105 However, the circumstances of the offending may involve dishonest conduct as was the case with the three agents in this case who engaged in deceit. Having regard to the facts and circumstances of their offending, the offences they committed can be broadly described as dishonesty offences.
106 Indeed, for the purpose of assessing vocational fitness, character and reputation, the focus should ordinarily be widened to include the facts and circumstances of the offending (and the circumstances of the offender). That approach is consistent with Cichello v Estate Agents Licensing Authority [1998] 4 VR 477. In that case the applicant for a real estate agent's licence had been convicted of intentionally causing injury contrary to s 18 of the Crimes Act 1958 (Vic) for which the maximum penalty was 7 1/2 years' imprisonment. The applicant was fined $1,500. The only evidence in the tribunal proceedings of the circumstances of the offence was that of the applicant who portrayed it as minor. That evidence was accepted by the tribunal. The tribunal refused the applicant's licence application because he had committed what it described as 'a serious offence of violence under the Crimes Act'. The Victorian Court of Appeal held that the tribunal had made an error of law by falsely characterising the offence by reference to its legal incidents rather than by reference to the facts and circumstances of the offending.
107 The Tribunal in this case did not err by wrongly characterising the offences committed by the respondent by reference to their legal incidents or elements. Counsel for the Commissioner expressly disavowed reliance on any claim that the offences of which the respondent had been convicted were, in the technical sense, dishonesty offences. Any attempt to do so in this appeal must be resisted if only because they are not dishonesty offences in the narrow sense.
108 However, the proposed ground of appeal is clearly intended to embrace the findings made by the magistrate as to the circumstances of the respondent's offending. The primary focus of the attack in proposed ground 3 is on the Tribunal's 'characterisation' of the findings made by the magistrate as to the circumstances of the offences. In particular, the focus is on the Tribunal's characterisation of the respondent's offending conduct variously as follows:
- a systems failure [33]; - an inadequate system of compliance [44];
- that the magistrate's adverse findings against the respondent did not constitute concrete findings of dishonesty[36];
- the respondent's offending did not sustain a conclusion that he had disregard for the interests of purchasers [44].
109 The claim of mischaracterisation is not a challenge to the Tribunal's findings of fact. What the magistrate found in relation to the circumstances of the respondent's offending is to be objectively determined from his reasons for decision. The respondent's convictions and the magistrate's findings in support thereof were relevant and admissible evidence of the truth of those matters: Roberts v The State of Western Australia (2005) 29 WAR 445 [144] - [146]; Sudath v Health Care Complaints Commission [2012] NSWCA 171 [83] - [101]. 110 The reasons for judgment in the single judge appeal and the Convictions Appeal involve an analysis of the facts found by the magistrate for the purpose of determining whether the magistrate had erred. The appellate judgments are not additional evidence in any relevant sense. It follows, that the reasons for judgment in the Convictions Appeal and the Silkchime Appeal can be taken into account in this 'appeal', notwithstanding that they were delivered after the Tribunal's decision.
111 However, I propose to make my own assessment of the magistrate's reasons and apply the test in relation to the drawing of inferences from primary facts, namely whether the Tribunal's characterisation of the circumstances of the respondent's offending is, as a matter of law, open. In my view it is not.
What the magistrate found
112 The dramatis personae include Sean Niven, a senior officer of Westpoint Realty, Bernard Worthington, a senior officer of Westpoint Realty, Daniel Hubbard, sales manager of Westpoint Realty and Halga James, in-house lawyer of the Westpoint Group. The three agents convicted of making false representations were David Lewis, Daniel Egan and Thomas Haynes. Niven, Worthington, Hubbard, Lewis and Egan gave evidence in the Magistrates Court. So too did the respondent.
113 The findings of Magistrate Malone and the objective evidence on which they are based are as follows. By 25 August 2005, the respondent, James and Worthington were aware that there was a major problem with the Stage 1A contracts because of the approval of the larger development the subject of Stage 1B (M 77).
114 On 14 October 2005 the respondent gave instructions to start selling the Stage 1B units. James pointed out that this could not be done without sorting out the Stage 1A contracts.
115 James sent a memorandum dated 17 October 2005 to Worthington, copied to the respondent, stating, inter alia:
You have instructed me that Lanepoint … wishes to terminate every contract is [sic] has entered into for Stage 1A, and then re-sell at a higher price (M 78, M 107 - 108).
116 The 17 October 2005 James' memorandum also:
- raises GST, deed of amalgamation and re-subdivision issues; - instructs on what documents are required to vary the Stage 1A contracts;
- advises that she is not sure Lanepoint has 'a clear basis for terminating the contracts';
- suggests giving purchasers a 'right to terminate' their contracts for the return of deposits and finance fees;
- states the view that termination is the only commercially safe way forward.
117 The magistrate found that prior to the respondent's October 2005 memorandum, he had made the only realistic commercial decision, which was to obtain the termination of the Stage 1A contracts and had so informed Messrs Niven and Hubbard before the dispatch of his October memorandum (M 110 - 111). Niven and Hubbard conveyed that decision to the three agents. 118 The respondent's October memorandum was addressed to Messrs Niven and Worthington and directed that it be given to Messrs Lewis, Egan and Haynes. I will deal with that memorandum separately.
119 By 3 November 2005 Worthington advised James of the decision to rescind the Stage 1A contracts and resell the units and requested a draft rescission letter for clients (M 105). James responded by supporting the decision and cautioning about the rescission process as follows:
Please don't forget that our right to rescind is 'shaky' at best - so of course if we can get the purchasers to agree to rescind the contract then we are in the best possible position (M 105).
120 A draft letter dated 10 November to clients was prepared. It invited discussions or contract cancellation. 121 On 11 November 2005 Messrs Lewis and Haynes were provided with cancellation agreements ahead of their prospective appointments with purchasers (M 106).
122 The false representations were made by the agents in November and December 2005. Lewis represented to Mr and Mrs Hall 'that the project … was not going ahead. There were problems, effectively the only answer to which was for them to withdraw from their contract' (M 51).
123 Lewis represented to Ms Hutchins that 'the project was indefinitely delayed. The problems were such that again, waiting wasn't a solution …, and the best thing was to terminate the contract' (M 52).
124 Lewis represented to Mr McCabe that 'the project was not going ahead. Effectively the only option was to terminate the contract' (M 52).
125 Haynes represented to Mr and Mrs Notarangelo that 'the development might never be finished. There were problems which meant that waiting was not an alternative and the only answer was to withdraw from the contract' (M 52).
126 Egan represented to Mr and Mrs Ingham that 'the development was not going anywhere. The problems were such that the better option was to terminate the contract' (M 52).
127 None of the purchasers were offered the opportunity to continue with the purchase of their respective unit, whether on the basis of a new contract or otherwise (M 53).
128 Each of the representations were, to the agent's knowledge, false (M 101, 102 - 103).
129 A process was implemented with the object of terminating every Stage 1A contract with the further object of reselling the properties to other parties at a significantly increased price (M 111). The respondent was part of that process (M 98).
130 Having secured the termination of the contracts, Westpoint Realty obtained new contracts and the units were sold to other purchasers at significantly increased prices (M 102 - 103).
131 From 14 November 2005 Hubbard started reporting to the respondent about the purchasers who had rescinded their Stage 1A contracts (M 106) (the crash reports).
The respondent's October memorandum
132 The magistrate was very critical of large parts of the memorandum which was directed to Messrs Niven and Worthington and copied to the three agents. The statements to which the magistrate directed particular attention and his related findings and comments are as follows. (a) During the planning process for … Stage 1 the City of Belmont insisted that [the] Stage 1B building be effectively seven-storeys in height including undercroft car park and high gables as from a town planning [perspective] they see the building as a gateway to the City of Belmont and want it to look like a landmark building.
133 The magistrate found that this statement was not true. Before receipt of the Lanepoint proposal the subject of the settlement agreement, the council had previously regarded a four-storey building as adequate (M 79).
(b) Given the height and bulk of this building [Stage 1B] it will impact negatively on the amenity of the Stage 1A apartments, particularly blocking light, views and cast[ing] shadows over Stage 1A apartments during the afternoon.
134 The magistrate said this was 'the creation of Mr Carey with no-one else - including the City of Belmont - ever expressing such concerns'. Any views of Great Eastern Highway and beyond would have been restricted by the two-storey building the subject of the original Stage 1B development (M 80).
(c) On the basis of the terms and conditions of the planning approval for Stage 1B, Lanepoint can legally terminate all current purchase contracts by serving written notice under clause 6.3(a).
135 The magistrate described this as being, at best, 'a gross over-simplification'. Development approval was granted for Stages 1A and 1B within the 12 months specified in all the relevant contracts and it would be difficult to establish that the approvals were not on terms satisfactory to Lanepoint, it having agreed to both (M 80).
(d) Further I cannot advise you whether Lanepoint will proceed with Stage 1B at this time as there are many issues relating [to] the feasibility and viability of this Stage that have arisen as a consequence of the significant changes required by the City of Belmont. As a result I cannot tell you when this Stage will proceed or whether it will ever proceed in the approved form. The best I can do is to keep you advised.
136 The magistrate said there were reasons to be concerned with the accuracy of this statement. Stage 1B was clearly being proceeded with as part of the termination and reselling process of the Stage 1A units (M 81).
(e) … [T]he current proposal (for Stage 2 is) for 58 newly constructed residential apartments in an eight-storey building … Given the height and bulk of this building it will impact negatively on the amenity of the Stage 1A apartments particularly blocking light, views and cast[ing] shadows over Stage 1A apartments during the morning. Further I cannot advise you whether Lanepoint will proceed with Stage 2 at this stage as there are many issues relating to the feasibility of this Stage that have arisen as a consequence of the significant changes required by the City of Belmont. As a result I cannot tell you when this Stage will proceed or whether it will ever proceed in this form. Lanepoint is currently considering its legal position in relation to the Council's position. The best I can do is to keep you advised.
137 In fact, the development application for Stage 2 was dated 22 November 2005 and Lanepoint had authorised its consultant to do everything necessary to progress the application (M 82).
(f) An issue has arisen which will substantially delay the issue of strata titles and settlement. Ordinarily the State Planning Office will allow the consolidation of existing titles and the registration of the strata plan and issue of strata titles contemporaneously. However the State Planning Office has indicated that they will not agree to this process on Regents Apartments and therefore (we) will need to go through the process of consolidation and produce a consolidated title first and then lodge the strata plan for registration and the application for strata titles.
138 In fact, those matters were a condition of the development approval given on 4 April 2005 and were always in contemplation. Further, having obtained the termination of the Stage 1A contracts, Westpoint Realty immediately resold the units. As the magistrate notes dryly, the title issue problem had clearly not gone away in the meantime (M 82 - 83). Further, Worthington gave evidence that the anticipated completion of Stage 1A by the end of January 2006 was pretty accurate. The magistrate concluded 'It is difficult not to conclude that Mr Carey was overstating both the currency and significance of this problem'.
(g) It has been brought to [my] attention that there are a number of issues with the current presale contracts including consents proposed re-subdivision of Lot 41, GST election and Deed of Amalgamation prohibition. The most serious issue is that existing purchasers have consented to the re-subdivision of Lot 41 into an additional 12 lots set out in the purchase contract[s]. As the approval for Stage 1B contains 20 strata lots (not 12 as originally intended) the original consents are of no effect and all purchasers will be required to sign new consents agreeing to the 20 lots with significant changes required to the strata scheme. In addition, purchasers will be required to sign an election for the GST margin scheme and enter into a deed of amalgamation with the City of Belmont. Consistent with Westpoint's core values and client for life philosophy, Lanepoint does not wish to terminate the purchase contracts even though it has the legal right to do so.
139 These same issues were raised by James in her memorandum of 17 October 2005 copied to the respondent. The consents and the amalgamation issues were of a longstanding nature and had not changed since development approval had been given.
140 Further, contrary to the assertions in the final sentence, the magistrate found that the respondent and Lanepoint had already decided to terminate the purchasers' Stage 1A contracts and had received advice from their in-house lawyer that was inconsistent with the unqualified assertion that it had the legal right to do so.
The respondent's evidence
141 The respondent's evidence was as follows. He did not take much notice of James' memorandum of 17 October 2005 and had not at that time instructed that Lanepoint wished to terminate the contracts. Before sending his October memorandum, external lawyers (Irdi Legal) had advised him that the existing contracts could be rectified by the original purchasers signing a document consenting to the proposed 20-unit development and that Lanepoint had a legal right to terminate the contract (M 84). However, very shortly after the respondent's October memorandum Irdi Legal then advised that there were so many fundamental changes to the Stage 1A contracts that rescission had to occur and new contracts had to be drawn up. The magistrate rejected all of this evidence.
142 As to the 17 October memorandum from James to Worthington (copied to the respondent) concerning the decision to rescind the Stage 1A contracts and resell at a higher price, the magistrate said:
143 Again on the subject of the James' memorandum of 17 October, the magistrate said: 144 In cross-examination the respondent had denied that it was apparent to him and his advisers soon after the making of the consent orders in July 2005 that the contractual obligations to the purchasers of Stage 1A units were incapable of implementation and said it took some considerable time to reach that point. The magistrate found:
In my judgment this was not true and the evidence showed that people in August 2005 were alert to this problem (M 98).
145 The respondent also said in evidence that he directed the sales people to give the Stage 1A purchasers the option of a substituted contract and said he 'instruct[ed] the agents to say that the purchasers could wait and have a new contract at the same price when it was ready' (M 100). The magistrate rejected this evidence (M 112). 146 The magistrate found that the three agents were not engaged in a frolic of their own. He said:
If the achievement of terminations was some unilateral aim by the agents you would have thought the crash reports would trigger concerns in Mr Carey but the evidence was contrary to that (M 103).
147 The magistrate found that the respondent (1) misrepresented matters in his October memorandum to his employees; (2) wanted to get on and presell Stage 1B units, which caused the problems with the Stage 1A contracts to be brought to a head; (3) was aware of the difficult situation in which Lanepoint found itself; and (4) was mindful of the warnings being voiced by James (M 110). The magistrate concluded:
I conclude that despite the contents of the [respondent's October memorandum] Mr Carey had already made the only realistic commercial decision which was to obtain the termination of the contracts. He had told Mr Niven this and Mr Hubbard and the agents had been alerted to this prior to the memo. …
The evidence showed that a process was implemented which clearly had the object of terminating every one of the Stage 1A contracts.
Accepting that was necessary in any event, it clearly was not on the basis of client[s] simply signing a new contract when that was available.
In my judgment the terminations were clearly being obtained on the basis of the property then being resold to others.
…
I conclude that Mr Carey has always known that justifying the unilateral termination of the contracts was going to be impossible to defend. He relied on the contents of his [October] memo but that could not explain why the methodical termination of the contracts took place.
In my judgment Mr Carey adopted the untruthful position of saying that the legal advice changed after his memo had been circulated and that contracts had to be terminated and new ones entered into.
His evidence was that existing purchasers were to be offered those new contracts but in my judgment the evidence is all against him on that.
…
Mr Carey knew and intended that the agents were to secure the terminations of each of the respective contracts so that each of those properties could be resold [to others] with new contract documentation (M 110 - 112).
148 It is against those factual findings that one needs to read the magistrate's conclusions relating to the respondent's defence under s 81(1)(a) of the FTA. On the subject of whether the respondent authorised the commission of the offences, the magistrate said: