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Hetherington v Queensland Building and Construction Commission QCAT 109
Hetherington v Queensland Building and Construction Commission  QCAT 109
Queensland Building and Construction Commission
Occupational regulation matters
23 January 2015
8 April 2015
Administrative review of decision – refusal by Authority to grant the Applicant permitted individual status – Permitted individual – whether individual took all reasonable steps – ATO debt – inadequate cash flow or high cash use
Queensland Building and Construction Commission Act 1991 ss 56AD(8), (8A)
Mr B J Saal (Solicitor)
Ms K Stewart (Solictor)
REASONS FOR DECISION
- Clinton Hetherington (“the Applicant”) seeks to review a decision of the Queensland Building and Construction Commission (“the Commission”) dated 2 September 2013 to refuse to categorise the Applicant as a permitted individual for the relevant event, being the Appointment of Administrators to Better Patios and Decks Pty Ltd on 22 July 2013 (“the relevant event”).
- The Applicant is seeking a review of a reviewable decision under section 17 of the Queensland Civil and Administrative Tribunal Act 2009 (“QCAT Act”).
- Section 20 of the QCAT Act provides that the purpose of the review is to produce the correct and preferable decision. The review is to occur by way of a fresh hearing on the merits.
- Pursuant to section 24(1) of the QCAT Act the Tribunal may:
- confirm or amend the decision; or
- set aside the decision and substitute its own decision; or
- set aside the decision and return the matter for reconsideration to the decision-maker for the decision with directions.
- Section 56AD(8) of the Queensland Building and Construction Commission Act 1991 (“QBCC Act”) provides the test which must be applied by the QBCC when deciding whether an excluded individual should be categorised as a permitted individual. The section provides that 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) of the QBCC Act provides a list of circumstances which the QBCC must have regard when deciding whether the test has been satisfied. It provides as follows:
(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 the 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 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(B) provides that this list of factors is not exhaustive and the QBCC may have regard to other factors.
- In relation to the reasonable steps, the test to be applied is the taking of all reasonable steps, viewed objectively from the position of the Applicant, to avoid the existence of the circumstances that resulted in the happening of the relevant event.
- It is not a question of whether the Applicant did everything possible to prevent the circumstances from arising, or whether they would have arisen if he had acted differently.
- What were reasonable steps depends on what was reasonable for the individual concerned in the circumstances in which he found himself with such information as he then had.
- The Applicant set up Better Patios and Decks Pty Ltd (“the Company”) in 2000 to undertake construction and installation of patios and decks on the Sunshine Coast.
- The Applicant held a licence pursuant to the QBSA Act in the class of sheds, carports and garages.
- The Company’s main supplier was Apollo Patios and Pergolas and from 2006 the Company traded under the name of Apollo Patios Sunshine Coast even though there was not a formal written agreement between the entities.
- Evidence was given by the Applicant that between 2009 – 2011 there was a decrease in the Company’s income.
- The Applicant agreed that the Company’s income decreased as follows:
- 2008/9 income approximately $1.8 million;
- 2009/10 income approximately $1.5 million;
- 2010/11 income approximately $1.20 million;
- 2011/12 income approximately $862,000.00.
- However during this time the Company’s expenses remained at approximately $500,000.00 per year.
- The Company’s expenses outweighed its gross profits and the Company made the following losses:-
- 2010 – $60,000.00;
- 2011 – $32,000.00;
- 2012 – $168,000.00.
- In January 2011 the Sunshine Coast experienced flooding followed by heavy rains which affected both the Company’s supply of product from Apollo and its level of orders.
- As a result of these circumstances, the Company endeavoured to reduce its overheads by taking steps such as not renewing the lease of its display centre and reducing staff and contactors.
- Also in 2012, the relationship between the Company and Apollo deteriorated and Apollo commenced trading under its name and in direct competition against the Applicant’s company.
- At this point Apollo was owed a substantial debt and demanded immediate payment.
- As there was no written agreement between the Company and Apollo, the Company had no legal right to trade under Apollo’s name and in 2013 the Company reverted to its former name of Better Patios and Decks Pty Ltd.
- Considerable pressure was placed on the Applicant to repay its debt to Apollo in preference to any other outstanding debts.
- At this time the Company owed a considerable debt of some $183,000.00 to the Australian Taxation Office.
- The Applicant was being pressured by the Australian Taxation Office to repay this amount.
- The Applicant gave evidence that the amount outstanding to the Australian Taxation Office would have been reduced if the Applicant had the funds to pay the accountant to prepare and file two outstanding income tax returns.
- The Applicant also gave evidence that business activity statements from April 2011 to March 2012 were not lodged.
- In February 2013 the Company approached the Australian Taxation Office to enter into a payment plan.
- The Australian Taxation Office demanded a 50% payment before it would enter into a payment plan for the balance.
- Negotiations failed and on 11 July 2013 the Australian Taxation Office filed an application in the Federal Court to wind up the Company.
- The Applicant was approached by Hall Chadwick Chartered Accountants and on 22 July 2013 Blair Pleash and Domencio Calaleratta of Hall Chadwick Chartered Accountants were appointed as Administrators of the Company.
- The Applicant gave evidence that he was not aware at the time of taking this step that it would affect his licence.
- The Applicant was under the misapprehension that Hall Chadwick would appoint a solicitor to prevent the Applicant’s licence from being affected.
- The parties, in common ground between them, agreed that the most relevant sections of 56AD(8A) were subsections (b), (e) and (f).
- Regarding subsection (b) i.e. seeking appropriate financial or legal advice, several financial and legal issues seem to have contributed to the Applicant’s problems.
- Financially evidence was given by the Applicant that the tax debt itself may have been reduced if returns and business activity statements had been lodged.
- This did not occur mainly due to a lack of working capital to pay for these expenses.
- Similarly the lack of legal advice regarding the company trading name and the affect of appointing Hall Chadwick on the Applicant’s licence.
- Subsection (e) requires that credit management processes be put in place and reasonable steps taken to recover debts.
- The Applicant set out in evidence problems that occurred during the course of conducting the business with respect to debt recovery.
- Evidence was again given by the Applicant regarding its lack of working capital to engage legal advice to assist with debt recovery.
- Subsection (f) requires the making of appropriate provision for Commonwealth and State taxation debts.
- This particular subsection is highly relevant to the Applicant’s situation as it was the non-payment of taxes to the Australian Taxation Office which led to the relevant event.
- Evidence was given by the Applicant that an account was set aside for GST payments but that when pressured by Apollo the funds ear-marked for GST were sometimes drawn to pay Apollo.
- No evidence of planning for tax payment was evident in the evidence submitted.
- Indeed, very significantly Hall Chadwick in their report to the Creditors at page (8), after investigations, formed the opinion that the Company’s failure was due to inadequate cash flow or high cash use.
- The Administrators go on to state that the ‘Company had had difficulty generating sufficient cash flow to meet its debts as when they fall due. It would appear the Company was effectively funded by non-payment of its statutory taxes’.
- The question has to be asked, was it reasonable to prioritise Apollo’s payments over the payment of taxes to the Australian Taxation Office?
- Did the Applicant act reasonably in not lodging tax returns or business activity statements in a timely manner?
- Did the Applicant review its financial and legal positions in a timely manner and when a reasonable person would have assessed it as necessary?
- Unfortunately this Tribunal is not satisfied that the Applicant took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.
- It follows that I am not satisfied that the Applicant should be categorised as a permitted individual for the relevant event.
- Therefore the decision of the Commission of 2 September 2013 is confirmed.
- Published Case Name:
Clinton Hetherington v Queensland Building and Construction Commission
- Shortened Case Name:
Hetherington v Queensland Building and Construction Commission
 QCAT 109
08 Apr 2015