Commissioner for Fair Trading v Grant; Commissioner for Fair Trading v John B Grant Real Estate Pty Ltd (No.2) (GD)
[2006] NSWADTAP 42
•01/09/2006
Appeal Panel - Internal
CITATION: Commissioner for Fair Trading v Grant; Commissioner for Fair Trading v John B Grant Real Estate Pty Ltd (No.2) (GD) [2006] NSWADTAP 42
This decision has been amended. Please see the end of the decision for a list of the amendments.PARTIES: FIRST APPELLANT: Commissioner for Fair Trading, Office of Fair Trading
FIRST RESPONDENT: John Bruce Grant
SECOND APPELLANT: Commissioner for Fair Trading, Office of Fair Trading
SECOND RESPONDENT: John B Grant Real Estate Pty LtdFILE NUMBER: 059080; 059081 HEARING DATES: 26/06/2006 SUBMISSIONS CLOSED: 06/26/2006
DATE OF DECISION:
09/01/2006BEFORE: O'Connor K - DCJ (President); Higgins S - Judicial Member; O'Neill A - Non Judicial Member CATCHWORDS: penalty - procedural fairness - relevant/irrelevant considerations MATTER FOR DECISION: Principal matter FILE NUMBER UNDER APPEAL: 053008 and 053009 DATE OF DECISION UNDER APPEAL: 11/25/2005 LEGISLATION CITED: Property Stock and Business Agents Act 2002 CASES CITED: Commissioner for Fair Trading, Office of Fair Trading v Grant; Commissioner for Fair Trading, Office of Fair Trading v John B Grant Real Estate Pty Ltd (GD) [2006] NSWADTAP 24 REPRESENTATION: FIRST APPELLANT AND SECOND APPELLANT
FIRST RESPONDENT AND SECOND RESPONDENT
M Painter of counsel instructed by B Mauro, solicitor, Office of Fair Trading
M Parasyn, solicitorORDERS: 1. Licence Conditions. That the parties bring in minutes of orders within 14 days in relation to the conditions to be placed on the First Respondent’s and the Second Respondent’s licences based on the terms set out at paras [48] and [49]. That either party have liberty to apply on 2 days’ notice if a further hearing is desired to settle the final terms of the orders; 2. Fine. That the Second Respondent be fined 100 penalty units, the fine to be paid within 60 days or by such further time as the Commissioner permits.
REASONS FOR DECISION
1 The Appeal Panel gave leave in a decision delivered 16 May 2006 for the present appeal by the Commissioner for Fair Trading against orders made by the General Division of the Tribunal to be extended to the merits: see Commissioner for Fair Trading, Office of Fair Trading v Grant; Commissioner for Fair Trading, Office of Fair Trading v John B Grant Real Estate Pty Ltd (GD) [2006] NSWADTAP 24.
2 The proceedings concern two licences issued under the Property, Stock and Business Agents Act 2002 (the Act) – the individual licence held by the first respondent, Mr Grant, to carry on business as a real estate agent; and the corporation licence held by the second respondent (‘the Company’) allowing it to carry on business as a real estate agent. The Company is the family company founded by Mr Grant, the present directors being Mr Grant’s wife and daughter.
3 A licence granted to a natural person and the licence granted to a corporation is to permit the licensee to ‘act as or carry on the business of … a real estate agent’ (s 8(1)(a); s 9(1)). Following a disciplinary inquiry, the Commissioner declared Mr Grant to be a disqualified person for a specified period of time, 6 months (see s 192(1)(h)) and imposed conditions on the Company’s licence (see s 192(1)(e)) and a fine (s 192(1)(d)). The Commissioner’s determination took effect from 10 February 2005. The fine was 150 penalty units ($16,500). The principal condition was that the Company by not later than 31 March 2005, at its expense, develop a financial management compliance program that fully identifies and explains its obligations in respect of money received by the Company on behalf of another person. Further, the program was to be certified by a registered company auditor as being reasonably capable of ensuring that the Company meets those obligations. By not later than 7 April 2005 the Company was required to provide a hard copy of the program to the Commissioner. The Company was directed to provide audit reports in addition to those required by the Act over the next two years on a six monthly basis.
4 Following application by Mr Grant and the Company, the Tribunal, on 18 February 2005 stayed the operation of the disqualification order affecting Mr Grant, instead permitting him to continue in practice subject to various conditions, and stayed the payment of the fine imposed on the Company. The Company did not object to the conditions imposed by the Commissioner, and has proceeded to carry them out.
5 The Company’s business is substantial. There are three offices and 39 employees. The combined effect of the orders made by the Commissioner would have been to allow the Company to continue to operate, but with no involvement by Mr Grant in its business. A disqualified person can not be a director of a corporation holding a corporation licence: s 14(2). Nor can a disqualified person work in any capacity that required a certificate of registration, in particular as a salesperson: s 14(3). At the end of the period of disqualification, the disqualified person is at liberty to re-apply for a licence or a (lesser) certificate of registration as a salesperson, but not necessarily with any guarantee of success.
6 On review, the Tribunal concluded that Mr Grant should be penalised less severely; and it set aside the fine imposed on the Company. It took the view that Mr Grant’s misconduct was not so grave as to render him unfit to hold a licence. Instead in its decision given on 26 November 2005 it allowed him to retain his licence subject to conditions substantially the same as those that had been imposed at the time of the stay order (18 February 2005) which were to apply for a further 6 months (i.e. to 25 May 2006). The conditions were:
7 In our decision delivered 16 May 2006 we upheld the Commissioner’s appeal in part, and extended the hearing to the merits. While we were satisfied with the decision of the Tribunal to reduce the penalty from one of disqualification to one which permitted him to retain his licence subject to conditions, we expressed concern over the adequacy of the conditions imposed on Mr Grant. We were particularly concerned by evidence that Mr Grant’s daughter (who has a licence) had taken over as a manager, and that she had replaced him as a director (on 30 November 2005). We doubted whether the clear object of the Tribunal’s conditions – to remove Mr Grant for a period from any managerial or supervisory involvement in the conduct of a real estate business (in particular his own) was being achieved. We upheld the Commissioner’s appeal in relation to the Tribunal’s decision not to impose any financial penalty on the Company for the misconduct of which it and Mr Grant, its general manager, had been found guilty. We set the matter down for further consideration of the appropriate conditions and the appropriate fine.
(a) Mr Grant is not to act as a licensee in charge of any real estate agency;
(b) Mr Grant is not to be involved in the day-to-day management of any entity operating as a real estate agency;
(c) Mr Grant is not to act in any supervisory capacity in any real estate agency;
(d) Mr Grant is to disclose the conditions to which he is subject to any licensee by whom he is employed and such disclosure is to occur prior to the commencement of employment in a real estate agency; and
(e) Mr Grant is to provide the Commissioner with written confirmation from the licensee that he has disclosed the condition to which he is subject prior to the commencement of employment in a real estate agency.
8 The parties filed written submissions, and a further hearing was held on 26 June 2006. Mr Grant was invited to give evidence and did so. He was cross-examined.
9 The imposition of conditions on licences is permitted by s 20 of the Act which provides:
10 Subsequent provisions deal with the imposition of certain types of special conditions. They are not relevant to this case.
‘ 20 Conditions – general
A licence or certificate of registration may be granted subject to conditions, including (but not limited to) conditions of the following kind:
(a) a condition prohibiting the holder from exercising functions under the licence or certificate of registration otherwise than as an employee of a licensee whose licence does not contain such a condition,
(b) a condition requiring the holder to undertake or complete a specified course of studies within a specified period of time,
(c) a condition requiring a licensee or holder of a certificate of registration to undertake by way of professional development specified further education or training during the term of the licence or certificate of registration,
(d) a condition prohibiting the holder from exercising functions under the authority of the licence or certificate of registration in relation to specified activities, or prohibiting the holder from exercising functions under the authority of the licence or certificate of registration except in relation to specified activities.
Note. An example of a condition under paragraph (d) is a condition that the holder of a real estate agent’s licence act only as a buyer’s agent.’
11 Two other provisions of importance appear at ss 31 and 32:
12 As noted in our earlier decision, references to the ‘Director-General’ are now to be read as being to the Commissioner.
‘31 Each place of business to be in charge of licensee
(1) An individual who carries on business under a licence at more than one place of business must employ at each of those places of business (except the place at which the licensee is personally in charge) as the person in charge of business at that place a person who is the holder of a licence that an individual is required to hold to carry on that business.
(2) A corporation that holds a corporation licence must employ as the person in charge at each place of business at which the corporation carries on business under the licence a person who is the holder of a licence that an individual is required to hold to carry on that business.
(3) A licensee must not employ a person to be the person in charge of business at a place of business of the licensee if the person is also employed to be the person in charge of business at another place of business of the licensee or at a place of business of another licensee.
(4) A person employed as the person in charge of business at a place of business of a licensee must not exercise functions or provide services on behalf of 2 or more licensees at that place (whether corporations or individuals) unless those licensees are in partnership.
(5) The Director-General may grant a person an exemption from a provision of this section. The exemption may be granted unconditionally or subject to conditions. The Director-General may at any time by notice in writing to a person granted an exemption revoke the exemption or vary the conditions of the exemption.
(6) The regulations may specify the matters to be taken into account by the Director-General in considering whether to grant a person an exemption from a provision of this section.
Maximum penalty:
(a) 200 penalty units in the case of a corporation, or
(b) 100 penalty units in any other case.
32 Duty of licensee and person in charge to properly supervise business
(1) A licensee must properly supervise the business carried on by the licensee.
(2) A licensee employed by another licensee (the principal licensee) as the person in charge of business at a place of business of the principal licensee must properly supervise the business of the principal licensee carried on at that place.
(3) The requirement to properly supervise the conduct of business includes the following requirements:
(a) a requirement to properly supervise employees engaged in the business,
(b) a requirement to establish procedures designed to ensure that the provisions of this Act and any other laws relevant to the conduct of that business are complied with,
(c) a requirement to monitor the conduct of business in a manner that will ensure as far as practicable that those procedures are complied with.
(4) The Director-General may from time to time issue and notify to licensees guidelines as to what constitutes the proper supervision of the business of a licensee. A failure to comply with the requirements of any such guidelines in connection with the supervision of a business constitutes a failure to properly supervise the business.
Maximum penalty:
(a) 200 penalty units in the case of a corporation, or
(b) 100 penalty units in any other case.’
13 The orders proposed by the Commissioner need to be seen as a package. The Commissioner commended the following as the alternative conditions to be placed on Mr Grant’s licence:
Orders Proposed by Commissioner
14 The conditions were not time-limited.
(a) not to act as licensee in charge of a real estate agency;
(b) not to be involved in the day to day management of any entity operating as a real estate agency;
(c) not to act in any supervisory capacity in any real estate agency and not to provide training to staff members;
(d) to disclose the conditions to which he is subject to any licensee in charge employed by the Company and such disclosure to occur prior to the commencement of his employment or placement in position of licensee in charge;
(e) to provide written confirmation from the appointed licensee in charge of the Company that he had disclosed the condition to which he is subject prior to commencement of his employment or placement in position of licensee in charge;
(f) to complete at least four Continuing Professional Development courses over a six month period; one from each of the following priority learning areas: ethics and professional responsibility, business management practices, trust accounting and communication skills. The completion of the courses will be in addition to the 12 CPD points. In addition Mr Grant will be required to give Fair Trading written confirmation of their completion;
(g) that Mr Grant’s daughter be removed from the directorship of the corporate licensee (the Company); and
(h) The corporate licensee (the Company) appoint a person with real estate experience and independent as a director for a period of 12 months.
15 Mr Grant opposed the imposition of conditions (a) to (e).
16 As will be seen, they have the effect of precluding him (possibly forever) from returning to a managerial or supervisory position, and restricting him, in effect, to being a salesperson. This is the position Mr Grant has been in since the Tribunal orders made 26 November 2005. He informed the Appeal Panel that he had continued voluntarily to work in that capacity since the Tribunal order expired (26 May 2006) having noted the concerns expressed by the Appeal Panel over the adequacy of the conditions and pending the present decision.
17 Mr Grant did not oppose a requirement to undertake continuing professional education (condition (f)) but queried the practicality of the specific requirements.
18 As to conditions (g) and (h), dealing with the running of the Company, he would reluctantly agree though he would prefer to have a supervisory role.
19 In the case of the Company the Commissioner proposed (the Company’s response is shown in parenthesis):
20 We gave a summary of the types of non-compliance committed by Mr Grant at [18] of our earlier decision. We repeat them here to provide context for what follows:
(a) the extension of the six monthly audits to September 2007 (not opposed);
(b) the Company to recruit a consultant (expert in running a real estate business/accountant) to design, develop and implement a financial, compliance and training plan (specific time frame). The consultant to design, develop and implement a specific training program for Mr Grant against a list of real estate competencies (questioned);
(c) the Company to provide a specific and detailed financial management, compliance and training plan to the Commissioner, with time frame to be specified (question necessity, given what has already been done); and
(d) the consultant to mentor Mr Grant for a period of 12 months (questioned).
21 As we noted in our earlier decision, the Commissioner does not question the personal honesty or integrity of Mr Grant.
‘18 There was no dispute with the Commissioner’s account of the instances of non-compliance that had occurred while Mr Grant had been general manager. They included:
19 The Tribunal referred to the audit reports that had been presented during 2005 in consequence of the statutory requirements or the additional requirements (not stayed) that had been imposed by the Commissioner. The reports made in March, May, September and October were qualified noting continuing problems with the corporation’s recordkeeping and reconciliation practices. The September and October reports noted a number of breaches of the Regulation.
– The Company had failed to record in its internal records within the time required the receipt of rents into its trust account by tenants using a bank direct debit system
– Several breaches of requirements relating to the timely banking of trust funds
– Employment of three persons who did not hold a certificate of registration or a licence as required by the Act (not disputed that these were contraventions of ss 8(1) and 11(1))
– In the case of the Moorebank office, deficiencies in the trust account arising from failure to bank some creditor funds
– In the case of the Moorebank office, criminal misappropriation of nine rental bond payments and two holding deposits by an employee (total amount $11,380)
– In the case of the Chester Hill office, a pattern of irregularities in the corporation’s trust account records, in particular aged outstanding deposits and aged unpresented cheques, with failure to reconcile irregularities from month to month
– In the case of Glenfield, an apparent deficiency according to the Commissioner (disputed by Mr Grant), due to a series of failures to balance the end of month trust account reconciliations of $22,635 (as at 20 December 2004)
20 The Tribunal referred to the submissions of the Commissioner and Mr Grant, and noted the evidence of Mr Grant as to the difficulties he claims to have had in implementing computerised account keeping systems, and the difficulties he has experienced in coming to grips with the systems and their requirements.’
22 Mr Grant gave evidence. He informed the Appeal Panel that the firm had on its books 800 rental properties. The other side of the business is residential property sales. The monthly staff payroll is about $100,000. Trust account holdings per annum come to about $20.2m, roughly divided between rental payments, about $9.6m, and purchasers’ deposits on sales, $10.6m. We noted in our earlier decision that the firm has three offices and that according to Mr Grant’s evidence the three offices had a combined annual sales and rental turnover at that time of approximately $107m with 39 employees. The $107m figure, as we now understood the evidence, has bundled into it the total sale price of properties sold.
23 To obtain some understanding of the level of payment activity that occurs across the business, we asked Mr Grant about the usual frequency of rent payments. He said that tenants usually paid weekly, and that the rental payment, depending on the region, was usually of the order of $250-$300 per week. Just using these figures as a guide, it can be seen that the business may have to process around 41,600 rental payments a year (800 properties x 52 weeks), or about 160 per business day (treating the year for this purpose as having 260 business days, 5 days by 52 weeks). Then there are the many large-sum deposits paid by purchasers of homes for sale.
24 On any view this is a large real estate business with a high level of trust account activity. The detail that has surrounded the discussion of conditions in this case – those personal to Mr Grant’s licence and those affecting the Company’s licence – are all affected by a fear that if Mr Grant is put back in charge the same problems will recur.
25 Mr Grant’s solicitor, Mr Parasyn, submitted, in effect, that Mr Grant had already been punished enough. Mr Grant had been restricted in his involvement with the Company in the way reflected in the final order of the Tribunal since his application to have stayed his disqualification had been granted on 18 January 2005. With the addition of the further 6 months imposed by the Tribunal’s order, and his voluntary submission to the order since it expired, he had been subject to restriction now for a period of 16 months. Problems of the dimension that had led to the Commissioner’s action had not recurred.
Submissions
26 Mr Parasyn advised that Mr Kevin O’Mara, an accountant qualified in the way required by the Commissioner, but aged 71 years, had assisted in the financial management of the firm for the last 12 months. He had recently stood down for personal reasons and the resignation had taken effect on 23 June 2006. He noted that Mr Grant’s daughter, Amy Patricia Werne, is the licensee in charge of the Glenfield office. As at 30 November 2005, following the delivery of the Tribunal’s decision, she had replaced her father as a director. As to the other two offices, we were told that Mr Brittoni is the licensee in charge of Moorebank office. We were told that Mr O’Mara had been at Chester Hill, though we took it not as licensee.
27 Mr Parasyn said that it would be very difficult, if not impossible, to find an independent director who would take on the responsibilities set out in the conditions. So far as the appointment of a consultant is concerned, Mr Parasyn referred to the financial systems now in place. He said that a standard recommended by the Real Estate Institute of NSW had been adopted. His submission was that such an imposition was not required.
28 Mr Parasyn stated that Mr Grant wishes to be restored to at least the status of licensee in charge of an office, and he was prepared to submit to supervision. Ms Painter, for the Commissioner, replied that this was unworkable.
29 Mr Grant’s record is such that there are serious doubts about his ability to comply with the prudential requirements that fall today on a real estate agent running a business of the scale presented by this case. The package of measures proposed by the Commissioner seeks to prevent Mr Grant being involved, in any way for the foreseeable future, in the management of the business, especially the administration of prudential responsibilities. The Act is replete with reporting obligations and other requirements relating to the management of client funds and the administration of trust accounts.
Assessment
30 There is also concern that Mr Grant may continue to have an undue influence on the running of the business if he remains employed by the Company, one that he built up to be a successful and large business and, which is, in a very real sense, his. This concern provides the background to the Commissioner’s proposed conditions relating to supervision and training. It also provides the background to the condition that seeks to exclude his daughter (who holds a licence) from being involved in the affairs of the Company. The present position, as noted earlier, is that Mr Grant’s wife and their daughter are the directors. The Commissioner proposes that a director be introduced who is free of family ties.
31 We have sympathy for the approach the Commissioner suggests, but we doubt whether it is possible to go that far, and have taken a more qualified approach.
32 We do think that Mr Grant should remain subject to restriction, but not forever as proposed by the Commissioner but for a fixed period of approximately 18 months, which by 10 February 2008 would be four years after the Commissioner’s original order. In our view the length of further stand-down imposed by the Tribunal (6 months to April 2006) was too short.
33 Mr Grant is, we think, a person with a strong sense of the importance of integrity and honesty in personal dealings. We are not surprised to hear that he has never been the subject of complaint in relation to the way he personally has dealt with customers.
34 However, he has difficulty in seeing that, as the leader of a business of some scale, more is required than a personal commitment to integrity and honesty. It is necessary to have in place systems which are compliant with the requirements of the law and protect the interests of his clients and others with whom the business deals.
35 In evidence before us, he spoke of how he felt let down by some of the events that have given rise to these proceedings. He feels that the trust that he placed in some employees was not repaid. He referred to the two incidents in recent years where there had been defalcations by trusted employees. At one point of his evidence he said to us: ‘I am a people person who never took any notice of books’ and that he ‘trusted people’. He explained some of the non-compliances (to do with trust account bookkeeping requirements) as having occurred when his daughter who is ‘more skilled in books’ left to have her first baby. He said that was when the books were not kept up to date.
36 He reiterated before us, as he did in responding to the Commissioner and the Tribunal, that, in the end, any money missing was put back. He had made up any shortfalls and the defalcations out of his own money.
37 He referred to the efforts that he has made in the last three years, since the Commissioner commenced to take the present disciplinary action against him, to improve his business systems. He has had his computerised systems redesigned by a firm that specialises in the needs of the real estate industry (the Clark software accounting system). He referred, positively, to the assistance Mr O’Mara had provided. He described him as ‘a stickler for protocols’ in ensuring that proper banking practices are being adopted.
38 His comments suggested to us that Mr Grant still had difficulty ‘owning’ the importance of observing the various requirements and in himself being sufficiently aware to identify omissions or systemic weaknesses. They tended to reinforce our doubts as to whether Mr Grant was now able to manage effectively an organisation as big as his business, with its volume of activity, in relation to its trust account and similar requirements.
39 He acknowledged in cross-examination that as recently as 12 April 2006 there were irregularities in his trust account in relation to a problem previously identified and the subject of findings of contravention, i.e. the presence of aged, unpresented cheques (on that occasion in the sum of $5,500). He acknowledged that it was required that aged, unpresented cheques must be transferred, under cl 28(6) of the Regulations, to the Office of Fair Trading.
40 The Appeal Panel’s conclusion is that it would not be prudent, or in the public interest, to allow Mr Grant to resume as a licensee in charge of an office at this time.
41 As to the Company, we think the proposals of the Commissioner for introduction of a consultant to take responsibility for the accounting and prudential obligations of the Company’s business should be pursued.
42 We have given consideration to whether a restriction should be placed on the licence of Mr Grant or of the Company so as to prevent his daughter being involved in the business as a practising licensee in charge or as a director. We doubt whether it is appropriate to go that far. The Commissioner has not taken any action against her and there is no evidence before us suggesting non-compliance with standards on her part. We have expressed concern over the substitution of her for Mr Grant as director, and the possibility that nothing has changed in reality in the way in which the Company’s business is conducted. On the other hand, it does appear to be the case that the introduction of the consultant, Mr O’Mara, into the structure has proved effective. The Commissioner’s proposed orders seek to retain in the business a presence of the kind that was provided by Mr O’Mara.
43 We doubt whether subjecting Mr Grant to numerous special courses at this stage of his life and career is of any great value. We have required that Mr Grant undertake one additional course only. Further, while we agree that Mr Grant should not be accorded any supervisory role for a period which touches on the accounting and prudential operations of the business, we do not see any need to restrict Mr Grant from having a training relationship with staff involved in sales.
44 In our view the matter is best resolved in the following way, with conditions being imposed on Mr Grant’s personal licence for a further period of approximately 18 months and on the Company’s corporation licence. The period of 18 months will also give a sufficient period, we think, for a new consultant to see that satisfactory systems are in place.
45 We agree with the Commissioner’s proposal that there be a consultant engaged with responsibility for advising the Company and the licensees in charge of the offices on the implementation of appropriate systems, and in assisting them to implement schemes for monitoring compliance. We do not think that it is necessary to attach more detailed performance conditions to the Company’s licence.
46 The consultant might well wish to consult Mr Grant on particular matters and we do not seek to preclude that kind of contact.
47 The Company should be given two months in which to appoint a new consultant.
48 In the case of Mr Grant’s licence:
Summary of Conditions:
As to Mr Grant’s Licence
49 In the case of the Company’s licence:
(a) not to act as licensee in charge of a real estate agency before 10 February 2008;
(b) not to be involved in the day to day management of any entity operating as a real estate agency before 10 February 2008;
(c) not to act in any supervisory capacity in any real estate agency but to be permitted to provide training to staff members in relation to selling practices and techniques;
(d) to disclose the conditions to which he is subject to any licensee in charge employed by the Company, such disclosure to occur prior to the commencement of that person’s employment or placement in position of licensee in charge;
(e) to provide written confirmation from the appointed licensee in charge of the Company that he had disclosed the condition to which he is subject prior to commencement of that person’s employment or placement in position of licensee in charge;
(f) to undertake one additional Continuing Professional Development course over a six month period; relating to business management practices or trust accounting. The completion of the courses will be in addition to the 12 CPD points. In addition Mr Grant will be required to give the Commissioner written confirmation of its completion.
50 In the case of Mr Grant’s licence, our conditions (a) and (b) are in line with conditions proposed by the Commissioner, with the important difference that they are now time limited. In our view, Mr Grant should not be prevented from resuming as a licensee in charge as from February 2008. Our condition (c) adopts part of the Commissioner’s proposed condition (c), but does not include the prohibition in relation to ‘providing training to staff members’. This is too broad, we think, as we do not see any difficulty in Mr Grant being involved in training in connection with those competencies that are not in issue.
(a) the extension of the six monthly audits to September 2007;
(b) the Company to recruit within two months (any extension to be approved by the Commissioner) a consultant to continue the design, develop and implementation of a financial, compliance and training plan (the plan); and to provide regular training and mentoring to Mr Grant for the next 18 months;
(c) the Company to provide the Commissioner in conjunction with the six monthly audits referred to in condition (a) with a report on the details of the plan, its effectiveness and the specific training and mentoring provided to Mr Grant.
Differences from Commissioner’s Proposed Conditions
51 The Commissioner’s proposed conditions (d) and (e) are adopted, with some minor changes to wording designed to clarify them.
52 As to additional professional education (condition (f)), we think that the requirement of four additional courses is too onerous. We think one additional course is sufficient, and it should be selected from the areas of greatest concern – business management and trust accounting.
53 We have not adopted the Commissioner’s proposed conditions (g) and (h). We do not think it is necessary to go so far as having Mr Grant’s daughter removed from the directorship. If the Company has licensees in charge other than Mr Grant, and continues to have a consultant for a further period of 18 months, that will hopefully prove sufficient to eliminate the problems that have been raised.
54 We doubt whether it is appropriate to place restrictions on the directorship of the Company. But we reiterate our concern that arrangements be put in place by the directors (Mr Grant’s daughter and his wife), in particular the appointment of the consultant, that ensure that the licensees – the Company and the individuals in charge of the offices – are responsible for ensuring compliance with the financial and prudential obligations; and that Mr Grant is not in any way involved in management.
55 In the case of the Company, especially as there was no objection, we have adopted the Commissioner’s proposed condition (a). We have not adopted proposed conditions (b), (c) and (d) in the terms proposed, but we have sought to reflect their substance in terms (b) and (c).
56 It will be seen that, overall, the object of the terms is to have the Company’s financial and prudential systems operating in an orderly way by the end of 2007, in contemplation of the possibility that Mr Grant might be permitted to return as a licensee in charge of one of the offices.
57 The Commissioner’s penalty was a fine of 150 penalty units (penalty unit is $110), total $16,500. The Tribunal set the fine aside. In our earlier decision, we commented:
The Fine
58 These are disciplinary proceedings. Their purpose is protection of the public. The disciplinary order is also intended to serve that end. We agree with the Commissioner’s submissions that account should be taken of the following factors: the seriousness of the breaches, the persistence of the breaches, the potential for financial harm to consumers, and the general requirement for observing statutory obligations and maintaining public confidence in the integrity of the licensing system.
‘56 Here serious misconduct on the part of the Company had been identified – numerous contraventions of the financial management regulations. But the Commissioner and the Tribunal both concluded that it should not be stripped of its licence. Their reticence to do so is understandable, given the scale of the business and the number of employees whose livelihood depended on the business. The reasons given at [42] commence by stating the Tribunal’s view that the irregularities in practice had been ‘resolved to the stage that the public can have confidence in the operations of the Company provided that it continues to operate under close scrutiny’. The Tribunal continued that as this met the consumer protection objectives of the legislation the imposition of a monetary penalty ‘would be excessive and unnecessary’.
57 The difficulty we have with the reasons as to penalty is that no reference is made to the past history of non-compliance or inadequate compliance with requirements, and the entire disciplinary history affecting Mr Grant and his Company. We think this was a matter to be taken into account on penalty, and was not. We are of the view that the determination not to impose a fine should be set aside, and further submissions should be considered at the resumed hearing. That said, it may be that the point at which the Commissioner pitched the fine is excessive. We are inclined to the view that a fine at 75% of the maximum allowed by the legislation is rather high.’
59 The Commissioner submitted, noting the Tribunal’s view that three-quarters of the maximum appeared rather harsh, that the fine be 100 penalty units (half). We agree. This case includes repeated breaches. It is also important to send a signal through the level of the fine to other members of the real estate industry. We do not think any significant regard should be given, on this occasion, to the other costs that Mr Grant and his firm have incurred as a result of these proceedings.
60 We have departed to some degree from the framework of the orders as they were canvassed before us by the parties. We would invite the parties to produce minutes of order for final endorsement. We give the parties liberty to apply on 2 days’ notice for a further hearing if there are aspects of the terms of our draft orders which need refinement or, are seen by the Commissioner in particular, as not being readily capable of implementation as presently expressed.
Formulation of Orders
Orders
1. Licence Conditions. That the parties bring in minutes of orders within 14 days in relation to the conditions to be placed on the First Respondent’s and the Second Respondent’s licences based on the terms set out at paras [48] and [49]. That either party have liberty to apply on 2 days’ notice if a further hearing is desired to settle the final terms of the orders.
2. Fine. That the Second Respondent be fined 100 penalty units, the fine to be paid within 60 days or by such further time as the Commissioner permits.
[On 30 November 2006, the Appeal Panel made the following orders:
059081 : Commissioner for Fair Trading, Office of Fair Trading v John Bruce Grant
The Appeal Panel of the Tribunal orders that the Respondent’s licence to carry on business as a real estate agent be subject to the following conditions:-
1. The Respondent will not for a period of eighteen (18) months, until 10 February 2008:
(a) act as a licensee in charge of any real estate agency;
(b) be involved in the day to day management of any entity operating as a real estate agency;
(c) act in any supervisory capacity in any real estate agency except that he is permitted to provide training to staff members in relation to selling practices and techniques;
(d) be a director of any entity that holds a licence under the Property, Stock and Business Agents Act 2002.
2. The Respondent will, until 10 February 2008, disclose the conditions to which he is subject to any licensee in charge employed by John B Grant Real Estate Pty Ltd, such disclosure to occur prior to the commencement of that person’s employment or placement in the position of licensee in charge;
3. The Respondent will provide written confirmation to the Commissioner for Fair Trading from the appointed licensee in charge of John B Grant Real Estate Pty Ltd that he has disclosed the condition to which he is subject prior to commencement of that person’s employment or placement in position of licensee in charge. (The written confirmation to be forwarded to Manager, Real Estate Investigations, PO Box 972 Parramatta 2124);
4. The Respondent will, in addition to the 12 CPD points, which every real estate agent must obtain each year, undertake one additional Continuing Professional Development Course over the next six (6) month period relating to business management or trust accounting and must give the Commissioner for Fair Trading written confirmation from the institution attended of his completion of the course and its requirements. (The written confirmation to be forwarded to Manager, Real Estate Investigations, PO Box 972 Parramatta 2142).
059080 : Commissioner for Fair Trading, Office of Fair Trading v John B Grant Real Estate Pty Ltd
The Appeal Panel of the Tribunal orders that the Respondent’s corporation licence be subject to the following conditions:-
1. The Respondent will have its trust account/s audited every six (6) months until 30 September 2007 for the periods 1 September 2006 to 31 March 2007 and 1 April 2007 to 30 September 2007 such audits to be conducted and completed within 28 days of 31 March 2007 and 30 September 2007 respectively;
2. The Respondent will provide the Commissioner for Fair Trading with copies of the audited accounts within 28 days of the end of the six monthly audit periods. (The audit reports to be forwarded to Manager, Real Estate Investigations at PO Box 972, Parramatta 2124);
3. The Respondent will recruit, within two months of the orders being made, a consultant to:
(a) continue the design, development and implementation of the financial management compliance and training plans (“plans”); and
(b) provide regular training and mentoring to Mr Grant for a period of 18 months.
4. The Respondent will provide the Commissioner for Fair Trading with a copy of the financial management compliance and training plans within 28 days of the appointment of the consultant and thereafter every month provide to the Commissioner a report prepared by the consultant of the progress of implementation and effectiveness of the plans including with respect to Mr Grant, details of the training and mentoring provided.]
02/02/2007 - To include orders made by Appeal Panel on 30/11/2006 - Paragraph(s) Orders at end of reasons for decision.
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