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- Unreported Judgment
Mortimer v Queensland Building and Construction Commission QCAT 124
Mortimer v Queensland Building and Construction Commission  QCAT 124
Peter Owen Mortimer
Queensland Building and Construction Commission
Occupational regulation matters
6 May 2016
Member JC Carey
24 May 2016
Permitted individual – review of QBCC decision – reasonable steps to avoid liquidation
APPEARANCES and REPRESENTATION (if any):
Ms K Joyce, QBCC
REASONS FOR DECISION
- The Applicant was the sole director of Mortimer Constructions Pty Ltd. The Applicant purchased another company, Tedesco Engineering, in 2011.
- As the business grew the Applicant was required to personally supervise projects on site, which took him away from the office for extended periods of time. The Applicant states that he relied on his employees to look after financial aspects of the company in his absence.
- The company was placed in liquidation on 27 May 2015.
- The issues for decision are:
- Identification of the relevant event;
- Identification of the circumstances that resulted in the happening of the relevant event;
- Whether the Applicant took all reasonable steps to avoid the coming into existence of those circumstance; and
- If (c) is satisfied, should discretion be exercised to classify the Applicant as a ‘permitted individual’.
- There is no dispute that the relevant event was the appointment of a liquidator to Mortimer Constructions Pty Ltd on 27 May 2015.
Identification of the circumstances that resulted in the happening of the relevant event
- The Applicant contends that the circumstances which led to the happening of the relevant event are:
- an allegation of fraud by employees of the company, being misappropriation of company funds; and
- failure to recover large sums of money under a subcontract with a company called Michael Camporeale Builders (‘Camporeale’), pursuant to adjudications under the Building and Construction Industry Payments Act 2004 (Qld). Failure to recover those sums severely restricted the cash flow and resulted in the company being unable to pay its debts, including tax debts, as and when they fell due.
- The Respondent claims that the relevant event was failure to make provision for tax liabilities. The Respondent’s position is that the debt to Camporeale added to an existing problem that could not have been overcome by the Applicant, even if the outstanding monies under the subcontract were paid. The Respondent points to financial reports produced by the Applicant that show the tax liabilities were increasing, even while the Applicant was making regular repayments to the Australian Tax Office (‘ATO’).
- According to Younan v Queensland Building, by which the Tribunal is bound, the standard required is that the Applicant must produce evidence that all reasonable steps were taken without the benefit of hindsight.
- I am satisfied that the circumstances that resulted in the happening of the relevant event was the Applicant’s failure to make provision for tax liabilities. It is true that the debt not paid by Camporeale added to the pre-existing problem. However, from the financial statements filed on behalf of the Applicant it is clear that the regular repayments to the ATO were not sufficient to meet the tax debt and that the tax debt was increasing as time went by. Even if the adjudicated amount in excess of $90,000.00 been recovered, the company tax debt was in excess of $680,000.00.
Whether the Applicant took all reasonable steps to avoid the coming into existence of those circumstances
- The Applicant contends that it did take all reasonable steps by appointing staff to administer and deal with the accounting issues that it faced. The Applicant states that he thought the company BAS liability had already been paid by one of the employees and was surprised to learn that it had not.
- The Applicant states that he sought accounting advice from Moore Stephens when he realised the parlous nature of the company’s finances.
- Having regard to the evidence presented and the submissions made on behalf of the Applicant and the Respondent, the Tribunal is satisfied that the Applicant did not take all reasonable steps for the following reasons:
- The tax debt was allowed to bourgeon without being addressed for over twelve months. It was incumbent on the Applicant to ensure that the appropriate provision for taxation liabilities was made. Due to the fact that the Applicant was out of the office for long periods of time that did not occur. Reliance on employees to make unspecified payments of tax liabilities is not sufficient
- Although regular re-payments were made when able after the extent of the problem became apparent to the Applicant, it was clear that the tax debt was becoming larger and larger and that the company did not have sufficient work in progress to cover those debts.
- Although the adjudication application against Camporeale was a reasonable step in the circumstances, the non-payment of the adjudicated amount contributed to the Applicant’s situation. Although the Applicant sought legal advice and was successful in the adjudication forum, those monies were not recovered. This contributed to the company’s inability to pay its tax liabilities.
- There is an evidentiary onus on the Applicant to satisfy the QBCC that the company made appropriate provision for taxation debts. The undisputed evidence before the Tribunal is that the Applicant:
i) failed to pay the company’s tax liability when it was due;
ii) failed to keep sufficient monies in reserve to pay taxation liabilities when they arose;
iii) was reliant on future income to meet past and future taxation liabilities; and
iv) entered into a payment arrangement with the ATO because overdue tax debts could not be met and relied on future income to meet those repayments.
- The reasonable conclusion is that the company did not make appropriate provision for the payment of taxation debts. This is very similar to the factual circumstances in Queensland Building and Construction Commission v Jensen. In that case the decision of the Applicant was confirmed.
- It is this Tribunal’s role to establish what amounts to reasonable steps the Applicant should have taken to prevent the circumstances which led to the relevant event. The Tribunal does this by investigating the nature of the harm, foreseeability and degree of risk of its happening and the measures reasonably available to prevent that risk. The Applicant took steps that were too little too late and ought to have made provision much earlier.
- It is not a question of whether the Applicant did everything possible to prevent the relevant event, or whether the relevant event would not have arisen if the Applicant had acted differently. The reasonable steps taken have been assessed by reference to what was known by the Applicant at the time without the benefit of hindsight. The Applicant concedes that he “made a mistake”. However, in the circumstances the Tribunal is not satisfied that all reasonable steps were taken by the Applicant to prevent the happening of the relevant event.
Section 56AD QBCC Act
- The Tribunal must also specifically take into account the matters outlined in s 56AD(8A) of the QBCC Act. They are:
- Keeping proper books of account and financial records.
The Applicant submitted evidence that records were kept appropriately and prepared by Moore Stephens. It was not disputed by the Respondent that these records were properly prepared and presented. These statements appear to have been prepared after the extent of the tax debts became clear and did not assist in preventing the problem from arising.
- Seeking appropriate legal or financial advice before entering into financial business arrangements or conducting business.
Moore Stephens was engaged after the business was purchased. The Applicant did not seek legal or financial advice prior to entering into the subcontract with Camporeale, nor was any advice sought until the extent of the ATO debt was realised. It seems that no advice was sought or received by the Applicant in relation to amounts owed to the ATO.
- Reporting fraud or theft to the police.
The Applicant’s evidence was that he did not report his suspicion of fraud or theft to the police. No conclusive evidence was adduced to prove any such allegation.
- Ensuring guarantees provided were covered by sufficient assets to cover the liability of the guarantees.
This is not applicable to this matter.
- Putting in place appropriate credit management for amounts owing and taking reasonable steps for the recover of the amounts.
The Applicant states that he did take reasonable steps to recover amounts owed. This is evidenced by the BCIPA adjudication application against Camporeale. Unfortunately no amounts were recovered. It is clear that appropriate management and oversight of staff tasked with controlling the financial arrangements of the company was not sufficient. It is unfortunate that amounts payable form Camporeale were not recovered, however, as outlined above, these would not have been sufficient to allow the Applicant to meet its existing tax liabilities.
- Making appropriate provision for Commonwealth and State taxation events.
The Tribunal is satisfied that this did not occur for the reasons outlined above.
- The Tribunal is not satisfied that all reasonable steps were taken by the Applicant to prevent the occurrence of the relevant event.
Exercise of discretion
- The Tribunal does not need to consider this element as it is satisfied that the Applicant did not take all reasonable steps to avoid the circumstances that gave rise to the relevant event coming into existence.
- The decision of the QBCC is affirmed.
- The Applicant is to be categorised as an ‘excluded individual’.
- There is no order as to costs.
- Published Case Name:
Mortimer v Queensland Building and Construction Commission
- Shortened Case Name:
Mortimer v Queensland Building and Construction Commission
 QCAT 124
Member JC Carey
24 May 2016