COMMISSIONER FOR CONSUMER PROTECTION and STEADALL - [2019] WASAT 113

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)
CITATION:   COMMISSIONER FOR CONSUMER PROTECTION and STEADALL [2019] WASAT 113
MEMBER:   JUSTICE PRITCHARD, PRESIDENT
HEARD:   23 JULY 2019
DELIVERED          :   23 JULY 2019
PUBLISHED           :   18 NOVEMBER 2019
FILE NO/S:   VR 102 of 2019
BETWEEN:   COMMISSIONER FOR CONSUMER PROTECTION
Applicant
AND
MICHAEL STEADALL
Respondent

Catchwords:

Section 93(1) of Real Estate and Business Agents Act 1978 (WA) - Whether Tribunal satisfied there are reasonable grounds for believing that the agent is incapable of properly conducting his real estate agency business - Whether Commissioner should be authorised to approve a supervisor

Legislation:

Real Estate and Business Agents Act 1978 (WA), s 68(6)(d), s 93(1)
Residential Tenancies Act 1987 (WA)

Result:

Application allowed

Category: B

Representation:

Counsel:

Applicant	:	Mr J Derby
Respondent	:	In Person

Solicitors:

Applicant	:	Commissioner for Consumer Protection
Respondent	:	In Person

Case(s) referred to in decision(s):

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

(These reasons were delivered orally at the conclusion of the hearing. They have been edited to correct grammatical errors and infelicities in expression.)

Introduction

This is an application by the Commissioner for Consumer Protection (Commissioner) for orders pursuant to s 93(1) of the Real Estate and Business Agents Act 1978 (WA) (REBA Act).
The orders sought by the Commissioner today are set out in a Minute of Proposed Consent Orders dated 22 July 2019 and are inserted in their terms at the end of these reasons. Although the orders sought by the applicant are consented to by the respondent, s 93(1) of the REBA Act requires the Tribunal to be satisfied of certain matters before it makes orders under that section. For the reasons which follow, I am satisfied that the requirements of s 93(1) of the REBA Act have been met and I will therefore make the orders sought.
Section 93(1) of the REBA Act provides:
(1)Where the State Administrative Tribunal, on the application of the Commissioner, notice whereof shall be given to the agent, is satisfied that there are reasonable grounds for believing that an agent is, for any reason incapable of properly conducting his business, or is not conducting it in accordance with this Act, the State Administrative Tribunal may
(a)suspend the agent from carrying on his business for such period as may be specified in the order; and
(b)restrain the agent and his bankers and their respective servants and agents from dealing in all or any of the bank accounts of the agent, subject to such terms and conditions as the State Administrative Tribunal thinks fit; and
(c)authorise the Commissioner to appoint a supervisor of the business of the agent; and
(d)authorise the Commissioner to suspend the agent from carrying on his business until further notice; and
(e)make such other and further orders as the State Administrative Tribunal thinks fit.
Before the Tribunal may make orders under s 93(1), the Tribunal must be satisfied that there are reasonable grounds for believing that an agent is, for any reason, incapable of properly conducting his business, or is not conducting it in accordance with the REBA Act. If the Tribunal is so satisfied, it may make the orders of the kind set out in s 93(1)(a) (e) of the REBA Act.
The basis for the application is that the Commissioner contends that there are reasonable grounds for believing that the respondent is incapable of properly conducting his business, and that the Tribunal can be satisfied that that is so, having regard to the matters set out in two affidavits on which the Commissioner relies. Those affidavits are the affidavit of Alissa Michelle Horner, sworn 15 July 2019, and the affidavit of Timothy Ray Banfield, sworn 12 July 2019. Having regard to that evidence, I am satisfied that there are reasonable grounds for believing that the respondent is incapable of properly conducting his business.
The evidence confirms that the respondent is the holder of a real estate and business agent's licence and triennial certificate, which were granted pursuant to the REBA Act. The most recent renewal of the triennial certificate was for the period up to 4 June 2021.
Initially, the respondent conducted a real estate business under the name of 'Harcourts Phoenix'. However, that name is no longer being used, and since 3 June 2019, the respondent has carried on business under the name of 'Steadfast Real Estate WA' (business). In the course of conducting that business, the respondent has maintained a trust account with the Australia and New Zealand Banking Group Ltd (trust account).
There are three bases on which the Commissioner contends that the Tribunal can be satisfied that there are reasonable grounds for believing that the respondent is incapable of properly conducting his business.
First, an audit report prepared by Greenwich & Co., the auditors for the respondent, dated 9 May 2019, detailed a number of apparent breaches of the requirements of the REBA Act in respect of the trust account. In summary, these were:
1)A number of unauthorised transactions which were not properly supported by documentation in relation to payments into the trust account. The auditors reported that due to the absence of documentation, they were unable to ascertain the reasons why certain transactions occurred, whether they were authorised, and whether they were bona fide transactions in the ordinary course of the business. Further, as a result of the absence of documentation, there was no support identified for unreconciled payments, totalling in excess of $40,000. There was also no support for manual journal adjustments put through the trust account.
2)The auditors also identified evidence suggesting breach of s 68(6)(d) of the REBA Act, which requires that an agent correctly balance the accounts at the end of each month. The auditors also identified that on a number of occasions, reconciliations had not been prepared within a reasonable timeframe from the end of the month.
3)The auditors identified apparent breaches of the requirement in s 68(6)(d) of the REBA Act that the monthly trust account reconciliation be verified, signed and dated by the agent, (or by the person in bona fide control, if the agent is a body corporate), in that on a number of occasions, the agent had not signed and dated the monthly trust account reconciliations.
4)In addition, the auditors identified apparent breaches of s 68(6)(d) of the REBA Act, in relation to the requirement for a trust account reconciliation at the end of each month, in that on a number of occasions, such reconciliations had not been prepared to the end of each month.
5)Finally, the auditors indicated that the trust account for the respondent's business had not been correctly described.
The respondent's position, which he confirmed today, is that he does not dispute that there were what I will neutrally describe as 'irregularities' in respect of the trust account. It is unnecessary for the Tribunal to delve further into the reasons for those 'irregularities' at this stage, particularly in view of further investigations which may be pursued. The respondent, of his own volition, drew to the attention of the Commissioner (by an email dated 27 June 2019) that there had been a 'breach of our trust accounts. We are short of funds in the trust account, to the tune of about $60,000 due to mismanagement and theft'.
These irregularities, by virtue of their apparent seriousness, warrant orders of the kind sought by the Commissioner.
In addition, the Commissioner relies on two further groups of matters as a basis for the making of the orders sought. The first is that the auditors identified apparent breaches of the requirements of the Residential Tenancies Act 1987 (WA) (RT Act) in respect of the payment of security bonds for rental properties.
In her affidavit, Ms Horner deposes that the Commissioner has identified evidence which indicates that in respect of two properties, a property in Greenmount and a property in Midland, the respondent was acting for the landlord in respect of each property, the respondent entered into residential tenancy agreements on behalf of the landlord with tenants for those properties, each tenant paid a bond into the respondent's trust account, and the Bond Administrator has no record of the bond being lodged with it in respect of either property.
The Commissioner's position is that the failure to lodge the bond with the Bond Administrator would constitute a breach of the requirements of the RT Act, which requires that all security bonds must be lodged with the Bond Administrator.
The final matter relied upon by the Commissioner in support of the application is that since the beginning of July 2019, the Commissioner has received complaints from 10 individuals, each of which has been, in substance, the same. The complainants are the owners of properties managed by the respondent which are leased to tenants and in each case, the owners have complained that the respondent has not paid to them the rent received, for about four weeks. The respondent has confirmed to the Tribunal that he does not dispute that those owners have not been paid that rent received, as they allege. It is unnecessary for the Tribunal to delve further into the reasons why that is so, given further investigations which may be pursued.
The evidence of these matters as set out in the affidavits together with the information provided by the respondent today, leads me to the conclusion that there are reasonable grounds for believing that the respondent is incapable of properly conducting his business, and it is therefore appropriate to make the orders sought by the Commissioner.
I am content to make the orders sought in the Minute of Proposed Consent Orders save that in respect of order 2, the orders made should reflect, with precision, the names of the respondent's bank accounts which are to be restrained.

Orders

I make orders in the following terms:
The parties have consented to the following orders and the Tribunal orders as follows:
1.Pursuant to s 93(1)(a) of the Real Estate and Business Agents Act 1978 (WA) (Act), the Respondent be suspended from carrying on his business until further order of the Tribunal.
2.Pursuant to s 93(1)(b) of the Act, the Respondent be restrained from dealing with all of the bank accounts related to or for the purpose of the Respondent's business as an agent.
3.Pursuant to s 93(1)(b) of the Act, the Australia and New Zealand Banking Group Ltd and its servants and agents be restrained from dealing with the following accounts:
(i)Michael Steadall t/a Steadfast Real Estate WA Reba Trust Account [account details redacted];
(ii)Business Extra Account [account details redacted];
(iii)Commercial Card Account Number [account details redacted];
(iv)Cheque Account [account details redacted].

4.Pursuant to s 93(1)(c) of the Act, the Applicant be authorised to appoint a supervisor to the business of the Respondent.
5.Pursuant to s 93(3)(a) of the Act, any supervisor appointed under order 4 be empowered to withdraw any moneys from any bank account of the Respondent referred to in order 2.
6.The supervisor shall cause a notice to be issued to each financial institution with which the Respondent held an account informing them of the appointment and the power to transact upon the accounts.
7.Any person affected by these orders has liberty to apply to vary them on 48 hours' notice.
8.The matter is adjourned for a further directions hearing on Tuesday 22 October 2019 at 9:30 am to consider any further order which may be required and for the purpose of a report as to the progress of the supervision.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
FP
Associate to the Honourable Justice Pritchard
18 NOVEMBER 2019