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- Unreported Judgment
Lowe v Queensland Building and Construction Commission QCAT 110
Lowe v Queensland Building and Construction Commission  QCAT 110
Alexander David Lowe
Queensland Building and Construction Commission
Occupational regulation matters
22 October 2014
Member A Fitzpatrick
15 April 2015
Builder – permitted individual – creditors’ voluntary winding up and members’ voluntary winding up – debt to Australian Taxation Office – reasonable steps to avoid circumstance
Corporations Act 2001 (Cth), s 9, s 491, s 494
Queensland Building Services Authority Act 1991 (Qld), s 3, s 56AC, s 56AD
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 19, s 20, s 24
Younan v Queensland Building Services Authority  QDC 158
Younan v Queensland Building Services Authority  QCA 1
Queensland Building and Construction Commission
Alexander Lowe represented by Charles Wilson of counsel instructed by Jeffrey Garrett of Attwood Marshall Lawyers
Queensland Building and Construction Commission represented by Dr Richard Schulte of counsel
REASONS FOR DECISION
- Mr Lowe seeks a review of a decision of the Queensland Building Services Authority (now the Queensland Building and Construction Commission – ‘QBCC’), made on 20 September 2013 refusing to categorise him as a ‘permitted individual’ within the terms of s 56AD (1) of the Queensland Building Services Authority Act 1991 (Qld) (the Act).
- At the hearing evidence was given by Mr Lowe who also relied on affidavits filed in the proceedings and documents tendered at the hearing. The QBCC relied upon the Statement of the decision maker, Ms Dennis.
- The following facts arise from the evidence and are not in contention between the parties.
Chronology of Events
- At all relevant times Mr Lowe held Open licence No. 24719 – in the class of Builder.
- Mr Lowe was a Director of Eco Homes Pty Ltd ACN 054 738 126, which carried on business as a construction contractor from approximately 1992. He was also a Director of Arachon Pty Ltd, which from approximately 2006 carried on business as a construction contractor, servicing a more expensive sector of the market than Eco.
- At all relevant times Mr Lowe was a Director or person of influence with respect to Eco.
- Mr Lowe followed advice from his accountant, Mr Holmes of Costello Holmes McBain, Accountants and Tax Agents. Particular advice was given to Mr Lowe to incorporate an entity and establish a trust structure for the purpose of an employee benefit fund and to establish accounts operated through New Zealand. The object was to enable Eco to claim tax deductions for employee bonuses or superannuation benefits and thereby reduce its tax payable in Australia. Eco and Mr Lowe acted in accordance with the advice given by Mr Holmes from 2004 to late 2010.
- In February/March 2009 the Australian Taxation Office (ATO) contacted Mr Holmes to arrange an interview about Eco’s tax position.
- On 20 March 2009 Mr Holmes recommended winding up Eco in favour of carrying on business by Arachon alone. On 11 May 2009 Eco cancelled its Builder’s Licence and ceased to trade. On 9 February 2010, Mr Lowe resigned as a Director of Eco, but remained a shareholder. Eco was divested of its assets during 2009 and 2010 to a related entity.
- On 31 August 2010, the ATO issued a position paper in relation to claimed tax deductions arising from the employee benefit fund, expressing a view that Eco had engaged in tax evasion.
- On 20 December 2010 Mr Holmes requested that Mr Lowe attend at his office with his cheque book to pay all accounts to wind up Eco ‘on Wednesday’.
- On 14 February 2011, the ATO issued to Eco:
- a notice of shortfall penalty for the years 2005 and 2006 totalling $108,000.00 payable on 8 March 2011;
- a notice of amended assessment for the year ended 30 June 2005, in the sum of $22,473.65 payable on 10 March 2011; and
- a notice of amended assessment for the year ended 30 June 2006, in the sum of $143,633.24 payable on 10 March 2011 (Totalling - $274,106.89).
- On 15 April 2011, Eco filed an objection to its assessment.
- The ATO served amended notices of assessment in respect of the 2005 and 2006 years claiming $435,184.00 from Mr Lowe and his wife. Mr and Mrs Lowe filed an objection to their assessments.
- On 28 April 2011 Mr Holmes recommended Eco be wound up by creditors’ voluntary winding up rather than a members’ voluntary winding up.
- On 3 June 2011, Francoise Lowe, sole Director, resolved that Eco was insolvent and that it should be voluntarily wound up. The Form 509 summary of affairs recorded unsecured creditors in the sum of $153,940.00. On 3 June 2011, the members of Eco, Alexander and Francoise Lowe resolved that the company be wound up and that Jason Bettles and Ivor Worrell of Worrells Solvency & Forensic Accountants, be appointed joint liquidators of Eco.
- On 10 June 2011, Worrells issued a report to creditors listing the following creditors, totalling $153,940.00:
- ATO – $150,000;
- Costello Holmes McBain – $440.00;
- Francoise Lowe – $3,500.00.
- On 16 December 2011, Worrells reported that two claims had been lodged by unsecured creditors totalling $3,940.00 and that the ATO did not lodge a proof of debt.
- The liquidation was finalised on 28 September 2012.
- On 12 June 2013, the Building Services Authority gave notice to Mr Lowe, pursuant to s 56AC of the Act, that it considered him to be an excluded individual for a relevant event, under s 56AF of the Act. That is, within the terms of the Act he was a Director or influential person for Eco at the time of, or within one year of, a relevant event, being the appointment of liquidators to Eco.
- On 19 July 2013, Mr Lowe applied to be categorised as a permitted individual under s 56AD(1) of the Act. That application was refused. Mr Lowe seeks a review of that decision in this application, under s 86(1)(j) of the Act.
- Mr Lowe compromised the ATO’s claim against himself and his wife on 30 September 2013 and later on 1 May 2014 paid out their shortfall penalty. Eco’s tax debt has not been paid.
- Mr Lowe has commenced proceedings against Costello Holmes McBain for damages for professional negligence.
- Mr Lowe’s rights arise under s 56 AD(1) of the Act, set out in a reprint of the legislation current as at 1 January 2011. Section 56AD (1) provides that the QBSA may categorise a person as a permitted individual for a relevant event if the QBSA considers the individual to be an excluded individual for the relevant event. Section 56AC provides that a relevant event includes the winding up of a company for the benefit of a creditor.
- By s 56AD(8), the QBSA may categorise the individual as a permitted individual for the relevant event, only if it 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 Act sets out matters to which the QBSA and now the Tribunal, must have regard in determining whether a person took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.
- By s 24 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act), this Tribunal may confirm or amend the decision of the QBSA to refuse to categorise Mr Lowe as a permitted individual. It may set aside the decision and substitute its own decision; or set aside the decision and return the matter to the decision-maker.
- As the QBCC has succeeded the QBSA, I will refer to the QBCC in the balance of this decision.
- By s 19(c) of the QCAT Act, this Tribunal has all the functions of the decision-maker, however, it stands in the shoes of the decision-maker and makes the decision afresh. By s 20 of the QCAT Act, the purpose of the review is to produce the correct and preferable decision, following a fresh hearing on the merits.
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. 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 these 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.
The Relevant Event
- The QBCC has treated the relevant event for the purpose of s 56AD of the Act as the winding up of Eco on 3 June 2011.
- Mr Lowe submits that the appointment of liquidators to Eco was not ‘for the benefit of a creditor’, and is therefore not a relevant event because:
- the appointment was a members’ voluntary winding up under s 491 of the Corporations Act 2001 (Cth) (which was not on that account, and without more, a liquidation ‘for the benefit of a creditor’;
- Eco was not a failed company in the sense of being unable to pay its debts;
- Eco was wound up on the advice of its accountant;
- Mrs Lowe and Mr Holmes lodged proofs of debt only for the purpose of ensuring there was someone who could vote at the meeting of creditors;
- the ATO did not lodge a proof of debt and could not participate in any distribution of assets;
- there is no evidence Mr Lowe wound up Eco in an effort to avoid payment of the tax debt.
- The QBCC submits that the Tribunal must assume there was a ‘relevant event’ by virtue of Mr Lowe seeking categorisation as a ‘permitted individual for a relevant event’ in circumstances where he did not seek a review of the decision that he was categorised as an ‘excluded individual for a relevant event’. The QBCC submits that it is not open for Mr Lowe to now seek a review of the decision whether he was an ‘excluded individual for a relevant event’ because the existence of that status is a prerequisite for Mr Lowe to apply to be categorised as a ‘permitted individual for a relevant event’. The QBCC says that the Tribunal does not have jurisdiction to make a finding that there was not a ‘relevant event’.
- I accept the submissions of the QBCC that having the status of an excluded individual for a relevant event is a prerequisite for categorization as a permitted individual, however, consistent with Younan’s case, I must determine the ‘relevant event’.
- I find that the appointment of liquidators to Eco on 3 June 2011 was the relevant event.
- I reject Mr Lowe’s submission that the winding up was a voluntary members’ winding up pursuant to s 491 Corporations Act 2001 (Cth).
- I accept that the winding up was voluntary, however, it is apparent from the reports to creditors prepared by the liquidators that the winding up proceeded as a creditors’ winding up because of the insolvency of Eco. No declaration of solvency was made by the Director as required for a members’ voluntary winding up. In fact, the Statement of Resolutions by Directors signed by Mrs Lowe, records: ‘That the company was insolvent and that the company should be voluntarily wound up…’. On that basis winding up of the company was recommended to Eco’s members. An extract from Form 509 – Summary of Affairs of the Company, signed by Mrs Lowe on 3 June 2011, records the unsecured creditors as having an estimated realisable value of $153,940.00. On the face of the public documents the Director is acknowledging that the company is insolvent with debts of $153,940.00. That status was confirmed by the liquidators in their report to creditors, dated 10 June 2011.
- The purpose of a winding up in circumstances of insolvency is to allow the orderly finalisation of the affairs of the company including realisation of any assets and the payment of creditors. Accordingly, I find that because of the insolvency of Eco, the appointment of a liquidator was for the benefit of a creditor. I reject the submission that it is only in circumstances of catastrophic failure of a company or evident inability to manage finances that appointment of a liquidator is for the benefit of a creditor. Such a refinement on the ordinary meaning of the words would be too difficult to administer given the wide variation of factual circumstances which arise on appointment of a liquidator. In any event, in this case, as at 3 June 2011 a very significant debt to the ATO existed in circumstances where the company had no ability to pay the debt.
- As to the other matters submitted on behalf of Mr Lowe as to why a ‘relevant event’ had not occurred, I consider what is important is the status of the debts owed by the company as at 3 June 2011. I do not think it is relevant that the debts Mrs Lowe and Mr Holmes claimed from Eco are now said to have been claimed for convenience. At that date they claimed to be creditors. I do not think it is relevant that Eco had lodged an objection to the amended assessment of taxation. At 3 June 2011, the ATO had issued Eco notices of assessment of shortfall penalty payable on 8 March 2011 and amended assessments payable 10 March 2011. The fact that the ATO elected not to pursue its debt in the course of the winding up, does not affect its entitlements as at 3 June 2011. That fact was acknowledged in evidence by Mr Lowe.
- Likewise, I do not consider it relevant to the occurrence of a ‘relevant event’ that the appointment of liquidators was done on advice from an accountant. There is no suggestion the will of the Director or members of Eco was overborne. The fact that the advice may have been poor or that there were other ways of proceeding does not affect what was in fact done by the Director and members.
Circumstances giving rise to the Relevant Event
- On the evidence I find that the circumstance which gave rise to the appointment of liquidators for the benefit of creditors was unpaid tax as at 3 June 2011 - including amended assessments of income tax for the 2005 and 2006 years and shortfall penalties. This circumstance occurred in the context of a decision for Eco to cease trading, divest itself of assets and pay out its creditors, to enable Arachon to operate as the sole construction company with which Mr Lowe was associated.
- I accept the evidence of Mr Lowe, that he accepted the advice of his accountant to operate the construction business only through Arachon to avoid the cost of running two companies. Mr Lowe agreed to wind up the affairs of Eco to that end.
- The evidence reveals that although a voluntary winding up may have been originally contemplated, that form of winding up was not possible because of the debt owing to the ATO.
- I note exhibit “AL-6” to the affidavit of Mr Lowe, filed 29 January 2014, (Exhibit 1 in the proceedings), which sets out an email exchange between Mr Lowe and Mr Holmes.
- At 1.52pm on 22 February 2011, ‘Holmsey’ advised that the ATO had made their decision against
All advice from the tax lawyers etc. The application for “Voluntary Wind Up” could not go ahead because there was no chance the ATO giving a clearance even though there was no debt at that stage. Worth a try to save you $5k (difference between voluntary and winding up with a debt). The experts inform me you can fight this and probably win but it will cost a mint or you can just pay Worrells the extra $5k and let it all go.
- Mr Lowe responded at 7.17am on 23 February 2011:
Hi David, I don’t understand what you mean by the extra 5k with Worrells. Won’t they just come after the trust or even Arachon?
- The next email exchange in evidence occurred on 1 March 2011, exhibit “AL-7” to the 29 January 2014 affidavit. Mr Lowe said that he had not heard from anyone regarding liquidating Eco. Mr Holmes responded that he had engaged David Hughes a tax lawyer to review the matter. Thereafter Mr David Hughes of Small Myers Hughes, lawyers, advised Mr Holmes by email dated 28 March 2011 to lodge an objection to the amended assessment for Eco. That email appears as “AL-4” to the affidavit of Mr Lowe filed 15 April 2014 (Exhibit 2 in the proceedings).
- By email dated 13 April 2011 sent at 7.22 am, forming part of “AL-8” to Mr Lowe’s 29 January 2014 affidavit, Mr Holmes advised:
Alex Finally received the instructions from tax lawyer. Lodge objection to set the record straight. They have completely bungled the whole thing Lodge amended returns so they can’t come back on you for Div.7A (loans to shareholders) Pay Worrells the extra 5k and liquidate company. I await your instructions. (sic)
- Mr Lowe responded at 3.29pm on 13 April 2011 that he would liquidate. On 28 April 2011 Mr Holmes advised by email forming part of “AL-9” to the 29 January 2014 affidavit, that the objection had been lodged on time and amended returns were being lodged and ‘then wind up’.
- Mr Lowe’s accountant was clear in his advice that because of indebtedness to the ATO a members’ voluntary winding up could not be undertaken and that instead a creditors’ voluntary winding up was necessary. Mr Lowe followed that advice. The tax debt was the reason why liquidators were appointed for the benefit of creditors, by way of a creditors’ voluntary winding up.
- My finding as to the circumstance giving rise to the relevant event is consistent with the submissions of the QBCC that one must ask what action was taken by Mr Lowe in relation to making appropriate provision for Commonwealth and State taxation debts. The QBCC point to Exhibit 13 in the proceedings, being Eco’s income tax account balance as at 3 June 2011 in an amount of $281,727.18.
- Mr Lowe submits that the tax debt did not form part of the circumstances that resulted in the happening of the relevant event. He says that it was causatively irrelevant to the decision to wind up Eco, although the debt was a contemporaneous occurrence.
- Mr Lowe submits that the circumstances that resulted in Eco being wound up were:
- distally, the slow down in the local building and construction sector in 2008 or 2009; and
- more proximally, the advice of Mr Holmes to wind up Eco which advice was confirmed by Mr Hughes; and alternatively or additionally;
- Mr Holmes’ advice for Eco to enter an off-shore arrangement that resulted in Eco claiming a deduction that was disallowed by the ATO resulting in a shortfall in its income tax returns for the year ended 30 June 2005 and 2006.
- I do not consider a slow down in the local building and construction sector in 2008 or 2009 was the circumstance which gave rise to the relevant event. At best it was the context within with business decisions were made. Likewise the advice given by Mr Holmes was contextual rather than the circumstance in itself. For these reasons, I reject Mr Lowe’s submissions which seek to identify the circumstance which gave rise to the relevant event.
- I reject Mr Lowe’s submission that the tax debt was not the circumstance in question. I consider the email exchange between Mr Holmes and Mr Lowe on 22, 23 February 2011, and 13 April 2011 to be good evidence as to the reason for the winding up for the benefit of a creditor.
Did Mr Lowe take all reasonable steps to avoid Eco’s unpaid tax debt coming into existence?
- I am obliged to consider the factors set out in s 56AD(8A) of the Act when determining this issue. Of the matters set out in the section, issues of fraud or theft are not relevant. Nor does a question of adequacy of guarantees or appropriate credit management arise.
- However, a real question arises as to whether Mr Lowe made appropriate provision for Commonwealth and State taxation debts and in this regard, whether there was a failure to keep proper books of account and financial records or to seek appropriate financial or legal advice before entering into financial or business arrangements or conducting business.
- The QBCC submits that the only step Mr Lowe took to deal with the tax debt was the lodgement of an objection and that was not a reasonable step to avoid the unpaid debt, nor was it making adequate provision for the debt.
- I have earlier addressed Mr Lowe’s submissions in relation to the circumstance which gave rise to the winding up. I have found that the circumstance was the unpaid taxation debt, not the matters submitted by Mr Lowe. Accordingly I am not assisted by Mr Lowe’s submissions to the extent that they are directed to those other matters.
- Mr Lowe does however make submissions in relation to Eco’s tax debt. He suggests that Eco did not have any liability at all to the ATO, because its objections were soundly based or because in discharging his and his wife’s personal liabilities to the ATO, the liability of Eco was discharged. It is mere speculation as to whether the objection was successful. There is no evidence that is the case. Further, I am not prepared to conclude that because the ATO did not pursue recovery action against Mr and Mrs Lowe under the director penalty provisions of the Taxation Administration Act 1953 (Cth) after 3 June 2011 –that the objection was successful. Likewise there is no evidence from the ATO or any expert opinion which would allow me to confidently conclude that in discharging Mr and Mrs Lowe’s personal liabilities to the ATO, the liability of Eco was discharged. I reject those submissions.
- I consider that Mr Lowe’s conduct in taking steps to avoid the circumstance which gave rise to the relevant event should be assessed by what happened before the liquidation on 3 June 2011, not afterwards.
- In relation to whether Eco made provision for the debt, the debt was notified in February 2011 and fell due in March 2011. By then the company had ceased trading and its assets had been transferred to a related entity. Plainly it had little capacity to make provision for the debt at that stage.
- Was it reasonable for Eco to make provision for the debt at an earlier stage? Mr Lowe’s evidence given in his affidavit filed 15 April 2014 (Exhibit 2 in the proceedings) is that he was aware of an audit of Eco conducted by the ATO in 2009. He does not say what he knew of the outcome of the audit, however, it appears he was sufficiently concerned to want to speak directly to the ATO ‘about the issues confronting my wife and me, and about the ATO’s dispute’. Mr Lowe swears that he was advised not to meet with the ATO. That affidavit also reveals that he and his wife received a Position Paper from the ATO on 31 August 2010.
- The Position Paper clearly states the ATO’s intention to amend Eco’s income tax assessment for the income year ended 30 June 2006 by an adjustment of $400,000.00, being non-deductible expenses and to impose a base penalty of 75% for intentional disregard of the law increased by 20% for making a false or misleading statement and seeking to hide this from the ATO. The penalty totalled $108,000.00.
- The Position Paper is scathing about the conduct of Mr Holmes as Eco’s tax agent and damning in its criticism of Eco’s conduct.
- It is very surprising that independent advice was not taken at that point in time to ensure that Eco was co-operating with the ATO and that the advice it was receiving was reliable. Very serious allegations are bought to Mr Lowe’s attention at that time, however, it appears that he did nothing other than continue to follow Mr Holmes’ advice.
- I reject the submissions of Mr Lowe that he had no reason to doubt the quality of the advice he had received from Mr Holmes about winding up Eco or that he knew of the ATO’s opinion of Mr Holmes. Mr Lowe says that Mr Holmes did not provide him with the ATO’s reasons for decision dated 9 February 2011 at any point before 3 June 2011. This ignores Mr Lowe’s sworn evidence that he and his wife received the 31 August 2010 position paper. The position paper should have given rise to doubts as to the advice he was receiving, but I accept Mr Lowe’s evidence that he trusted Mr Holmes and accepted what he was told by Mr Holmes.
- I do not accept the submission that the advice given by Mr Hughes to Mr Holmes in relation to the tax debt and lodgement of an objection is independent advice. Mr Holmes engaged Mr Hughes. Mr Hughes advice is not directed to how Eco might make provision for a tax debt at that point in time – to cover the contingency that the objection may be unsuccessful. I find that it would have been reasonable for Mr Lowe to take independent advice in relation to the matters raised by the ATO in its position paper and as to how Eco might best make provision for a tax liability arising out of the offshore transactions. Despite this finding it is not possible to say that independent advice would have changed the outcome that as at 3 June 2011, there was an unpaid debt to the ATO.
- Mr Lowe’s evidence is that the winding down of the affairs of Eco took place from March 2009, including cessation of trading, the payment of trade creditors and disposal of assets. The Liquidators’ report to creditors dated 16 December 2011 reveals that Eco was the registered owner of two motor vehicles and three parcels of real property which were transferred to related entities prior to appointment of the Liquidators. Mr Lowe gave evidence in chief at the hearing that Arachon bought assets off Eco, that it ‘cost a fortune’, and that Mr Lowe regretted the transfer of assets. It is not clear what assets were transferred to Arachon. There is no evidence before me as to the date of transfer or the value of any equity in the real property. In relation to the motor vehicles, Mr Lowe swears in his affidavit filed 15 April 2014 that a Toyota Hilux Registration Number 127IVT was paid out by EM2 Trust on 11 March 2010 and a Mercedes Benz ML280 CDI Registration Number 603KXL was paid out by EM2 Trust on 13 May 2011. It is possible that EM2 Trust is a reference to Emilie No 2 Trust (AUS) referred to in the ATO position paper, but the evidence is not clear. The unsigned financial statements and reports for the period to 30 June 2010, forming part of Exhibit 10 in the proceedings record that total dividends were declared and paid in the sum of $45,000.00 on 31 March 2010.
- Exhibit 10 in the proceedings is a set of financial statements and reports for Eco for the financial years 1999 and 2001 – 2010. The balance sheet for 2008 records net equity of $310,146.98. The balance sheet for 2009 and 2010 record total equity of -$201,553.18 and -$269,258.17 respectively. Assuming the assets were transferred for fair market value, the proceeds of sale of the assets do not appear in the financial accounts for 2009 and 2010. During cross-examination Mr Lowe could not say what his accountant had done with the assets of Eco in the accounts. His evidence was that accountants work the figures to make the figures work for tax purposes. When asked in cross-examination if Mr Lowe took responsibility for the figures, he responded that he signed off.
- Related to this issue is evidence that there was no documentation for the offshore transactions which affected the 2005 and 2006 tax years and which ultimately gave rise to the tax debt. However, I am prepared to accept that this lack of documentation was the fault of Mr Holmes and that at the time the transactions were being effected Mr Lowe had no reason to doubt the advice and arrangements put in place by Mr Holmes.
- Without further explanation, the financial statements appear unsatisfactory, particularly the lack of evidence as to treatment of Eco’s assets. However, the financial statements are the only evidence before me as to the ability of Eco to make provision for a future tax liability.
- If I rely upon the 2009 financial statements, Eco had no assets with which to provide for any debt from at least 30 June 2009. Accordingly it would have been impossible to make provision for the debts by the time it was on notice as to the likelihood of amended assessments in August 2010.
- In re-examination on the issue of Eco having no assets in 2011, Mr Lowe said that if in June 2011 a debt was owed to the ATO, he would have loaned funds to Eco to pay the debt. Although that may be a stance Mr Lowe now takes, he did not do anything practical to support Eco prior to the appointment of liquidators. He did not for example hold off on liquidation until the objection had been determined or offer a guarantee to Eco in relation to the debt. I do not say that Mr Lowe was bound to meet Eco’s debts or that may have been a reasonable step to take. In fact, I consider Mr Lowe’s willingness to do so is a position taken with the benefit of hindsight.
- From the date of the position paper no steps were taken to make provision for payment of the tax. The only positive step taken to deal with the tax debt was to put the company into liquidation, in order to avoid the cost of ‘fighting’ the ATO and to ‘let it go’. Mr Lowe gave evidence in cross-examination that he did not realise there was an alternative.
- The QBCC submits that Mr Lowe’s conduct in causing Eco to lodge a tax objection and to then wind up the company without knowing the outcome of the tax objection is neither a “reasonable step” nor is it “adequate provision” for the tax debt. The QBCC does not however say what might have been reasonable steps for Mr Lowe to take.
- On the facts before me the company had no assets with which to make provision for the tax or to pay the ultimate debt from the time it was clear an amended assessment would issue. The circumstances in which Mr Lowe finds himself arise from an unfortunate intersection of the voluntary winding up of the affairs of Eco by its members, with the amendment of a tax liability of Eco, at a point in time where there was little which could be done to meet that liability.
- I find that there was no reasonable step capable of being taken which would have avoided the unpaid tax debt. I make this finding by reference to what Mr Lowe knew at the time, in accordance with the professional advice he had been given – and without the benefit of hindsight (Younan).
Should a discretion be exercised in favour of Mr Lowe to classify him as a permitted individual?
- The QBCC has helpfully set out factors relevant to the exercise of the discretion in its outline, handed up at the hearing. In particular, it is submitted that the purpose of the statute should be considered. Relevantly, s 3 of the Act refers to an object of the Act being ‘to ensure the maintenance of proper standards in the industry’. In this regard, the role played by Mr Lowe as a Director and as a person of influence over the affairs of the company is relevant.
- In Mr Lowe’s favour are his unblemished history as a builder and the fact that Eco had always met its tax obligations other than the debt following the amended assessments for 2005 and 2006.
- Also in Mr Lowe’s favour is the fact that Eco did not put any customer at risk in the winding up of its affairs. All creditors apart from the ATO were paid before the liquidation. Insofar as the ATO was concerned, it did not lodge a proof of debt in the winding up and did not pursue the Directors for payment of Eco’s debt. Mr Lowe settled his debt and the debt of his wife with the ATO.
- Finally, Mr Lowe followed the advice of his accountant in participating in the offshore transactions which lead to the amended assessments and the unpaid tax. I accept his evidence that he had faith in his accountant and no reason to doubt that the transactions were lawful. I note that it was Mr Holmes who conducted interviews with the ATO and whose conduct the ATO found objectionable.
- For these reasons, I am prepared to find that Mr Lowe should be classified as a permitted individual.
- I order that:
- The decision made on 20 September 2013 be set aside;
- Alexander David Lowe be classified as a permitted individual for the relevant event, being the winding up of Eco Homes Pty Ltd on 3 June 2011.
 QDC 158.
Younan v Queensland Building Services Authority  QCA 1.
Younan v Queensland Building Services Authority  QDC 158 at .
Corporations Act 2001 (Cth), s 9, s 494.
Attachments to the Statement of Natasha Dennis, filed 17 December 2013 (Exhibit 19 in the proceedings) at 142 – 143.
Attachment to the Statement of Natasha Dennis, filed 17 December 2013 (Exhibit 19 in the proceedings at 117.
Exhibit 2 at .
Exhibit 2, Attachment AL16.
Exhibit 12 in the proceedings, email David Holmes to Eco Homes, dated 20 March 2009.
Attachment “AL-6” to Exhibit 1 an email exchange between Mr Lowe and Mr Holmes, sent at 1.52pm on 22 February 2011.
- Published Case Name:
Alexander David Lowe v Queensland Building and Construction Commission
- Shortened Case Name:
Lowe v Queensland Building and Construction Commission
 QCAT 110
15 Apr 2015