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Vale v Queensland Building and Construction Commission QCAT 344
Vale v Queensland Building and Construction Commission  QCAT 344
Queensland Building and Construction Commission
General administrative review matters
29 August 2016
13 September 2016
PROFESSIONS AND TRADES – BUILDERS – LICENSING AND REGISTRATION – OTHER MATTERS - where general administrative review – whether permitted individual for builder licence – where relevant event was liquidation of company – where circumstances were insufficient working capital and entering into contract significantly increasing company’s legal and financial risk –– whether individual took reasonable steps –– where no profit and loss statements or balance sheets for three years preceding liquidation – where no legal or financial advice before signing contract
Queensland Building and Construction Commission Act 1991 (Qld), ss 56AC, 56AD, 56AE, 56AF
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 20
Ernst v. Building Services Authority  QCATA 155
Mobile Building System International Pty Ltd v. Hua  QCAT 636
Mobile Building System International Pty Ltd v. Hua  QCATA 94
Mobile Building System International Pty Ltd v. Hua  QCATA 336
Younan v. Queensland Building Services Authority  QDC 158
APPEARANCES and REPRESENTATION (if any):
Mr Mark Derbyshire appeared on behalf of Mr Nicholas Vale
Mr Brendan Cole appeared on behalf of the Queensland Building and Construction Commission
REASONS FOR DECISION
What is this Application about?
- Liquidators were appointed to Nicholas Vale’s building company, Mobile Building System International Pty Ltd on 20 May 2015. Because Mr Vale was a Director, the Queensland Building and Construction Commission categorised him as an ‘Excluded Individual’, preventing him from holding a builder’s licence for five years.
- Mr Vale then applied to the Commission to be a ‘Permitted Individual’, so that he could continue to hold an open licence as a builder. The Commission refused to categorise Mr Vale as ‘Permitted Individual’ because it was not satisfied that Mr Vale took all reasonable steps to avoid the circumstances leading to the liquidation. The Commission confirmed its decision upon internal review.
- Mr Vale has applied to the Tribunal to review the Commission’s decision.
What does the Tribunal do?
- 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.
- The Tribunal must therefore decide whether Mr Vale should be categorised as a permitted individual.
- In deciding Mr Vale’s application, the issues for me to determine are the circumstances that resulted in liquidators being appointed to his company, and whether he took all reasonable steps to avoid the ‘coming into existence of’ those circumstances.
What are the circumstances that resulted in the appointment of liquidators?
- Mr Vale submitted that the sole cause of Mobile’s liquidation were issues related to a contract he entered into with Koji Hua on 10 November 2011 to build a duplex at 18 Sapium Street, Kingston for a fixed price of $353,500.00.
- The liquidator’s report noted that in August 2012, a dispute arose about unpaid progress claims and rectification works. Specifically, Mobile had commenced proceedings in the Tribunal on 28 August 2012 to recover $127,960.35 in outstanding stage payments. However, on 28 November 2013, the Tribunal ordered Mobile pay $168,149.50 to Mr Hua.
- Mr Vale focused much of his case on the correctness of the Tribunal’s decision and later related decisions, including its decision ordering Mobile to pay $24,526.00 as security for costs that may have resulted from its appeal of the original decision, and the Tribunal’s decision to strike out Mobile’s appeal of that order.
- The difficulty is that Mr Vale has not provided any records to show Mobile’s financial position or working capital since 2011, almost four years before the liquidation. For the financial year ended 30 June 2011 and some four months before the Kingston contract, Mobile sustained an operating loss of $62,741.52 and had Net Assets of only $7,789.53, while the Independent Review Report revealed Net Tangible Assets of only $2,278.00 as at 31 October 2011. Although Mr Vale claimed to have lent money to Mobile, unfortunately neither the financial statements nor any other evidence show when and how much.
- At the start of the hearing, Mr Vale tendered a bank statement showing an overdraft facility of $40,000.00 with a debit balance of $41,481.00 as at 18 September 2012. This means that no funds were available from the facility at that time. Regardless, it does not show what funds were available when Mobile entered the Kingston contract on 10 November 2011. At best, assuming no amounts had been drawn down, Mobile had $42,278.00 available (Overdraft Facility $40,000.00 plus Net Tangible Assets $2,278.00) when it entered the Kingston Contract to do work for $353,500.00.
- This shows that Mobile was already financially vulnerable before entering the Kingston contract. At the time Mobile entered into the Kingston contract, it was not in a positive cash flow position and could not endure any disruption to its trading pattern.
- Against this background of minimal working capital and negative cash flow, Mobile signed the Kingston contract for a fixed price with a special condition that any variations would only be with the owner’s permission and at no additional cost to the owner. I do not accept Mr Vale’s submission that any variations were limited to the façade or external finishes, because these were only nominated in the special conditions as examples. Further, although the owner warranted “no known issue provided the builder constructs in accordance with builder plans”, this did not take into account unknown or latent defects. Mr Vale signed the contract at a fixed price with no knowledge of the site classification.
- As the learned Member noted in the original decision, the special conditions to the contract meant that Mobile’s fixed price was “set much too low” and “assumed all the risk for any expensive, unforeseen, latent conditions”. This applies even to Mr Vale’s version of the special conditions.
- No evidence was presented to demonstrate that Mobile had sufficient assets or cash flow to pay its current liabilities since entering the Kingston contract or before any default in payment. Mobile was entirely reliant upon progress payments and any disruption jeopardised its existence. By the time liquidators were appointed, Mobile owed $120,343 and had $129,124 owing. It could not meet its debts and was not sufficiently capitalised to continue as an ongoing entity.
- Without revisiting the Tribunal’s findings in its earlier decisions, I am satisfied that the circumstances resulting in the appointment of liquidators was Mobile’s lack of trading capital and entering into a contract on terms placing it at further significant financial risk.
Did Mr Vale take all reasonable steps to avoid the coming into existence of these circumstances?
- Mr Vale provided some evidence of Mobile’s financial history and legal advice sought, together with his submissions on the conduct of the litigation with Mr Hua and the protracted nature of those proceedings and what he considered to be “failed systems” beyond his control to recover amounts owing.
- However, it is not sufficient that Mr Vale took some reasonable steps to avoid the circumstances of Mobile’s liquidation; he must take all reasonable steps. This means that even if I accept that Mr Vale did pursue appropriate recovery action in the Tribunal for Mobile and that Mobile’s failure to recover amounts owing was beyond Mobile’s control, I must still consider other relevant prescribed matters.
Did Mr Vale keep proper books of account and financial records?
- Mr Vale did not provide balance sheets or profit and loss statements for Mobile from 2012 to 2015, when liquidators were appointed. This means that it is impossible to determine Mobile’s cash flow or whether it would have been sufficiently capitalised, regardless of the issues with the Kingston contract.
- During the hearing, Mr Vale explained that this was because his solicitors had advised him to stop all work. However, the company was still an ongoing concern and accounts should have been prepared. I am therefore not satisfied that Mr Vale has kept proper books of account and financial records.
- Mr Vale submitted that even if he had prepared these accounts, they would have essentially been the same as the 2011 statements. This means that even on Mr Vale’s version, the accounts would have shown the company to have minimal capital and cash flow – if any.
Did Mr Vale seek appropriate legal or financial advice before entering into financial or business arrangements or conducting business?
- Mr Vale provided a letter from his solicitors that relevantly stated:
We… confirm that the firm… has provided general advice with respect to various legal matters put to it by Mobile Building System International Pty Ltd over a period of time, in particular with respect to a dispute with Koji Hua and various matters ancillary thereto.
- The difficulty is that neither this letter nor any other evidence shows whether Mr Vale sought legal advice before signing the Kingston contract on 10 November 2011. During the hearing, Mr Vale clarified that although he had used the Housing Industry Association standard contract and sought general legal advice at times, he did not seek specific legal advice about the Kingston contract.
- Given his company’s already vulnerable financial position, the fixed amount of the contract, the almost one page of special conditions including the builder waiving the requirement for the owner to deposit money into a security account and the transfer of substantial risk – both legal and financial - risk to the builder, it would have been reasonable for Mr Vale to seek legal and financial advice on these changes and the potential consequences for his company.
- While Mr Vale appears to have obtained some legal assistance at various times throughout his dispute (although Mobile was not formally represented at the original hearing), by then it was too late. Mr Vale is an experienced builder who should have been alert to the special conditions that the owner was seeking to impose. In those circumstances, it would have been appropriate for Mr Vale to seek legal and financial advice before signing to protect or at least minimise the risk to his company.
Did Mr Vale report fraud or theft to police?
- In its original decision, the Tribunal did not accept Mr Vale’s claim that the Kingston contract had terms added after he signed it. Regardless of the Tribunal’s finding, I do not accept it as a circumstance causing the liquidation because even Mr Vale’s version of the contract contained a special condition about variations that significantly increased the risk to the company’s already precarious financial position.
- However, even if the alleged fraud had been a contributing factor, Mr Vale did not provide any evidence to support that he reported it to police, such as a police report or police reference number.
- In the absence of supporting evidence, I cannot be satisfied that the alleged fraud was properly reported to police.
What other steps could Mr Vale have taken?
- During the hearing, Mr Vale submitted that the reason for his company’s liquidation was a “horror client who did not want to pay”. However, in his further statement of evidence, Mr Vale attributed the Kingston contract as “the sole cause that gave rise to (Mobile) being placed into liquidation”.
- Mr Vale is required to take reasonable steps to avoid the coming into existence of the circumstances, rather than steps to address the event. Well before Mr Vale’s client became difficult or his company became embroiled in protracted litigation, Mr Vale could have attempted to re-negotiate or end the contract rather than continuing to operate at a loss.
- Unfortunately for Mr Vale, because he entered his under-capitalised company into a contract that significantly increased its legal and financial risk without obtaining legal or financial advice, he cannot be considered to have taken all reasonable steps to avoid the coming into existence of the circumstances giving rise to its liquidation.
- Because of this, I cannot be satisfied that Mr Vale took all reasonable steps to avoid the ‘coming into existence’ of the circumstances giving rise to Mobile’s liquidation.
- I must therefore confirm the Commission’s decision not to categorise him as a ‘permitted individual’.
What is the appropriate Order?
- The appropriate order is that the decision of the Queensland Building and Construction Commission not to categorise Nicholas Vale as a permitted individual is confirmed.
 Queensland Building and Construction Commission Act 1991 (Qld) ss 56AC, 56AE and
Ibid, s 56AD.
 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 20.
 Queensland Building and Construction Commission Act 1991 (Qld) s 56AD(8).
Report of FTI Consulting dated 31 July 2015.
 Mobile Building System International Pty Ltd v. Hua  QCAT 636.
 Mobile Building System International Pty Ltd v. Hua  QCATA 94.
 Mobile Building System International Pty Ltd v. Hua  QCATA 336.
Profit & Loss Statement July 2010 through June 2011.
Balance Sheet as of June 2011.
Independent Review Report of Matthew Hazlewood dated 31 October 2011.
ANZ Overdraft Statement dated 18 September 2012.
Although Mr Hale disputed the version of the contract at the original hearing, the
Tribunal accepted these terms in its findings: Mobile Building System International Pty Ltd v. Hua  QCAT 636 at  to , . In any event, the fixed price and special condition were also in Mr Vale’s draft version upon which he had relied at the original hearing.
Contract dated 10 November 2011, Item 8.
 Mobile Building System International Pty Ltd v. Hua  QCAT 636 at .
Report of FTI Consulting dated 31 July 2015.
 Queensland Building and Construction Commission Act 1991 (Qld) s 56AD(8A).
Ibid, s 56AD(8B).
 Ernst v. Building Services Authority  QCATA 155 at .
Letter PHV Law To Whom It May Concern dated 20 May 2016.
 Mobile Building System International Pty Ltd v. Hua  QCAT 636 at  to ,
Draft Special Conditions dated 8 November 2011.
Statement of Nicholas Vale dated 12 July 2016, p.8.
 Younan v. Queensland Building Services Authority  QDC 158 at .
- Published Case Name:
Vale v Queensland Building and Construction Commission
- Shortened Case Name:
Vale v Queensland Building and Construction Commission
 QCAT 344
13 Sep 2016