the contract in respect of the back charges or the wet weather decision. He said he thought that it was a dispute about the variations and that it would be settled at the end of the project. He believed that if he instituted proceedings he would be ‘off the project’. He said that he did not think he could sue. He knew that there were processes and he had had the conversation with the employee from Dowells about the BCIPA claim and ‘vaguely knew’ about the Subcontractors’ Charges Act 1974 (Qld) ‘but did not really think about it’. He was trying to come to an amicable arrangement and continue with other projects. About four weeks out from administration, he was acting on the assumption that BBC would receive approximately $700,000 from McNab. [93] The Tribunal finds that at no time did Mr Bradford seek formal legal advice regarding the McNab project. No advice was sought before entering into the contract or during the project. Further, no legal advice was sought at any time regarding recovery from McNab of amounts BBC considered to be owing to it under the contract. BBC did not make any BCIPA claim, or exercise its potential rights under the contract. BBC did not exercise any rights under the Subcontractors’ Charges Act 1974. The contract documents [94] The Tribunal has examined the documents that formed the contract between BBC and McNab:  Formal instrument of agreement  Exhibit A - General conditions  Exhibit B – Special conditions  Exhibit C – Quantities, pricing and data  Exhibit D – scope of work and technical specifications  Exhibit E – drawings  General conditions of sub-subcontract  General conditions of Sub-Subcontract Schedule 1 – Scope of Works  General conditions of Sub-subcontract Schedule 2 – Specifications  General conditions of Sub-Subcontract Schedule 3 – drawings. -- 17 of 28 -- 18 [95] The General conditions contain details of the scope of works.49 Clause 24 provides for variations. According to McNab’s response to the variations claimed by BBC in April 2013, it rejected a number of claims due to BBC’s failure to comply with clause 24. Clause 29 provides for delay and extensions of time. It sets out the circumstances under which the sub- subcontractor is entitled to an extension of time and the process for seeking an extension of time. It is not apparent that BBC pursued its rights under clause 29 when wet weather delayed its work in February 2013. [96] Clause 30 provides that the subcontractor may direct the sub-subcontractor to accelerate the execution of the sub-subcontract works or to recover any delay in the execution of the sub-subcontract works but provides for the process for making such a direction. [97] Clause 52 covers default by the subcontractor and clause 53 deals with default by the sub-subcontractor’s default. Dispute resolution is provided for in clause 55, which provides for mediation and arbitration in the event of a dispute. [98] Based on clause 1.2 of the formal instrument of agreement the contractual obligations between Bechtel and McNab could potentially affect BBC. [99] It is arguable that clauses 3 and 4 of the formal instrument of agreement prevented BBC relying on any verbal terms it says were negotiated pre- tender or before the contract was executed. It seems to the Tribunal that this is in fact what BBC sought to do throughout its dealings with McNab in 2013. Financial advice and recovering monies [100] In a written statement, Mr Bradford states that the company had appropriate credit and debt recovery policies. Monthly profit and loss breakdowns were compiled by Mr du Preez and in-house accounting and administration staff. Meeting were held twice monthly between Mr Voyce, Mr du Preez and Mr Bradford to go through breakdowns of jobs, profit percentage margins, losses and how to streamline operations or areas where the company could improve.50 [101] Mr Voyce said that he and Mr Bradford monitored cash flow weekly. Mr Voyce said that he was always ringing and emailing McNab about payments. He regarded some of McNab’s responses to BBC’s payment claims to be unreasonable. [102] Mr Voyce said that he would tell McNab that BBC was expecting money on a particular date but only part of the payment would be paid and then, at some point, the payments stopped all together. He was able to obtain $100,000 from John Holland with whom BBC was working on another project, which was nearing completion. Despite the payment not being due, their good working relationship meant that John Holland was prepared to pay the amount early. Mr Voyce said that things got to the point, around July/August 2013, where they could not keep going back to John Holland 49 Exhibit 1, “MB-7”, General conditions, clause 2. 50 Exhibit 1, paragraphs [70] and [71]. -- 18 of 28 -- 19 for money. Mr Bradford’s statement indicates that this was in early August 2013.51 [103] Mr Bradford states that meetings were held at least every two months with Ms Leis of PWC in relation to profit and loss, taxation issues and accounting in general. Numerous phone calls were made to Ms Leis in between these meetings.52 [104] Mr Bradford’s evidence is that in early June 2013, he spoke with Mr du Preez about BBC’s cash flow issues and they sought advice from Ms Leis of PWC about raising working capital for the companies due to the ongoing issues with McNab.53 [105] A meeting was held on 12 June. Over the next week or so documents were put together as requested by PWC but in the end ‘the outcome was that we were not in a position to raise enough capital due to no significant assets to lend against.’54 [106] In mid-2013 Mr Bradford retrenched 50 to 60 employees. He states that this was a the time that he was unable to inject any working capital as he did not have sufficient personal funds and because the business loan with Bendigo bank was fully drawn down.55 He further states that this was at a time when a couple of contracts were nearing completion.56 Presumably, the retrenched employees were those hired for those contracts. [107] In early July 2013, Mr du Preez spoke with Rabo Bank in regards to obtaining business finance but again that did not come to fruition.57 [108] In early August 2013, Mr du Preez who had been in regular contact with the ATO and had disclosed the issues with the McNab contract, told Mr Bradford that the ATO had suggested that it could issue garnishee notices to McNab to recover the taxation debt. Mr Bradford states that he decided that this was not in the interests of BBC as he considered that McNab had a counter-claim against BBC.58 [109] As the ATO director’s penalty notice drew nearer Mr Bradford spoke to PWC about engaging a good administrator to explore all options and discuss the next course of action.59 [110] Mr Bradford says that he approached Korda Mentha and understood that they would operate the company for a minimum of eight weeks as the work on hand and money due in would satisfy the ATO debt but this did not occur once Korda Mentha was engaged. [111] The Tribunal finds that BBC sought advice regarding the raising of capital in June 2013 but was unable to raise capital in July 2013. In the absence of 51 Exhibit 3, paragraph [45]. 52 Exhibit 1, paragraph [72]. 53 Exhibit 3, paragraph [54]. 54 Exhibit 3, paragraph [55] and [56]. 55 Exhibit 2, paragraph [11]. 56 Exhibit 1, paragraphs [26] and [27]. 57 Exhibit 3, paragraph [57]. 58 Exhibit 1, paragraph [66]. 59 Exhibit 3, paragraph [68]. -- 19 of 28 -- 20 any evidence to the contrary, the Tribunal finds that Mr Bradford did not seek any financial advice prior to BBC commencing the McNab project. [112] The Tribunal finds that Mr Bradford and other members of BBC’s staff were monitoring BBC’s cashflow week to week in 2013. The Tribunal accepts that Mr Voyce was requesting payment from McNab and seeking payment from other sources to assist with BBC’s cashflow. [113] The Tribunal accepts Mr Bradford’s evidence that he continued throughout 2013 to source further work for BBC and manage other ongoing projects, payment for which would have assisted with BBC’s cashflow. The Report by Administrators dated 2 October 2013 [114] At paragraph 2.7 of the report by the administrators, Korda Mentha sets out the events leading up to the administration: The Director of the Company has advised us that the Company’s financial position can be attributed to: McNab Constructions Aust Pty Ltd (‘McNab’), who owed the Company $1,195,786, not paying the outstanding monies. This amount has been due since at least June 2013. The outstanding amounts related to the Curtis Island LNG plant. Additionally the Australian Taxation Office (‘ATO’) issued a Directors penalty notice for $575,344 which required payment by 9 September 2013, in the absence of which the Director would become personally liable for the debt. The issuing of this notice led to the appointment of the Administrators. Our investigations indicate the Company’s financial difficulties can also be attributed to:  The Company not previously having managed its contractual position to avoid the McNab debt being so significant and overdue for such a long period.  Insufficient working capital to continue trading in the absence of the McNab payment.  Historical trading results and cash flow being insufficient to meet outstanding liabilities to the ATO. [129] Korda Mentha’s report also states that the profit and loss statement suggests that the company was trading strongly between 1 July 2013 and 5 September 2013 and that if the company had been able to collect monies due by McNab ($1,195,786) and other debtors it may have been solvent.60 It also states that the company had trade debtors in the amount of $2,430,779.61 Conclusion regarding the circumstances that resulted in the happening of the event. [115] Mr Bowden argues that the failure of the McNab project was the one circumstance that led to the happening of the event. The Tribunal does not accept that submission. While the Tribunal accepts that the failure of McNab 60 Paragraph [2.10] of the Korda Mentha report at annexure “MB-3” of Exhibit 1. 61 Ibid, at paragraph [2.9.1] on p 7. -- 20 of 28 -- 21 to pay BBC its payment claims in full affected BBC’s cashflow, other circumstances contributed to that lack of cashflow becoming a serious issue for BBC. For example, had BBC had sufficient working capital McNab’s failure to pay may not have so dramatically affected BBC. [116] The Tribunal has accorded substantial weight to the report of Korda Mentha in identifying the circumstances that resulted in the administration of BBC. The Tribunal considers that the factors listed by Korda Mentha as the events leading up to administration and the factors which contributed to BBC’s financial difficulties are consistent with the evidence of Mr Bradford. Based on the findings of fact already made by the Tribunal and the report of Korda Mentha, the Tribunal identifies the following circumstances that resulted in the happening of the event. [117] The administrators were appointed because Mr Bradford was unable to satisfy the Director’s Penalty notice issued by the ATO in August 2013. [118] BBC’s tax liability was a relevant circumstance as was the inability of BBC and Mr Bradford to meet that liability resulting in the need for a payment arrangement with the ATO, which commenced from 28 February 2013. Further, BBC’s failure to adhere to that arrangement was also a relevant circumstance. [119] Further, BBC’s lack of cash flow due in part to the non-payment of its payment claims in relation to the McNab project was a relevant circumstance. [120] From BBC’s point of view, McNab owed it substantial monies. Its failure to recover those monies was also a relevant circumstance. [121] BBC’s inability to raise working capital when it experienced cash flow problems was also a relevant circumstance as well as its insufficient working capital to continue trading in the absence of any payments from McNab. Consideration of whether the applicant took all reasonable steps to avoid those circumstances coming into existence including identification of the steps Mr Bradford took. Submissions [122] The Tribunal has already dealt with the applicant’s submission regarding BBC’s previous profitability62 and accepts Mr Bradford’s lengthy experience in the concreting industry including 16 year working for Remo Concreting. [123] It was submitted that as BBC only dealt with ‘Tier 1’ construction companies there was ‘really no room to negotiate the terms of each contract and therefore no need to instruct solicitors in relation to each contract.’ [124] It was further submitted that the failure of the McNab contract could not be attributed to the lack of a contract being in place prior to mobilisation of BBC’s workforce. It is argued that the email of 23 October 2012 was a ‘letter 62 [20], [21]. -- 21 of 28 -- 22 of intent’ and at that stage the parties were bound. The applicant relies on a number of cases for that proposition.63 [125] It is argued further that the steps taken up to and including the meeting on 7 December 2012 is clear evidence that the scope of works was settled by that date at the latest and that thereafter the parties proceeded as if there as a contract even if there was not and the subsequent conduct is admissible.64 [126] Alternatively, the applicant argues that if there was no contract then BBC may well have been better placed. It could have walked off the job and pursued a quantum merit claim. [127] The applicant further submits that there is no basis for concluding that the absence of a contract made any difference to the result as none of the terms of the contract would have assisted BBC to avoid the consequences that occurred. [128] By subsequently signing the contract the parties applied the terms of the contract to their relationship retrospectively and it defined their rights. As McNab did not change its position but continued to deny BBC’s claim, the dispute did not relate to or arise out of the fact that there was no written contract. [129] The applicant acknowledges three disputes: (a) as to variations, (b) as to certain back charges and (c) as to simple non-payment of some progress claims. [130] The applicant relies on a number of events which he says were beyond his control which affected the manner in which the project was performed by BBC and the profitability of the contract: a) the motorcycle accident of Mr Farmer which prevented him being on site. b) From about the last week in January until about the first week of March there was wet weather. This had the result of preventing work on the site by BBC. McNab refused to give an extension of time. c) Then McNab wanted to vary the scope of works. They wanted work to be done on seven buildings simultaneously. This required much additional staff and equipment on the part of BBC. d) McNab then decided to remove critical parts of the work from BBC. [131] Mr Bowden submitted that Mr Bradford was on top of the events as they occurred and the difficulties that they created and was aware of his legal options. He considered using his BCIPA rights when McNab owed $400,000.00. When the debt was about $500,000, he considered a subcontractor’s charge. However, mindful of the business aspect of what was occurring and the healthy business relationship with McNab because of the Village Coorparoo project, he decided to negotiate rather than to 63 Sinclair Scott & Co v Naughton (1929) 43 CLR310 at 317. 64 Abigroup Contractors Pty Ltd v ABB Services Pty Ltd [2004] NSWCA 181 at [63] per Giles JA. -- 22 of 28 -- 23 litigate. Litigation would be a lengthy process and BBC did not have that time. [132] The attempt to refinance in mid-June 2013, demonstrates Mr Bradford’s financial awareness, concern and responsibility and the repayment arrangement negotiated with the ATO also supports that submission. [133] In mid-August there was discussion of a possible compromise with McNab and that was the appropriate approach. The administrators were appointed when this was unavoidable. This was only two to three weeks after the final attempt at negotiation. [134] In terms of the general discretion, the applicant submits that there can be no criticism of the applicant as to how he handled the McNab transaction once the dispute had arisen. However, time ran out. [135] The QBCC submits that the applicant has not demonstrated that he has taken all reasonable steps to avoid the circumstances resulting in the relevant event in particular that he:  did not seek appropriate legal advice before entering into financial or business arrangements or conducting business  did not put in place appropriate credit management for amounts owing and take reasonable steps for recovery of the amounts or  did not make appropriate provision for Commonwealth or State Taxation debts and therefore the discretion should not be exercised. [136] The QBCC made additional submissions related to the general exercise of the discretion but given the conclusion reached by the Tribunal it is unnecessary for the Tribunal to consider those submissions. Consideration [137] In deciding whether Mr Bradford took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event, the Tribunal must have regard to the matters set out in s 56AD(8A). Keeping proper books of account and financial records [138] The respondent does not take issue with the books of account. The report of Korda Mentha states that from their investigation, at that point, they considered that the company had maintained books and records in accordance with the requirements of the relevant Act.65 The Tribunal is satisfied that the applicant kept proper books of account and financial records in respect of BBC. Seeking appropriate financial and legal advice before entering into financial or business arrangements or conducting business [139] Mr Bowden submits that the problem confronting the applicant was not one to be solved by any form of technical financial or legal advice and that Mr Bradford’s problem was that McNab took a perverse view of its obligation to make payments under the contract. BBC proceeded on the basis that it had 65 At paragraph [3.4.1]. -- 23 of 28 -- 24 a good case and legal advice confirming that fact was not of any particular use. The Tribunal does not accept that submission. [140] That submission assumes that, had legal advice been obtained, it would have been consistent with Mr Bradford’s views at all relevant times. The Tribunal does not know what the advice would have been as no advice was sought. [141] Further, if indeed Mr Bradford considered BBC had a good case, then McNab’s continuing failure to accede to BBC’s demands could well have been dealt with in a timely manner by seeking and pursuing contractual advice. [142] Mr Bowden’s alterative argument is that if there was no contract in place until late March 2013 BBC could have walked off the job up until that time. Presumably then had BBC done so, the relevant event may have been avoided. However, Mr Bradford did not seek advice about BBC’s options at that time. [143] Mr Bradford is not a lawyer. While it may not have been his practice to seek legal advice before signing a contract, the McNab project was a large one, governed by many legal documents not only between McNab and BBC but also between Bechtel and McNab. Any dispute between Bechtel and McNab could potentially affect BBC. During the negotiations with McNab, Mr Bradford was aware of the other matters impacting BBC’s financial position including the lack of working capital, its inability to raise further working capital, the other contracts BBC had on foot, its ongoing taxation liabilities and the impact non-payment by McNab would have on cashflow. Further, it is not prudent to commence to perform a contract prior to its execution. [144] While Mr Bradford and Mr Voyce considered they had an agreement with McNab, in December 2012, there was no completed contract in place before BBC mobilised workers to Curtis Island and commenced work. No advice was sought regarding BBC’s rights and obligations in the absence of a formal written contract, for example, whether the parties were bound by a ‘letter of intent’ or otherwise. [145] The applicant submits that once a dispute arose, negotiation was the best option to resolve any dispute and there was no reason to consider that any other legal avenue would have led to a better result. Mr Bradford’s evidence was that BBC had never experienced such conflict on a project before and that in other contracts any dispute was sorted out amicably and within a reasonably quick time frame. That did not occur with the McNab project. The ongoing disputes with McNab were outside Mr Bradford’s usual experience yet he did not seek any legal advice about any options available to BBC at any time. [146] Further, the Tribunal does not consider that it can, or is required to, determine that negotiation was the best option. Nor does the Tribunal consider that the appropriate question for it to ask and determine is whether any other legal avenue would have successfully avoided the relevant event or whether Mr Bradford should have commenced legal proceedings or whether any such proceedings would have been successful. It is also -- 24 of 28 -- 25 unnecessary for the Tribunal to speculate as to what legal advice would have been given had it been sought. [147] The Tribunal must ask whether the seeking of appropriate legal advice at any particular stage was a reasonable step to avoid the coming into existence of the circumstances that resulted in the administration given what Mr Bradford knew at those points in time. [148] The Tribunal has found that there were disagreements between BBC and McNab regarding not only the scope of works but also site management of the work including the impact of wet weather on site and the refusal of McNab to grant BBC an extension of time to complete its work as well as payment issues. Those disagreements arose as early as February 2013 prior to the contract being finalised and remained ongoing problems thereafter. Mr Bradford did not seek legal advice about BBC’s rights or remedies in respect of those issues. Mr Bradford conceded in cross- examination that it was probably reasonable for him to have sought legal advice about McNab’s refusal to grant an extension of time for BBC to complete its work following the wet weather in January and February 2013. [149] After the contract was made, there was dispute between McNab and BBC over a number of issues including the scope of BBC’s works, ongoing issues regarding the wet weather delays, the engagement by McNab of other labour, the back charges that flowed from this, McNab’s withdrawal of certain work from BBC and the non-payment of claims and variations. At no time did Mr Bradford seek legal advice about BBC’s rights or remedies in respect of any of those areas of dispute. All of those areas of dispute negatively impacted BBC’s cash flow. [150] Further, Mr Bradford did not seek legal advice on any options BBC might have to recover monies he maintained were owed by McNab. He did not pursue the dispute resolution processes under the contract. [151] The Tribunal does not consider that Mr Bradford’s reason for failing to seek advice in March/April 2013 was due to his desire to maintain a relationship with McNab. He gave conflicting evidence that the relationship had soured by March/April 2013. Rather, the Tribunal considers he simply held fast to the position that BBC would be paid without any reasonable basis for maintaining that position at that time. Further, and in any event, given Mr Bradford’s knowledge of the financial circumstances impacting BBC, the Tribunal considers his decision to prioritise the maintenance of a relationship with one contractor, albeit a large company, over BBC’s future viability to be unreasonable and imprudent. [152] The Tribunal does not consider that Mr Bradford’s belief that BBC would be paid $650,000 as late as early August 2013 prevents such a finding. [153] Taking into account the matters known by Mr Bradford regarding the financial position of BBC, at all relevant times, including its limited working capital, its inability to quickly raise further working capital, and the effect any non-payment by McNab would likely have on BBC’s cash flow, and for the reasons already given, the Tribunal concludes that Mr Bradford did not seek appropriate legal advice in either entering into business arrangements or in -- 25 of 28 -- 26 conducting business. Further, the Tribunal considers that the seeking of such advice in those circumstances was reasonable. [154] The Tribunal considers it open to find that Mr Bradford did not seek appropriate financial advice before entering into the contract with McNab and it was reasonable to do so. While PWC and Mr du Preez were consulted and involved in negotiations with the ATO and Bendigo Bank and Mr du Preez provided updates to Mr Bradford regarding BBC’s cash flow, neither PWC nor Mr du Preez were engaged to advise whether BBC had sufficient working capital to continue trading in the absence of payment by McNab. Negotiations with the ATO commenced as early as January 2013 due to concern regarding McNab’s non-payment of BBC’s claims. That was before the contract documents were executed by BBC and McNab. [155] The focus of s 56AD is concerned with the prudent management of a company as an ongoing business, or prevention rather than dealing with problems after they have arisen. The Tribunal does not consider that Mr Bradford took any proactive steps by seeking relevant advice either before entering into the contract with McNab or after its execution when it was clear disputes had arisen. Reporting fraud or theft to the police. [156] This matter does not arise on the facts of this case. Ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees [157] The Tribunal has no evidence before it regarding any guarantees. Putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts [158] At the time of administration, Mr Bradford informed Korda Mentha that BBC was owed $1,195,786 by McNab. The company had recorded trade debtors of $2,430,799. [159] Mr Bowden submits that the McNab debt was probably not recoverable yet also argues that McNab was intent on breaching the contract. The Tribunal does not consider that it must determine whether the debt was recoverable or whether McNab breached the contract. [160] The Tribunal has found that Mr Voyce secured funds from another contractor to assist BBC’s cash flow and cash flow was monitored throughout 2013. Mr Voyce also demanded payment from McNab throughout 2013. These were reasonable steps. Mr Bradford retrenched some staff in June 2013. In the circumstances, this was also likely to be a reasonable step. [161] The Tribunal has found that Mr Bradford managed other ongoing projects throughout 2013, payments for which may have assisted BBC’s cash flow and Mr Bradford continued to source other projects for BBC. [162] The Tribunal has already found that the non-payment of BBC’s claims in connection with the McNab project negatively impacted BBC’s cash flow in 2013. McNab did not pay BBC the total amount of its monthly payment claims from February/March 2013. Mr Bradford informed Korda Mentha that -- 26 of 28 -- 27 McNab had owed BBC $1,195,786 since at least June 2013. However, Mr Bradford did not seek legal advice about recovery action against McNab or take any formal steps to recover any unpaid payment claims from McNab. He did not make a BCIPA claim, issue a sub-contractor’s charge or seek to avail himself of the dispute resolution processes provided for in the contract. [163] While the staff of BBC and Mr Bradford took some reasonable steps for recovery of amounts owing to BBC, the Tribunal does not consider that Mr Bradford took all reasonable steps for recovery of amounts owing to BBC. Making appropriate provision for Commonwealth and State Taxation debts [164] Korda Mentha’s investigations revealed that BBC’s historical trading results and cash flow were insufficient to meet the outstanding liabilities of the ATO. [165] BBC had not retained funds to pay the ATO. Mr Bowden submitted to the Tribunal that he had never seen any commercial business keep PAYG tax aside. What other businesses do about making provision to meet their PAYG liabilities is not in evidence before the Tribunal. The Tribunal must consider whether Mr Bradford as director of BBC made appropriate provision for taxation debts. [166] Mr Bowden also submitted that but for the McNab transaction, BBC could have met its liability to the ATO. It is clear that the McNab project affected cash flow. However, there were other circumstances, which contributed to BBC’s financial difficulties including its inability to raise further working capital after March 2013. [167] While Mr Bradford, through Mr du Preez, arranged for Ms Leis to liaise with the ATO and she negotiated a payment arrangement with the ATO, BBC did not have sufficient funds to pay the instalments once the company experienced problems with cash flow and it did not make any repayments after June 2013. [168] It was Mr Bradford’s inability to satisfy the Director’s Penalty Notice issued in August 2013 by 9 September 2013, which led to Mr Bradford engaging Korda Mentha. The amount sought by the ATO was $575,344. As the Tribunal has found, Mr Bradford had no equity in any of his personal assets and no ability to raise funds to pay the ATO. [169] For the reasons given, the Tribunal finds that Mr Bradford did not make appropriate provision for taxation debts. Other matters taken into account [170] The Tribunal is entitled to have regard to other factors in considering whether the applicant took all reasonable steps to avoid the circumstances coming into existence. The Tribunal is entitled to consider the manner in which Mr Bradford conducted the business of BBC in a broad sense. [171] BBC’s limited working capital, the repayment arrangement with the ATO, BBC’s commitments to repay particular amounts to Bendigo and its inability to raise further working capital are all relevant matters for the Tribunal to consider under s 56(AD)(8B) of the QBCC Act. Mr Bradford was aware of those matters when he engaged BBC in the McNab project and acted as he did in the relevant period. -- 27 of 28 -- 28 [172] Further, Mr Bradford decided to mobilise his men to Curtis Island in the absence of a completed written contract. Mr Bowden submitted that it is not unusual for lessees to take possession of premises in the absence of an executed lease. However, the Tribunal does not consider that in either case such action could be considered prudent. [173] Mr Bowden submits that events beyond Mr Bradford’s control affected the profitability of the McNab project.66 The Tribunal accepts that Mr Bradford could not predict the weather or Mr Farmer’s accident. However, the Tribunal does not consider it unusual for businesses to experience unexpected events, which impact their financial position. Prudent management of a business includes having contingency plans or strategies in place to deal with such events. [174] Further, the unexpected events gave rise to disputes regarding the scope of works and the programme of work which were contractual matters. The Tribunal has already considered Mr Bradford’s actions in relation to obtaining legal advice and pursuing BBC rights and remedies under the contract. [175] In the circumstances of this case, the Tribunal does not consider that Mr Bradford’s actions were those of a prudent manager. Conclusion [176] In all of the circumstances, the Tribunal is not satisfied that Mr Bradford took all reasonable steps to avoid the coming into existence of the circumstances, which led to the administration. [177] Given that the Tribunal is not satisfied as to the threshold issue, the Tribunal is not required to consider whether to exercise the discretion to categorise the individual as a permitted individual. [178] The reviewable decision to refuse to categorise Mr Bradford as a permitted individual is confirmed. 66 [128] above and [46] of the written ‘Submissions of the Applicant’. -- 28 of 28 --