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Halstead v Queensland Building & Construction Commission[2015] QCAT 324

Halstead v Queensland Building & Construction Commission[2015] QCAT 324

CITATION:

Halstead v Queensland Building & Construction Commission [2015] QCAT 324

PARTIES:

Richard Alfred Halstead

(Applicant)

v

Queensland Building & Construction Commission

(Respondent)

APPLICATION NUMBER:

OCR049-13 and OCR031-14

MATTER TYPE:

Building matters

HEARING DATE:

22 and 23 April 2015

HEARD AT:

Brisbane

DECISION OF:

Member King-Scott

DELIVERED ON:

18 August 2015

DELIVERED AT:

Brisbane

ORDERS MADE:

1. Order that pursuant to s 56AD(8) of the Queensland Building Construction Commission Act 1991 the Applicant be categorised as a permitted individual for the relevant event being the appointment of liquidators on 7 December 2012 to Clipstar (Melb) Pty Ltd.

2. Order that pursuant to s 56AD(8) of the Queensland Building Construction Commission Act 1991 the Applicant be categorised as a permitted individual in relation to the relevant bankruptcy event his having signed on 2 October 2013 an authority pursuant to s. 188 of the Bankruptcy Act 1966. 

CATCHWORDS:

Application to be categorised as a permitted individual – two events, relevant company and bankruptcy events – affect of amendment to s. 56AC (5) Queensland Building and Construction Commission Act 1991 treating the both events as arising from the one set of circumstance – whether amendment retrospective – cause of events failure to set aside statutory demand by negligent solicitor and intervention of company’s bank freezing all accounts

APPEARANCES and REPRESENTATION (if any):

APPLICANT:

Mr B J Saal  (Solicitor) of Saal and Associates Lawyers

RESPONDENT:

Mr M Robinson (Solicitor) of Robinson Locke Litigation Law

REASONS FOR DECISION

  1. [1]
    Mr Richard Halstead was notified on 20 December 2012 by the Queensland Building Services Authority (“QBSA”) as it was then known, that he had been categorised as a excluded individual following the appointment of liquidators to Clipstar (Melb) Pty Ltd on 17 January 2013.  He applied to the QBSA on 17 January 2013 pursuant to s. 56AD (1) of the Queensland Building Services Authority Act 1991 (Qld) to be categorised as a permitted individual.  The Authority refused that application on 24 January 2013.  Mr Halstead has applied, in Matter OCR049-13, to review that decision. 
  2. [2]
    On 2 October 2013, Mr Halstead entered into a Part X agreement under the Bankruptcy Act 1966.  He was notified by the QBSA on 19 November 2013 that he was considered an excluded individual pursuant to s. 56AC of the QBSA Act.  On 23 December 2013, Mr Halstead applied to be categorised as a permitted individual.  The Commission refused that application on 21 February 2014.  Mr Halstead then sought review of that decision in application OCR031-14.
  3. [3]
    An earlier decision had been made by the Tribunal on 9 December 2014 in relation to the insolvencies of Clipstar Pty Ltd and Fortress Knight Pty Ltd and the Commission’s decision not to categorise Mr Halstead as a permitted individual in respect of those insolvencies was set aside as the insolvency arose from the one set of circumstances.
  4. [4]
    The power to review decisions was conferred upon the Tribunal by s. 87 of the Queensland Building and Construction Commission Act 1991 (Qld). In particular, s. 86(1)(j) specifically provides that a decision not to categorise an individual as a permitted individual for a relevant event may be reviewed by the Tribunal.
  5. [5]
    Pursuant to s. 19 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld), the Tribunal has all the functions of the decision-maker for the reviewable decision being reviewed.
  6. [6]
    Section 56AC of the Queensland Building Services Authority Act 1991 (Qld) provides, inter alia:

56AC  Excluded individuals and excluded companies

  1. (1)
    …
  2. (2)
    This section also applied to an individual if –
    1. after the commencement of this section, a company, for the benefit of a creditor –
  1. has a provisional liquidator, liquidator, administrator or controller appointed;  or
  2. is wound up, or is ordered to be wound up; and
  1. 5 years have not elapsed since the event mentioned in paragraph (a)(i) or (ii) (relevant company) happened; and
  2. the individual –
  1. was, when the relevant company event happened, a director or secretary of, or an influential person for, the company; or
  2. 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.
  1. (3)
    …
  2. (4)
    If this section applies to an individual because of subsection (2), the individual is an excluded individual for the relevant company event.
  3. (5)
    An excluded individual for a relevant bankruptcy event (the first event) does not also become an excluded individual for another relevant bankruptcy event (the other event) if the first event and the other event are both consequences flowing from what is, in substance, the one set of circumstances applying to the individual.
  4. (6)
    An excluded individual for a relevant company event (the first event) does not also become an excluded individual for another relevant company event (the other event) if the first event and the other event are both consequences flowing from what is, in substance, the one set of circumstances applying to the company.
  5. (7)
    …

Preliminary Point

  1. [7]
    Before considering the applications, the parties have raised a preliminary matter which requires the Tribunal’s decision.  It arises in this way. 
  2. [8]
    The relevant legislation being s. 56AC (5) and (6) of the Queensland Building Services Authority Act 1991 (Qld) (“QBSA Act”), now known as the Queensland Building and Construction Commission Act 1991 (Qld), hereafter referred to as “the Act”, was amended by the Professional Engineers & Other Legislation Amendments Act 2014 on 10 November 2014.[1] 
  3. [9]
    The effects of the amendment are that at the time of the decision under review, a relevant bankruptcy event and a relevant company event were considered separately and there was no provision to consider if each event arose from the one set of circumstances.  The amendments to s. 56AC (5) changed this. 
  4. [10]
    It is necessary to refer to the legislation in some detail.  I have already set out s. 56AC as it existed before the amendment.  The effect of the amendment was to delete subparagraphs (5) and (6) and insert a new subparagraph which read as follows:
  1. (5)
     An excluded individual for a relevant event does not also become an excluded individual for another relevant event if the commission is satisfied that both events are consequences flowing from what is, in substance, the one set of circumstances.
  1. [11]
    Also amended was s. 56AD (8).  In the amended version, it provides as follows
  1. (8)
     The commission may categorise the individual as a permitted individual for the relevant event only if the commission is satisfied, on the basis of the application, that –
  1. (a)
     section 56AC(5) applies to the individual for the relevant event; or
  1. (b)
     the individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event.
  1. [12]
    The effect of the amendment was to insert subparagraph (a) – otherwise the provision is unchanged.
  2. [13]
    The Commission submits that the amendments are substantive as opposed to procedural, and therefore the presumption against retrospective legislation applies.  It is agreed that the Tribunal has no power to review a decision under s. 56AC.  As stated by Judicial Member Thomas AM QC in Dinsey v Queensland Building Services Authority [2013] QCATA 225 (26):

Exclusion is prima facie automatic upon (the happening of any relevant company events). The occurrence of the event brings about the exclusion. Causation is not an element…

  1. [14]
    The Commission submits that the amendment to s. 56AC (5) affect substantive rights as it changes the way in which licence exclusions are to be applied.  It further submits that the amendment to s. 56AD (8), although at first glance seems procedural, can only apply to the new version of s. 56AC (5).
  2. [15]
    The Commission’s role is not to categorise the individual and, as stated earlier, that is an automatic consequence of the happening of an event.  The Commission’s role is to notify the individual pursuant to s. 56AF and advise the individual of his rights to apply to become a permitted individual and the consequences for him if he does not do so.
  3. [16]
    As noted by the Tribunal in QBSA v Plotkin [2013] QCATA 219:

The effect of s 56A is that, if Mr Plotkin was an “influential person” in respect of the companies which went into administration, he attracts the status of “excluded individual”. The section does not, however, contain any express provision for the QBSA to make a decision about the matter.  Rather, on its face, the section simply confers that status if a company has a provisional liquidator, liquidator, administrator or controller appointed, or is ordered to be wound up. 

  1. [17]
    The Commission submits that s. 56AC (5) affects substantive rights as it changes the way in which the licence exclusions are to be applied.  Though that may be the case, there is no decision made by the Commission as to whether both events had consequences flowing from the one set of circumstances.  That decision has never been made by the Commission.
  2. [18]
    A liability was acquired by Mr Halstead when he twice assumed the status of an excluded individual.  The review applications under consideration do not involve a consideration of that accrued liability, but rather whether he should be categorised as a permitted individual. The amended s. 56AC (5) is remedial and provides relief to a person in Mr Halstead’s position if he can satisfy the Commission that both events are consequences flowing from the one set of circumstances. It is, as referred to below, a grant of a right or privilege.
  3. [19]
    Section 20 (2) (c) and (e) of the Acts Interpretation Act 1954 provides:-

The repeal or amendment of an Act does not-

(c) affect the right, privilege of liability acquired, accrued or incurred under the Act;…

(e) affect an investigation, proceeding remedy in relation to a right, privilege, liability or penalty mentioned in (c) or (d).

  1. [20]
    The Applicant referred to a decision of the Administrative Appeals Tribunal of Re Costello and Secretary, Department of Transport (1979) 2 ALD 934 (Costello’s case).  At 943-944 the Tribunal said:

… it seems to us that the question as to the law to be applied by the Tribunal must be resolved by having regard:

  1. (i)
     to the nature of the decision under review; and
  1. (ii)
     to the provisions of the legislation by which the change in the law is effected (cf Quilter v Mapleson (19882) 9 QBD 672).

…

But where the nature of the decision under review does not involve a consideration of accrued rights or liabilities but rather involves an investigation whether the applicant has a present entitlement to the grant of a right or privilege, we have concluded that, unless the amending law otherwise provides we should apply the law as amended as at the date of our decision.

  1. [21]
    The Applicant also refers to the comments of Brennan J in Esber v The Commonwealth of Australia & Anor (1992) 174 CLR 430 at 448 where he said:

Where on a rehearing de novo the question for decision is whether an applicant should be granted a right, the law as it then existed is applied, not the law as it existed at an earlier time. Harris v Caladine (1991) 172 CLR 84 at 125; Re: Costello (1979) 2 ALD at 994. By contrast, in a judicial proceeding brought to enforce an alleged right accrued at the time when the proceedings were instituted, the question for decision is determined according to the law existing when the proceedings were instituted unless statute provides otherwise.

  1. [22]
    I agree with the Applicant’s submission that the situation is analogous to Costello’s case.  There has never been a decision made to the effect that the Applicant did not satisfy the ‘one set of circumstances’ test.  I agree also that what has happened in this matter is that the Applicant, in the words of the majority in Esber’s case, is taking ‘advantage of an enactment’.  He is not asserting any crude, substantive right.
  2. [23]
    I intend to apply s. 56AC(5) as it now stands and not prior to its amendment.

History

  1. [24]
    Richard Alfred Halstead is a Plasterer.  He has been a Plasterer since about 1980.  In 1998, he commenced business on his own as R A Halstead Plastering.  The business flourished and expanded into the installation of plasterboard and associated products.  It expanded into a number of companies, namely Asap Plasterers Pty Ltd, Clipstar Pty Ltd, Pioneer Plasterers Pty Ltd, Clipstar (Melb) Pty Ltd and Clipstar (WA) Pty Ltd.
  2. [25]
    Mr Halstead was a Director of each of those companies.  He held a Plastering Drywall and Passive Fire Protection-Fire and Smoke Walls and Ceilings Licence under the former Queensland Building Services Authority Act 1991 (Qld).
  3. [26]
    On or about 7 December 2012, Clipstar (Melb) Pty Ltd (“Clipstar (Melb)”) was placed in liquidation. Mr Halstead was notified by the Queensland Building Services Authority (“BSA”) that he was an excluded individual on 20 December 2012.  He sought to be categorised as a permitted individual for that event (“the liquidation”) on 17 January 2013.  That application was refused and Mr Halstead was notified of that decision on 24 January 2013.  He now seeks a review of that decision.
  4. [27]
    R A Halstead Plastering was given "preferred plasterboard contractor” recognition by Pioneer Plastamasta a supplier of plasterboard and associated products. In 1999 Pioneer Plastamasta was acquired by Lafarge Plasterboard Pty Ltd (“Lafarge”). Mr Halstead says he developed a very strong and mutually rewarding business relationship with both Pioneer Plastamasta and Lafarge.
  5. [28]
    Mr Halstead says that he was encouraged to enter into the Victorian market by Lafarge which had supplied him with materials in Queensland. Lafarge, he says, promised to introduce Clipstar (Melb) to builders in Victoria. Lafarge provided Clipstar (Melb) with favourable terms, more favourable than the terms Clipstar Pty Ltd and the other Halstead companies had with Lafarge in Queensland.
  6. [29]
    In 2005, Mr Halstead entered into an exclusive supply and install contract with Dennis Family Homes Pty Ltd for 2 years.  That was successful and in 2007, a further agreement was entered into between those parties and this was extended by 3 years in 2009 and 2012.
  7. [30]
    However, Lafarge wanted Clipstar (Melb) to continue to expand its customer base in Victoria, in circumstances, where it had not introduced clients to Clipstar (Melb) as it had promised. Mr Halstead advised Lafarge that in order for Clipstar (Melb) to grow further in Victoria, it required larger infrastructure to be put in place which would take away from the profits it was receiving from the work performed for Dennis Family Homes Pty Ltd.
  8. [31]
    To address this, Lafarge requested Clipstar (Melb) order its material from the Lafarge’s own company owned stores and not through franchisee stores. In doing this, Lafarge agreed that they would not seek payment from Clipstar (Melb) for that material while Clipstar (Melb) was continuing to expand and until it had consolidated sufficient infrastructure in Victoria. This agreement was not in writing, but was more in the form of a gentleman’s agreement.
  9. [32]
    Ultimately, a repayment agreement was verbally agreed between Lafarge and Clipstar (Melb) where Clipstar (Melb) was able to delay payment to Lafarge for the materials it obtained directly from it.[2] Clipstar (Melb) became Lafarge's largest customer nationally.
  10. [33]
    The agreement continued up until Lafarge was sold to Knauf Plasterboards Pty Ltd (“Knauf”) in September 2011. The management team that Mr Halstead had worked successfully with at Lafarge were all sacked and a Mr Mark Norris was appointed Chief Executive Officer of Knauf and a new management team installed. Communications between Knauf, Mr Halstead and his companies was limited to emails and teleconferences.  Previously there had been regular face to face meetings.[3]
  11. [34]
    On 9 May 2012 Clipstar (Melb) entered into a written repayment agreement with Knauf. The repayment agreement referred to a quarantined debt of $3,277,734.32. Clipstar (Melb) was to repay the debt by $50,000 instalments the first commencing in July 2012. From August 2012 a percentage of the previous month's net profit was also to be included.
  12. [35]
    There were monthly meetings held between the parties when the state of the debt was discussed. Mr. Halstead accepts that the July payment was missed but the August and September payments were made. He says the July payment was "fixed up", at a subsequent meeting. He believed that Knauf was happy with the arrangement. He had been sent an agenda for a meeting to take place, by teleconference, on 16 October 2012. Up until the time of that meeting no dissatisfaction had been expressed by Knauf as to the arrangement. At the meeting Mr Norris, advised Mr Halstead that Knauf was not happy with the current model they had inherited from Lafarge and it was looking at restructuring it.
  13. [36]
    Subsequent to that meeting, without notification, Knauf served a Statutory Demand on Clipstar (Melb).  The following day Mr Halstead first became aware of it when one of his suppliers advised him that they had been notified, presumably, by Knauf.[4]  It was a complete surprise to Mr Halstead, as at the teleconference, the day before, there had been no indication by Knauf that it intended to take such action nor mention of any problem it had with the agreement or arrangement that existed between the two companies.
  14. [37]
    Subsequently it was established that Clipstar (Melb) had been served the day before when two Statutory Demands had been slid under the door of the Melbourne office of Clipstar (Melb) after hours. 
  15. [38]
    Mr Halstead made enquiries of Mr Norris as to why the two Statutory Demands had been served.  Initially, Mr Norris said he could not explain it, but in a later telephone call advised him that he would not discuss the matter further.  Mr Halstead retained solicitors, Saal & Associates. 
  16. [39]
    The initial demands were for $3,177,734.32 and $372,916.56 respectively dated 17 October 2012.
  17. [40]
    The first such Statutory Demand was withdrawn on 2 November 2012 and a further Statutory Demand for an amount in excess of $3,177,734.32 was served on 6 November 2012 by email to the company solicitor, Stone Group Lawyers.
  18. [41]
    The reaction of the Clipstar (Melb)’s bankers, National Australia Bank [“NAB”], was immediate, not only was its account frozen but so were all associated company bank accounts.[5] This was despite the fact that Clipstar Pty Ltd had a credit of $387,234.78.[6]
  19. [42]
    Following receipt of the Statutory Demand, Mr Halstead first spoke to his Accountant, David Sidhu of International Professional Services Pty Ltd.  He then spoke to his solicitors, Saal & Associates, and sought advice on the effect of a Statutory Demand and the consequences that flowed from it.  On 22 October 2012, his Accountant advised him that the money sought by Knauf was, firstly, not due and payable pursuant to the Repayment Agreement, and, secondly, the debt was for an incorrect amount.
  20. [43]
    Unfortunately, Mr Halstead retained solicitors other than Mr Saal to act on his behalf.  Those solicitors advised him that he had sufficient grounds to set aside the Statutory Demand, but that strategically he should file the application on the last day allowed for it to be filed.  Unfortunately, there were problems affecting proper service and the application was not filed in time.  It was conceded by the Commission that the solicitor was negligent.
  21. [44]
    On the current state of authorities,[7] Mr Halstead could have been confident in setting the Statutory Demand aside.  He would have been able to show that there was a genuine dispute.  He may well have succeeded in voiding a condition that he pay any sum as Knauf seemed incapable of actually quantifying the correct amount of the debt as it had not quantified or paid significant rebates to Clipstar (Melb) which would have reduced the debt and may have even extinguished it.
  22. [45]
    My remarks above have been confined to the Statutory Demand for $372,000 and not for the Statutory Demand for $3,177,000.  That Demand was subsequently withdrawn but replaced on 2 November 2012 by a Statutory Demand for the same amount.  However, it is patently clear that Knauf had no right to make such a demand as its only remedy for default of payment of an instalment under the Repayment Agreement was to implement a Stop Supply order.
  23. [46]
    Clipstar (Melb) and Clipstar Pty Ltd had a Debtor Finance Facility with the NAB for $3 million.  Once Clipstar (Melb) failed to file the Affidavit to set aside the Statutory Demand, the NAB froze the company’s bank account.  Subsequently, it controlled the accounts and the only transactions it permitted were the payment of wages and suppliers.  It would not provide funds to resist the winding up.  NAB appointed BDO to audit Clipstar (Melb) at a cost to the company of $14,919.47. The NAB never provided a copy of the report but Mr Halstead was told it was satisfactory.[8] 
  24. [47]
    At the time Auditors were appointed, Clipstar (Melb)’s bank account showed a debit of $287,650.30, but Clipstar Pty Ltd had a credit of $387,234.78.
  25. [48]
    Mr Halstead, in his statement, said that Clipstar (Melb) paid all debts that were due and payable when they fell due. if it did not pay its debts that would have been because there was a dispute. Over the last 10 year period Clipstar (Melb) had grown to the point where it's gross annual turnover had increased to an excess of $16 million. Understandably, it had a large number of creditors some on 60 day payment terms, others 45 day and some 30 day terms. He said it was not unrealistic to expect that the amount payable to creditors would, at any given time, be large and would vary dramatically from month to month.
  26. [49]
    Clipstar (Melb) was up to date with its superannuation payments.
  27. [50]
    The average monthly rebate payment payable to Clipstar (Melb) by Lafarge and then Knauf was $160,000 per month. In addition, rebate payments to Clipstar Pty Ltd by Knauf averaged $40,000-$50,000 a month.
  28. [51]
    Outstanding payments of $550,000 were due and owing to Clipstar (Melb) by Dennis Family Homes Pty Ltd and others and were recovered by NAB. Mr Halstead reckoned that the company could have collected $1.2 million in what it was owed by debtors had the Statutory Demand been set aside and the NAB not frozen its accounts.[9]
  29. [52]
    Mr David Sidhu was a director of a chartered accounting firm International Professional Services Pty Ltd and was retained by Mr Halstead, personally and by his companies. Mr Sidhu provided accounting and business services including annual budgets, monthly planning meetings, year end financial statements, year end income tax returns, business activity statements, superannuation advice and general business advance. In his statement he said all companies were up-to-date with lodging tax returns and business activity statements. Further, the companies maintained proper books and records that included the use of accounting software QuickBooks for the early years and more recently BusinessCraft. Up until the adverse action by Knauf the businesses had been operating successfully.
  30. [53]
    I accept Mr Sidhu’s evidence. He was cross-examined about the quarantined debt. He was confident that Clipstar (Melb) had the potential to pay out the debt if it was successful in getting new builders. He said negotiations had taken place and there was a new builder that would have had a “big dint” on the repayments.
  31. [54]
    It might be suggested that it was naive to believe Clipstar (Melb) could make those payments, however, it had successfully operated for a number of years and it was only an extraordinary set of circumstances that led to its demise. If it had not paid all the $3 million debt I believe it would, in normal circumstances, have been able to at least renegotiate another repayment plan.
  32. [55]
    Mr Halstead says he has continued to work with NAB in recovery of outstanding moneys and that NAB’s Debtor Finance Facility has been paid out and all other moneys owed to NAB have been repaid. In addition he had a debtor finance facility with Atradius Credit Insurance. That provided Clipstra (Melb) with insurance in the event that one of its builders became insolvent.[10]

The Principles to be Applied in considering an application under Section 58AD (8A) and (8B)

  1. [56]
    Section 56AD required Mr Halstead to state the reasons why the Commission should categorise the individual as a permitted individual. In considering the application the Commission must be satisfied the individual took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the event. In doing so the Commission must have regard to the matters set out in section 56 AD (8A) as follows: –

a) keeping proper books of account and financial records;

b) seeking appropriate financial or legal advice before entering into financial or business arrangements for 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 proper credit management for amounts owing and taking reasonable steps for recovery of the amounts;

f) making appropriate provision for Commonwealth and State taxation debts.

  1. [57]
    Speaking of the same section of the QBSA Act McGill DCJ in Younan v Queensland Building Services Authority [2010] QDC 158 at [26] said:-

The section speaks about taking reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. 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. (citations omitted)

THE RELEVANT COMPANY EVENT OCR049 – 13

  1. [58]
    On 7 December 2012 Clipstar (Melb) Pty Ltd was placed into liquidation by the order of the Supreme Court of Queensland upon the application of Knauff. 

Circumstances Resulting in the Relevant Company Event

  1. [59]
    The Commission says that Clipstar (Melb) was placed into liquidation by the Supreme Court because it was deemed insolvent, not having paid or set aside the Statutory Demand served by Knauf. 
  2. [60]
    That Demand was for a payment of $372,916.56 for supply of goods as stated in the Statement of Account for the period February 2012 to 16 October 2012.  The Commission submits that Mr Halstead in his Affidavit did not deny the debt, but merely swore that he could not ascertain the validity of the debt and hence could not deny it. 
  3. [61]
    It is apparent that at the time there was some confusion as to what was the quantum of the debt, if any.  Mr Du Verdier of Knauf, deposed to a debt of $372,916.56 in his first Affidavit and then corrected it to $193,123.27 in his subsequent Affidavit, the difference being a rebate for September 2012 and some other adjustments. It would appear that the information was always available and had been overlooked or ignored.
  4. [62]
    The Commission submits that the amount of $184,855 needed to be paid by the date of the hearing.  That was the amount reached by Mr Halstead by deducting what Mr Halstead said in his Affidavit was owed to the company by Knauf.  However, it appears from the email correspondence that Knauf was still uncertain what the debt was as late as 8 November 2012.[11]
  5. [63]
    Mr Halstead says that the calculation of the rebate system and credits in the Exclusive Supply Agreement dated 1 April 2011 and the Preferential Supply Agreement were complex, as it related to multiple projects performed in effect throughout Victoria, both in the Melbourne area and country areas, and the offsetting of those rebates and credits against what was owing to Knauf for the supply of plasterboard and those amounts were continually changing.
  6. [64]
    In my opinion, the circumstance that caused the happening of the event was the negligence by Mr Halstead’s solicitor in failing to serve the application to set aside the Statutory Demand in time. I am satisfied that the Statutory Demand would have been set aside had the application been heard. I am not at all convinced that had the application been made in time and competently, that Mr Halstead would have been required to pay any part of the alleged debt. 
  7. [65]
    I do not agree that $184,855 was the undisputed amount of the debt and should have been paid by Mr Halstead.  I agree with Mr Halstead that the Commission’s submissions ignore commercial reality, and quite clearly Knauf did not know what the debt was.  However, had the application to set aside the Statutory Demand been made competently, then Clipstar (Melb)’s bankers, NAB, would not have controlled the accounts and there would have been sufficient funds to meet any amount of the reduced debt that Clipstar (Melb) might have been ordered to pay as a condition of setting aside the Statutory Demand.  Under the Corporations Act, s. 49F(2)(a)(ii) it would have an extended period of at least 7 days to pay the substantiated amount.

Steps Taken to Prevent the Liquidation of Clipstar (Melb)

  1. [66]
    The Commission criticises Mr Halstead for not taking the following steps, which it submits would have been reasonable:

a) the Applicant should have taken steps to make payments in respect of the acknowledged liability of the company before the Statutory Demand was served.  That acknowledgement was said to have been made in the teleconference of 16 October 2012.  In particular, the Commission relies upon:

  • a concession in the Applicant’s Affidavit in support of the application to set aside the Statutory Demand that $185,855 was owing;
  • the failure to pay $50,000 due in July 2012 under the Repayment Agreement; and
  • the failure to pay a percentage of the profits in July to September 2012, again due under the Repayment Agreement;

b) on receipt of the Statutory Demand, Clipstar (Melb) should have paid the undisputed amount of the debt;

c) if the bank accounts of Clipstar (Melb) did not have sufficient funds to meet the debt, funds should have been injected.

  1. [67]
    As stated earlier, the precise quantum of the Knauf debt appears to have been unknown, even to Knauf.  It would, as the Applicant submits, ignore commercial reality to pay the amount if there was no legal obligation for him to do so.
  2. [68]
    The amount of $50,000 for the July payment arose under the Repayment Agreement. I do not believe these matters are relevant to the circumstances giving rise to the company event. In any event, Knauf had no remedy for recovery of the non-payment of that amount, other than to place a Stop Supply Order on Clipstar (Melb).  Mr Halstead says the payment was overlooked as subsequent payments of $50,000 were made in the months of August and September.  Similarly, Knauf was limited to the same remedy for non-payment of any percentage of profits in July to September 2012. 
  3. [69]
    In the instant case, I agree with the submissions made on Mr Halstead’s behalf.  The reasonableness of his behaviour must be assessed by reference to what was known to him at the time without the benefit of hindsight.  In that regard, Mr Halstead believed:

a) that the amount sought in the Knauf Statutory Demand was excessive;

b) rebates and credits were yet to be applied to any amount owed to Knauf;

c) as at 18 October 2012, Mr Halstead was uncertain as to the precise amounts of rebates and credits to be offset against the amount, if any, to be paid;

d) the quarantined amount was not fully due and payable;

e) Knauf, in particular Mr Norris, had refused to talk to him further.

  1. [70]
    Further, Mr Halstead had sought advice from Mr Matthews and Mr Saal in relation to Knauf’s Statutory Demand.  He had attempted to have the Statutory Demand withdrawn or set aside and dispute resolution occur with Knauf.  He had relied upon the advice from his then solicitor and Clipstar (Melb)’s solicitors for the application to set aside the Knauf Statutory Demand.
  2. [71]
    Section 56AD(8)A (Factors):

a) Keeping proper books of account and financial records.

 Books of account were kept. The Commission acknowledges that Mr Halstead’s Accountant has said that the accounts were in order, it does not dispute that assertion but merely says it has not had the books made available to it to examine them.

b) Seeking appropriate financial or legal advice before entering into financial or business arrangements or conducting business. This was not an issue at the hearing.

c) Making appropriate provision for Commonwealth and State taxation debts. Clipstar Pty Ltd and Clipstar (Melb) as well as Mr Halstead and other companies had a Tax Agent Portal arrangement with the Australian Taxation Office. Itemised accounts were kept and were accessible on line.  Mr Halstead gave evidence that it was a requirement of the NAB[12] that the company not be in arrears and it has access to the Portal.  The statements of account do not disclose  any tax to be significantly in arrears.

 The Commission alleges there was an amount of unpaid GST liability and that appears to be a component of the balance owing at the time of the event. The Commission alleges that as it did not have access to the bank accounts of Clipstar (Melb), it cannot comment whether it had the ability to pay this amount in addition to other outstanding amounts to Knauf.  The Company’s Accountant, David Sidhu, says that Clipstar (Melb) did have the capacity to pay any moneys owing to the Australian Taxation Office. That is not disputed by the Commission.

 The Commission further submits that another company in which Mr Halstead was involved, namely Fortress Knight Pty Ltd, had failed to pay its tax and had entered into a Repayment Arrangement.  Fortress Knight’s sole income came from Clipstar (Melb).  It will be recalled that this Tribunal (Member Crawford) on 9 December 2014 found that the insolvency events of Clipstar Pty Ltd and Fortress Knight Pty Ltd arose from the same set of circumstances, that is, the winding up of Clipstar (Melb).  In my opinion, I do not consider this taxation repayment plan a factor that is adverse to granting the application.

Relevant Bankruptcy Event– OCR031-14

  1. [72]
    On 2 October 2013, Mr Halstead signed an Authority pursuant to s. 188 of the Bankruptcy Act 1966 which constituted the taking advantage of the laws of bankruptcy. 
  2. [73]
    If I am correct on the preliminary point, then it follows that the relevant company event and the bankruptcy event are consequences flowing from what is in substance the one set of circumstances then it is not necessary for me to consider further the circumstances resulting in the happening of the bankruptcy event.  However, in case I am wrong in respect of the preliminary point, I will go on to determine whether Mr Halstead can be categorised as a permitted individual for the bankruptcy event.

Circumstances that Resulted in the Happening of the Bankruptcy Event

  1. [74]
    Mr Halstead says that with the winding up of Clipstar (Melb) and then the subsequent collapse of the other companies and the calling in of personal guarantees and other debts, his bankruptcy was inevitable. 
  2. [75]
    The Commission submits Mr Halstead has not demonstrated that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in his bankruptcy.  It sets out the following matters:

a) Mr Halstead had not demonstrated that he had sufficient funds to cover the amount of the guaranteed debts;

b) he had not acted reasonably in the conduct of his affairs by the use of credit cards and BarterCard;

c) although Mr Halstead submitted he did not lead an extravagant lifestyle, there were said to be personal acquisitions on his BarterCard of up to $2.95M for services supplied by his companies.  The use of credit cards appeared to involve a revolving debt and were not merely current for the month; he allowed his personal exposure to the company debt when the company could not pay immediately but only under a Repayment Plan.

  1. [76]
    The Commission has set out in its submissions a statement of the itemised proofs of debt of Mr Halstead.  It amounts to $4,384,566.05.  Of that sum, the BarterCard Australia “loan” amounts to $2,988,284.  There are 17 separate credit cards with debts amounting to $321,553.37.
  2. [77]
    Mr Halstead explained the use of credit cards were for company business and were to obtain Frequent Flyer points which were then used to purchase or subsidise the purchase of his air travel on behalf of the company.  It is noted that he had companies in Melbourne and Western Australia and travelled there on a regular monthly basis.  The company would pay him back.  Only the NAB credit card ($5,221.31 debit) was for personal use.  The balances were usually paid in full.[13]  None was in default until the happening of the event.
  3. [78]
    His Accountant, Mr Sidhu, explained that the use of the credit cards bought extra time, it was a cheap alternative to using the Debtor Finance Account, and kept the overall interest low.[14]
  4. [79]
    At the time Mr Halstead gave the guarantees he believed he had sufficient assets to satisfy them many years earlier.[15] He gave a guarantee to the NAB in relation to Clipstar (Melb). It is unrealistic to expect that he would be expected to cover all of the company’s debt. 
  5. [80]
    Mr Halstead gave evidence that he incurred the BarterCard debt 12-14 years ago on behalf of the company.  He says he would use it to buy goods and services to help his businesses.[16]  He says that he acted as a sort of ambassador for BarterCard and that BarterCard did not seek repayment of any of the debt.  No call has ever been made in respect of the debt, although they did lodge a Proof of Debt. 
  6. [81]
    The Commission is critical of the incursion of large sums of money, privately, on credit cards and the BarterCard.  However, Mr Halstead says that these debts were incurred on behalf of the company and not privately.  I am prepared to accept Mr Halstead’s evidence in this regard.  Generally, I found Mr Halstead to be frank and honest in his responses, although at times he was vague in respect of details.
  7. [82]
    I am satisfied that Mr Halstead took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the winding up of Clipstar (Melb). I make the following orders:
    1. Order that pursuant to s 56AD(8) of the Queensland Building Construction Commission Act 1991 the Applicant be categorised as a permitted individual for the relevant event being the appointment of liquidators on 7 December 2012 to Clipstar (Melb) Pty Ltd.
    2. Order that pursuant to s 56AD(8) of the Queensland Building Construction Commission Act 1991 the Applicant be categorised as a permitted individual in relation to the relevant bankruptcy event his having signed on 2 October 2013 an authority pursuant to s. 188 of the Bankruptcy Act 1966. 

Footnotes

[1]The Act was further amended by Queensland Building and Construction Commission and Other Legislation Amendment Act 2014. The amendments with some exceptions came into effect from 1 July 2015. The effect of those amendments were, inter alia, to omit Part 3A Division 2 Categorisation as a permitted individual. Transitional provisions are found in s. 58 of the Act. The repeal of the Part does not affect the Tribunal’s right of review of the Commission’s decision which is preserved by s. 58(4) of the Act. See Acts Interpretation Act 1954 s. 20.

[2]Supplementary statement of R A Halstead 10 April 2013 paragraph 8.

[3]Transcript 1-22 lines 25-40.

[4]Transcript 1-24 lines 5-20.

[5]Transcript 1-34 ll 46.

[6]Transcript 1-35 ll 1-25.

[7]Graywater Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 21 ACSR 581.

[8]Transcript 2-57 ll 20-30.

[9]Transcript 2 -49 ll 5 to 13.

[10]Transcript 1-38 ll 30 to 45 1–39 ll 1 to 10.

[11]See internal emails of Knauf dated 8 November 2012.

[12]Transcript 2-46, ll. 5-15.

[13]Transcript 2-12, l. 39.

[14]Transcript 2-73, ll. 15-25.

[15]Transcript 1-39 ll 20.

[16]Transcript 2-11, ll. 1-5.

Close

Editorial Notes

  • Published Case Name:

    Halstead v Queensland Building & Construction Commission

  • Shortened Case Name:

    Halstead v Queensland Building & Construction Commission

  • MNC:

    [2015] QCAT 324

  • Court:

    QCAT

  • Judge(s):

    Member King-Scott

  • Date:

    18 Aug 2015

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Dinsey v Queensland Building Services Authority [2013] QCATA 225
1 citation
Jump To
Cite 1 - [2013] QCATA 225
Esber v The Commonwealth (1992) 174 CLR 430
1 citation
Jump To
Cite 1 - (1992) 174 CLR 430
Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581
1 citation
Jump To
Cite 1 - (1996) 21 ACSR 581
Harris v Caladine (1991) 172 C.L.R 84
1 citation
Jump To
Cite 1 - (1991) 172 C.L.R 84
Queensland Building Services Authority v Plotkin [2013] QCATA 219
1 citation
Jump To
Cite 1 - [2013] QCATA 219
Re Costello and Secretary, Department of Transport (1979) 2 ALD 934
2 citations
Jump To
Cite 1 - (1979) 2 ALD 934
Cite 2 - (1979) 2 ALD 934
Younan v Queensland Building Services Authority [2010] QDC 158
1 citation
Jump To
Cite 1 - [2010] QDC 158

Cases Citing

Case NameFull CitationFrequency
D'Arro v Queensland Building and Construction Commission [2016] QCATA 766 citations
1

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