Carter v Queensland Building Services Authority [2010] QCAT 444

CITATION: Carter v Queensland Building Services Authority [2010] QCAT 444 PARTIES: Mr Edward Ian Carter v Queensland Building Services Authority APPLICATION NUMBER: QR274-09 MATTER TYPE: General administrative review matters HEARING DATE: 4 May 2010 HEARD AT: Level 10 BOQ Centre 259 Queen Street BRISBANE QLD 4000 DECISION OF: Mr Alexander Brands DELIVERED ON: 30 August 2010 DELIVERED AT: BRISBANE ORDERS MADE: The Tribunal confirms the decision under review. This means that the appeal is unsuccessful. CATCHWORDS : Refusal of application to be categorised by QBSA as a Permitted Individual – section 56AD(1) of the Queensland Building Services Authority Act 1991. APPEARANCES and REPRESENTATION (if any): APPLICANT : Mr Edward Ian Carter – self-represented RESPONDENT: Mr Brendan B. Cole, Principal Legal Officer, Queensland Building Services Authority – for Respondent Ms Natasha Dennis – original decision-maker, Queensland Building Services Authority -- 1 of 9 -- QR274-09 / Page 2 of 9 REASONS FOR DECISION HISTORY OF THE APPLICATION 1. On 29 September 2009, the Queensland Building Services Authority (the QBSA) made a decision not to categorise Mr Carter as a “permitted individual” pursuant to s56AD of the Queensland Building Services Authority Act 1991 (the QBSA Act). 2. On 22 October 2009, the applicant appealed to the Commercial and Consumer Tribunal (the CCT) for a review of the decision. 3. On 1 December 2009 the CCT and a number of other Tribunals were replaced by the Queensland Civil and Administrative Tribunal (QCAT/the Tribunal). 4. On 4 May 2010 the application was heard by QCAT. THE LEGISLATION 5. On 1 December 2009, QCAT came into existence. The CCT and a number of other Queensland Tribunals were abolished by the Queensland Civil and Administrative Tribunal Act 2009 (the QCAT Act). 6. Under section 256 of the Act, a pending proceeding (being a proceeding commenced in one of the Tribunals abolished by the 2009 Act but not heard by the abolished Tribunal prior to 1 December 2009) is taken to be a proceeding before QCAT. This enabled QCAT to hear Mr Carter’s application. 7. However, according to section 271 of the QCAT Act, the Tribunal only has the functions that the CCT would have had in relation to the pending proceeding under the now repealed Commercial and Consumer Tribunal Act 2003 (the CCT Act). 8. The Queensland Building Services Authority Act (the QBSA Act) and the Domestic Building Contracts Act 2000 (the DBC Act) were the empowering Acts for the former CCT. Both Acts are still in force. 9. Section 20 of the QCAT Act makes it clear that this review hearing is a fresh hearing on the merits and that the Tribunal is to produce the correct and preferable decision. 10. In accordance with section 19 of the QCAT Act, the Tribunal, in exercising its review jurisdiction: (a) must decide the review in accordance with this Act and the enabling Act under which the reviewable decision being reviewed was made; and -- 2 of 9 -- QR274-09 / Page 3 of 9 (b) may perform the functions conferred on the tribunal by this Act or the enabling Act under which the reviewable decision being reviewed was made; and (c) has all the functions of the decision-maker for the reviewable decision being reviewed. 11. Section 56AC of the QBSA Act provides as follows: 56AC Excluded individuals and excluded companies (2) This section also applies 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 event) 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. (4) If this section applies to an individual because of subsection (2), the individual is an excluded individual for the relevant Company event. 12. Section 56AD of the QBSA Act provides that: (1) An individual may apply to the authority, in the form approved by the Board, to be categorised as a permitted individual for a relevant event if the individual has been advised by the authority, or has otherwise been made aware, that the authority considers the individual to be an excluded individual for the relevant event. (3) If the individual applies, the application must include the reasons why the authority should categorise the individual as a permitted individual for the relevant event. (8) The authority may categorise the individual as a permitted -- 3 of 9 -- QR274-09 / Page 4 of 9 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. (8A) 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. (8B) 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. (9) If an individual is categorised as a permitted individual for a relevant event, the individual is taken not to be an excluded individual for the relevant event. THE ISSUES 13. The issues in relation to the application before the Tribunal are as follows: (i) What was the relevant event for the purposes of s56AD of the QBSA Act? (ii) What were the circumstances that resulted in the occurrence of the relevant event? (iii) Did the applicant take all reasonable steps to avoid the coming into existence of those circumstances that resulted in the occurrence of the relevant event as required by s51AD(8) of the QBSA Act?; and, if he did -- 4 of 9 -- QR274-09 / Page 5 of 9 (iv) Should discretion be exercised, as also required under s51AD(8), to categorise the Applicant as a permitted individual? BACKGROUND 14. Glentone Australia Pty Ltd (the Company/Glentone) operated a shop- fitting business in Sumner Park, Brisbane. 15. In June 2008, the applicant, Mr Carter, became involved with the Company and in January 2009 he became its General Manager. 16. The relevant event for the purposes of ss56AD of the QBSA Act was the appointment on 13 May 2009 of liquidators (Worrall’s Solvency & Forensic Accountants) to the Company. 17. At the time of the relevant event, Mr Carter was an influential person for Glentone. SUBMISSIONS The circumstances that resulted in the happening of the relevant event. 18. The applicant submitted that the main cause of the relevant event was the inability of the Company to recover amounts owing. For example, Salsa Fresh Mixed Food Grill (Salsa) had contracts with Glentone totalling $500,000. Salsa owed the Company $139,204, and this resulted in non-payment of wages and standing down of staff. Salsa then “withdrew” their contract. Mr Carter said that he first became aware of the cause of the relevant event in mid April 2009. 19. He said that the Company first had difficulty in paying its debts in March 2008. The total amount owing to creditors, including the ATO was approximately $230,000. 20. Worrells, the liquidators, in their report said that the Company ceased trading and terminated employees approximately two weeks prior to their appointment. Glentone advised the liquidators that the business began to experience financial difficulty as the shop-fitting industry contracted as a result of economic downturn which in turn affected cash flow. The Company owed employees’ superannuation in the amount of $31,972.75. 21. Mr Carter said that he was approached in June 2008 to assist office staff of Glentone to sort out their books of account. He said he was never employed by the Company but rather acted as a consultant through his business, Carter’s Business Consultancy. Mr Carter said that Glentone’s directors had asked him to help the Company “to get back on its feet again.” Mr Carter went on to say that, although he was never employed by the Company, he was regarded as the General -- 5 of 9 -- QR274-09 / Page 6 of 9 Manager “in order to lend support to his actions in stopping the bad management and fraud currently with the Company.” 22. The submissions in relation to whether Mr Carter took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the occurrence of the relevant event were as follows:- Keeping proper books of account and financial records 23. The applicant submitted that in June 2008 when he was asked to “sort out” the Company’s books of account, it soon became clear to him that the books of account and the actual financial state of the Company did not accord. Financial reports provided by the accountant showed a profit of $81,096, however the applicant estimated a loss of $210,000. 24. Mr Carter went on to say that the bank account had not been reconciled for the three months up to 30 June 2009. He said that he assisted in bringing MYOB accounts up to date, and introduced daily bank reconciliation. 25. The respondent submitted that Mr Carter provided no evidence in relation to having kept proper books of accounts and financial records or evidence to support the claims of the steps he said he took. Seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business 26. Mr Carter said that by April 2009, non payment by customers was causing a serious cash flow problem. Once it became clear to Mr Carter that predicted sale were not forthcoming, he contacted the directors and suggested they seek professional advice. He arranged an appointment for the directors with an accountant on 1 May 2009. Based on the directors’ estimate of sales, it was agreed to keep trading. The applicant could see that the sales forecast was unfounded and made an appointment for the directors to see the liquidator on 8 May 2009. 27. The respondent submitted that there was no evidence that any legal, professional, accountancy or financial advice had been sought or received. For example, no evidence was provided by Mr Carter as to why Salsa withdrew from their contract or whether that contract was legally terminated or whether advice was sought or received about these matters. 28. The respondent submitted that Mr Carter provided evidence to substantiate his claims regarding the actions he claimed he took. -- 6 of 9 -- QR274-09 / Page 7 of 9 Reporting fraud or theft to the police. 29. Mr Carter said that he found that employees were stealing from the Company and, with the agreement of senior management, “new procedures were implemented.” For example each Company vehicle now had to be signed out and fuel purchases now had to be accompanied by dockets showing speedo and fuel amount. As a result, he claimed, the fuel bill was reduced by 25%. Another measure was that all overtime had to be authorised. As a result, it was claimed, overtime was reduced by 75%. 30. Mr Carter told the Tribunal that he had not reported matters of fraud or theft to the police, and that he had not sought legal advice on behalf of Glentone regarding action against employees who had stolen from the Company . 31. The respondent said Mr Carter provided no evidence to substantiate his claims in relation to the steps he said took about fraud and theft. 32. The respondent also submitted that there was no evidence that the applicant sought legal advice on behalf of Glentone in regard to its rights of recovery against employees defrauding and stealing from the Company. Ensuring guarantees provided were covered by sufficient assets to cover the liability under the guarantees 33. There are no relevant guarantees in this case. Putting in place appropriate credit management for amounts owing and taking reasonable steps for recovery of the amounts 34. The applicant submitted that he put in place the following measures in relation to credit management. Debtors were reviewed weekly, bank accounts were reconciled on a daily basis, the debtors’ ledger was reconciled against Glentone’s ledger, and work was suspended if payment was not made. 35. The applicant further stated that he recommended to the directors to involve senior staff in marketing and sales, assisted with bank re- financing, dismissed non-performing staff and employees (which he said reduced pay roll tax by $4,000 per month), and that all of this resulted in a reduction of expenses. 36. Mr Carter claimed that he had continual discussions with creditors to provide payment plans. 37. The applicant’s opinion was that legal action to recover amounts owing to the Company was unjustified. He claimed it would have been uncommercial to take legal action because the amounts of the debts -- 7 of 9 -- QR274-09 / Page 8 of 9 were low and there were defences available to the debtors. He provided no corroborating evidence in support of this claim. 38. The evidence of Worrells, the liquidators, was that, at the time of the liquidation, trade creditors were owed a total of $873,652, and outstanding trade debtors owed a total of $212,103. However, of the latter amount $74,699 was written off by the liquidators due to rectification works required to be performed by the customers due to an unsatisfactory job performed by the Company. 39. The respondent submitted that no evidence was provided of the debts owed to the Company, of what steps were actually taken to recover such debts, such as any debt collection action (for example letters of demand, employing debt collectors) nor was there any evidence of legal advice sought or received in relation to the debts due to the Company. There was also no evidence as to what negotiations if any were undertaken with creditors, or of any repayment arrangement entered into, of any part payments made, nor of any advice sought or received. Making appropriate provision for Commonwealth and State taxation debts 40. The applicant submitted that when he started with Glentone the amount owing to the Australian Taxation Office (the ATO) had been greatly underestimated by accountants in the 2008 financial statements, and BAS had not yet been lodged. 41. He further submitted that he negotiated with the ATO which was owed $286,000. He claimed he “made satisfactory arrangements” with the ATO and reduced interest by $48,000. 42. Mr Carter claimed that he had set aside and paid a percentage of the Company’s sales to the ATO. 43. The evidence of Worrells, the liquidators, was that the ATO has lodged a proof of debt in the amount of $189,841 in respect of outstanding PAYG and GST. The Business Activity Statements for April and May 2009 have not been lodged and this is likely to result in an increase of the ATO debt. 44. The respondent submitted that no evidence was provided that the applicant ensured that adequate provision was made for Glentone’s taxation liabilities, and further, that no evidence was provided as to how the tax debt arose, or of whether negotiations with the ATO occurred, of any repayment arrangements entered into with the ATO, or of any advice sought or received. -- 8 of 9 -- QR274-09 / Page 9 of 9 DISCUSSION OF THE EVIDENCE 45. There is no dispute in this case that, the relevant event was the appointment of administrators to Glentone Australia Pty Ltd on 13 May 2009. 46. The evidence confirms that, for the purposes of ss56AC(2)(c)(i) of the QBSA Act, the applicant, Mr Edward Carter, was an influential person for Glentone at the time of the relevant event. 47. In relation to the applicant’s evidence, the Tribunal finds that he provided no evidence to substantiate his claims of having taken all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. 48. Whilst the applicant was able to describe specific steps which he claimed he took, he provided no evidence to substantiate those claims of steps taken. 49. In some areas where Mr Carter should have taken steps, on his own evidence, he chose not to. For example, Mr Carter decided not to report matters of fraud or theft to the police, and not to seek legal advice on behalf of Glentone regarding action against employees who had stolen from the Company. 50. Another example is that in regard to taking reasonable steps for recovery of the amounts owing to the Company, Mr Carter decided that legal action to recover such amounts was unjustified. He claimed it would have been uncommercial to take legal action because there were defences available to the debtors (but provided no evidence to support that claim) and that the amounts owing were low (although the evidence before the Tribunal that this was not the case). CONCLUSION 51. Subsection 8 of s51AD of the QBSA Act requires a consideration of whether the applicant took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. 52. On the basis of all the evidence before it the Tribunal finds that the applicant has failed to show that he took all such reasonable steps as required and the application therefore fails. 53. The Tribunal affirms the decision under review. This means that the application for a review of the decision made by the QBSA on 29 September 2009 is unsuccessful . -- 9 of 9 --