Brunner v Queensland Building and Construction Commission
[2015] QCAT 513
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- Unreported Judgment
- Brunner v Queensland Building and Construction Commission[2015] QCAT 513
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Brunner v Queensland Building and Construction Commission[2015] QCAT 513
Brunner v Queensland Building and Construction Commission[2015] QCAT 513
CITATION: | Brunner v Queensland Building and Construction Commission [2015] QCAT 513 |
PARTIES: | Ben Raymond Brunner (Applicant) v Queensland Building and Construction Commission (Respondent) |
APPLICATION NUMBER: | OCR022-15 |
MATTER TYPE: | Occupational regulation matters |
HEARING DATE: | 8 December 2015 |
HEARD AT: | Brisbane |
DECISION OF: | Member Gardiner |
DELIVERED ON: | 10 December 2015 |
DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
CATCHWORDS: | PERMITTED INDIVIDUAL – where the applicant was a director of a building company – where a substantial debt arose to ATO over a number of years – where applicant says debt arose because of reliance on wife as book-keeper in circumstances of marital breakdown – where company also not licensed for work undertaken – where second company incorporated licensed – whether all reasonable steps taken – whether a licensee can place full reliance on another person Queensland Building and Construction Commission Act 1991 (Qld), ss 56AC, 56AD Jones v Dunkel (1959) 101 CLR 298 Mair v QBCC [2014] QCAT 566 Meredith v QBSA [2012] QCAT 146 QBCC v Meredith [2014] QCA 62 QBCC v Jensen [2014] QCATA 028 Younan v QBSA [2010] QDC 158 |
APPEARANCES:
APPLICANT: | Mr Cooke of Counsel represented Mr Brunner |
RESPONDENT: | Ms Guiney, Lawyer represented the Queensland Building and Construction Commission |
REASONS FOR DECISION
- [1]On 22 January 2015, the Queensland Building and Construction Commission refused an application by Ben Raymond Brunner to be categorised as a permitted individual under s 56AD(1) of the then Queensland Building and Construction Commission Act 1991 (‘Commission Act’).
- [2]Ben Brunner has been in the building industry as a plasterer since finishing his apprenticeship. He says until now he has run a profitable business, first as a sole trader, on his marriage to Julia, in a partnership and then from 2008, under the auspices of the company Brun Pty Ltd, of which he was the sole director and secretary. Mr Brunner is licenced, holding a Queensland licence in the class of Plastering Solid.
- [3]On 25 September 2014, Brun Pty Ltd went into voluntary liquidation and liquidators were appointed. This resulted under the Commission Act in Mr Brunner being deemed to be an “excluded individual”[1] and his licence being cancelled for five years.
- [4]Julia Brunner has long experience in book-keeping and accounting. She had worked in an accounting firm and undertaken training in this field. During their 15 year relationship, Mr Brunner handed over the responsibility for the accounting side of their partnership and then the company, to his wife. She was (she says herself) primarily responsible for the maintenance of accounting software, tax compliance and liaising with Noyes Partners – the company’s accountants.[2]
- [5]Mr Brunner says he completely trusted his wife with these responsibilities – he had no reason not to. Despite her holding no formal office in the company, this division of responsibilities played to their individual strengths in place since their marriage, no matter what the legal framework. It was a shared family enterprise for the benefit of themselves and their children. In his view it had successfully worked for the greater benefit of his family unit for 15 years.
- [6]Mr Brunner had responsibility for the weekly work on site. Because of his long experience, Mr Brunner says he accurately knew the outgoings of a job in materials, time and wages and as he did all his own pricing for new work, could gauge continually the state of the cash flow. As long as he was making more than the job was costing him, he was confident that there would be a profit and sufficient cash flow for his wife to pay the bills (including any tax debts) and wages responsibilities as they fell due.
- [7]Mr Brunner says he didn’t sign BAS returns, leaving that to his wife and the accountant and probably only saw the final figures annually.
- [8]From time to time, he would ask his wife how things were going and he was always assured they were fine. He relied on his wife to draw any problems to his attention. Ms Brunner agrees with this - she says in her letter to the ATO dated 5 September 2014[3] that “Ben, as director of the Company, relied on me to perform these functions. In turn I would raise financial issues with Ben at my absolute discretion…”
- [9]The marriage broke down and Mr and Ms Brunner separated in early March 2013. This separation weighed very heavily on Mr Brunner. The parties are now proceeding through what appears to be a very acrimonious divorce.
- [10]In March of 2013, Mr Brunner sought advice directly from the accountant for the company - Mr Noye.
- [11]Mr Noye was the accountant for Brun Pty Ltd from February 2011. His evidence was as follows:
- his firm was accustomed to dealing with Julia Brunner on day to day taxation matters;
- she was well known to him and had previously worked with him in his firm. He had full faith in her abilities and understanding of the financial requirements of the company and in particular, company responsibilities to the ATO;
- he became aware of the marital separation in March of 2013;
- Julia Brunner had carriage of all the company accounts and ATO lodgements up until March 2013 and a reduced involvement between March and October 2013;
- after October 2013, the company engaged a book-keeper who became the primary contact for financial matters and Mr Brunner’s wife was no longer involved;
- in March 2013, Mr Brunner informed him he had only just become aware of the outstanding ATO debt and outstanding lodgements;
- Mr Brunner was also of the view that the company through his wife had agreed to a repayment plan with the ATO;
- Mr Brunner did not have unfettered control of the accounts of the company until October 2013 when Ms Brunner was entirely removed from any financial/administration role;
- In his view, the company/trust was “collateral damage” from a “messy separation” between the parties.
- [12]It also appeared to Mr Noye and Mr Brunner that approximately $90,000 had been removed from the company accounts over a period and could not now be accounted for, or recovered. Mr Brunner alleges this sum was removed by Ms Brunner.
- [13]Mr Noye said Mr Brunner advised him he intended to sell the family home to repay the debt. Mr Brunner was of the view that he would have sufficient equity in the sale of the home to clear the debts to the ATO.
- [14]During the remainder of 2013, Mr Brunner gave evidence that he was advised by Mr Noye not to repay any further monies to the ATO until negotiations were completed through his firm and a payment plan put in place. Mr Brunner says he accepted and relied on this advice.
- [15]Mr Noye says the ATO was advised of the pending sale of Mr Brunner’s home in December 2013 with proceeds to be used in part to settle the ATO debt. The matrimonial home was sold in February 2014 but there was no equity after payment of the mortgage and some outstanding business debts.
- [16]By February 2014, the debt to the ATO had risen to $146,602 and the ATO contacted Mr Noye regarding the outstanding debt and outstanding lodgements.
- [17]Mr Brunner says Mr Noye advised him at this time to re-commence payments to the ATO. Mr Brunner says he always intended to pay the debt.
- [18]From February onwards, sums amounting to $27,312 were paid by Mr Brunner to the ATO but by the end of March 2104, with interest charges added, the debt to the ATO remained at approximately $149,000.
- [19]In early April 2014, the ATO issued a statutory demand against Brun Pty Ltd. Mr Noye submitted a payment proposal to the ATO but this was rejected.
- [20]The debt to the ATO increased by about $61,000 in the period July to August 2014 when a BAS lodgement was made including a PAYG statement for this amount. Beneficiary loan accounts existed in the company for both Ben and Julia Brunner. Mr Noye gave evidence that with the marital breakdown and the winding up of the family trust for which Brun Pty Ltd was trustee, these loan accounts either needed to be paid or taxed as income.
- [21]Mr Noye says independent third party advice was sought from an accounting firm as to the consequences of treating the loan accounts as wages and a significant portion of the loan accounts were treated for accounting purposes as wages to Mr Brunner in that year, giving rise to the spike in the tax debt.
- [22]As indicated above, on 25 September 2014, Brun Pty Ltd went into voluntary liquidation and liquidators were appointed.
The Law
- [23]Under the then Queensland licensing system, if an individual was a director or influential person in a company that has become insolvent, the individual was deemed to be an “excluded individual” and the licence is cancelled for 5 years.[4]
- [24]However an excluded individual could apply to be a “permitted individual” allowing him to retain his licence if the individual could show that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event. Here the relevant event was the liquidation of Brun Pty Ltd .[5]
- [25]The Queensland Building and Construction Commission Act also then set out the matters the Commission (and therefore this Tribunal) must have regard to when examining any action by the excluded individual to show that he took all reasonable steps to avoid the coming into existence of the circumstances that resulted in the happening of the relevant event in this matter[6]. The Commission was also able to have regard to other matters when deciding if a builder took all reasonable steps.[7]
- [26]The leading decision of Judge McGill in Younan v QBSA[8] identifies a four step process when determining a permitted individual. These steps are:
- Identify the relevant event;
- Identify the circumstances that resulted in the happening of the relevant event;
- determine if the applicant took all reasonable steps to avoid the coming into existence of those circumstances; and
- if the threshold test is satisfied, should discretion be exercised to classify the applicant as a permitted individual.
- [27]His Honour then goes on to say:[9]
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 might 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 benefit of hindsight.
- [28]It is agreed that the relevant event in this case was the company liquidation on 25 September 2014 (step one).
- [29]Steps two, three and four (to identify the circumstances that resulted in the happening of the event; to determine if Mr Brunner took all reasonable steps to avoid those circumstances; and to determine the exercise of any discretion) are the subject of these reasons.
- [30]During the course of the hearing, the argument in this matter was mainly addressed to two subsections of section 56AD(8A) of the Commission Act. Firstly, whether Mr Brunner sought appropriate financial or legal advice before entering into financial or business arrangements (56AD(8A)(b)) and secondly, whether Mr Brunner made appropriate provision for State and Commonwealth taxation debts (56AD(8A)(f)).
Post March 2013
- [31]After the debt to the ATO came to his notice, Mr Brunner says he took advice on a referral from his accountant (as discussed above) and from a liquidation specialist.
- [32]Mr Noye opines that the significant factors in the demise of the company were the company’s difficulties prior to March 2013, in particular, the accumulated taxation debt, the ATO non-compliance matters and the separation of Mr Brunner and his wife. In his view, for Mr Brunner, these factors were “vastly” unforseen events.
- [33]On the advice of Mr Noye, Mr Brunner consulted JOBA Management Services in July 2014 and Mr Brunner engaged Mr Craig Baldwin of that firm to provide advice in relation to his duties to the company.
- [34]Mr Baldwin gave a statement dated 27 November 2014. He said as follows:
- After his firm JOBA was engaged by Mr Brunner it was identified that Mr Brunner had a potential professional conflict if it acted for the company and Mr Brunner. On his advice, Mr Brunner engaged an independent lawyer for the company;
- In Mr Baldwin’s opinion, from 17 July 2014, Mr Brunner demonstrated above average diligence concerning the debts to the ATO;
- When JOBA was engaged, the ATO had already commenced winding-up proceedings against Brun Pty Ltd and neither the company nor Mr Brunner had any ability to meet the ATO debt. All repayment alternatives had been exhausted by Mr Noye;
- Brun Pty Ltd was not licensed with the Commission but was undertaking work;
- Mr Brunner was advised to discontinue trading because the company was unlicensed and insolvent.
- [35]After the true financial position came to Mr Brunner’s attention in March 2013, the evidence from his financial and legal advisers is that he took all necessary steps and acted on their advice in relation to the company with generally above average diligence.
- [36]Mr Brunner conceded in the hearing that prior to that date he had not fulfilled his duties to the company in the role of director or secretary but that it was reasonable in the circumstances for him to rely on his wife.
- [37]I am satisfied that after March 2013, Mr Brunner took all reasonable steps to seek appropriate financial and legal advice before entering into dealings with the ATO.
- [38]The question remains however if before March 2013, it was reasonable for him to rely on his wife for advice.
Pre March 2013
- [39]Mr Brunner describes his martial separation as ‘volatile’ and says it put him in the ‘unenviable and unpleasant’ position of having to rely on his estranged wife admitting fault in a corporate insolvency failure. Mr Brunner gave evidence that the reasons for the separation were personal but completely unforeseen by him.
- [40]Mr Brunner reiterated he had no reason to doubt Ms Brunner’s abilities. He and his wife had run family related businesses in the past without problems. He says she was more than an employee, as they both had a vested joint interest in the company for their own sakes and that of their children.
- [41]Mr Brunner says he trusted his wife to deal with the ATO and to bring any issues to his attention, particularly prior to March 2013.
- [42]After further negations failed with the ATO, Mr Brunner placed the company into voluntary liquidation. In Mr Baldwin’s view, after discussions with Mr Brunner’s wife in September 2014, he formed the view that ‘Julia Brunner was inappropriately trying to intertwine unrelated issues (namely the matrimonial property settlement) into any requests for evidence pertaining to her role in the Company.’[10]
- [43]In Mr Baldwin’s view, Mr Brunner took all reasonable steps available to him post 17 July 2014 to avoid the appointment of voluntary liquidators.
- [44]Mr Brunner says it was entirely reasonable for him to rely on Ms Brunner and that in his previous experience with his wife, she had been trustworthy and reliable. Her recent course of conduct was entirely unforeseen by him. Mr Brunner says that without the actions of his wife, the company would have continued to trade profitably as it always had in the past, prior to the matrimonial break down.
- [45]Mr Brunner’s submissions rely for their binding authority on the decision of the Supreme Court of Queensland Court of Appeal in QBCC v Meredith.[11] In this decision there was a relationship of trust relied upon by one director to allow the other director to manage the financial matters of two companies that then went into liquidation. Justice Gotterson (with whom the other Appeal Court members agreed) made the following comments:
At a general level, I would reject the proposition that, as a matter of law, an individual who has placed full reliance upon another with respect to the financial affairs of a company may never satisfy the “all reasonable steps” test prescribed in s 56AD(8). Such a proposition implies that the expression “took all reasonable steps” is to be read as precluding action by way of placing full reliance upon another. There is no justification in the text of the section for such an implication. Moreover, it is logically flawed because whether action of that kind was reasonable must depend upon a consideration of relevant circumstances.
As to the second alleged error of law, it must be said at once that the activities list in s 56AD(8A) are ones for which regard must be had in terms of action taken by the individual in relation to them. It does not at all follow that because an individual has not personally participated actively in relation to those that are applicable, then, as a matter of law, that individual cannot satisfy the test in s 56AD(8). Neither section so provides expressly or impliedly. The true position is that, if having regard to any one of those activities QBSA determines that an applicant had not personally participated actively with respect to it but had placed full reliance upon another with respect to it, the issue raised by s 56AD(8) would be whether, in the relevant circumstances, such reliance was reasonable.
- [46]The Commission submits that Mr Brunner failed to take all reasonable steps in relation to the ATO debt. It says Ms Brunner has not provided a statement in these proceedings and therefore any assertion by the applicant in relation to his wife’s conduct should attract a negative inference. The Commission relies on the single member QCAT decision of Mair v QBCC [2014] QCAT 566 (‘Mair)[12] as authority for this submission. That matter also recorded a hostile relationship between the applicant and his wife. The Commission relied on the rule in Jones v Dunkel[13] to submit that the failure by Mr Mair to call his wife and accountant gave rise to inferences[14] and that this rule should also be applied in relation to Ms Brunner. The Commission submits that the letter dated 5 September 2014 from Ms Brunner does not state that she withheld information from Mr Brunner in relation to the ATO.
- [47]I would be very surprised in the circumstances of this matter if Ms Brunner would be prepared to so admit. There is a very difficult divorce proceeding between the parties. There is an allegation that $90,000 has gone missing from the accounts of the company – potentially classified as matrimonial property in those proceedings. The relationship is volatile at the least and Mr Brunner gave evidence that his requests for assistance in this matter from Ms Brunner met with the response ‘over my dead body’.
- [48]I do not think compelling Ms Brunner would have progressed the evidence in this matter any further and I do not draw any inferences from her non-attendance.
- [49]The Commission submitted that the Tribunal decision in Mair is authority for the proposition that a director cannot wholly abrogate and delegate his duties of monitoring and supervising employees or advisers, as a complete proposition. However, that decision qualified that proposition by saying that:[15]
Put simply, Mr Mair did not receive answers to many questions as to the state of the business, because he did not ask them. In failing to do so, he did not take reasonable steps in his position as a Director.
- [50]The proposition in the Mair decision was therefore qualified by a requirement for the reliance on another person to be “reasonable”. The Mair decision also referred to and relied upon the QCAT single member decision in Meredith.[16] That decision was considered by the Court of Appeal as discussed above.
- [51]The proposition that is enlarged from the Mair decision by the later Meredith decision both in the Tribunal Appeal decision and the later Court of Appeal decision is that a licensee may place full reliance upon another, but only in circumstances where that reliance is shown to be reasonable.
- [52]The Commission also argues that Meredith can be distinguished because the parties there were co-directors and one director placed reliance on the other, whereas Mr Brunner was the sole office holder in this matter.
- [53]The fact remains however that he and Ms Brunner were in a close relationship of trust and his evidence is that he had no reason to not accept her advices. He and Ms Brunner had a close trusting successful business and personal relationship for over 15 years. Ms Brunner was skilled in the area of business finance and had successfully dealt with these responsibilities for many years on behalf of both of them through many legal arrangements.
- [54]I am satisfied that such a relationship or reliance existed and that it only broke down with the breakdown of the marriage. I am satisfied that the marriage disintegration as outlined in evidence by Mr Brunner was unforeseen by him.
- [55]Significantly, the evidence of Mr Brunner is that he did make enquiry of Ms Brunner by asking her from time to time how things were going, and she always assured him they were fine.
- [56]Mr Brunner placed full reliance on Ms Brunner but I accept it was reasonable for him to do so, given the nature of their relationship, her financial experience and the reassurances she gave him that everything was fine.
- [57]I am bound by the findings of the Court of Appeal Meredith decision in the application of the test of “all reasonable steps” in this matter. I do not see any foundation for distinguishing this decision on the basis of the status of the participants. I do not see that Ms Brunner was not a co-director makes any difference. The emphasis of the Court of Appeal decision is on the strength of the relationship of trust – not the status of the participants.
- [58]I am satisfied it is was reasonable in the circumstances for Mr Brunner to rely on Ms Brunner. The ‘reasonableness of his behaviour must be assessed by reference to what was known by him at the time, without benefit of hindsight’.[17] I am satisfied that prior to March 2013, it was reasonable for Mr Brunner to rely on his wife. I am further satisfied that past March 2013, Mr Brunner acted to inform himself of the true position of the ATO debt and to take what steps he could, based on professional advice, to avoid the coming into existence of the circumstances that resulted in the liquidation of Brun Pty Ltd.
- [59]I am therefore satisfied that Mr Brunner did take all reasonable steps, as required by the Commission Act as it then was, and that my discretion should be exercised to classify Mr Brunner as a permitted individual.
- [60]The decision of the Commission dated 22 January 2015 refusing to categorise Mr Brunner as a permitted individual in relation to the liquidation of Brun Pty Ltd is set aside.
Footnotes
[1] Queensland Building and Construction Commission Act 1991 (Qld), s 56AC.
[2] Letter to the ATO from Julia Brunner dated 5 September 2014; Exhibit 2, page 316 (red).
[3] Ibid.
[4] Queensland Building and Construction Commission Act 1991 (Qld), s 56AC.
[5] Ibid, s 56AD.
[6] Ibid, s 56AD(8A).
[7] Ibid, s 56AD(8B).
[8] [2010] QDC 158.
[9] Younan v QBSA [2010] QDC 158 at para [26].
[10] Statement of Craig Baldwin dated 27 November 2014: Exhibit 2, page 245 (red).
[11] [2014] QCA 62.
[12] [2014] QCAT 566.
[13] (1959) 101 CLR 298.
[14] Mair, para [29].
[15] Mair, para [47].
[16] [2012] QCAT 146
[17] Younan v QBSA [2010] QDC 158, at para [26].