Cooper v Queensland Building Services Authority [2010] QCAT 640

CITATION: Cooper v Queensland Building Services Authority [2010] QCAT 640 PARTIES: Mr Raymond Kevin Cooper v Queensland Building Services Authority APPLICATION NUMBER: QR233-09 MATTER TYPE: General administrative review matters HEARING DATE: 20 September 2010 HEARD AT: Brisbane DECISION OF: Graham Quinlivan - Member DELIVERED ON: 20 September 2010 DELIVERED AT: Brisbane ORDERS MADE: The reviewable decision is confirmed. CATCHWORDS : Section 56AD of the Queensland Building Services Authority Act 1991; refusal to categorise the applicant as a permitted individual APPEARANCES and REPRESENTATION (if any): APPLICANT : Mr Raymond Kevin Cooper represented himself RESPONDENT: Queensland Building Services Authority represented by Ms Jodie Stroud -- 1 of 10 -- QR233-09 / Page 2 of 10 REASONS FOR DECISION Introduction 1. This was an application to review a decision of the Queensland Building Services Authority (“the Authority”) to refuse to categorise the applicant as a permitted individual pursuant to section 56AD of the Queensland Building Services Authority Act 1991 (“the QBSA Act”). The application was heard on 20 September 2010. The applicant made the application for a review of the Permitted Individual Decision pursuant to section 86(1)(j) and 87 of the QBSA Act and sought leave to either: a) Have the “permitted individual” decision set aside and substituted with a decision to categorise the applicant as a permitted individual for the “relevant event” pursuant to s24(1)(b) of the Queensland Civil and Administrative Tribunal Act 2009 (“the QCAT Act”); or b) Pursuant to s24(1)(c) of the QCAT Act have the decision set aside and the matter returned to the Authority to reconsider the permitted individual decision with any directions the Tribunal considers appropriate. The evidence 2. The applicant relied on his written application that was received by the Authority on 9 March 2009 together with supporting annexures. In addition, on 1 February 2010, the Tribunal received a further document entitled “Items in BSA Decision for Review” from the Applicant consisting of 8 pages of comments regarding aspects of the Building Services Authority decision for review together with approximately 127 pages of additional annexures. The applicant also gave oral evidence at the hearing. 3. The Authority relied on 2 statements in the form of affidavits from Ms Natasha Dennis sworn on 1 March 2010 and 8 July 2010, including a Statement of Reasons dated 30 November 2009 Background 4. The background of the applicant’s involvement in the company known as Leadertech Energy Pty Ltd and it’s relationship with Sunpak Pty Ltd (Sunpak) as summarised by the parties is as follows: a) Leadertech Pty Ltd was registered as a company on 12 December 2005 and was set up for the sole purpose of importing energy efficient water heating products from China. b) The directors of Leadertech at that time were the applicant and Gordon Ryan with the shareholders being Silvia Cooper (wife of the applicant) and Sunpak Pty Ltd atf the AFT Family Trust. c) The company required funds to import the products and the applicant arranged finance through the Bendigo Bank. d) The Bank would only provide finance on the condition that Gordon Ryan was removed as a director and the shareholding was restructured. -- 2 of 10 -- QR233-09 / Page 3 of 10 e) Gordon Ryan was removed as director and shareholder in May 2006 and the Sunpak shareholding was transferred to Silvia Cooper atf of the Energy Trust. f) Gordon Ryan was a discretionary beneficiary of the Energy Trust, which was a beneficial owner of 50% of the shares in Leadertech. g) The distributors of the products imported by Leadertech were Tybolt Pty Ltd trading as Central Solar Systems (the applicant’s company) and Sunpak Pty Ltd (Gordon Ryan’s company). h) Products were to be supplied on credit with agreed terms for payment of 14 days. i) Leadertech provided products on credit to Sunpak. j) The Sunpak credit grew to $101,688.62 in May 2007 but this figure was reduced to $$31,688.62 on 30 May 2007. During the period June 2007 to December 2007 the credit balance fluctuated between $30,153.10 and $50,605.89. k) As at 3 July 2008 Leadertech had not been able to recover a trade debt of $40,000 owed by Sunpak. 5. At the relevant times to these proceedings the applicant was the sole director and secretary of Leadertech Energy Pty Ltd (Leadertech). 6. From 10 March 1997 the applicant was also the sole director and from 13 December 2002 the secretary of Tybolt Pty Ltd which held and continues to hold a trade contractors license issued pursuant to the QBSA Act in the class plumbing and drainage, with the license number being 1018529. 7. On 6 February 2009 the Authority sent a letter to the applicant advising that the Authority considered that the applicant was an excluded individual pursuant to Section 56AC(3) of the QBSA Act because, on 3 July 2008, Susan Ruth Carter and Jason Walter Bettles of Worrells Insolvency and Forensic Accountants were appointed as liquidators of Leadertech. As a result the Authority considered the applicant to be an excluded person at the time that Leadertech was placed in liquidation because the applicant was a director, secretary or influential person for the company. 8. On 9 March 2009 the Authority received from the applicant a written application seeking that the applicant be categorised as a permitted individual. On 20 August 2009 the Authority sent a letter to the applicant advising him that the Authority had reviewed the applicant’s application and had refused to categorise the applicant as a permitted individual for the relevant event because the Authority was not satisfied that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the event. 9. On 16 September 2009 the applicant commenced these present proceedings seeking a review of the Authority’s decision and specifically requesting that the -- 3 of 10 -- QR233-09 / Page 4 of 10 Tribunal set aside the decision and substitute another decision. The applicant stated in his review application that he disagreed with the assertion that he did not take all reasonable steps to avoid the liquidation of the company. He claimed that he was placed in a situation that could not be undone by a third party. When he realized he was in the situation he immediately sought legal and financial advice. He was advised that placing the company under administration was the only course of action that could be taken. The Law 10. The relevant provisions of the QBSA Act are sections 56AD(8)(a) and (b). Section 56AD(8) provides: “The authority may categorise the individual as a permitted individual for the relevant event only if the authority is satisfied, on the basis of the application, that the individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.” Section 56AD(8A) outlines the matters which the Authority must have regard to in determining whether a person took all reasonable steps: “In deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of a relevant event, the authority must have regard to action taken by the individual in relation to the following— (a) keeping proper books of account and financial records; (b) seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business; (c) reporting fraud or theft to the police; (d) ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees; (e) putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts; (f) making appropriate provision for Commonwealth and State taxation debts.” Section 56AD(8B) provides that: “Nothing in subsection (8A) prevents the authority from having regard to other matters for deciding whether an individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of a relevant event.” 11. In the decision of Younan v QBSA (2010) QDC 158 His Honour Judge McGill made the following observations: ƒ At [24] When having regard to the criteria in section 56AD(8A) the focus of this subsection is on prevention rather than dealing with problems after they have arisen. -- 4 of 10 -- QR233-09 / Page 5 of 10 ƒ At [26] The test outlined in section 56AD(8) requires: (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 relevant individual took all reasonable steps to avoid those circumstances coming into existence, and if satisfied of that (4) A decision whether to categorise an individual as a permitted individual. ƒ At [26] The reasonableness of his behaviour must be assessed by reference to what was known by him at the time, without the benefit of hindsight. ƒ At [37] Regarding the issue of onus His Honour stated that “subsection 8 authorises the characterisation of an individual as a permitted individual only if the Authority was satisfied of the relevant matter on the basis of the application, that is to say on the basis on the case made by the applicant. It follows that if relevant considerations are not addressed by the applicant so that the application fails to show in a relevant respect that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event then the application will fail.” The issues 12. Turning to the test as set out in the case of Younan, the issues which the Tribunal must consider are as follows: (i) What was the relevant event? 11. The relevant event occurred on 3 July 2008 when Susan Ruth Carter and Jason Walter Bettles of Worrells were appointed as liquidators of Leadertech and consequently the Authority considered that the applicant to be an excluded individual. What were the circumstances that resulted in the happening of the relevant event? 12. The appointment of liquidators to Leadertech came about as a result of the creditors of the company resolving to wind it up. The creditors who resolved to wind up the company were Silvia Cooper (the wife of the applicant) and the applicant as proxy for Jin Fu Di (a party to the Joint Venture). The evidence in relation to the unsecured creditors of Leadertech was that at the time of the event, all but one creditor, being the Australian Taxation Office was either a related entity or officer, shareholder, or a beneficiary of shares of the company. 13.The Authority submitted that it was difficult to understand why the creditors of Leadertech resolved to wind the company up where it appears that no demand for payment by the unsecured creditors was made on the company. The Authority therefore submitted that the only assumption possible, since the ATO was the only -- 5 of 10 -- QR233-09 / Page 6 of 10 non-related unsecured creditor, was that it was this debt or more specifically the company’s inability to be able to pay this debt that was the reason for the event. 14. In his application to the Authority the applicant stated that by December 2007 he became worried that Sunpak Pty Ltd would not pay the trade debt of $40,000. The applicant gave evidence that Gordon Ryan was a beneficiary of the Energy Trust, a 50% shareholder in Leadertech. Further Gordon Ryan was also a director of Sunpak Pty Ltd until he resigned and his son Ben became director (in name only). The applicant submitted that as an effective 50% shareholder Ryan/Sunpak was given more leeway than a normal trade debtor. The applicant gave evidence that the non-payment was not affecting Leadertech finances and would not be a problem until Leadertech sold its remaining stock and ceased to trade. Legal and accounting advice was obtained in January/February 2008. This advice was to continue to pursue the $40,000 from Sunpak until the remaining stock had been sold. If the $40,000 had not been recovered by this time then Leadertech should be placed into voluntary administration because the administrator could pursue the $40,000 with more authority. There was no evidence from the Applicant as to any advice received regarding the likely consequences of placing Leadertech into liquidation and the entitlement to hold a licence under the QBSA Act. 15. The applicant submitted that the non-payment by Sunpak was not a problem until the company sold its remaining stock in mid 2009 but it is clear from emails between the applicant and Gordon Ryan during the period April 2007 to August 2007 that the non-payment was affecting Leadertech’s cash flow. Despite being aware that Sunpak was in difficulty because it’s debt was in excess of the agreed trade terms, the applicant continued to extend credit to Sunpak until Leadertech was placed in liquidation. The Authority acknowledged that the applicant may have sought both legal and financial advice in relation to recovering the Sunpak debt but submitted that such advice was not obtained until well after the debt was incurred and as such was not a step to avoid the circumstances that resulted in the event but more the event itself. 16.The Authority also submitted that the refusal of the Bendigo Bank to provide to Leadertech finance while Gordon Ryan was a director and Sunpak a shareholder was a matter that should have raised concerns for the applicant. The Authority submitted that if this were the case, a reasonable person in the applicant’s position would have put in place strict financial measures such as limiting credit facilities and/or ensuring the 14 day payment period was strictly adhered to. In his response the applicant gave evidence that “Sunpak was a key customer, not to mention the fact that, as a 50% shareholder, Ryan had a vested interest to ensure that Leadertech Energy was a success.” The evidence was that at the time Ryan was at most the primary beneficiary of The Energy Trust dated 26 May 2006. According to the evidence contained in the records held by ASIC Ryan ceased to be a Director of Leadertech on 16 May 2006 and neither Ryan nor Sunpak were directors or shareholders of Leadertech at the date of the Event. 17.The Authority submitted that the applicant did not take any appropriate action and despite being aware of the situation with respect to Sunpak the applicant continued to extend credit in amounts of up to and exceeding $100,000 for a considerable period of time and failed to ensure that proper credit management was in place to recover such amounts. -- 6 of 10 -- QR233-09 / Page 7 of 10 ATO Debt 18.The evidence from the applicant makes it clear that at the date of the Event the company had a taxation liability to the ATO for unpaid goods and services tax in the amount of $27,822. By letter dated 15 June 2010 Tom Walsh of Walsh & Walsh Chartered Accountants stated: “That the company incurred the great majority of the ATO debt from the sale of its remaining stock and assets prior to liquidation and that this figure was provided for in the accounts prepared by the company for the liquidator.” In relation to this statement the Authority argued that it was not clear what portion of the ATO debt arose from the sale of the stock and what amount was owed prior to the sale of the stock because the applicant had failed to provide any particulars or evidence with respect to the ATO debt. Further the sale of the stock was to Tybolt Pty Ltd, a related entity company and provisioning of tax in accounts and making appropriate provision for payment of taxation are separate and distinct. 19.It is apparent to the Tribunal that at the time of the happening of the event that there was a debt owing to the ATO and that the company failed to make adequate provision for the payment of its taxation liability. Did the applicant take all reasonable steps to avoid the circumstances that led to the relevant event, coming into existence? 20.In the decision of Dyson v QBSA that is reported at [2009] CCT QR084 at paragraph 14 Member Lorisch clearly indicated that: “It is to be remembered that the onus rests with the applicant to prove that the applicant had taken all (and not some) reasonable steps in terms of section 56AD(8) of the QBSA Act. If the applicant happens to fall short of discharging that onus because of either or both, lack of documentation or failure in recollection, then simply the applicant fails in this application.” Member Lohrisch at paragraph 35 went on to say that “the Applicant’s recollection of events was not reliable without corroborating documentation. Accordingly, without appropriate evidence, I cannot be satisfied that all reasonable steps (were) taken in respect of this alleged deficiency.” Respondent’s submissions 21. The Authority submitted that the applicant: • had provided minimal documentary evidence that was relevant to support his statements, • had failed to adequately explain the reasons for the event, • had provided insufficient information in relation to the unsecured creditors of the company, • had provided insufficient evidence in relation to the ATO debt, • had provided insufficient evidence in relation to the financial position of the company, -- 7 of 10 -- QR233-09 / Page 8 of 10 • had provided no supporting evidence of a distribution agreement with Sunpak or any agreement with Sunpak with respect to trade terms; and • had provided no financial documents to support that the company was meeting its liabilities as and when they fell due. 22. Further, the Authority submitted that the applicant should have been aware that Gordon Ryan was a potential financial risk because of the requirement by Bendigo Bank that Gordon Ryan and Sunpak be removed as officers and shareholders of the company. In these circumstances it was submitted by the Authority that a reasonable person with this knowledge would have: a) Carried out due diligence with respect to entering into business arrangements with Sunpak and Gordon Ryan b) Not have extended credit c) If credit was extended: ƒ Entered into a written agreement regarding credit arrangements ƒ Obtain some form of guarantee in the event of non payment ƒ Limited the extent of credit ƒ Ceased providing goods if payment had not been made ƒ Commenced recover action within a reasonable period of time if the debt was not paid. On this basis the Authority submitted that the Tribunal could not be satisfied that the applicant: a) Had in place appropriate credit management for amounts owing and taken reasonable steps to recover those amounts b) Made appropriate provision for Commonwealth and state taxation debts. Applicant’s submissions 23. In the applicant’s document headed – “BSA decision for review” which was received by the Tribunal on 1 February 2010, the applicant in paragraphs 1 – 6 addressed a number of the issues raised by the Authority in relation to the steps taken by the applicant to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. Specifically the applicant submitted that the Authority “in its position has a very different power over its debtors that most suppliers do not have. Non-payment of licences fees enables the BSA to cancel a license and stop someone from trading with no ongoing risk to the BSA’s future revenue base or viability. In the case of a small business working with key customers is paramount to the ongoing viability of the business.” 24. The applicant further submitted that, “(o)nce it became apparent that Sunpak didn’t intend to repay without significant effort, there was no option but to put the company into administration. The option of the company pursuing the debt against Sunpak through legal means would have been very messy due to Ryan’s shareholding in the company via the trust. The appropriateness of credit management policies should be considered with consideration of the circumstances when the product was supplied and also the company’s success in recovering debts from all other creditors not just one rogue one.” -- 8 of 10 -- QR233-09 / Page 9 of 10 Findings 25. The Tribunal finds that the applicant did not provide adequate evidence of actions taken by him to satisfy the matters set out in section 56AD subsection 8A of the QBSA Act, namely: (a) keeping proper books of account and financial records – there was only limited evidence of the accounting and financial records maintained by Leadertech. These were not sufficient to justify a finding that proper books of account and financial records were maintained. (b) seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business – The Tribunal finds that the applicant did seek legal and financial advice in relation to recovering the Sunpak debt but this only occurred after the debt was incurred. There was no evidence of any such advice being obtained by the applicant or Leadertech before entering into the financial or business arrangements or commencing or conducting the business. (c) reporting fraud or theft to the police – there was no evidence that fraud or theft was an issue. (d) ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees – there was no evidence from the applicant in this regard. (e) putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts – the Tribunal is not satisfied that the applicant put in place appropriate credit management arrangements in relation to the debt with Sunpak. Further the Tribunal finds that the applicant did not take reasonable steps to recover the trade debt from Sunpak and that the steps that were taken did not result in the recovery of the debt. (f) making appropriate provision for Commonwealth and State taxation debts – the evidence provided by the applicant did demonstrate that some provision was made in the accounts for the ATO debt. However the Tribunal is not satisfied that the provision was appropriate because the debt to the ATO would only be satisfied if Sunpak paid the debt to Leadertech. 26. The applicant relied heavily on the fact that Sunpak had the ability to pay the debt of $40,000 to Leadertech and that if it did so then this would resolve the problem. However the applicant acknowledged that any attempt to recover the debt through legal means would be “very messy” and the legal advice obtained was that if the debt was not paid then placing the Company in liquidation was the preferred option. The applicant did not identify any other matters that would satisfy the Tribunal that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of a relevant Event. Should discretion be exercised to categorise the applicant as a permitted individual for the relevant event? 27. It is clear to the Tribunal that the applicant has not met the threshold criteria regarding the steps taken by him to avoid the circumstances coming into existence that resulted in the happening of the relevant event and as a result the question of whether to exercise the discretion of the Tribunal is not relevant. -- 9 of 10 -- QR233-09 / Page 10 of 10 28. Since the threshold issue has not been determined in the applicant’s favour it is not necessary to consider whether a discretion should be exercised to categorise the applicant as a permitted individual. 28. The reviewable decision is confirmed. -- 10 of 10 --