Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Gittany v Director-General, Department of Finance and Services, NSW Fair Trading [2014] NSWCATOD 119 Hearing dates: 22 April 2014 Decision date: 20 October 2014 Jurisdiction: Occupational Division Before: S Higgins, Principal Member Decision: The decision of the respondent to refuse the applicant's application for a contractor licence is affirmed. Catchwords: ADMINISTRATIVE LAW - administrative review of decision to refuse the applicant's application for a contractor licence to contract to undertake residential building work - applicant a director of an externally-administered corporation within three years prior to making his application - whether the applicant took all reasonable steps to avoid the liquidation of these corporations - whether the applicant a fit and proper person to be issued with a contractor licence Legislation Cited: Administrative Decisions Review Act 1997 Building and Construction of Securities of Payments Act 1999 Civil and Administrative Tribunal Act 2013 Corporations Act 2001 Home Building Act 1989 Home Building Regulation 2004 Cases Cited: Australian Broadcasting Commission v Bond [1990] HCA 33; (1990) 170 CLR 321 Hughes & vale Pty Ltd v New South Wales (No 2) [1955] HC 28; (1955) 93 CLR 127 Obradovic v Commissioner for Fair Trading, Office of Fair Trading (GD) [2006] NSWADTAP 18 Pobjie v Commissioner for Fair Trading, NSW Office of Fair Trading (No 2) [2008] NSWADT 39 Sobey v Commercial and Private Agents Board 20 SASR 70 Re Brennan & Australian Casino Surveillance Authority (1995) 38 ALD 794 Re Percival and Australian Securities Commission (1993) 30 ALD 280, at 290. Category: Principal judgment Parties: Mouhsen Gittany (Applicant) Director-General, Department of Finance and Services, NSW Fair Trading (Respondent) Representation: Counsel: R Notley (Applicant) ERA Legal (Applicant) B Burke (Respondent) File Number(s): 133356 reasons for decision Introduction 1The applicant, Mouhsen Gittany, seeks review of the decision of the respondent, the Director-General, Department of Finance and Services, NSW Fair Trading, to refuse his application for a contractor licence under Division 1 of Part 3 of the Home Building Act 1989 (HB Act). 2The applicant made his application for a contractor licence on 30 January 2013. He had also made an application, on behalf of Affordable Housing Constructions Pty Ltd, for a contractor licence. In that application he had identified himself as the company's proposed authorised supervisor. 3On 30 April 2013, the respondent determined to refuse both applications. The basis on which that decision was made was the applicant's involvement, as a director, of a number of companies which had been placed in external administration within three years of having made his application for the licence. 4The applicant sought internal review of the respondent's determination. 5On 8 November 2013, the respondent determined to affirm its earlier decision. 6On 29 November 2013, the applicant lodged this application with the then Administrative Decisions Tribunal, seeking external review of the respondent's determination in regard to his application for a contractor licence. 7The applicant's application was heard on 22 April 2014. 8As anticipated, on 1 January 2014, the NSW Civil and Administrative Tribunal was established and on its establishment the Administrative Decisions Tribunal was abolished (see s 7 and cl 3 of Schedule 1 of the Civil and Administrative Tribunal Act 2013). By reason of cl 7(1) and (3) of Schedule 1 of the Civil and Administrative Tribunal Act 2013, this application is taken to be an application before the NSW Civil and Administrative Tribunal (NCAT), with NCAT (the Tribunal) being vested with all the relevant functions of the Administrative Decisions Tribunal immediately before its abolition and the provisions of HB Act continuing to apply. 9There is no dispute that the Tribunal has jurisdiction to hear and determine this application. 10The role of the Tribunal is to determine, having regard to the applicable law and the relevant factual material, whether the decision of the respondent is the correct and preferred decision: see s 63(1) of the Administrative Decisions Review Act 1997, as it applied prior to 1January 2014. 11For the reasons set out below I have found that the decision of the respondent to refuse the applicant's application for a contractor licence is the correct and preferred decision. However, I have not made this finding on the basis of the applicant not being a fit and proper person to hold such a licence. I have made my finding on the basis that I am not satisfied that the applicant took all reasonable steps to avoid the appointment of an administrator to the companies of which he was a director and which have now been deregistered. Home Building Act 1989 12The HB Act makes provision for residential building work and specialist work (e.g. plumbing, gasfitting and electrical work). The latter is not relevant to this application. 13Residential building work is defined in subs 3(1)of the HB Act to mean: residential building work means any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling. 14Para 4(1)(a) of the HB Act, prohibits a person from contracting to do residential building work unless they are the holder of a contractor licence authorising the holder to contract to do such work. 15Division 1 of Part 3 of the HB Act makes provision for the issue of a contractor licence. The relevant provision for the purpose of this application is s 20, which relevantly provides: 20 Issue of contractor licences (1) The Director-General must refuse an application for a contractor licence if: (a) the Director-General is not satisfied that the applicant is a fit and proper person to hold a contractor licence, or (b) ... (c) ... (1A) Without limiting subsection (1) (a), in determining whether an applicant is a fit and proper person to hold a licence the Director-General is to consider whether the applicant is of good repute, having regard to character, honesty and integrity. (2) The regulations may fix or provide for the Director-General to determine additional standards or other requirements that must be met before any contractor licence is issued or before a contractor licence of a particular kind is issued. (3) The Director-General must refuse an application for a contractor licence if: (a) the Director-General is not satisfied that any such requirement would be met were the contractor licence to be issued, or (b) ... 16For the purpose of subs 20(2) of the HB Act, cl 25 of the Home Building Regulation 2004 (HB Reg), prescribes a number of matters of which the respondent must be satisfied before an authority (including a contractor licence) under the HB Act is issued. For the purpose of this application the relevant matters are: 25 General requirements for obtaining certain authorities under Act (1) Before an authority (other than an owner-builder permit) is issued, the Director-General must be satisfied that: (a) each relevant person in relation to the application for an authority: (i) ... ..., and (xiii) except in relation to an application for a tradesperson certificate-within the period of 3 years before the date of the application, ... was not a director of, or a person concerned in the management of, an externally-administered body corporate (within the meaning of the Corporations Act 2001 of the Commonwealth) except in a case of a voluntary winding up of the body corporate, ... 17The term 'a relevant person' is defined in cl 25(2) of the HB Reg to include the applicant for an 'authority' under the HB Act, which includes a contractor licence: see subs 3(1) of the HB Act. 18Cl 26 of the HB Reg prescribe some additional requirements for obtaining a contractor licence. That cl relevantly provides as follows: 26 Additional requirements for obtaining contractor licences (1) ... (2) ... (3) Despite clause 25 (1) (a) (xiii), the Director-General may issue a contractor licence if the Director-General is of the opinion that: (a) there is no evident risk to the public that the applicant will be unable to complete building contracts entered into in the future for the doing of residential building work or specialist work of that kind, or both, and (b) the relevant person concerned took all reasonable steps to avoid the ..., liquidation or appointment of a controller or administrator. (3A) A contractor licence issued under subclause (3) may be issued subject to any of the following conditions: (a) that the licence authorises its holder to do residential building work or specialist work of the kind prescribed by clause 46 (clause 46 (1) (a) and (b) excepted) but not of any other kind, (b) that the holder of the licence not do work: (i) if the contract price exceeds $20,000 (inclusive of GST), or (ii) if the contract price is not known-where the reasonable cost of the labour and materials involved in the work exceeds $20,000 (inclusive of GST). (4) ... Issues 19There is no dispute that the applicant was a director of several externally-administered corporations within three years of his application for a contractor licence. Accordingly, there is no dispute that clause 25(1)(a)(xiii) of the HB Reg apply. 20What is in issue is the following: (a)whether, the grounds for the exercise of the discretion in cl 26(3) of the HB Reg apply and the discretion should be exercised in favour of the applicant; and (b)whether, on the material before the tribunal, the applicant's involvement as a director of the companies in which he was a director establishes he is not a fit and proper person to hold a contractor licence (s 20(1) and (1A) of the HB Act). 21It is the respondent's contention that there is no basis to exercise the discretion in cl 26(3) and that the conduct of the applicant, as a director of companies that have been placed in external administration show that he is not a fit and proper person to be issued with a contractor licence. The applicant contends that he is a fit and proper person to be issued with a contractor licence and that the discretion in cl 26(3) should be exercised in his favour. The evidence 22In support of his application, the applicant relied on a statutory declaration made by him on 26 March 2014. Exhibited to his statutory declaration was a folder of documents. The applicant also relied on three further statutory declarations, made by his father, Anthony Gittany, his brother, Antoine Gittany and his accountant, Simon Patrick Reed. 23The respondent relied on two bundles of documents together with a company extract for Pluto Industries Pty Ltd and Tasman Explorer Fisheries Pty Ltd. 24The applicant also gave oral evidence at the hearing and was cross-examined by Ms Burke, on behalf of the respondent. 25The applicant is 31 years of age. He has been working in the building industry since he left school in 2001. His father has been the holder of a contractor licence for many years and the applicant and his brothers have all worked for him at some time. In around 2008, the applicant began working for Dilcara Constructions Pty Ltd as a carpenter and construction manager. In early 2010 the applicant began working with Opera Projects Pty Ltd in a similar capacity. The applicant ceased working for these companies at the end of 2012. He is currently working as a sub-contractor for Complex Scaffolding Solutions Pty Ltd as a sales representative. 26The applicant has been involved in the development and construction of numerous residential building projects, including two projects as an owner builder. 27In 2012, the applicant obtained his Certificate II and IV in Carpentry. 28During the course of the hearing, Ms Burke advised that the respondent was satisfied that the applicant had the necessary qualifications and experience to be issued with a contractor licence. 29Since 13 December 2002, the applicant has been a director of nine companies, eight of which are now deregistered and one is in liquidation. In summary the companies of which the applicant was a director and their status at the time of hearing is as follows: Company Name Incorp. Date Appoint. of Administrator Date of De-Registration Gittany Scaffolding Pty Ltd 13/12/2002 01/07/2008 Samco Scaffolding Pty Ltd 07/02/2005 2/02/2011 01/07/2012 Plank Corp Australasia Pty Ltd 17/05/2005 20/4/2010 04/12/2011 M.G.G. Group Pty Ltd 17/05/2005 5/01/2010 07/07/2013 RCJ Holdings Pty Ltd 17/05/2005 5/01/2010 07/07/2013 Pluto Industries Pty Limited 24/03/2006 19/02/2009 21/05/2011 Gas-Online Pty Ltd 18/05/2006 27/04/2009 Samco The Scaffolding Solution Pty Ltd 07/02/2007 6/02/2013 In Liquidation E.N.D. Scaffolding Pty Ltd 05/05/2005 11/12/2005 30Of concern to the respondent is the applicant's directorship in M.G.G. Group Pty Limited (MGG Group), RCJ Holdings Pty Ltd (RCJ Holdings), Plank Corp Australasia Pty Ltd (Plank Corp), Samco The Scaffolding Solution Pty Ltd (Scaffolding Solution) and Samco Scaffolding Pty Ltd (Samco). Administrators were appointed to each of these companies and they were wound-up and deregistered as listed above. Background to the company structures 31In his statutory declaration, the applicant explained that he, his cousin and Steven Jeitani (Mr Jeitani) incorporated Gittany Scaffolding Pty Ltd (Gittany Scaffolding) for the purposes of supplying scaffolding to construction sites. About four months after the company was incorporated (i.e. about 8 April 2003), in the course of supplying scaffolding for a construction site, Mr Jeitani fell from a height and badly injured his back. The applicant said as a result of the injuries, Mr Jeitani was unable to continue to work in the scaffolding business. As Mr Jeitani did not receive any benefits from a workers compensation insurer, the applicant decided that Gittany Scaffolding should continue to operate and pay Mr Jeitani. He said his cousin, Matthew Gittany, did not agree with this approach and the company was ultimately voluntarily wound-up. 32In the meantime, in February 2005, he and Mr Jeitani incorporated Samco. About three months after Samco was incorporated, the applicant said they received advice from their then accountant to establish three further companies. These were Plank Corp, MGG Group and RCJ Holdings. 33The applicant said that the purpose of this company structure was as follows: (a)Samco would be the entity that entered into contracts for the sale of scaffolding equipment to MGG Group, RCJ Holdings and external third parties. Samco would give its clients an all-exclusive scaffold service which included labour, transport, hire and all components required to complete the project. The applicant said that he provided in excess of $200,000.00 in seed funding to Samco. This funding was obtained by using his home as security. (b)Plank Corp would purchase the scaffolding equipment, predominantly from China, for the on-sale to MGG Group, RCJ Holdings and external third parties; and (c)MGG Group and RCJ Holdings would jointly purchase land for the purpose of development of residential properties on that land. 34In accordance with the above structure, MGG Group and RCJ Holdings purchased land at 39 Chetwynd Road, Merrylands (Merrylands), 8 Baronia Street, South Wentworthville (South Wentworthville) and 6-8 Wynyard Street, Guildford (Guildford), with the intention of constructing four townhouses/units on each block of land. 35The applicant said he directed that funds due to him from a recent sale of a residential development in Newtown were to be placed into the accounts of MGG Group and RCJ Holdings so as to ensure that the abovementioned development projects were completed. 36The applicant explained that the MGG Group was the trustee of the Mas Trust and held the jointly owned property assets of MGG Group and RCJ Holdings on trust for the Sam Trust. The beneficiaries of the Mas Trust included the applicant and members of his family. RCJ Holdings was the Trustee of the Sam Trust and held the jointly owned property assets of the MGG Group and RCJ Holdings as Trustee for the Mas Trust. The beneficiaries of the Sam Trust were Mr Jeitani and members of his family. 37The applicant explained that Pluto Industries was incorporated in 2006 as the entity that would perform building and construction works for MGG Group and RCJ Holdings. He noted he was only a director of Pluto Industries from 24 March 2006 to 8 November 2006. That is, he was not a director of that company when it went into external administration. The applicant said that he was not at any time aware of the company having been placed into liquidation until early 2010 when the liquidator of Pluto Industries contacted him and advised that the basis on which the company had been placed into external administration. 38The applicant explained Samco Solution was incorporated subsequently for the purpose of hiring labour for the MGG Group and RCJ Holdings projects. Administration and deregistration of MGG Group and RCJ Holdings 39As I have noted, an administrator was appointed to MGG Group and RCJ Holdings, on 5 January 2010. The administrator was appointed on the basis of a resolution, by the applicant (the sole director of each company) that each company was or was likely to become insolvent at some future time (see s 436A of the Corporations Act 2001). 40In his 7 January 2010 notice of appointment and the calling of the first meeting of creditors, the Administrator identified the creditors of the companies as follows: Arab Bank TBC Advance Legal $25,000 ATO TBC Gittany Anthony $260,000 Gittany Mouhsen $329,500 Jeitani Steven $329,500 M & N Partners TBC Padovan Michael TBC Property Select $78,672 Samco Scaffolding $578,199 Turbo Scaffolding $259,300 41On 2 February 2010, the Administrator issued a notice of second meeting of creditors. Attached to that notice was the Administrator's report to creditors under subs 439A(4) of the Corporations Act 2001. At para 1.3 of that report the administrator had the following disclaimer: This report has been prepared from my investigations to date, which has relied on the available books and records of the Companies and information provided by the Companies' director, Mr Mouhsen Gittany, .... the Companies' solicitors and the Company's external accountants. Due to time constraints imposed by the Act, this information has generally been accepted without conducting an audit or obtaining independent verification of its accuracy. 42At para 4.6 of his report, the Administrator noted that the applicant had not provided him with a report as to the affairs (i.e. an insolvency balance sheet) of the companies and that he would endeavour to obtain this prior to the second meeting of creditors. In his report, the Administrator also noted the following: (a)Mr Michael Padovan and Mr Ravy Bale had commenced the winding up proceedings against the companies in the Supreme Court. In support of their application for winding up in insolvency Mr Padovan and Mr Bale claimed that the companies were indebted to them for the amount of $464,032.85 which represented the balance of purchase monies paid in pursuance of a contract for sale of land dated 28 August 2006, subsequently rescinded by them. This debt arose from an agreement that Turbo Scaffolding Pty Ltd (Turbo), a company in which Mr Padovan and Mr Bale had an interest, would transfer scaffolding equipment, to the value of $464,032.65, to Samco. In consideration for the transfer of the scaffolding equipment, the MGG Group and RJC Holdings agreed to transfer two properties they jointly held to Mr Padovan and Mr Bale for the sale price of $670,000.00. When the MGG Group and RJC Holdings failed to transfer the properties, Mr Padovan and Mr Bale rescinded the contract for the sale of the properties and commenced proceedings in the Supreme Court seeking recovery of the value of the scaffolding equipment that had been transferred Samco. The Administrator stated further investigations were required in regard to this transaction to ascertain whether it was one falling within section 588FB of the Corporations Act 2001 (i.e. an uncommercial transaction), (b)the assets owned by the companies comprised of four jointly owned units located at Merrylands and a further jointly owned unit at Guildford. Each unit had a first ranking mortgage in favour of the Arab Bank, (c)the principal place of business of MGG Group was the residential address of the former director of the company Ms K Jeitani (the wife of Mr Jeitani). The principal place of business of RCJ Holdings was the residential address of the applicant. It was noted that the companies did not trade on a day to day basis. However, the applicant managed the overall affairs of both companies as required. The companies did not employ any employees, (d)a number of payments made from the cash management account of the companies were identified as 'potential preference payments'. Twenty-five payments were identified, which totalled $218,296. With two exceptions the payment were described as being 'TRF Gittany Loan'. The exceptions were a payment to Samco for $8,900 and a payment to the applicant's father for $10,000. Again these payments were identified as requiring further investigation; (e)six related party transactions which were identified as requiring further investigation. These were: * a loan account owing from Gas On-Line Pty Ltd to the companies for an amount of $409,800; * a loan account owing from Pluto Industries for $1,109.34; * a loan account owing from the companies to 'related parties', which were not identified, for an amount of $51,470; * a loan account owing from the companies to Samco for $705,054 in 2009 (from $75,000 in 2008); * a loan account owing from the companies to the applicant's father for an amount of $260,000. It was noted that the applicant's father had a second ranking mortgage over a unit at Guilford as security for this loan; and * $13,206 interest paid to 'related corporations'. 43In his report to creditors, the Administrator also put forward a proposed deed of company arrangement for consideration. He described the advantages and disadvantages of such a deed. 44It is the applicant's evidence that Turbo Scaffolding had initially supplied scaffolding material to Gittany Scaffolding and as at 31 March 2005 Gittany Scaffolding owed Turbo Scaffolding $106,137.64. He said that a month prior to this, Turbo Scaffolding had established a trading account for Samco. By the beginning of 2006, Samco had purchased almost $450,000.00 of scaffolding material from Turbo Scaffolding, for which it had only paid $221,000.00, leaving a debt of $227,121.25. 45He said Turbo Scaffolding demanded he and S Jeitani personally settle the debt owed to it by Gittany Scaffolding and Samco. In response to the demand, he and S Jeitani suggested they satisfy the debt by transferring to directors of Turbo Scaffolding (Mr Bale and Mr Padovan) two lots that were being developed by MGG Group and RCJ Holdings at Merrylands. The proposed purchase price for that sale was $670,000.00. The applicant went on to say the proposal was that the $300,000.00 debt Gittany Scaffolding and Samco owed to Turbo Scaffolding would be considered to be the deposit on the sale of the lots to Mr Bale and Mr Padovan, with Mr Bale and Mr Padovan paying the balance of $370,000.00 to MGG Group and RCJ Holdings at the time of settlement of the sale of the lots. On the basis of this proposal Turbo Scaffolding continued to supply scaffolding to Samco. 46The applicant said that in February 2007, MGG Group and RCJ Holdings entered into a loan agreement with the Arab Bank as lender whereby the Arab Bank agreed to lend MGG Group and RCJ Holdings $600,000.00 to re-finance an existing investment property loan relating to the land at Merrylands and another unrelated property. Then, in November 2008, MGG Group and RCJ Holdings entered into a construction finance facility agreement with the Arab Bank whereby the bank agreed to lend to MGG Group and RCJ Holdings up to $600,000.00 to construct four, two bedroom townhouses on the land at Merrylands. In consideration of the loan and the construction facility, the Arab Bank became the registered first mortgagor over the whole of the land at Merrylands. 47A condition of the loan and construction facility was that MGG Group and RCJ Holdings procure exchanged contracts in respect of two of the lots being developed on the land at Merrylands. The applicant and Mr Jeitani jointly and severally guaranteed the obligation of MGG Group and RCJ Holdings under the loan and the construction facility. 48The construction of the lots on the land at Merrylands was completed around April 2008. At the time Mr Bale and Mr Padovan occupied the lots and made the lots available for rent even though the plan of subdivision of the land had not been registered. 49On 4 November 2008, Mr Bale and Mr Padovan rescinded the contract for sale of the lots on the land at Merrylands and demanded a refund of the consideration under the sale contract, which had been intended to satisfy the debt owed for the ongoing supply of scaffolding, to Samco, by Turbo Scaffolding. The applicant states that a refund was not possible as the scaffolding, which had been supplied was being used and he did not otherwise have the funds available to make the refund. 50The applicant explained the sale of the lots on the land at Merrylands could not be completed because there was a delay in the issue of occupation certificates for the development. The delays, he said, were due to a dispute about the cutting down of two large dead overhanging trees from a neighbouring property onto the land at Merrylands. In cross-examination, the applicant acknowledged that the removal of the trees had been included in the development application. 51The applicant said that in April 2009, he and S Jeitani made a further 'informal' proposal to Mr Bale and Mr Padovan in order to satisfy the debt that was owed to Turbo Scaffolding. The proposal was that the property being developed by the MGG Group at South Wentworthville be transferred to Mr Bale and Mr Padovan. That transfer, however, was conditional on Mr Bale and Mr Padovan discharging the existing Arab Bank mortgage, on the property and the difference between the amounts paid to discharge the mortgage and the agreed value of the property would be set off against the amount owing to Turbo Scaffolding in regard to the rescission of the sale contract for the developed lots on the land at Merrylands. The applicant said the agreement was accepted by way of a handshake and the agreed purchase price for the South Wentworthville property was $660,000.00. 52The applicant said this agreement was a valid attempt to save the relationship with Turbo Scaffolding and to settle their outstanding issues on commercial terms. However, Mr Bale and Mr Padovan commenced proceedings in the Supreme Court seeking to have MGG Group and RCJ Holdings wound-up. The applicant said that as a result of those proceedings, in July 2009 the South Wentworthville property was sold and an amount of $175,967.15 was credited against the amount MGG Group and RCJ Holdings owed Turbo Scaffolding as a result of their (i.e. Turbo's) rescission of the contract for the lots on the land at Merrylands. This left an amount of $464,032.85 being outstanding. 53In December of 2009, Mr Bale and Mr Padovan registered caveats on the title of the lots on the land at Merrylands and subsequently commenced proceedings to windup MGG Group and RCJ Holdings, which resulted in the Arab Bank entering into possession of the lots on the land at Merrylands. The properties were sold and the caveat removed. The net proceeds of those sales were applied in reduction of the debt due under the Merrylands loan and construction facility. The Merrylands loan was fully repaid but the construction facility had a shortfall figure of $74,649.84 owing to the Arab Bank. 54In the winding up proceedings, Mr Bale and Mr Padovan also sought a right of subrogation to the personal guarantee given by the applicant which was secured by the mortgage in favour of the Arab Bank over the Merrylands property. In those proceedings the Court found that Mr Bale and Mr Padovan had a negligible interest in the Merrylands property and as their equitable interest had been taken and sold when the Arab Bank exercised its power of the sale and the proceeds of sale of that interest, the Court ordered that Mr Bale and Mr Padovan were entitled to be subrogated to the rights of Arab Bank against the applicant as guarantor of the debt due by MGG Group and RCJ Holdings. The applicant said as a result of these Court orders, Mr Bale and Mr Padovan wound-up MGG Group and RCJ Holdings. Administration and deregistration of Samco 55As noted above, the Administrator was appointed to Samco on 21 December 2010. On 4 March 2011, at a meeting of creditors, it was resolved that it would be wound up under s 439C(c) of the Corporations Act 2001. The applicant asserted that Samco had a number of bad debtors, which brought about the demise of Samco and MGG Group and RCJ Holdings. In summary these debtors were: (a)Commercial and Residential Constructions Pty Ltd - owed Samco $50,000.00 when it was placed into external administration on 13 February 2006. The applicant said he attended a creditor's meeting where creditors were informed they would receive no more than 5 cents in the dollar of the amounts owing to them. The applicant said that in these circumstances he decided not to lodge a formal proof of debt in the winding up of that company; (b)Tasman Explorer Fisheries Pty Ltd -as at 30 August 2007, this company owed Samco an amount of $387,098.82. In addition to this, sometime after 6 March 2007, Tasman Explorer rescinded five contracts for the sale of five lots at Guildford, for which MGG Group and RCJ Holdings had paid a deposit of $96,250.00, which was never returned. Tasman Explorer was placed into external administration on 15 September 2009; (c)JPS Development - as at 18 December 2008, JPS Development owed Samco an amount of $724,797.00. JPS Development was placed into external administration on or around 13 July 2012. The applicant said he attended a creditor's meeting of the company and lodged a formal proof of debt. However, he has never received any notification from the liquidator as to his proof of debt or been paid any money; (d)Kich Constructions Pty Ltd -as at 3 March 2009, Kich Constructions owed Samco an amount of $120,000.00 for the supply of scaffolding equipment. By agreement the amount owing was reduced to $67,627.00 but that amount was never paid; (e)MCP Group Pty Ltd for - in September 2010, Samco obtained judgement debt against MCP Group for $88,000.00 and served a statutory demand for this amount, which was not pursued further; (f)Arkibuilt Pty Ltd - in September 2010, Samco commenced proceedings, in the District Court, against Arkibuilt seeking to recover $184,132.50 in unpaid invoices that dated back to 2007. These proceedings were not pursued any further; (g)Velcon Constructions Pty Ltd - as at September 2010, Velcon owed Samco $68,808.34 for unpaid fees for demolition and excavation work it had undertaken. Samco obtained judgment for this amount in the Parramatta Local Court and statutory demand was made in regard to this amount. This was not pursued any further. 56The applicant and Mr Jeitani were both appointed directors in February 2005. However, Mr Jeitani resigned as a director in October 2007, leaving the applicant as the sole director. Administration and deregistration of Plank Corp 57As noted above, an application for a winding-up order of Plank Corp was filed on 12 March 2010. Three days prior to this the applicant became a director of this company replacing the former sole director, the applicant's partner. She had been the sole director since May 2008. 58On 27 April 2010, the Court made an order for the winding up of Plank Corp. The company was deregistered in December 2011. 59In the report as to the affairs regarding the winding up of Plank Corp, the estimated total liabilities of the company is stated to be $58,438.00 and the causes of the failure of the company are said to be: 'Poor strategic management of business. Poor economic conditions. Trading losses.' Administration and deregistration of Scaffolding Solutions 60The applicant and Mr Jeitani were both appointed as directors of Scaffolding Solutions on 7 February 2007, when the company was incorporated. The company was placed into a creditor's voluntary winding -up in February 2011. The creditor being the Workers Compensation Nominal Insurer and as I have noted the company was wound-up and deregistered on 1 July 2012. 61It is the evidence of the applicant that he was unaware of the company having been placed into liquidation until around April 2013. He said he was not served with a creditor's statutory demand, but he understood through discussions with his former solicitor that a demand had been made by the workers compensation nominal insurer. He said his solicitor advised him that it would not be in his interest or that of Scaffolding Solutions to make an application to have the orders appointing the administrator aside. 62In cross-examination, the applicant acknowledged he had been involved in a dispute with the insurer over a claim for compensation by a worker allegedly engaged by the company. Cl 26(3) discretion 63As I have pointed out above, by reason of the applicant having been a director of a company(s) which were the subject of external administration within three years of his application for a contractor licence, the Director-General was required to refuse his application: see subs 20(2) of the HB Act and cl 25(1)(a)(xiii) of the HB Reg. However, the Director-General is also given a discretion (see cl 26(3) of the HB Reg) to grant such a licence where he forms the opinion that: (a) there was no evident risk to the public that the applicant will be unable to complete residential building contracts entered into in the future; and (b)the applicant took all reasonable steps to avoid external administration and liquidation of the five companies of which he was a director. 64In regard to (a) above, the respondent contends that a competent builder 'would have acted much earlier on a requirement in the DA to ensure timely completion of the building contract' for the sale of the units at Merrylands. The respondent also appears to rely on its finding that the applicant is not a fit and proper person to be issued with a contractor licence as a basis for finding that there is an evident risk to the public that the applicant will be unable to complete residential building contracts entered into in the future. 65And in regard (b) above, the respondent contends the complicated corporate structure adopted by the applicant, together with the manner in which the companies traded the applicant was able to place himself and other family members in a better position to that of the other secured creditors. This, the respondent claimed negated any suggestion that the applicant took reasonable steps to avoid external administration of his companies. 66In regard to (a) above, the applicant noted that the winding-up of MGG Group, RCJ Holdings, Samco, Scaffolding Solutions and Plank Corp did not result in the developments at Merrylands, South Wentworthville and Guilford being left prior to completion. On the contrary, they were all completed and ultimately sold. In his evidence the applicant also pointed to a number of residential dwellings and buildings he has worked on and which have all been completed. Completion of this work, the applicant argues is evidence of no risk to the public of him completing residential building contracts in the future, should he be issued with a licence. 67The respondent has not questioned this evidence and as I have noted, the respondent concedes that the applicant has the necessary skills to complete residential building contracts in the future. Accordingly, the only question is whether the applicant's fitness and propriety is relevant to this. In my view, this will depend on the circumstances in which such a finding is made. In this application, for the reasons set out below, I have not made a finding that the applicant's conduct in regard to the companies of which he was a director demonstrates that he is not a fit and proper person to be issued with a contractor licence. 68Accordingly, given the applicant's experience in the industry and the respondent's concession that he has the necessary skills to undertake that work I am satisfied that cl 26(3)(a) of the HB Reg is satisfied. However, I am unable to make a similar finding in regard to cl 26(3)(b) (i.e. the applicant took reasonable steps to avoid external administration and liquidation of the five companies of which he was a director). 69It is the contention of the applicant that the efforts he and Mr Jeitani made to settle the debt Samco and Gittany Scaffolding owed to Turbo Scaffolding together with the steps he took in seeking to recover debts owed to Samco were sufficient to meet this requirement. In addition to this, the applicant contends that when a settlement could not be reached he initiated the winding-up process as he could see that there were solvency issues. 70In my view, on the material before the tribunal, these were all very last minute steps, when it was evident from the beginning of 2006 that the scaffolding arm of the business, Samco had incurred a considerable debt to its supplier Turbo Scaffolding. On the evidence of the applicant, it was a debt, neither he, or the business could pay. At the time it was a debt of $227,121.25 and instead of seeking ways to decrease the debt, he and Mr Jeitani entered into an arrangement that facilitated the increase of that debt. Samco also appears to have a number of large external debtors. The largest being Tasman Explorer Fisheries and JPS Development. In regard to these debts, the applicant filed an invoice issued by Samco, on 30 August 2007, to Tasman Explorer Fisheries and another invoice issued to JPS Development on, 18 December 2008. These invoices are not itemised, but are both stated to be a claim under the Building and Construction Industries Security of Payment Act 1999. The objective of that Act I note is to ensure the quick recovery of any progress payments issued in accordance with a construction contract. 71These debts alone totalled $1,111,836.79. As the Samco arm of the business appears to have been intended, in part, to provide revenue for the group of companies under the applicant's control, his failure to fully explain when these debts arose and what steps were taken to enforce the payment thereof leaves me with the impression that he did nothing. Accordingly, it is difficult to say the applicant took reasonable steps to avoid the administration of this company. 72The applicant acknowledged the debt Samco owed Turbo Scaffolding and its failure to recover amounts owing to it by its debtors was instrumental in MGG Group and RCJ Holdings being placed into administration. While I accept he and Mr Jeitani endeavoured to discharge that debt, in my view, on the information available, it was all too late. As noted in the Administrator's first report to creditors, the MGG Group and RCJ Holdings also owed Samco more than $500,000. With this knowledge of the ever increasing debts owed by and to Samco, since 2005, in my view, a reasonable person in the position of the applicant and Mr Jeitani would have taken steps much earlier to avoid the companies being placed into external administration. 73Accordingly, I am not satisfied that the applicant took all reasonable steps to avoid these companies being placed into external administration. 74I make a similar finding in regard to Plank Corp and Scaffolding Solutions. As I have noted, the applicant did not become a director of Plank Corp until the day before it was placed into administration. I assume he did so as he was in effect the controller of that company and not his partner, yet there is no evidence of him having taken steps to avoid that company being placed into external administration. In regard to Scaffolding Solutions, in my view, as a director of that company it was incumbent on his to be fully aware of debts being incurred by that company. Fitness and propriety of the applicant 75In its submissions, the respondent adopted the findings of the internal reviewer in that the applicant is not a fit and proper person to be issued with a contractor licence because his pattern of behaviour lacked integrity and honesty. The internal reviewer made the following findings on the basis of the Administrator's 2 February 2010 report to creditors of MGG Group and RCJ Holdings: * the applicant continued trading while insolvent * unfair preferences had been made to accounts belonging to related parties * the transaction entered into with Messrs Bale and Padovan was an uncommercial transaction * the related parties transaction had been ongoing for some time. 76On the basis of these findings, and the internal reviewer formed the opinion that: i. the applicant's companies were linked in a complicated network so as to optimise the opportunity for the applicant to reduce his obligations and subsequently add to his profit; ii. the applicant over extended himself and decided to trade insolvent hoping to diminish his losses by transferring money to related parties, including himself, while insolvent and to enter into an unwise transaction that resulted in the court action by Messers Bale and Padavon; iii. the applicant did not take steps to minimise his loss by pursuing the three non-liquidated companies that he advised in his Statutory Declaration that owed him money; iv. the applicant decided to list related parties as unsecured creditors. That is, himself, family members and other companies of which he was a director; and v. this action had the effect of putting himself in a better position than other unsecured creditors. 77The internal reviewer also noted that the applicant's personal assets exceeded $1.3 million and yet he did not attempt to avoid the insolvencies of his companies in 2009, or settle his debts after the insolvency when his asset value had substantially increased. The internal reviewer also questioned how the applicant's personal assets had increased in value from 2009 to 2013. 78The applicant argues that the respondent has taken the administrator's report out of context and there is no evidence of the applicant's companies having traded while insolvent or that the applicant contravened any law while a director of his companies. That is, he contends there is no evidence of misconduct on his behalf. Hence, a finding that he is not a fit and proper person cannot be made. 79As pointed out by the applicant the principles to be applied when considering whether a person is a fit an proper person were considered in detail by the tribunal in Pobjie v Commissioner for Fair Trading, NSW Office of Fair Trading (No 2) [2008] NSWADT 39, at [113] to [124]. That case concerned a review of a decision of the respondent to disqualify the applicant from holding a licence under the HB Act, following disciplinary action for alleged breaches of the Act and the HB Reg. 80These principles are equally applicable to this application and I will summarise the more relevant ones. 81In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, Chief Justice Mason described the phrase 'fit and proper', at 380, as follows: The question whether a person is fit and proper is one of value judgment. In that process the seriousness or otherwise of particular conduct is a matter for evaluation by the decision maker. So too is the weight, if any, to be given to matters favouring the person whose fitness and propriety are under consideration. 82At 380, Toohey and Gaudron JJ described the phrase to mean: The expression "fit and proper person", standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of "fit and proper" cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question." 83In Hughes and Vale Pty Ltd v New South Wales (No.2) (1955) 93 CLR 127 the High Court said (at 156-7): The expression 'fit and proper' is of course familiar enough as traditional words when used with reference to offices and perhaps vocation. But their very purpose is to give the widest scope for judgment and indeed for rejection. 'Fit' (or 'idoneus') with respect to an office is said to involve three things, honesty, knowledge and ability ... When the question was whether a man was a fit and proper person to hold a licence for the sale of liquor it was considered that it ought not to be confined to an inquiry into his character and that it would be unwise to attempt any definition of the matters which may legitimately be inquired into; each case must depend upon its own circumstances. 84In Sobey v Commercial and Private Agents Board 20 SASR 70 Walters J said: In my opinion what is meant by that expression is that the applicant must show not only that he is possessed of a requisite knowledge of the duties and responsibilities evolving upon him as the holder of a particular licence ... but also that he is possessed of sufficient moral integrity and rectitude of character as to permit him to be safely accredited to the public ... as a person to be entrusted with the sort of work which the licence entails. 85That is, what is fit and proper will depend on the legislative context and the nature of the particular profession, trade or occupation in question: Re Brennan & Australian Casino Surveillance Authority (1995) 38 ALD 794, at 796 paragraph [41]; Re Percival and Australian Securities Commission (1993) 30 ALD 280, at 290. 86In Obradovic v Commissioner for Fair Trading, Office of Fair Trading (GD) [2006] NSWADTAP 18 the Appeal Panel took into account the manner in which the former building licence holder had conducted his licensed activity in determining his fitness and propriety to be issued with a new licence. There was no evidence of dishonesty or bad repute, but there was evidence of the applicant having been extremely tardy and intransigent in dealing with customer complaints. 87The respondent has conceded that the applicant has the necessary qualifications to be issued with a contractor licence. Accordingly, it is difficult to see how it can be argued that he does not have the requisite knowledge for being issued with a contractor licence. 88In regard to the issue of integrity and honesty, I agree with the applicant that there is no evidence of any dishonesty or misconduct by the applicant. Nor is there any evidence of him being held in disrepute. 89The Administrator's report of 2 February 2010, as I have noted was a preliminary report and while he raised the question of insolvency, related party transactions and preferential payments he did so only in the context of these needing further investigation. He did not make any adverse findings against the applicant, nor was it suggested that the applicant had attempted to thwart him in his tasks. This does not mean that I accept the manner in which the applicant operated his business activities through these companies was acceptable. They clearly were not, but this does not mean he is not a fit and proper person to be the holder of a contractor licence. On the evidence, the companies were established on advice of the applicant's then accountant and in my view the applicant presented as a truthful witness. He was clearly very young when the company structure was set up and also lacked experience in dealing with structures of this kind. However, his current applicantion is for a licence to be held by him personally and in my view, on the material before the tribunal, he is a fit and proper person to be issued with such a licence. I would have made the same finding had he applied for a licence through a company of which he was a director, as I believe he has learnt the consequences of failing to appropriately manage the affairs of such a company. Conclusions and orders 90For the reasons set out above, I find that the decision of the respondent to refuse that applicant's application for a contractor licence is the correct and preferred decision. However, I have not based my finding on the applicant not being a fit and proper person to hold a contractor licence. I have made my finding on the basis that I am not satisfied that the applicant took all reasonable steps to avoid his companies being placed into external administration. As a consequence, pursuant to cl 25(a)(xiii) of the HB Reg his application for a contractor licence must be refused as he was a director of several externally administered companies within three years prior to the date on which he made his application. This does not mean that the applicant is prohibited from making future applications for a contractor licence once this three year period has expired. In the event he makes such an application it will be a matter for the respondent to determine having regard to any additional information that is available at that time. 91Accordingly I order that the decision of the respondent to refuse the applicant's application for a contractor licence is affirmed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 October 2014