COMMISSIONER FOR FAIR TRADING v MCPHERSON (Occupational Discipline)
[2019] ACAT 70
•10 July 2019
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
COMMISSIONER FOR FAIR TRADING v MCPHERSON (Occupational Discipline) [2019] ACAT 70
OR 5/2019
Catchwords: OCCUPATIONAL DISCIPLINE – real estate agent – audit of trust accounts – failure of agent to provide audit of trust account – financial penalty – public reprimand – public reprimand as deterrent to other agents
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 65, 66
Agents Act 2003 ss 7, 41, 115, part 7
Fair Trading (Australian Consumer Law) Act 1992, Dictionary
Subordinate
Legislation cited: Agents Regulation 2003 r 17
Tribunal: Senior Member H Robinson
Date of Orders: 10 July 2019
Date of Reasons for Decision: 30 July 2019
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) OR 5/2019
BETWEEN:
COMMISSIONER FOR FAIR TRADING
Applicant
AND:
DONALD AMBROSE MCPHERSON
Respondent
TRIBUNAL: Senior Member H Robinson
DATE: 10 July 2019
CONSENT ORDERS
Pursuant to section 55 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act), by consent of the parties, the Tribunal makes the following final orders in this matter.
Pursuant to section 66 of the ACAT Act, the following orders are imposed:
(a) Pursuant to s 66(2)(a) of the ACAT Act, the Respondent is publically reprimanded.
(b) Pursuant to s 66(2)(c) of the ACAT Act, the Respondent must, within six months of the date of the Tribunal’s order, complete to the satisfaction of the Commissioner the following real estate industry training courses, which are to be designed for the Australian Capital Territory’s legislative environment and are not to count towards the Respondent’s continuing professional development requirement.
(i)establish and manage agency trust accounts;
(ii)maintaining business records
(iii)minimising agency and consumer risk; and
(iv)apply knowledge of state or territory legislative and regulatory framework to complete agency work.
(d) Pursuant to s 66(2)(g) of the ACAT Act and s 34(2)(c) of the Agents Act 2003, the Applicant is directed to impose the following conditions on the Respondent’s licence (18402133):
(i)the Respondent must submit his trust account records to a qualified auditor for audit once every six months, for a period of two years commencing on 1 July 2019 and ending on 30 June 2021, with the completed audit reports to be provided to the Commissioner via email to [email protected] within three months of the end of the six month period, either by the Respondent or the qualified auditor engaged by the Respondent;
(ii)within 28 days of the date of this order, the Respondent must provide to the Commissioner, via email to [email protected] a copy of his updated policies and procedures for record keeping and trust accounting, including information in relation to his record and bookkeeping practices; and
(iii)within 14 days of the end of every quarter, being 30 June, 30 September, 31 December and 31 March, the Respondent must provide a copy of the Respondent’s records in relation to transactions effected within that quarter to the Commissioner, via email to [email protected], for a period of one year commencing on 1 July 2019 and ending on 30 June 2020.
(d) Pursuant to s 66(2)(h) of the ACAT Act, the Respondent is required to pay, to the Applicant, the sum of $2,500, within three months of the date of these orders.
The directions hearing listed on 12 August 2019 is vacated.
The final hearing listed on 14 August and 15 August 2019 is vacated.
The respondent admits to the facts set out above and agrees that his conduct contravened the Agents Act 2003.
……………Signed…………..
Senior Member H Robinson
REASONS FOR DECISION
This is an application for an occupational discipline order against Mr Donald McPherson (respondent) for a contravention of section 115 of the Agents Act 2003 (the Agents Act). On 15 September 2016, the Commissioner filed an application for disciplinary action. On 12 June 2019, the parties filed proposed consent orders and a statement of agreed facts. The proposed orders and agreed facts are annexed at the end of these reasons.
Background and legislative framework
The facts in this matter are not in dispute. The respondent is and was, at all material times, a licensed agent generally under the Agents Act and Part 7 of the Agents Act. The respondent became a licensed agent on 1 September 2014 and carried on a business as a real estate agent at all relevant times, trading as “One Agency Don McPherson”.
Section 115(1) of the Agents Act requires agents to submit their trust account for audit annually. For the financial year 2015/16, the respondent did not engage a qualified auditor to audit his trust account within the statutory timeframe prescribed by section 115(1).
Additionally, for the financial years 2015/16, 2016/17 and 2017/18, there were several exceptions to compliance with Part 7 of the Agents Act identified in the audit reports provided to the Commissioner. The respondent was unable to provide any explanation or reasonable basis for these exceptions.
Section 41 of the Agents Act sets out the grounds for occupational discipline against a licensed agent. The Commissioner contended that the respondent is liable for occupational discipline for:
(a)contravening fair trading legislation for failing to maintain adequate trust account records and failing to comply with auditing requirements;[1] and
(b)contravening rules of conduct for failing to act honestly, fairly and professionally, failing to exercise reasonable skill, care and diligence, failing to act in accordance with client instructions and acting as an agent without written consent.[2]
[1] Section 41(1)(a)
[2] Section 41(1)(b)
For the purposes of section 41(1)(a), section 7 of the Agents Act and the Dictionary to the Fair Trading (Australian Consumer Law) Act 1992 defines “fair trading legislation” to include the Agents Act.
For the purposes of section 41(1)(b), section 171(1) of the Agents Act and regulation 17(1) of the Agents Regulation 2003 (the Regulations) sets out the rules of conduct for agents. Schedule 8 of the Regulations provides that an agent must “exercise reasonable skill, care and diligence”.
The agreed facts
The 2015-2016 audit period
The respondent was required to file an audit of trust accounts on 30 August 2016 for the 2015-2016 audit period. The respondent did not do so until 27 April 2017, which is approximately seven months outside the prescribed timeframe.
The 2015-2016 report provided by the auditor to the Commissioner detailed several “exceptions” to compliance with Part 7 of the Agents Act:
(a)Transaction and property management documents relating to the dissolution of the partnership by the respondent with his partner were not visible on the files.
(b)Bank fees ($120), marketing fees ($6,360) and commissions ($8,800) were not remitted to the respondent at the time of settlement.
(c)Overpayments to the amount of $74,340 had been distributed from the trust account due to errors in processing settlement payments (all overpayments were eventually rectified).
(d)Details for electronic fund transfers were insufficient to enable transfers be validated against the instructions received.
The 2016-2017 audit period
The 2016-2017 report was provided to the Commissioner on 15 September 2017.
The report detailed the following ‘exceptions’ to compliance with Part 7 of the Agents Act:
(a)No documented transaction confirmations for the first quarter of the audit period.
(b)Details for electronic fund transfers were insufficient to enable transfers be validated against the instructions received.
(c)Funds from the respondent’s operating account were used to meet the settlement requirements for one property.
(d)Numerous funds were transferred between the operating account and the trust account to pay commission and marketing fees.
(e)No payment of commission and marketing fees for some properties to rectify the shortfall in the trust account.
(f)Several commissions were remitted without the agent’s instructions or authorisations being sighted.
(g)Retrospective correction of errors in the trust account balance to ensure the amount on trust was correct.
The 2017-2018 audit period
The 2017-2018 report was provided to the Commissioner on 28 September 2018.
The report detailed the following ‘exceptions’ to compliance with Part 7 of the Agents Act:
(a)An adjustment for an $1,000 erroneous payment transferred to the respondent was corrected by adjustment to the commission paid to the respondent, rather than a proper refund and repayment.
(b)An adjustment for an $1,940 unauthorised payment transferred to an agent was corrected by adjusting the commission of another transaction.
(c)Lack of clarity and explanation for the respondent’s disbursements.
(d)Incomplete record keeping, including missing orders, files, instructions and confirmation of documents being sighted.
(e)Incomplete completion of checklists for compliance.
Grounds for occupational discipline
The parties appeared before the Tribunal on 10 July 2019 to seek the proposed orders. At the conclusion of the hearing the Tribunal made the proposed orders, and now publishes its reasons.
Section 65(3) of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) sets out the factors for consideration when making orders for occupational discipline, and section 66 sets out orders that the tribunal may make. These orders reflect the considerations under section 65(3).
Whether the person took reasonable steps to avoid the action (the contravention) that is the ground for occupational discipline
The respondent offered no evidence to steps taken to avoid a contravention of section 115 of the Agent Act. It is apparent from the agreed facts that the respondent consistently failed to keep sufficient details for payment to ensure it could be validated with the instructions he received. On several occasions when an erroneous or unauthorised payment was made, the respondent corrected the errors retrospectively by adjusting the fees for commission. The respondent has also transferred funds between his operating account and trust account as a method to rectify the balance of the trust account. The Tribunal is therefore satisfied that in neglecting and overlooking his trust accounting obligations, the respondent did not take reasonable steps to avoid the contravention.
Whether occupational discipline has previously been used against the person for a similar act
An order for occupational discipline has previously been made against the respondent[3] (previous disciplinary proceedings). On 7 February 2017, the respondent was publicly reprimanded, ordered to pay the Territory the sum of $1,000, and complete real estate industry training courses. It does not appear, as a result of this previous order, that the respondent has fully understood his responsibility as an agent to know his obligations, and to ensure that they are met.
Whether the person has taken steps to mitigate the effect of the contravention
[3] Commissioner for Fair Trading v Donald Ambrose McPherson [2017] ACAT 6
The respondent has not taken any steps to mitigate the effect of the contravention. The audit reports confirm there were several breaches of the respondent’s trust accounting requirements. While erroneous or unauthorised payments were eventually rectified, rather than a proper refund and repayment, the respondent corrected his mistakes by transferring funds between his accounts or adjusting the fees of another transaction. These retrospective practices do not demonstrate that the respondent has taken steps to mitigate the effect of his contraventions.
The impact of the contravention on any other person
By failing to submit his trust account audit report within the prescribed timeframe, the respondent has caused additional expense to the Commissioner in the additional regulatory burden of seeking to enforce the requirement. The Commissioner’s capacity to protect the public was compromised during the period the report was due and not filed.
Additionally there were a number of deficiencies in the respondent’s trust accounts. Though there is no evidence that any person was adversely affected or suffered any loss, the respondent’s deficient record keeping and inadequate file management exposes members of the public to an increase risk of the adverse effects of poor conveyancing.
Likelihood that the person will act in a way that is ground for occupational discipline in the future
The respondent has now been subject to two separate disciplinary proceedings in relation to account keeping and record keeping. He has cooperated with this process and had admitted to the exceptions identified in the audit process. He has agreed to undertake training. The exceptions identified in the 2017-2018 report are less significant than those identified in earlier audits, which appears to show some pattern of improvement. The Tribunal is reasonably satisfied that the respondent will exercise greater care in the future.
Consideration
The Tribunal is satisfied from the agreed facts that there are grounds for occupational discipline pursuant to section 41(1)(a) of the Agents Act. Having regard to the nature of the contravention, the Tribunal is satisfied that the proposed orders are appropriate.
The Tribunal is satisfied that it is appropriate for the respondent to be publicly reprimanded. These reasons will serve as that public reprimand.
The Tribunal is satisfied that the applicant should undertake the suggested training courses. As evidenced by the audit report, there are clear deficiencies in the management of the respondent’s files, payment receipts and client instructions. It is in the interest of the public that the respondent undergoes appropriate training for establishing and managing trust accounts, maintaining business records and minimising risk and applying the relevant statutory framework. These courses are to be completed in addition to his usual continuing professional development obligations.
The Tribunal notes that the respondent has previously completed training courses in ‘maintaining business records’ and ‘minimising agency and consumer risk’, pursuant to orders made in the previous disciplinary proceedings. While the Tribunal is not entirely convinced that repeating these courses would be of benefit, the applicant advises that they are the only suitable courses for addressing the compliance issues raised in these proceedings. The respondent has, in any case, agreed to undertake them.
The Tribunal is also satisfied that there should be conditions imposed on the respondent’s licence. This breach is a significant one, and an occupational discipline order has previously been made against the respondent for a similar omission. It is therefore necessary that steps are taken, and safeguards be put in place, to prevent the respondent from breaching his obligations again. By requiring the respondent to update the Commissioner on his records for future audit periods, these conditions can ensure appropriate supervision on the respondent.
Lastly, the fine of $2,500 within three months of the date of these orders is appropriate to serve as a deterrent to the respondent and other agents, to ensure there are no such contraventions in the future. The fine imposed will ensure other agents are aware of their obligations, and the consequences of not meeting them.
………………………………..
Senior Member H Robinson
APPLICATION FOR CONSENT ORDERS -ANNEXURE B
STATEMENT OF AGREED FACTS
COMMISSIONER FOR FAIR TRADING v DONALD AMBROSE McPHERSON (OR 5/2019)
The Respondent’s license and business
The Respondent is and was, at all material times, a licensed agent for the purposes of the Agents Act generally and Part 7 of the Agents Act (which deals with trust accounts). The Respondent was first licensed as an agent on 1 September 2014.
From 1 September 2014 to 30 June 2016, the Respondent held license number 18401868. From 1 July 2016 to 1 November 2016, the Respondent did not hold a real estate agent licence. From 2 November 2016 to 30 June 2019, the Respondent held licence number 18402133.
At all material times, the Respondent carried on a business as a real estate agent, trading as ‘One Agency Don McPherson’.
Previous proceedings
On 15 September 2016, the Commissioner made an application to the Tribunal for orders for occupational discipline against the Respondent. The Commissioner alleged that the Respondent had contravened the fair trading legislation and a rule of conduct by failing to complete an audit report within the statutory timeframe required pursuant to s 115 of the Agents Act.
On 17 November 2016, the Tribunal heard the Commissioner’s application.
On 7 February 2017, the Tribunal published its decision on the application: Commissioner for Fair Trading v McPherson (Occupational Discipline) [2017] ACAT 6.
In its decision, the Tribunal stated that it was satisfied that the grounds for occupational discipline had been made out (at [33]-[35]), and made orders for the Respondent to be publicly reprimanded, pay the Territory the sum of $1000, and attend real estate industry training courses on maintaining business records and minimising agency and consumer risk (at [67]).
The present application
The present application for orders for occupational discipline (the Application) relates to three audit periods: 1 July 2015-30 June 2016 (the 2015-2016 Period), 1 July 2016 - 30 June 2017 (the 2016-2017 Period), and 1 July 2017 - 30 June 2018 (the 2017-2018 Period).
By 30 September 2016, the Respondent’s trust account was required to be audited by a qualified auditor, pursuant to s 115(1) of the Agents Act. The Commissioner sent a reminder to all licensed agents of the upcoming deadline for the audit of trust accounts on 30 August 2016. The Commissioner did not receive any report from a qualified auditor of the result of any audit of the Respondent’s trust account for the 2015-2016 period as required under s 118(2) of the Agents Act.
Consequently, on 28 February 2017, the Commissioner requested a copy of the 2015-2016 Period audit report from the Respondent.
On 27 April 2017, the Mr Peter Bauerhuit provided the Commissioner with his report of the result of an audit of the Respondent’s trust account prepared in relation to the 2015-2016 Period, dated 5 April 2017 (2015-2016 audit report). The performance of the audit report was approximately 7 months outside the statutory timeframe for compliance. Information requested by the Commissioner from Mr Bauerhuit, together with correspondence from the Respondent dated 2 March 2017, indicates that Mr Bauerhuit was not engaged by the Respondent to perform the trust account audit until March 2017.
On 28 April 2017, the Commissioner requested further information from the Respondent in relation to the 2015-2016 audit report. On 5 May 2017, the respondent provided, via email, additional information in response to the Commissioner’s request.
On 10 May 2017, the Commissioner requested additional further information from the Respondent in relation to the 2015-2016 audit report. On 17 May 2017, the respondent provided additional information in response to the Commissioner’s request.
On 15 September 2017, Mr Bauerhuit provided the Commissioner with a trust account report he prepared in relation to the 2016-2017 Period (2016-2017 audit report).
On 28 September 2018, Mr Bauerhuit provided the Commissioner with a trust account report he prepared in relation to the 2017-2018 Period (2017-2018 audit report).
All three audit reports described above identified a number of “exceptions” to compliance with Part 7 of the Agents Act, which are considered below.
On 22 February 2019, Access Canberra, as the administering authority for the Commissioner, requested further information from the Respondent about the exceptions identified in the audit reports. Access Canberra requested that any further information be provided by the Respondent by 8 March 2019.
On 7 March 2019, Access Canberra received an email from the Respondent in relation to the 22 February 2019 letter. The email did not provide any additional information in relation to the concerns put to the Respondent about his compliance with the Agents Act or Regulation.
Findings in the audit reports
The 2015-2016 Audit Report
The Respondent did not engage a qualified auditor to audit his trust account for the 2015-2016 Period within the statutory timeframe prescribed by s 115(1) of the Agents Act, as it was in force during the relevant period.
The 2015-2016 Report details the following exceptions to compliance:
(a)Primary documentation relating to transactions and property management were not visible on the files, having been taken from the Respondent by his partner upon dissolution of the partnership. Only supporting documentation was presented at audit to support transactions to and from the trust account.
(b)Bank fees in the amount of$120, marketing fees in the amount of $6,360 and commissions in the amount of $8,800 were not remitted to the Respondent at the time of settlement.
(c)Payments totalling $74,340 were made for more than the funds held due to errors in processing settlement payments. Most of these overpayments related either to settlement funds being distributed from the trust account when either a bond had been used or the full deposit amount had not been received. The report confirms that all overpayments were eventually refunded by the Respondent.
(d)Several commissions were remitted at exchange without the agent’s instructions or authorisation being sighted.
(e)Insufficient recipient details for electronic funds transfers to enable the transfers to be validated against the instructions received.
The Commissioner notes the additional information provided by the respondent in response to enquiries in 2017 about the exceptions identified in the 2015-2016 report. The Commissioner’s view is that the additional information does not provide an explanation or reasonable basis for any of the exceptions identified.
The 2016-2017 Audit Report
The 2016-2017 Report details the following exceptions to compliance:
(a)No documented confirmation for transactions processed in the first quarter of the audit period.
(b)Several instances where there were insufficient details for electronic fund transfers to validate the transfers against instructions.
(c)Use of funds from the Respondent’s operating account to the trust account to meet the settlement requirements for one property, 17 Collocott Crescent.
(d)Numerous transfers of funds from the trust account to the operating account to effect payment of commissions and marketing fees. The amount of the fees was reduced according to the amount of funds available in the trust account.
(e)No payment of commission or marketing fees for some properties to rectify the shortfall in the trust account.
(f)Several commissions were remitted at exchange without the agent’s instructions or authorisations being sighted.
(g)The retrospective correction of errors in the trust account balance by adjusting payments to the Respondent’s operating account in an effort to ensure that the amount on trust was correct. This practice meant that the trust account records do not properly record the transfer of funds on a property by property basis.
The 2017-2018Audit Report
The 2017-2018 Report details the following exceptions to compliance:
(a)An adjustment for an erroneous payment in the sum of$1,000, which involved adjustments to the amount of commission paid to the Respondent, rather than a proper refund and repayment of the funds erroneously transferred to the Respondent.
(b)The unauthorised payment of $1,940 to the Agent from the trust account for the marketing fee of a property withdrawn from sale. The Respondent addressed this discrepancy by adjusting the commission on another transaction.
(c)A lack of clarity and explanation for the Respondent’s disbursements.
(d)Incomplete record keeping, including files that were missing orders from solicitors and instructions from sellers or files that were missing confirmation of the relevant documents being sighted.
(e)Incomplete completion of compliance checklists.
HEARING DETAILS
FILE NUMBER: | OR 5/19 |
PARTIES, APPLICANT: | Commissioner For Fair Trading |
PARTIES, RESPONDENT: | Donald Ambrose McPherson |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | N/A |
SOLICITORS FOR APPLICANT | ACT Government Solicitor |
SOLICITORS FOR RESPONDENT | N/A |
TRIBUNAL MEMBERS: | Senior Member H Robinson |
DATES OF HEARING: | 10 July 2019 |
1
1
0