Building professional avoids life ban in Castle -v- QBCC decision
On 13 February, 2015 the matter of Michael Castle -v- Queensland Building and Construction Commission (QBCC) was heard in the Queensland Civil and Administrative Tribunal. At stake was the question of whether Mr Castle was to be permanently excluded from holding a builders licence, or excluded for only 5 years.
Ultimately the Applicant, Mr Castle, succeeded in his submissions. The key principle emerging from this matter and which decided the issue was that the reasonableness of the Applicant’s conduct ought to be assessed by reference to his knowledge and personal circumstances at the time of that conduct.
Under the Queensland Building and Construction Commission Act 1991 (‘QBCC Act’), a ‘bankruptcy event’ occurs where a person uses the law of bankruptcy to their advantage (they enter into voluntary bankruptcy), or is forced into bankruptcy by a creditor (they enter into involuntary bankruptcy). The result is that they become an excluded individual.
In addition, if a person was a director or an influential person in a company, and that company enters into liquidation or is wound up, that too is a relevant event (a ‘company event’), the effect of which is that the director or influential person becomes an excluded individual.
The penalty for being an excluded individual is a 5 year ban on holding a builders licence.
Where a person is the subject of two relevant events, for example both a bankruptcy event and a company event, they may be deemed to be a permanently excluded individual, which as the name suggests, is an individual permanently excluded from holding a builders licence.
However the person can apply to become a ‘permitted individual’ if they can show that they took all reasonable steps to prevent the event from occurring.
This law is currently under review and may result in automatic bans without any ability to apply to be a permitted individual.
The potentially harsh effects of the QBCC Act are magnified when exposed to the reality of the building industry.
It is common that, for the usual reasons of risk management and financial certainty, builders form a company through which they practice their trade. Often they establish multiple companies based on an accountants’ advice and when one falls down, so do the others. However, from this common business arrangement can flow serious consequences for a builder should the company get into financial difficulties.
Oftentimes, a director-builder will provide personal guarantees for goods purchased in the course of the business. When the business defaults, the personal guarantees are triggered and the director is forced into bankruptcy.
Other times the events will be unrelated but the outcome the same; two relevant events occur in a short period of time and as a result the builder is permanently excluded individual.
Castle -v- QBCC
Mr Castle’s matter concerned the latter scenario. Two events had occurred but were considered unrelated, thereby disentitling him from a defence available under the QBCC Act. In order to avoid permanent exclusion he had to show that for one of the two events, the company event, he was not an excluded individual.
His application was grounded in the argument that he took all reasonable steps to prevent the liquidation of his company. At the heart of this submission was the question of whether the determination of ‘reasonable steps’ should be viewed from the perspective of the company – potentially a more objective test – or from the perspective of the individual, a more subjective consideration.
If the latter argument were to be accepted by the Tribunal, then upon assessing whether the steps taken by Mr Castle to avoid his company going into liquidation were reasonable, reference would need to be made to Mr Castle’s understanding of the financial condition of the company when he took those steps.
Ultimately it was decided that the latter test was the correct and preferable one, and on these grounds Mr Castle was considered to have acted reasonably. As a result he was considered a permitted individual in relation to the company event and avoided being categorised as a permanently excluded individual.
Matthew Foster – Solicitor