| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : VOCATIONAL REGULATION ACT : REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA) CITATION : COMMISSIONER FOR CONSUMER PROTECTION and SAMYKANNU PTY LTD [2013] WASAT 129 (S) MEMBER : JUDGE T SHARP (DEPUTY PRESIDENT) MR T CAREY (MEMBER)
MR G POTTER (SENIOR SESSIONAL MEMBER)
HEARD : DETERMINED ON THE DOCUMENTS DELIVERED : 6 DECEMBER 2013 FILE NO/S : VR 89 of 2012 BETWEEN : COMMISSIONER FOR CONSUMER PROTECTION Applicant
AND
SAMYKANNU PTY LTD
First respondent
JOHN SAMYKANNU
Second respondent
Catchwords: Vocational regulation - Real estate agent - Disciplinary action - Penalty - Costs
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Legislation: Real Estate and Business Agents Act 1978 (WA), s 103(1)
State Administrative Tribunal Act 2004 (WA), s 87, s 87(2) Result: Respondents reprimanded
Respondents ordered to contribute to applicant's costs
Summary of Tribunal's decision: In a decision delivered on 14 August 2013, the Tribunal found that proper cause existed for disciplinary action against the first and second respondents. The parties then made submissions on the appropriate penalty and whether an order for costs should be made.
The Tribunal considered those submissions and concluded that the appropriate penalty was to reprimand both respondents. The Tribunal also considered that the first and second respondents should contribute to the applicant's costs.
Category: B
Representation: Counsel:
Applicant : Mr G Cobby
First respondent : Ms C Thompson
Second respondent : Ms C Thompson
Solicitors:
Applicant : Department of Commerce
First respondent : Nielsen and Co
Second respondent : Nielsen and Co
Case(s) referred to in decision(s):
Commissioner for Consumer Protection and Samykannu [2013] WASAT 129
Commissioner for Consumer Protection v Hawaii Pty Ltd & Anor [2008] WASAT 22 (S)
Medical Board of Western Australia and Roberman [2005] WASAT 81 (S)
Paridis v Settlement Agents Supervisory Board [2007] WASCA 97
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REASONS FOR DECISION OF THE TRIBUNAL:
Introduction 1 On 23 May 2012, the applicant (Commissioner) made an application to the Tribunal alleging that there was proper cause for disciplinary action against the first respondent (Company), and the second respondent (Mr Samykannu)(together, Respondents) under s 103(2)(c)(iii) of the Real Estate and Business Agents Act 1978 (WA) (REBA Act). 2 The Respondents were the leasing and management agents of a residential property owned by two people who were living and working overseas. The Respondents then took instructions to sell that property from persons they believed to be those owners. It transpired that it was not the true owners who gave the Respondents those instructions, but instead someone pretending to be the owners. The sale was completed and settled but the true owners were unaware of the sale until they returned to Australia and asked to visit the property. 3 This fraud had occurred in similar circumstances to an earlier fraudulent sale of real property (Karrinyup fraud). The Karrinyup fraud was the subject of much media coverage, and had given rise to numerous alerts and warnings to the real estate profession from the industry regulator and peak industry bodies. 4 The Commissioner alleged that the Respondents had breached Article 7 of the Code of Conduct for Agents and Sales Representatives 1993 (Code),which requires agents to exercise skill, care and diligence. The alleged breaches of the Code by the Respondents were: a) failing to take any or any adequate steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas; b) failing to take any steps to obtain the instructions of one of the property owners in relation to the sale of a property prior to negotiating its sale; and c) failing to take any or any adequate steps to confirm the identity of the person or persons purporting to provide instructions in relation to the sale of a property. (Page 5)
5 In written reasons for decision delivered on 14 August 2013 and published as Commissioner for Consumer Protection and Samykannu [2013] WASAT 129 (Samykannu), the Tribunal made findings that the first but not the second and third allegations referred to above had been made out. The Tribunal therefore concluded that proper cause existed for disciplinary action against the Respondents. 6 The parties then made written submissions to the Tribunal concerning the appropriate disciplinary outcome and the payment of costs. This was dealt with on the documents and these are our findings and the reasons for them.
Commissioner's submissions relating to penalty 7 The Commissioner submits that the nature of the real estate industry is such that any failure to maintain the standards established by the Code can lead to catastrophic results for consumers. The Commissioner therefore submits that the Respondents' failure to be aware of the numerous warnings issued by the industry regulator, peak industry bodies and the media in relation to a similar, previous fraud was serious conduct demonstrating a failure to implement systems to ensure the Respondents were abreast of industry developments. 8 The Commissioner further points out that no evidence was led on the Respondents' behalf that there was any system in place for ensuring important information came to the attention of the Respondents. The Commissioner says that the only explanation propounded for the Respondents being unaware of the previous fraud was that Mr Samykannu was overseas for some of the relevant period. The Commissioner says that this explanation is unsatisfactory and that the inconvenience involved in having any such system in place would have been minimal. 9 The Commissioner argues that a real estate agent holds a position of trust and expertise within the community, and that agents' actions can have very significant financial implications for consumers. Therefore, it is of importance that agents maintain a minimum level of competency so that public confidence is maintained. 10 Finally, the Commissioner submits that it is important that the Tribunal have regard to the need for general deterrence in the context of agents who fail to take reasonable steps to achieve, and maintain, the necessary level of knowledge of current issues and developments in the industry. (Page 6)
11 The Commissioner for those reasons submits that the appropriate penalty is a reprimand plus a significant fine, in the range of $5,000 to $7,000, for each of the Respondents.
Respondents' submissions relating to penalty 12 The Respondents accept that it is part of a professional person's obligations to keep abreast of developments and knowledge relevant to their field of endeavour. The Respondents also accept that a reprimand is an appropriate penalty. However, the Respondents argue that this is not a matter where in addition a fine should be imposed. They say that this is because: a) the offence is not causative of any loss or damage, the loss to the home owners was caused by a third party who undertook a highly sophisticated and elaborate fraud which went undetected by the Respondents, the settlement agent, the bankers involved and Landgate; b) the Respondents complied with the legal requirements in place at the time in respect to identification of the vendors and obtaining instructions; c) in light of the totality of the facts in this case, even if the Respondents had been fully conversant with the earlier instances of fraud, the fraud itself would probably have still been committed; d) the offence is at the low end of the scale; e) neither of the Respondents has been convicted of any prior disciplinary offence; and f) the deterrent effect of a penalty in this case should be in the context of what the conviction was for, namely the Respondents' failure to keep themselves informed of developments in the industry. 13 In addition, the Respondents say that they have cooperated fully in the lengthy police investigation of the fraud. Also, they have offered to assist the owners of the property the subject of the fraud in any appropriate manner in their claim for compensation. The Respondents have also apologised to the owners and say they accept and understand the distress that the owners have suffered. (Page 7)
14 Furthermore, the Respondents point out that only one of the three allegations was sustained. 15 The Respondents contend that if, despite their submissions, the Tribunal regards a fine as appropriate, a global penalty against both Respondents of no more than $1,000 should be imposed. The Respondents point out that the Commissioner conceded during the hearing that this matter was at the low end of the offending scale, yet is now seeking a penalty of 75% of the maximum in respect of each of the two Respondents. The Respondents say that such a fine would have the effect of punishing them for something they were not convicted of, which is not the object of disciplinary proceedings. 16 They also say that a review of fines imposed by this Tribunal in disciplinary proceedings since 2009 would suggest that a more modest fine would be appropriate in this case. 17 On the quantum of any fine to be imposed, the Respondents say specifically that it should be no more than $1,000 because: a) the identity of the two Respondents is, whilst legally different, practically the same, Mr Samykannu being a director and 50% shareholder of the Company (his wife being the other director and shareholder), so that to fine each would be, in effect, to fine the same person twice for the one offence; b) the finding against each of the Respondents is identical, which is distinguishable from those matters where a respondent has been fined separately for more than one offence; c) the conduct which the Respondents were convicted of, at worst, is comparable to the lowest level offences for which the Tribunal has ordered a fine in the past four years, so that a fine of $1,000 would be comparable; and d) neither of the Respondents has a prior conviction for a disciplinary offence.
Statutory provisions relating to penalty 18 Section 103 of the REBA Act relevantly provides: Disciplinary action, SAT’s powers as to
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(1) If, in a proceeding commenced by an allegation under section 102(1) against an agent, the State Administrative Tribunal is satisfied that proper cause exists for disciplinary action, the State Administrative Tribunal may do any one or more of the following things (a) reprimand or caution the agent; (b) impose a fine not exceeding $10 000 on him; (c) suspend or cancel his licence and any triennial certificate in respect thereof and in addition, disqualify him either temporarily or permanently, or until the fulfilment of any condition which may be imposed by the State Administrative Tribunal, from holding a licence or triennial certificate, or both; (d) where the State Administrative Tribunal is satisfied that the agent is acting or has acted in breach of section 60(3), 61(5) or 64(4) (the subsection) (i) order the agent to pay to a person specified by the State Administrative Tribunal the whole or part of any commission, reward or other valuable consideration received or held in contravention of a provision referred to in the subsection; (ii) order that a demand by the agent in contravention of a provision referred to in the subsection for the whole or part of any commission, reward or other valuable consideration not be made, or if made, be withdrawn or varied in accordance with the order; (e) where the State Administrative Tribunal is satisfied that the agent is acting or has acted in breach of section 64(1), order the agent to pay to the agent’s principal any profit that the agent has made, or is, in the opinion of the State Administrative Tribunal, likely to make from the transaction.
Principles to be applied in determining penalty 19 The principles to be applied when determining the appropriate penalty in disciplinary proceedings are well established, and are not in dispute between the parties. These principles were applied in the context of disciplinary action against a settlement agent in Paridis v Settlement Agents Supervisory Board[2007] WASCA 97, where at [25], Buss JA stated as follows: The character and purpose of disciplinary proceedings against a member of a profession have been examined on numerous occasions. The object of those proceedings is the protection of the (Page 9)
public and the maintenance of proper professional standards. The maintenance of proper professional standards is conducive to the protection of the public. Disciplinary proceedings are not designed to punish the person who is disciplined. See, for example, Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279 at 286; Clyne v New South Wales Bar Association (1961) 104 CLR 186 at 201 - 202; New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183 - 184; Re a Barrister and Solicitor; Ex parte Attorney-General for the Commonwealth (1972) 20 FLR 234 at 244; Re a Barrister and Solicitor (1979) 40 FLR 1 at 24 - 25; Re a Practitioner; Ex parte The Legal Practitioners Disciplinary Tribunal [2001] WASCA 204 at [6] - [7]. 20 At [30], his Honour went on to say that it is necessary to evaluate and give weight to a variety of considerations, including: • the seriousness of the conduct giving rise to the allegation; • the Respondents' explanation for the conduct; • the maintenance of proper standards and public confidence; • the necessity for general deterrence; and • any personal matters of a mitigatory nature.
Disciplinary outcome 21 The finding made by the Tribunal against the Respondents in Samykannu was that the Respondents were guilty of failing to take steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas. This was contrary to Article 7 of the Code and as a result the Tribunal considered that there was proper cause for disciplinary action. 22 While any breach of the Code is a serious matter, the Tribunal agrees with the Respondents, and indeed with the Commissioner's statement during oral submissions at the hearing of the matter, that this is a breach which should be regarded as attracting a penalty at the lower end of the scale. It must be emphasised, however, that the Tribunal would not (Page 10)
necessarily come to the same conclusion if we were dealing with a second or subsequent finding for the same kind of breach. 23 The finding that there is proper cause for disciplinary action against the Respondents is in itself a permanent blemish on the Respondents' reputation and gives a message that the Respondents' failure is not being treated lightly. We consider that the Respondents should be reprimanded but that in the circumstances a fine in addition is not warranted.
Costs 24 The Commissioner also seeks an order that the Respondents pay the Commissioner's costs pursuant to s 87(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act). 25 Section 87 of the SAT Act is as follows: Costs of parties and others
(1) Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal. (2) Unless otherwise specified in the enabling Act, the Tribunal may make an order for the payment by a party of all or any of the costs of another party or of a person required to produce a document or other material on the application of the party under section 35. (3) The power of the Tribunal to make an order for the payment by a party of the costs of another party includes the power to make an order for the payment of an amount to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding or the matter because of which the proceeding was brought. (4) Without limiting anything else that may be considered in making an order for the payment by a party of the costs of another party where the matter that is the subject of the proceeding comes within the Tribunal's review jurisdiction, the Tribunal is to have regard to (Page 11)
(5) The rules may deal with the effect of certain offers to settle, and responses, if any, to the offer, on the making of an order for the payment by a party of the costs of another party. (6) The Tribunal may order that the representative of a party, rather than the party, in the representative's own capacity compensate that or any other party for costs incurred because the representative acted in, or delayed, the proceeding in a way that resulted in unnecessary costs. 26 In Medical Board of Western Australia and Roberman[2005] WASAT 81 (S) at [30] the Tribunal held that the question of an award of costs is a matter of discretion to be exercised in the circumstances of each case, but: … [w]here a regulatory authority successfully brings a complaint of conduct which, if proved, justifies disciplinary action by the Tribunal, there will usually be a strong case for the exercise of that discretion in favour of the regulatory body.That is because such bodies perform a function which promotes the public interest, and usually with limited resources. 27 The Tribunal went on to find at [31] that the partial success of a regulatory authority can justify an award of part of that authority's costs. 28 Even though the Commissioner may not have the same limitation on resources as some other vocational regulatory bodies, this principle was held to apply also to the Commissioner; Commissioner for Consumer Protection v Hawaii Pty Ltd & Anor[2008] WASAT 22 (S) at [9]. 29 The Respondents accept the principles affecting the award of costs in vocational regulation matters, but submit that, in the context of the overall outcome of this matter, there ought to be no order as to costs in this matter. The Respondents highlight the fact that the application which was originally filed with the Tribunal on 23 May 2012 initially claimed that the Respondents had breached the Code in five respects. However, the Commissioner filed amended grounds on 7 December 2012, only alleging that the Respondents had breached the Code in three respects. Following the hearing, only one of the three amended grounds was upheld against each Respondent. Therefore, the Respondents submit that of the eight allegations made in the course of the proceedings against the Respondents, only one was ultimately sustained. 30 In summary, the Respondents say a number of factors are relevant to the Tribunal's determination as to costs, including: (Page 12)
a) The hearing occupied only one day of evidence and half a day of submissions; b) The Respondents were successful in respect of the majority of the allegations; c) The bulk of the contested evidence went to the unsuccessful allegations; d) The allegation on which the Respondents were successful was first added to the application in December 2012, well after the mediation held in this matter in August 2012, and included a very substantial change in the nature of the allegations against the Respondents; f) The substantial changes to the grounds in December 2012 meant the Respondents incurred substantial costs in responding to the reformulated case and largely lost their costs incurred prior to December 2012, which additional and lost costs are irrecoverable; and g) There was no mediation sought by the Respondents after the amendments to the parties' statements of issues, facts and contentions. 31 However, the Respondents say that if a costs order is to be made, the amount ought to be fixed by the Tribunal. This is because the Commissioner has not given any indication of the amount of costs which are sought. Taking into account the factors listed above, the Respondents say that if any adverse costs order is to be made, it ought to be in the range of no more than one third of the costs relevant to the hearing days only, payable within 42 days.
Finding as to costs 32 The fact that the Tribunal upheld only one of the three bases on which the Commissioner alleged the Respondents had contravened Article 7 of the Code does not necessarily mean that the Tribunal should not exercise its discretion as to costs in favour of the Commissioner. The Tribunal considers that the Commissioner was acting in good faith when the complaints were brought to the Tribunal, even though the Commissioner was partially unsuccessful because of the particular facts and circumstances of the case. We believe that it was in the public interest and in the interests of the real estate industry that the extent of the duties and responsibilities of real estate agents in circumstances of this kind should be explored and ventilated. 33 The Tribunal considers that the Respondents should meet some of the Commissioner's costs in the matter, in an amount to be agreed between the parties, and failing such an agreement then in an amount to be settled by the Tribunal. (Page 13)
Orders |