Commissioner for Consumer Affairs v Taza P/L
[2011] SADC 192
•16 December 2011
DISTRICT COURT OF SOUTH AUSTRALIA
(District Court Administrative and Disciplinary Division)
COMMISSIONER FOR CONSUMER AFFAIRS v TAZA P/L & ANOR
[2011] SADC 192
Judgment of His Honour Judge Brebner
(Assessor Mr S Kemp and Member Ms A Bachmann)
16 December 2011
ADMINISTRATIVE LAW
Disciplinary proceedings brought under the Land Agents Act 1994. Land Agent which was a body corporate and its principal said to be liable to disciplinary proceedings by acting improperly in relation to the sale and purchase of land, in that they failed to act in the best interests of a vendor of land for whom they acted.
Held: Proper cause for taking disciplinary action existed. The conduct of the defendants created the potential to give rise to a perception of a conflict of interest. Their conduct fell well short of what was required and expected. The conduct was serious. Fine of $8,000 is imposed.
Land Agents Act 1994 ss 47, 23, 47(1) 47(2), 47(1)(b), referred to.
Craig v The Medical Board of South Australia (2001) 79 SASR 545, applied.
COMMISSIONER FOR CONSUMER AFFAIRS v TAZA P/L & ANOR
[2011] SADC 192
The Commissioner for Consumer Affairs alleged on complaint that there is proper cause for taking disciplinary action against the defendants, Taza Pty Ltd (the first defendant) and Zane Pitt (the second defendant) pursuant to section 47 of the Land Agents Act 1994 (SA) (the Act).
At all material times the first defendant was a land agent registered in conformity with the Act and the second defendant was the principal and sole director of the first defendant. For practical purposes the two defendants are one and the same and both are subject to the Act.
The complaint alleged that there was proper cause for taking disciplinary action against the defendants because they had acted improperly in that they had failed to act in the best interests of a Ms Woodlands in relation to the sale of her house.
When the complaint came on for hearing the defendants admitted through their counsel that they had acted improperly as alleged and conceded that, in consequence, there was proper cause for disciplinary action to be taken against them.
The court then heard submissions as to the consequential orders which ought to be made. Without objection, counsel for the Commissioner and counsel for the defendants each informed the court of the relevant facts, counsel for the Commissioner tendered a number of documents and counsel for the defendants tendered a document setting out the defendants account of the matter.
Ms Woodlands owned a maisonette at Renown Park. She decided to sell the property and in July 2006 she advertised it for sale on her own behalf in The Advertiser. She wanted $192,000 for the property. The second defendant responded to her advertisement and entered into discussions with her.
According to the second defendant, the property was in a poor state and he advised Ms Woodlands that it would be in her interests to clean up the property and to effect some repairs and that if she did so, the property might bring up to $250,000. He says he offered to assist Ms Woodlands by arranging for the necessary work to be done.
Also according to the second defendant, he and Ms Woodlands entered into a sales agency agreement which was eventually cancelled. He says that Ms Woodlands eventually asked him to show the property to a potentially interested party in its current state, however, he says that nothing ever came of this. He says that he then informed Ms Woodlands that his brother had been looking for a unit and that he might be interested in purchasing the property.
Then, and again according to the second defendant, Ms Woodlands spoke to him on about 14th or 15th August 2006 and enquired if his brother was interested in purchasing the property. He says he then told Ms Woodlands that he would make enquiries of his brother.
On 17 August 2006 Ms Woodlands entered into a sales agency agreement with the first defendant. The method of sale specified in the agreement was “offer to one person only for a price of $190,000.” This method of sale was devised by the second defendant inserted into the agreement by him. It was also a special term of the agreement that Ms Woodlands did not want the property advertised and that she expressly requested an offer of $190,000. Again, this special term was devised by the second defendant and inserted into the agreement by him. According to the second defendant, the method of sale and the special term were included in the agreement in order to reserve the property for his brother because Ms Woodlands had already agreed to sell it to him for that amount. The agreement further stipulates that the first defendant’s professional fee was to be $5,500. The agreement also contains a warranty given by the first defendant that it would comply with the provisions of the Act and that it would at all times act in Ms Woodland’s best interests and in accordance with the ethics of the Society of Auctioneers and Appraisers.
Also on 17th August 2006 Ms Woodlands signed a contract for the sale of the property to an entity named Naracoorte Readymix Pty Ltd, or its nominee. The purchase price specified in the contract is $190,000 and a deposit of $5,500 was due and payable after the expiration of the cooling off period.
The second defendant’s brother was the sole director and secretary of Naracoorte Readymix Pty Ltd. The second defendant had himself been the sole director and secretary of that entity up until some four months earlier. The contract is signed on behalf of Naracoorte Readymix Pty Ltd by someone, however, the person’s signature is indecipherable. The signature must be that of the second defendant’s brother or his agent.
On 7th October 2006 Ms Woodlands signed a memorandum of transfer. An annexure to the transfer names the second defendant’s brother as the transferee. Settlement on the property ultimately occurred on 17th October 2006.
The second defendant was paid the $5,500 commission as specified in the sales agency agreement. This is the same amount as the deposit specified in the contract and it was deducted from the purchase price of $190,000.
The day after settlement the second defendant advertised the property for sale in the mid $200,000’s. The property was then cleaned and repaired. The second defendant contributed $3000 towards the cleaning and the repairs. The property was eventually sold for $239,000 and settlement took place on 23rd November 2006. Out of the proceeds of the settlement the brother paid the second defendant $13,748 by way of commission and reimbursement of the $3,000 which he had spent on the cleaning and the repairs.
The second defendant’s brother had wanted to acquire a residence for his son and he purchased the property for this purpose without first inspecting its interior. He eventually inspected the inside of the property at some time after he had signed the contract and before settlement was due. He then decided that he did not like the property and he instructed the second defendant to sell it after settlement.
Counsel for the Commissioner informed the court that Ms Woodlands suffered from Bipolar Affective Disorder at the relevant time, however, the Commissioner does not allege that she was in a position of particular vulnerability at the time or that the second defendant somehow took advantage of her condition. Counsel also informed the court that Ms Woodlands now suffers from dementia in consequence of which she cannot now provide a statement or give evidence about the defendant’s version of what occurred. Counsel for the defendants did not dispute that this was so. Counsel for the Commissioner informed the court that, in these circumstances, the Commissioner neither accepted nor disputed the sequence of events put forward by the second defendant.
Although the court is highly suspicious about the second defendant’s account of the matter, there is no evidence before the court which has the capacity to call his account into question and the court will thus determine what orders ought to be made on the basis of the second defendant’s version of events.
Counsel for the Commissioner rightly submitted that the defendant’s conduct was improper in that the first defendant, through the second defendant, should not have acted for Ms Woodlands when the prospective purchaser was an entity controlled by the second defendant’s brother, notwithstanding that he had informed her of this. As set out above, through their counsel, the defendants admitted that they should not have acted for Ms Woodlands, that it was improper of them to have done so and that they are liable to disciplinary action accordingly.
Based on this concession, and on the facts set out above, the court is satisfied on the balance of probabilities that there is proper cause for taking disciplinary action against each of the defendants under s 47 of the Act. As mentioned, the question then becomes one of what consequential orders ought to be made.
As of 2006, registered land agents were prohibited by s 23 of the Act, as it then stood, from receiving commissions from the sale of land in which they had a direct or an indirect interest unless they were granted exemption by the Commissioner. Neither defendant applied for such an exemption to enable them to sell the property to the entity controlled by the second defendant’s brother on behalf of Ms Woodlands.
Through his counsel, the second defendant says that he did not apply for an exemption because he did not regard himself as having an indirect interest in the purchase of the property by his brother and that therefore he did not need an exemption to continue to act for Ms Woodlands. However, the second defendant had worked in the real estate industry for about 18 years by the time he became involved with Ms Woodlands. Through his counsel he has admitted that he well knew that he should not have continued to act for Ms Woodlands because his continuing to act might well give rise to a perception that he was acting in conflict of interest and he says that he acted for both parties in order, and we quote from counsel’s submission “To endeavour to help both sides of the transaction, to try and do the right thing by both of them, which he shouldn’t have done.”
Counsel for the Commissioner does not contend that $190,000 was not a fair market price. However, the court is satisfied beyond all doubt that the second defendant must have known that there was potential for a quick and handy profit for his brother if the brother purchased the property at that price.
By acting as he did the second defendant ran the risk of creating the perception that he was not acting solely in Ms Woodland’s best interests and that he had a conflict of interest which might ultimately operate to her detriment. It is also plain that he knew that he was acting in an irregular fashion. That said, if the second defendant had not disclosed the identity of the prospective purchaser to Ms Woodlands, his conduct would have been worse.
As has been mentioned, the second defendant received commission of $5,500 for the sale of the property by Ms Woodlands to his brother and some $10,000 in commission from the sale by his brother to the ultimate purchaser. He thus received commissions of about $15,500 which he would not received if he had declined to act for Ms Woodlands in the circumstances which arose. That said, the possibility that he might have eventually sold the property on her behalf to a third party for the price which his brother paid cannot be overlooked.
The second defendant has recently delivered a bank cheque drawn in favour of Ms Woodlands in the amount of $2,000 to counsel for the Commissioner. He drew the cheque on the basis that Ms Woodlands had originally nominated a purchase price of $192,000 for the property and that the $2,000 face value of the cheque represents the shortfall between this figure and the price which his brother ultimately paid for the property. Counsel for the Commissioner concedes that this amount of $2,000 should be taken into account in determining the amount of any fine which the court might be minded to impose.
Criminal charges were laid against the second defendant arising out of his actions in relation to the sale of the property. These charges were eventually discontinued. Publicity about the charges had an adverse effect on the second defendant’s reputation in the real estate industry and led to the termination of a franchise agreement he had with a real estate company. That agreement has since been resumed.
The second defendant is both personally and professionally contrite. A number of people have provided references for him attesting to his good character, his professionalism and his work ethic.
As counsel for the Commissioner rightly submitted, the sale or purchase of real property usually has significant financial implications for those involved and the community is entitled to expect that registered land agents and their principals and employees will act with complete integrity and in the best interests of those who have retained them and to the complete exclusion of the interests of any other people who might have some kind of interest in the particular transaction.
For the reasons which the court has set out above, the conduct of the defendants fell well short of the standards of professional conduct which are to be expected from members of the real estate industry and thus well short of the standards which the community rightly expects of those involved in the industry. The perceptions which the conduct could have created had would have had the potential significantly to undermine confidence in the integrity of the real estate industry as a whole. In all the circumstances the conduct was serious.
Sections 47(1) and (2) of the Act provide for a range of orders which may be imposed consequent on a finding that proper cause for disciplinary action exists. The consequences of these orders range in severity from a reprimand to permanent disqualification or prohibition.
The purpose of exercising the power to make orders pursuant to section 47 is not to punish the person or entity concerned but to protect the public and to maintain public confidence in the real estate industry by demonstrating to those who are licensed under the Act, and to the public, that the conduct in question is not acceptable and will be dealt with: Craig v The Medical Board of South Australia (2001) 79 SASR 545 at [57] Doyle CJ, Williams and Martin JJ concurring.
Counsel for the Commissioner submitted that as the defendants were for practical purposes one and the same no orders should be made against the first defendant and that the objects section 47 would be met by the imposition of a fine on the second defendant.
Counsel for the defendants submitted that reprimanding the second defendant would provide sufficient punishment and general deterrence. The court does not agree. For the reasons we have given, the conduct in which the second defendant engaged was extremely serious and had the potential to undermine confidence in the integrity of the real estate industry at large in a very material way and to the extent that a simple reprimand would not provide an adequate demonstration that conduct of the kind in which the second defendant engaged was not acceptable and would be punished. The court is of the view that a substantial fine is necessary in order to achieve the proper objects of disciplinary action under section 47 of the Act. Pursuant to section 47(1)(b) the maximum fine is $20,000.
The court makes no orders against the first defendant.
The second defendant will be reprimanded and fined the sum of $8,000. But for his admissions and concessions and his reparation of $2000, it would have been $12,000.
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