Speedy v Queensland Building and Construction Commission
[2015] QCAT 245
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- Unreported Judgment
- Speedy v Queensland Building and Construction Commission[2015] QCAT 245
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Speedy v Queensland Building and Construction Commission[2015] QCAT 245
Speedy v Queensland Building and Construction Commission[2015] QCAT 245
CITATION: | Speedy v Queensland Building and Construction Commission [2015] QCAT 245 |
PARTIES: | John Martin Speedy (Applicant) |
v | |
Queensland Building and Construction Commission (Respondent) |
APPLICATION NUMBER: | OCR067-14 |
MATTER TYPE: | General administrative review matters |
HEARING DATE: | 20 April 2015 |
HEARD AT: | Brisbane |
DECISION OF: | A/Senior Member Hughes |
DELIVERED ON: | 23 June 2015 |
DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
CATCHWORDS: | GENERAL ADMINISTRATIVE REVIEW – PERMITTED INDIVIDUAL – where relevant event was administration of company – where circumstances were inability to pay creditors and recover money owing from debtors –– whether individual took reasonable steps – where appropriate provision not made for taxation debts - where loans to related entities while having outstanding tax liabilities – where steps to recover amounts owing not sufficient – where no attempt to examine debtor finances, negotiate more favourable payment arrangements or seek further security Queensland Building and Construction Commission Act 1991 (Qld) ss 56AC, 56AD, 56AE, 56AF Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 20 D’Arro v. Queensland Building and Construction Commission [2015] QCAT 100 Ernst v. Building Services Authority [2011] QCATA 155 Papallo v Queensland Building Services Authority [2012] QCAT 59 Walker v. Wimborne (1976) 137 CLR 1 Younan v Queensland Building Services Authority [2010] QDC 158 |
APPEARANCES and REPRESENTATION (if any):
APPLICANT: | Mr MJ Drysdale of Counsel instructed by Romans & Romans Lawyers appeared on behalf of Mr John Martin Speedy |
RESPONDENT: | Mr Malcolm Robinson of Robinson Locke Litigation Lawyers appeared on behalf of the Queensland Building and Construction Commission |
REASONS FOR DECISION
What is this Application about?
- [1]John Martin Speedy has been working hard as a builder for over 30 years and completed approximately $800M worth of construction projects for over 100 clients. Mr Speedy wants to keep working as a builder.
- [2]Mr Speedy’s company, Global Construction Management (QLD) Pty Ltd, completed approximately $150M of construction projects over the last 10 years. Despite all his hard work, Mr Speedy’s company, Global Construction Management (QLD) Pty Ltd, fell into some financial difficulties. Administrators were appointed on 28 November 2013.
- [3]
- [4]Unfortunately for Mr Speedy, the Commission decided not to categorise him as a ‘permitted individual’. Understandably, Mr Speedy has applied to the Tribunal to review the Commission’s decision.
- [5]In deciding Mr Speedy’s application, the issues for me to determine are the circumstances that resulted in administrators being appointed to his company, and whether Mr Speedy took all reasonable steps to avoid the ‘coming into existence of’ those circumstances.[3]
What does the Tribunal do?
- [6]In a review application, the Tribunal’s purpose is to produce the correct and preferable decision by way of a fresh hearing on the merits.[4]
- [7]The Tribunal must therefore decide whether Mr Jensen should be categorised as a permitted individual.
Background
- [8]Global has lent substantial funds to related entities from as early as 2004 and as recently as 2007. Global has also had outstanding tax liabilities dating at least as far back as 30 June 2009.
- [9]In 2007, Accendus Pty Ltd as developer engaged Global to manage construction of a project known as the ‘Signature Waterfront Apartments’. Global commenced work in late 2009 and achieved practical completion in December 2009. However, Accendus defaulted on payment to Global of approximately $800,000.00.
- [10]Global continued to work on Signature to facilitate sales of units in the hope that proceeds of these sales would help Accendus pay its debt to Global. This entailed working on individual apartments for settlement, including furniture packages.
- [11]Mr Speedy also attended monthly meetings of Accendus from late 2009 and became a Director of Accendus in August 2013.
- [12]Despite these steps by Mr Speedy to procure payment from Accendus, on 28 November 2013 administrators were appointed to Global.
What are the circumstances that resulted in the appointment of administrators?
Inability to pay creditors
- [13]As at 30 June 2013 - four months before its administration – Global had current liabilities exceeding $1.3M.[5] This included $595,539.56 owing to trade creditors and unpaid tax debts exceeding $400,000.00.
- [14]
- [15]No evidence has been presented to demonstrate that Global had sufficient assets or cash flow[9] to pay its current liabilities as at the date of administration. The most recent financial statements show that Global had a net asset deficit of $429,927.77.
- [16]Global could not meet its debts and was not sufficiently capitalised to continue as an ongoing entity.
- [17]I am therefore satisfied that Global’s inability to pay its debts as and when they fell due and its lack of capital were circumstances resulting in its administration.
Inability to recover money owing from debtors
- [18]As at the date of administration, Accendus Pty Ltd owed Global approximately $800,000.00. This had been outstanding since 2009.
- [19]Global entered into a contract with Accendus in 2007 and was still seeking payment in 2013. Payment of this amount to Global would have substantially helped its cash flow.
- [20]I am therefore satisfied that failure to procure payment from Accendus was a circumstance resulting in its administration.
Did Mr Speedy take all reasonable steps to avoid the coming into existence of these circumstances?
- [21]
- [22]Mr Speedy submitted that he took reasonable steps by becoming a Director of Global’s major debtor, Accendus in August 2013 (to oversee the sale of Accendus’s apartments with a view to paying its debt to Global), seeking legal advice to place Global in administration due to its lack of cash flow and entering into a payment plan with the Australian Taxation Office on 20 February 2013.
- [23]However, it is not sufficient that Mr Speedy took some reasonable steps to avoid the circumstances of Global’s administration; he must take all reasonable steps.[12]
Was appropriate provision made for Commonwealth and State taxation debts?
- [24]Mr Speedy says that without the $800,000.00 from Accendus, Global was unable to pay its tax. This in itself suggests inadequate provision for tax debts because it means that Global was dependent on future payments to pay current tax liabilities and was therefore under-capitalised. Moreover, even if Accendus had paid the $800,000.00, Global still did not have assets sufficient to meet its liabilities.[13]
- [25]Global had entered into a payment with the ATO on 20 February 2013. By 28 November 2013, the solicitors for the ATO refused a further payment arrangement for these relevant reasons:
- Significantly poor compliance history with outstanding liability dating back to November 2011;
- Global continuing to not comply with its ongoing tax obligations during this period; and
- Global not complying with multiple payment arrangements during this period.[14]
- [26]Mr Speedy submitted that this letter overstated the position, but conceded during the hearing that he did not instruct his solicitors to inform the ATO that it was acting under a misapprehension.
- [27]Global’s unpaid tax liabilities extend back to 30 June 2009 and include $110,184.48 for 2009, $301,083.80 for 2010 and $80,494.39 for 2012.[15]
- [28]No evidence has been presented of any steps taken to meet these liabilities, apart from multiple attempts to enter into repayment plans that appeared to depend entirely upon Global’s ability to recover its debt from Accendus and Mr Speedy selling a related-entity motel. Despite Mr Speedy’s efforts to honour and renegotiate these plans, Global did not have sufficient capital or income to make regular instalments.
- [29]Accendus had not paid anything to Global for four years. It would have been evident by this time that payment was unlikely. Attempting to renegotiate further plans knowing this and without sufficient cash reserves to meet the repayment plan, cannot be appropriate provision for tax.
- [30]Global had four years to attempt to source alternative income to meet its tax obligations. Global’s income in the months immediately preceding the commencement of its most recent repayment plan indicate an operating profit of $190,287.00,[16] but it was still unable to honour the repayment plan.
- [31]I am therefore not satisfied that appropriate provision was made for taxation.
Were the steps taken to recover the amount owing from Accendus sufficient?
- [32]Accendus owed the debt to Global since in or around October 2009. Mr Speedy did not nominate and become appointed as a Director until 28 August 2013. Mr Speedy states that he attended monthly meetings in the intervening four years where he regularly reviewed Accendus’s financial performance. However, although Mr Speedy had access to Accendus’ financial reports from time to time, he did not personally examine them before his appointment as a Director in August 2013.
- [33]Given the substantial amount owing, it would have been reasonable for Mr Speedy to examine these reports to better inform himself of Accendus’s working capital and the viability of his ‘wait and see’ approach, compared with other methods of seeking payment, such as negotiating with Accendus’s Directors to obtain more favourable repayment arrangements,[17] commencing legal proceedings or issuing a statutory demand.
- [34]I am not satisfied that attending monthly meetings for four years in the hope that Accendus’s financial position would improve, without examining its financial reports is reasonable. Although Global had no legal duty to monitor Accendus’ finances and sales, it had an interest in those finances and sales. Despite this, no formal obligations were imposed on Accendus to ensure sales progressed. Mr Speedy did not seek further security in favour of Global. Global continued to incur liabilities for Accendus without any assurance of payment from Accendus. Accendus’s situation became worse during that time, culminating in its own administration on 25 November 2013.
- [35]Mr Speedy contended that had he commenced legal proceedings on behalf of Global against Accendus in 2010, he would have been expending money pursuing a company with minimal paid-up capital. Regardless of whether this recovery action would have been successful, it could have exerted pressure on Accendus and its Directors. At the very least, maintaining a vigilant watch on Accendus’ finances would have allowed Global to divert its resources elsewhere, earlier.
- [36]Although Mr Speedy may have sought legal advice to place Global in administration, there is no evidence of legal advice sought to recover the amount owing from Accendus in the four years preceding Global’s administration.
- [37]By the time Mr Speedy became a Director of Accendus in an attempt to generate sales, four years had lapsed without Accendus’s position improving. Unfortunately for Mr Speedy, it was a case of too little, too late.
- [38]I therefore cannot be satisfied that Mr Speedy took sufficient steps to recover the amount owing from Accendus.
Conclusion
- [39]Global had insufficient funds to meet its liabilities. Because of its inadequate capital, its ability to meet its obligations depended on its ability to recover loans to related entities and payment from Accendus.
- [40]In determining whether Mr Speedy took reasonable steps to prevent the circumstances resulting in its administration, Mr Speedy asked the Tribunal to consider what more he could have done. I have addressed this in my above reasons. I have also considered whether what he did do was reasonable, having regard to what was known at the time.[18]
- [41]Global was allowed to make loans to related entities at a time when it had outstanding tax liabilities – advancing funds to other companies is not a reasonable step for Global in these circumstances.
- [42]Despite being aware of Accendus’ non-payment and Global’s low priority for payment, Mr Speedy also allowed Global to expend funds and resources continuing to work for Accendus, knowing that Global was unlikely to be paid for an extended period and without an assessment on how to cover its liabilities until sales crystallised.
- [43]While it may be understandable for Mr Speedy to have adopted these strategies in the hope of achieving the most commercial outcome for his group of companies, they were not reasonable steps to prevent the circumstances resulting in Global’s administration.[19]
- [44]I am therefore not satisfied that Mr Speedy made appropriate provision for taxation or took sufficient steps to recover the amount from Accendus.
- [45]Because of this, I cannot be satisfied that Mr Speedy took all reasonable steps to avoid the ‘coming into existence’ of the circumstances giving rise to Global’s administration.
- [46]Unfortunately for Mr Speedy, I must therefore confirm the Commission’s decision not to categorise him as a ‘permitted individual’.
What is the appropriate Order?
- [47]The appropriate order is that the decision of the Queensland Building and Construction Commission not to categorise John Martin Speedy as a permitted individual is confirmed.
Footnotes
[1] Queensland Building and Construction Commission Act 1991 (Qld) ss 56AC, 56AE and
56AF.
[2] Ibid, s 56AD.
[3] Queensland Building and Construction Commission Act 1991 (Qld) s 56AD(8).
[4] Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 20.
[5] Balance Sheet of Global Construction as of 30 June 2013.
[6] Statement of John Martin Speedy dated 5 March 2015 at paragraph 63.
[7] Statement of John Martin Speedy dated 5 March 2015 at paragraph 55
[8] Statement of John Martin Speedy dated 5 March 2015 at paragraph 56.
[9] Profit & Loss Statement of Global Construction as of 30 June 2013 shows a net profit of
$14,983.68.
[10] Queensland Building and Construction Commission Act 1991 (Qld) s 56AD(8A).
[11] Ibid, s 56AD(8B).
[12] Ernst v. Building Services Authority [2011] QCATA 155 at [49].
[13] As at 30 June 2012, Global had Total Current Liabilities of $1,347,907 with Net Assets
of $275,636.
[14] Email Gadens to Mullins dated 28 November 2013.
[15] Balance Sheet of Global Construction as of 30 June 2013.
[16] Profit and Loss Statement of Global Construction as of 30 June 2012.
[17] D’Arro v. Queensland Building and Construction Commission [2015] QCAT 100 at [52].
[18] Papallo v. Queensland Building Services Authority [2012] QCAT 59 at [51]; Younan v.
Queensland Building Services Authority [2010] QDC 158 at [26].
[19] Ernst v. Building Services Authority, Ibid at [56], citing with approval
Walker v. Wimborne (1976) 137 CLR 1 at 6; D’Arro v. Queensland Building and
Construction Commission Ibid at [51] and [53].