Bemportato v Queensland Building and Construction Commission [2014] QCAT 464

CITATION: Bemportato v Queensland Building and Construction Commission [2014] QCAT 464 PARTIES: Augusto John Bemportato (Applicant) v Queensland Building and Construction Commission (Respondent) APPLICATION NUMBER: OCR125-12 MATTER TYPE: Occupational regulation matters HEARING DATE: 31 July 2014 HEARD AT: Brisbane DECISION OF: Member R F King-Scott DELIVERED ON: 15 September 2014 DELIVERED AT: Brisbane ORDERS MADE: The decision of the Commission, dated 16 March 2012, that Mr Bemportato, was an excluded individual in relation to events on 14th March 2012 whereby Administrators were appointed to each of the companies, Cavalier Homes Brisbane Pty Ltd; Stylebuilt Homes Australia Pty Ltd; Universal Steelframing Systems Pty Ltd and Steelbuilt Kit Homes Australia-Wide Pty Ltd is confirmed. CATCHWORDS: Occupational regulation matters – Applicant Director and shareholder of four companies placed in administration and subsequently liquidation. Cause or causes of each company’s demise examined. Whether a common cause permitting s 56AC (6) to apply. Queensland Building and Construction Commission Act 1991 ss 56AC, 56AD, 58. Dinsey v QBSA [2013] QCATA 225 followed -- 1 of 10 -- 2 APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr A J Bemportato in person RESPONDENT: Mr N Andreatidis of Counsel, instructed by Messrs Robinson Locke, Solicitors REASONS FOR DECISION [1] This matter was heard on the papers by the Tribunal and a decision delivered on 3 July 2013. The Member relied heavily on a decision of Dinsey v QBSA [2012] QCA 2690. That decision was reversed on appeal by Judicial Member Thomas AM QC on 22 July 2013.1 [2] Consequently, Mr Bemportato applied for leave to appeal. The appeal against the decision of the Tribunal was allowed and the matter was remitted to the Tribunal for re-hearing. [3] This is the re-hearing of the matter. [4] The Queensland Building Services Authority (as it then was) on 16 March 2012 determined that the Applicant, Mr Augusto Bemportato, was an excluded individual pursuant to s 56AF of the Queensland Building Services Act 1991 (now the Queensland Building and Construction Commission Act 1991) as a result of the appointment of Administrators on 14 March 2012 to each of the following companies: a) Cavalier Homes Brisbane Pty Ltd, (“Cavalier”); b) Stylebuilt Homes Australia Pty Ltd, (“Stylebuilt”); c) Universal Steelframing Systems Pty Ltd, (“Universal”); d) Steelbuilt Kit Homes Australia-Wide Pty Ltd, (“Steelbuilt”). [5] Mr Bemportato has also brought a separate application to be categorised as a permitted individual. That proceeding, OCR135-12, is stayed, pending the outcome of this Application. I am not required to consider that Application. [6] The power to review decisions was conferred upon the Tribunal by s 87 of the Queensland Building and Construction Commission Act 1991 hereafter referred to as “the Act”. In particular, s 86(1)(k) specifically provides that a decision under ss 56AF and AG may be reviewed by the Tribunal. [7] Pursuant to s 19 of the Queensland Civil and Administrative Tribunal Act 2009, the Tribunal has all the functions of the decision-maker for the reviewable decision being reviewed. 1 QBSA v Dinsey [2013] QCATA 225. -- 2 of 10 -- 3 [8] Section 56AC of the Act provides, inter alia: 56AC Excluded individuals and excluded companies (1) … (2) This section also applied to an individual if – (a) after the commencement of this section, a company, for the benefit of a creditor – (i) has a provisional liquidator, liquidator, administrator or controller appointed; or (ii) is wound up, or is ordered to be wound up; and (b) 5 years have not elapsed since the event mentioned in paragraph (a)(i) or (ii) (relevant company) happened; and (c) the individual – (i) was, when the relevant company event happened, a director or secretary of, or an influential person for, the company; or (ii) was, at any time after the commencement of this section and within the period of 1 year immediately before the relevant company event happened, a director or secretary of, or an influential person for, the company. (3) … (4) If this section applies to an individual because of subsection (2), the individual is an excluded individual for the relevant company event. (5) … (6) An excluded individual for a relevant company event (the first event) does not also become an excluded individual for another relevant company event (the other event) if the first event and the other event are both consequences flowing from what is, in substance, the one set of circumstances applying to the company. (7) … [9] The parties have agreed the following facts: a) the Applicant has been a builder, registered with the Queensland Building Services Authority, since 1 July 2004 under Licence No 47661; b) at all material times the Applicant has been a director of: i) Cavalier Homes Brisbane Pty Ltd (“Cavalier”); ii) Stylebuilt Homes Australia Pty Ltd (“Stylebuilt”); iii) Universal Steelframing Systems Pty Ltd (“Universal”); and iv) Steelbuilt Kit Homes Australia-Wide Pty Ltd (“Steelbuilt”); c) at all material times, Cavalier, Stylebuilt, Universal and Steelbuilt have had the same shareholders and directors and have traded from the same address; -- 3 of 10 -- 4 d) on 14 March 2012, Brad Morelli and Andrew Spring of Jirsch Sutherland were appointed Administrators of Cavalier, Stylebuilt, Universal and Steelbuilt; e) on 16 April 2012, at concurrent second meetings of creditors, Cavalier, Stylebuilt, Universal and Steelbuilt were placed into liquidation. [10] As Judicial Member Thomas AM QC said in Dinsey v Queensland Building Services Authority,2 ‘Exclusion is prima facie automatic upon (the happening of any relevant company events). The occurrence of the event brings about the exclusion. Causation is not an element…’. [11] If an individual has been categorised as an excluded individual for more than one relevant event then he is liable to be categorised as a permanently excluded individual under s 58 of the Act subject to the requirements of that section. An Applicant can avoid the effect of the section under s 56AC(6) of the Act by limiting the occasions upon which additional exclusions may be counted. [12] Without that provision, a person with more than one event arising from the same circumstances will be permanently disqualified from holding a Builder’s Licence.3 [13] Judicial Member Thomas AM QC held in Dinsey v Queensland Building Services Authority4, having regard to the fact that acts of a director may consist of acts in relation to a group of companies, there is nothing odd or contextually awkward in reading the final reference in s 56AC(6) to ‘the company’ as including ‘companies’. [14] Mr Bemportato deposed in his affidavit that the four companies referred to above were inter-related. They had the same directors, shareholders, employees and financial controller. Each shared the other’s cash resources and inter-company loans. They had the same bank and overdraft facilities. Cavalier and Stylebuilt operated out of Springwood offices. Steelbuilt and Universal operated out of Clontarf.5 [15] They all shared the same suppliers and the same suppliers’ credit. If any one of the companies was placed on a credit hold, the other three would be similarly affected. [16] On 2 February 2012, the Commission imposed a special condition on the Builder’s Licence of Cavalier. That was to the following effect: Cavalier Homes Brisbane Pty Ltd must not provide tenders or quotes, or enter into any contracts, for the performance of building work as defined in the Queensland Building Services Authority Act 1991 until it is notified in 2 Ibid [36]. 3 Section 58(1) of the Act. 4 [2013] QCATA 225 [46]. 5 See paragraph 18 of the Applicant’s affidavit. -- 4 of 10 -- 5 writing by BSA that BSA is satisfied it has the financial capacity to undertake new work. [17] That suspension was stayed by the Tribunal on 1 March 2012. The Administrators were appointed on 14 March 2012. [18] Mr Bemportato submitted that when the suspension was imposed, that had the effect of the suppliers placing credit holds on accounts. It slowed the building operations, supplies were not delivered and contractors did not attend at the sites. [19] In the course of the hearing, Mr Bemportato appeared to place weight on the decision of the Westpac Bank to stop Cavalier’s credit as the principal cause, that had the domino effect. He agreed that Cavalier could not keep trading when all of its credit was stopped. Once the credit dried up, all four companies being interlinked, fell down. He maintains that it was when Cavalier lost its credit that it triggered the events and the domino effect. [20] The Commission conceded that if all the companies were interlinked and all fell over because of the demise of Cavalier, then that would fall within s 56AC(6). It flows from that, that if that was the case, Mr Bemportato should succeed in his Application. [21] However, the Commission’s submissions are that each of the companies had its own separate problems, although, clearly interlinked, their individual problems did not necessarily influence the other. The Commission’s references to the documentary evidence and its commentary are contained in the footnotes. In most instances, Mr Bemportato did not dispute the emails, although in some cases he was not aware of the events taking place or was not a party to them. CAVALIER [22] This company was in business of constructing residential homes as a franchisee of Cavalier Homes Australia Pty Ltd (“Cavalier Australia”). Mr Bemportato was a director of both companies. Cavalier’s problems arose prior to the Commission imposing its conditions. Reference is made to the following: a) an inability to service debts and a worsening debt position. Counsel for the Commission spent some time taking Mr Bemportato through email correspondence involving Mr O’Dare, a director of both companies, and other officers of the company and creditors;6 6 06.06.11, email Commission to Mr Bemportato and another confirming the Commission’s request for internal management accounts ‘in order to alleviate [the Commission’s] concerns over recent complaints regarding payment by’ Cavalier Brisbane (Exhibit 1, Consolidated Bundle of Documents hereafter referred to by reference to the page as follows “CBOD/658”); 16.06.11, email Commission to Mr Bemportato and others requesting advice in relation to the outcome of enquiries into unpaid invoices to Citispec Constructions discussed on 10.06.11 (CBOD/658); 08.09.11, email Mr O’Dare to Mr Bemportato and others attaching a cash flow based on actual creditors in the computer and debtor forecasts and stating that Cavalier -- 5 of 10 -- 6 b) inability to pay creditors, the need to enter into payment plans or arrangements made with creditors and inability to meet those arrangements;7 c) poor management of cash flow resulting in an inability to keep bank facilities within credit limits;8 d) being on ‘stop’ with suppliers of goods and services as a consequence of those suppliers not being paid;9 e) poor sales;10 Brisbane ‘is getting deeper into debt with no way out if this is not rectified URGENTLY’ (CBOD/795); 29.09.11, being email from Mr Washbourne to Mr O’Dare and Mr Bemportato expressing concern about the level of debt associated to Cavalier Brisbane, reporting that he is ‘receiving daily communications with staff, trades, franchisees and suppliers with questions about the financial condition of this company, identifying that ‘all’ income from Cavalier Australia is being taken to pay for the Brisbane office and stating that he is ‘aware’ that there is serious debt in the Brisbane office and other companies like Steelbuilt… I have seen and heard of an escalation of these debt issues and I am seriously concerned’ (CBOD/482 and 482); 19.10.11, email Commission to Mr Bemportato where it is recorded that the Commission required an explanation for ‘another complaint of non-payment’ by Cavalier Brisbane (CBOD/665); 01.02.12, email from Mr O’Dare where he writes ‘now the issue I have is that $73K from two weeks ago and another $36K last week for Cavalier. Stylebuilt certainly can’t pay this and its bills due to its small cash flow’ (CBOD/411) 09.02.12, email from Mr Zauner stating that Cavalier Brisbane’s contractors are complaining that they are not being paid in accordance with their contract terms at the Broken Hill project (CBOD/423). 7 11.01.12 and 13.02.12, email chain in respect of debt of $60,000 to be paid by Cavalier Brisbane in respect of the Broken Hill project between 16 – 20 January 2012 and that by 9 February 2012 only a little under $21,000 had been paid and that sum was not paid until 9 February 2012 (CBOD/418); In a letter of demand dated 25.07.12, the liquidator of Cavalier Brisbane asserted that that company had been trading whilst insolvent and cited, as a basis for the allegation the fact that ‘A review of the books and records of the Company indicate that there were a significant amount of creditors that were outside the ordinary trading terms of 45 days. This is reflected in the number of Letters of Demand issued by Creditors’. The demand further asserts that ‘… the books and records of the Company indicate that a significant number of payment arrangements were entered into by the Company for the repayment of outstanding accounts’. 8 30.11.11, minutes of meeting of Cavalier Directors, where they were advised that Westpac ‘has expressed…concern and annoyance that the accounts are going over the over-draft limit without even a courtesy call or arrangement. If this continues to happen it will leave [Westpac] with no choice but to change the account set up so this option is removed’ (CBOD/819); 01.02.12, email Westpac (by Ms Brown) to Mr O’Dare and Mr Bemportato demanding that payment be made immediately to bring three Cavalier Brisbane Accounts back within limit. Whilst the extent to which the limit had been exceeded cannot be described as substantial, it is observed that two of the facilities allowed for almost $1 million dollars to be available to Cavalier Brisbane and that had been used to beyond that limit (CBOD/822). 9 30.11.11, minutes of meeting of Cavalier Directors, item 3 which records that Mr Osborne advised the directors that ‘he is on stop with just about every supplier and a lot of the subbies are at the stage where they are looking to use BCIPA to get payment before Xmas’. The board were also advised that ‘Karen and Peter are avoiding dealing with calls from suppliers and subbies so the end result is that those concerned are going direct to letters of demand because their calls are not returned and there is minimal communication’ (CBOD/819). -- 6 of 10 -- 7 f) poor controller of jobs Cavalier had contracted to be performed;11 g) management issues.12 [23] I should interpolate here that in many instances, Mr Bemportato claimed that he was not present at meetings when certain decisions were made and was not party to a number of decisions which significantly influenced the company. However, he was at all times a director, and in that respect he has to assume liability, whether he was aware of the decisions or not, and I note that in many instances he was copied into the correspondence and could have expressed his concern and/or disassociated himself from the decision. That would not have led to a different result in his categorisation as an exclusive individual but may have assisted him in his application to become a “permitted individual”. [24] In addition, it was submitted that Cavalier was insolvent well before the condition was imposed. One of the liquidators of Cavalier, Andrew John Spring, made that assertion in a report dated 25 July 2012 addressed to Mr Bemportato.13 The allegation was that the company had been trading whilst insolvent since 2010. Further, on 31 January 2011, Van Blinds Pty Ltd, a creditor of Cavalier, had served a Statutory Demand on Cavalier. That Demand was not paid or otherwise satisfied. No application was made to set it aside and consequently on 28 February 2012 an application to wind up Cavalier was filed in the court. STYLEBUILT 10 27.02.12, email Mr O’Dare to Mr Bemportato where Mr O’Dare notes that sales are ‘well short’ of target (CBOD/451). 11 07.02.12, email from Mr O’Dare where he writes that ‘unfortunately no one from Cavalier has ever been privy to discussions with the clients or MGMB as to the specifications or obligations in completing [Cinderella Street project]. This is a mess’ (CBOD/416); 09.02.12, email Mr Zauner identifying that the Broken Hill project is ‘well behind program’ (CBOD/423); 13.02.12, email from Mr Zauner stating that Cavalier Brisbane was 13 weeks behind program at the Broken Hill project (CBOD/421); 13.02.12, email from Mr Zauner stating that contrary to statutory declarations provided on behalf of Cavalier Brisbane to certify payments, a list of contractors have all advised that they have outstanding arrears with Cavalier Brisbane in respect of the Broken Hill project (CBOD/420); 15.02.12, email to Mr O’Dare identifying debt against the Cinderella Street project, the $1.2 million dollar loss incurred with Steelbuilt and how these weren’t taken into account in relation to the Broken Hill project and those issues have ‘stretched our cash flows to breaking point’ (CBOD/427). 12 18.10.11, email Mr Garis being report to directors of the Cavalier Group in which he identifies issues involving the CFO, Mr Gale, acting in a quasi-general managers role which has led to his role as the financial officer being sadly neglected and expressing a view that the group requires a financial manager whose sole role is to manager all the internal accounting requirements of the Group (CBOD/479); 10.11.11, business plan – which identifies that weaknesses include lack of direction, poor systems internally, the business being divided, too many office directors having different ideas and staff members having differing allegiances (CBOD/810); 19.11.11, business plan noting that Cavalier Brisbane has ‘become separated by name, opposite visions and management styles of the directors, too many separate entities in name and control but with the same finances and financial manager’ (CBOD/407). 13 Exhibit 7. -- 7 of 10 -- 8 [25] Stylebuilt was in the business of constructing residential hillside and transportable dwellings. It is submitted by the Commission that Stylebuilt was in financial difficulties prior to the Commission imposing the condition on Cavalier. The following were submitted as causes for its financial difficulties: a) poor management of finances resulting in an inability to pay a tax liability of $142,000 which was payable in March but the company was aware well beforehand;14 b) inability to service debts;15 c) inability to keep bank facilities within credit limits;16 d) poor sales and poor cash flow.17 [26] In addition, the Commission relied upon evidence of insolvency well before 2 February 2012. Applications to wind up Stylebuilt have been made by Crane Limited on 16 December 2011 (dismissed) and a subsequent application by Build Safe Qld Pty Ltd on 24 January 2012. UNIVERSAL [27] Universal was in the business of manufacturing steel frames and trusses for the other three companies. It had financial problems which it was submitted by the Commission were as follows: a) failing to pay suppliers of goods and services in accordance with payment plans or arrangements made with them;18 and constantly being put on ‘stop’ by its suppliers;19 b) poor cash flow;20 and 14 CBOD/829. 15 01.02.12, email from Mr O’Dare where he writes ‘now the issue I have is that $73K from two weeks ago and another $36K last week for Cavalier. Stylebuilt certainly can’t pay this and its bills due to its small cash flow’ (CBOD/411). 16 01.02.12 – email Westpac (by Ms Brown) to Mr O’Dare and Mr Bemportato demanding that the Stylebuilt Homes facility which had a limit of $360,097 be brought back within the limit – whilst the extent to which the limit had been exceeded is not significant, it is worth noting that this was a substantial limit and Stylebuilt Homes was clearly having trouble keeping within that limit (CBOD/822). 17 01.02.12, email from Mr O’Dare where he writes ‘now the issue I have is that $73K from two weeks ago and another $36K last week for Cavalier. Stylebuilt certainly can’t pay this and its bills due to its small cash flow’ (CBOD/411). 18 15.12.11 to 01.02.12, email chain with One Steel Distribution. A promise was made for $25,000 to be paid by the end of January however that did not happen. A promise was made on 1 February 2012 to pay by presumably 3 February 2012 but Mr O’Dare makes it clear that there are serious financial pressures on the Cavalier Group companies by that date when he writes ‘now the issue I have is that $73K from two weeks ago and another $36K last week for Cavalier. Stylebuilt certainly can’t pay this and its bills due to its small cash flow. Note this bill to One Steel is for Steelbuilt’s last five kits and coil used’ (CBOD/411 to 413). 19 30.09.10, email from Ms O’Dare stating that she is in a position where she has to ‘send money every month chasing why we’re on stop yet we should have a great cash flow’ (CBOD/364); 30.09.10, email from Ms O’Dare where she write in the context of an exchange over cash flow issues and being constantly put on stop by suppliers that ‘it is becoming a common problem for Universal’ (CBOD/363). -- 8 of 10 -- 9 c) insufficient income to pay its trade expenses.21 STEELBUILT [28] This company, as its name suggests, provided kit homes, particularly to people in rural areas. It had financial difficulties which were manifested by the following: a) questionable utilisation of money received from clients. As at 23 July 2010, it had been paid $390,000 as ‘100% pre payment by clients’ but was trading this as a debt it could not repay.22 By 6 February 2011 ‘the debt’ owed to the clients had increased to $800,000 by which time one of its directors, Mr O’Dare, stated that the company was ‘in serious trouble’.23 [I should interpolate here that Mr Bemportato was unaware of this state of affairs and was very angry to find out that the company was using pre-payment by clients as a debt. My comments at paragraph [23] above are equally applicable here as well.]; b) had insufficient income to pay its trade expenses;24 c) the company was in such a financial mess25 that in about October 2011 the directors caused it to stop trading;26 d) inability to pay its debts;27 20 30.09.10, email from Ms O’Dare indicating that she is in a position of having to ‘send money every month chasing why we’re on stop yet we should have a great cash flow’ (CBOD/364). 21 For the year ending 30.06.11 it had income of $738,642 with cost of sales of $646,484 and trading expenses of $356,701 suffering a net loss of $264,543 (CBOD/328). For the period to 29.02.12 it had income of $241,467 with cost of sales of $107,553 and trading expenses of $180,713 suffering a net loss of $46,779 (CBOD/328). 22 23.07.10, minutes of meeting of Directors of Cavalier in which it is recorded that the directors were advised that Steelbuilt Kit Homes had approximately $700,000 of outstanding debt which included ‘$310,000 of forecast costs for kits that had been 100% prepaid by clients. Steelbuilt has $23,000.00 available on their overdraft limit of 194,000.00’ and it was proposed that the solution for this included invoicing new franchisees, selling 8 new franchises in the next 12 months and generating $1 million dollars from ‘future kit sales that will be used to cover the creditors from previous kit sales’ (CBOD/779). 23 06.02.11, Steelbuilt restructure proposal prepared by Mr O’Dare, see discussion under the heading ‘current position of Steelbuilt’ (CBOD/369). 24 For the year ending 30.06.11 it had income of $136,838 with cost of sales of $677,617 and trading expenses of $161,855 suffering a net loss of $701,434 (CBOD/326). 25 06.02.11, Steelbuilt restructure proposal prepared by Mr O’Dare where he states ‘note if this company in its current state does not change the way we operate it will only incur more debt and see it accumulate and we will be in the same position in 12-14 months’ (CBOD/373). 26 10.10.11, email from Mr Washbourne noting that it has ceased to trade (CBOD/387). 27 06.02.11. Steelbuilt restructure proposal prepared by Mr O’Dare stating ‘currently, unfortunately, we are in serious trouble a debt exceeding 45 days of $400,000 owed to creditors and $800,000 owing in kit material to clients in future kit deliveries’ (CBOD/369); 11.02.11, email from Mr Plotkin identifying that the Cavalier Group needs to pay back ‘the $190,000 owed to Trilink once they have got the Steelbuilt debt under control’ (CBOD/367); 11.04.11, email from contracts administrator at Steelbuilt -- 9 of 10 -- 10 e) poor sales;28 f) having a bad reputation in the marketplace;29 g) being on ‘stop’ with suppliers of goods and services as a consequence of those suppliers not being paid;30 h) lack of control and direction;31 i) overspending on expenditure;32 j) poor management of finances resulting in inability to pay tax liability.33 [29] It is readily apparent from the above history and the documents supporting the Commission’s submissions that the demise of the four companies cannot be contributed to just one or two events. It is also readily apparent that the demise is due to poor financial systems, sales neglect and essentially poor management. Mr Bemportato, in the course of his cross- examination, made concessions to that effect. [30] I agree with the Commission’s decision. It follows that Mr Bemportato is an excluded individual in relation to the events, being the liquidation of the four companies. I find that the winding up of each company was due to separate and distinct financial difficulties they were undergoing at the time, although there is some inter-relationship between the causes. In particular, the problems associated with Steelbuilt were quite distinct from the actions of the Commission or of the Westpac Bank. [31] I confirm the decision of the Commission made on 16 March 2012. Australia trying to organize purchase of kit on a COD basis but indicating concern as to where the money can come from in writing ‘then I’ll try and arrange payment (????) from somewhere so I obtain a date for the client’ (CBOD/376); 11.04.11, email from Ms O’Dare identifying that ‘the problem is now money. With no sales currently apart from one from the internal sales team, we’re struggling to keep the COD payments going’ (CBOD/375). 28 24.07.10, email from Mr O’Dare to Mr Bemportato and other stating ‘we have fell well short of sales cash income’ and also states ‘sales need to be improved, we have to achieve an income of $450K per month not the $252K we are presently averaging’ (CBOD/781). 29 06.02.11, Steelbuilt restructure proposal prepared by Mr O’Dare in which he proposes a change to its name ‘this is due to Steelbuilt having a bad name in the market place, and its stale’ (CBOD/370). 30 09.04.11, email from Steelbuilt Parkes with the subject ‘problems with kits just getting worse’ and advising that Boral has put them on stop (CBOD/377). 31 24.07.10, email from Mr O’Dare to Mr Bemportato and others where he stated ‘let me stress this is not attacking Rowhan but as a director…I am concerned at the direction and lack of control we have with this company’ (CBOD/781). 32 24.07.10, email from Mr O’Dare to Mr Bemportato and others where he writes ‘at our meeting in Parkes and budget put forward and accepted last year and adopted again for this year, we…have overspent in nearly every area’, he also writes ‘we have spent $28,422.00 in travel since January with our budget being $25,000 for the year’ and also ‘if we combine the staff’s wages inclusive of Rowhan’s is in the area of $400k with our budget being $290,000’ (CBOD/415). 33 07.02.12, email from Ms O’Dare identifying that payroll tax of $189,504 was outstanding and had been brought to everyone’s attention in October 2010 (CBOD/415). -- 10 of 10 --