Commissioner for Fair Trading v Steele Properties Pty Ltd ACN 162 699 747 and Anor (Occupational Discipline) - [2020] ACAT 49

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

COMMISSIONER FOR FAIR TRADING v STEELE PROPERTIES PTY LTD ACN 162 699 747 & ANOR (Occupational Discipline) [2020] ACAT 49

OR 3/2020
OR 9/2020
Catchwords: OCCUPATIONAL DISCIPLINE – real estate agent – failure to comply with the auditing requirements – failure to maintain appropriate records – whether the agent has taken steps to avoid the contravention or mitigate the effect of the contravention – the impact of the contravention on any other person – public reprimand – fine – disqualification not appropriate

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 65, 66

Agents Act 2003 ss 41, 115

Subordinate
Legislation cited: Agents Regulation 2003 rule 8.5

Cases cited:Boyce v Building Professionals Board (No 2) [2020] NSWCATOD 14
Building Professionals Board v Hans (No 2) [2008] NSWADTAP 48
Commissioner for Fair Trading v Flint [2019] ACAT 80
Commissioner for Fair Trading v Property Plaza [2019] ACAT 109
Commissioner for Fair Trading v McPherson [2019] ACAT 70
Commissioner for Fair Trading v Yes Real Estate [2019] ACAT 103
Psychology Board of Australia v Roychowdery [2019] ACAT 50

Tribunal: Presidential Member MT Daniel

Date of Orders:           22 June 2020
Date of Reasons for Decision:         1 July 2020
AUSTRALIAN CAPITAL TERRITORY          OR 3/2020
CIVIL & ADMINISTRATIVE TRIBUNAL

BETWEEN:
COMMISSIONER FOR FAIR TRADING
Applicant

AND:
CAMERON STEELE
Respondent

TRIBUNAL: Presidential Member MT Daniel

DATE:22 June 2020

ORDER

Pursuant to section 66(2)(a) of the ACT Civil and Administrative Tribunal Act 2008 Cameron Robert Steele is reprimanded for failure to comply with sections 115 (‘Requirement for Audit’), 120 (‘Trust Money held by former licensed agents’) and 171 (‘Rules of conduct’) of the Agents Act 2003.
Pursuant to section 66(2)(h) of the ACT Civil and Administrative Tribunal Act 2008 Cameron Robert Steele is required to pay to the Territory the amount of $2000 within 12 months of the date of the Tribunal’s orders.
The applicant is to provide a copy of the Tribunal’s published reasons for this decision to the corresponding licencing body in New South Wales.

…………Signed……………..
Presidential Member MT Daniel

AUSTRALIAN CAPITAL TERRITORY
CIVIL & ADMINISTRATIVE TRIBUNAL OR 9/2020

BETWEEN:
COMMISSIONER FOR FAIR TRADING
Applicant

AND:
STEELE PROPERTIES PTY LTD ACN 162 699 747
Respondent

TRIBUNAL: Presidential Member MT Daniel

DATE:22 June 2020

ORDER

The Tribunal orders that:

Pursuant to section 66(2)(a) of the ACT Civil and Administrative Tribunal Act 2008 Steele Properties Pty Ltd is reprimanded for failure to comply with sections 115 (‘Requirement for Audit’), 120 (‘Trust Money held by former licensed agents’) and 171 (‘Rules of conduct’) of the Agents Act 2003.
Pursuant to section 66(2)(h) of the ACT Civil and Administrative Tribunal Act 2008 Steele Properties Pty Ltd is required to pay to the Territory the amount of $2000 within 28 days of these orders.

…………Signed……………..
Presidential Member MT Daniel

REASONS FOR DECISION

In these related proceedings the Commissioner for Fair Trading (the Commissioner) sought orders for occupational discipline against the respondents Cameron Steele (the Director) and Steele Properties Pty Ltd (the Company).
The applications for disciplinary action were filed in early 2020. The parties filed a statement of agreed facts on 19 May 2020. The Commissioner on 4 June 2020 filed submissions and copies of some correspondence with the respondents. On 9 June 2020 the respondents filed their submissions, with attached copies of correspondence with a client.
The applications came before me for hearing on 22 June 2020.
At the hearing the Commissioner alleged that the respondents had failed to:
(a)submit annual audit reports within the statutory timeframe for the financial years ending 2016 and 2017;
(b)give the Commissioner a statement of the trust account within three months of ceasing to be a licensed agent; and
(c)keep a record of the material details of every transaction conducted as a licensed agent.
The Commissioner submitted that the respondents’ conduct in these respects constituted grounds for occupational discipline pursuant to section 41 of the Agents Act 2003 (Agents Act), both as a failure to comply with the requirements imposed by the Agents Act, and as a failure to act with the due skill, care and diligence required by rule 8.5 of the Rules of Conduct set out at Schedule 8 of the Agents Regulation 2003.
The respondents did not dispute the facts alleged by the Commissioner, nor did they argue that their conduct was not grounds for occupational discipline.
The parties differed only on what orders the Tribunal should make. The Commissioner sought that the Tribunal impose a reprimand, fine and period of disqualification from applying for a licence. The respondents did not oppose the reprimand or fine, although suggesting the fine be in a lesser amount. The respondents opposed the Tribunal imposing a period of disqualification from applying for a further agents licence.

The facts

The relevant facts were not disputed.
The respondents were, at all relevant times, licensed agents under the Agents Act, and the Director was the sole licensed director of the Company. The Director became a licensed agent in the ACT in 2013 by way of mutual recognition of his NSW agents licence. The Company became licensed in the ACT in October 2014. Both ceased to be licensed agents in the ACT in July 2017. The Director remains a licensed agent in NSW.
The Company held trust money during the financial years ended 2016 and 2017. As a consequence, pursuant to section 115 of the Agents Act the Company was required to give to the Commissioner a report of its audited trust accounts (audit report) within three months of the end of the financial year. It did not do so.
By way of background, the Company had been late in providing its first (2015) audit report. The Tribunal was taken to correspondence between the Commissioner and the Director, in which this failure was acknowledged, and the Director assured the Commissioner that “As a new business owner I was unaware of the processes involved in my obligations… I have now under consultation and guidance with the auditor put process in place for the preparation and submission of future Trust Account for my requirements under the legislation.”
Notwithstanding this assurance about systems being put in place, the 2016 and 2017 audit reports were not provided as required. When the respondents ultimately (on 9 July 2019) engaged an accountant to audit the trust account for the relevant years the accountant provided a qualified audit report (only nine days later); noting:
(a)the agent has not kept the accounting records relating to trust money in accordance with Part 7 of the Agents Act;
(b)only limited records were available to allow an audit to be conducted;
(c)the records to which the audit related were not kept in a way that allowed them to be properly audited and were missing; and
(d)the Director had advised that due to the dissolution of the business and relocation from Canberra, appropriate trust account records had not been kept up to date and he was therefore unable to provide the information necessary for the requested audit reports.
As noted earlier, the Director and the Company both ceased to be licensed agents on 30 June 2017. At that time, there was a small amount of money in the trust account. Section 120 of the Agents Act requires a licensed agent to give the Commissioner a statement of trust money held at the time of ceasing to be a licensed agent. That statement was required to be provided to the Commissioner by 30 September 2017. The respondents did not provide such a statement to the Commissioner.
On 18 July 2019 the accountant provided the Commissioner with a statement dated 17 July 2019 from the Director which met the requirements of section 120. That statement apologised for the delay said to be caused by difficulty in retrieving records, confirmed the small amount of money held in the trust account (relating to one rental property) had now been disbursed, and provided evidence that the trust account was now closed.
At the hearing on 22 June 2020 the Director explained that as a new business the respondents could not afford to purchase professional real estate management software, and that his practice had been to rely upon his own memory and use the bank statements as a record of the transactions undertaken. He would perform an accounting every month. If physical notes were created by the Director during that process, they were not retained. In terms of the records remaining in existence the Director said that he would have physical copies of management agreements, but he was not confident of what other physical records existed, as he had left Canberra. He said there were no digital records of transactions other than bank statements, he did not create computerised records. He said he was able to operate the business effectively in this way because he only had a small number of about 14 rental properties being managed, as well as some sales.
I accept that the Company operated as a licensed agent in the manner described by the Director. His evidence is consistent with the qualified audit report provided on 18 July 2019. It also suggests that whatever advice about accounting and recordkeeping systems was given by the auditor in 2015, that advice was not followed.

The Tribunal’s jurisdiction

Section 65(2) of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) permits the Tribunal to make an order for occupational discipline against a subject person if satisfied that a ground for occupational discipline exists.
Section 41 of the Agents Act sets out the grounds for occupational discipline in relation to a licensed agent. Failure to keep proper records, failure to provide an annual audit report, and failure to provide a statement when ceasing to be licensed, each constitute a failure to comply with the Agents Act and are grounds for occupational discipline. Further, each of these failures demonstrated a lack of the due skill, care and diligence required of agents by the Rules of Conduct, which is a separate ground for occupation discipline under section 41 of the Agents Act.
I am satisfied that grounds for occupational discipline exist in relation to the Company and the Director. Under section 66 of the ACAT Act the Tribunal has the power to make the orders sought by the Commissioner. The question is, what orders are appropriate?
Section 65(3) of the ACAT Act sets out the factors the Tribunal should consider when making orders for occupational discipline:
65Considerations before making orders on application for occupational discipline
(1)     This section applies if the tribunal is considering an application for occupational discipline against a person (the subject person).
(2)     The tribunal may make an order for occupational discipline in relation to the subject person if satisfied that a ground for occupational discipline exists against the person.
(3)     In considering what occupational discipline to use against the subject person, the tribunal must consider the following:
(a)whether the person took reasonable steps to avoid the action (the contravention) that is the ground for occupational discipline;
(b)whether occupational discipline has previously been used against the person for a similar act;
(c)whether the person has taken steps to mitigate the effect of the contravention;
(d)the impact of the contravention on any other person;
(e)the likelihood that the person will act in a way that is a ground for occupational discipline in the future;
(f)whether the entity bringing the application has applied for particular occupational discipline to be used and, if so, the kind of occupational discipline applied for.
Example—par (c)
the person has changed a method of work or given a direction to staff to prevent further contraventions
(4)     The tribunal may consider any other relevant matter.
I turn then to consider each of these factors.

Whether the person took reasonable steps to avoid the contravention

The Commissioner submitted[1] that the Tribunal should be satisfied that the respondents had failed to take reasonable steps to avoid the contraventions that occurred in this case. The Commissioner pointed to the delay in lodging the 2015 audit report, and ensuing correspondence, as demonstrating that the respondents were aware of what steps could and should be taken to avoid future reporting failures, but simply failed to take them.
[1] Commissioner’s written submission filed 4 June 2020
The Director submitted[2] that due to financial distress, the dissolution of the business in late 2017 due to a partnership breakdown, and relocation from the ACT, he was unable to locate the necessary records of material details of transactions for the audit requirements. As noted above I am not satisfied, however, that adequate records were ever created.
[2] Respondents’ written submission filed 9 June 2020
The respondent’s submission while going some way to explain the background to the later contraventions, does not point to any reasonable steps being taken to avoid the contraventions. On the contrary, it seems to me that those later contraventions would have been avoided had appropriate records been created and maintained.
I am not satisfied that either respondent took reasonable steps to avoid the contraventions that occurred in this case.

Whether occupational discipline has previously been used against the person for a similar act

Occupational discipline has not previously been used against either respondent.

Whether the person has taken steps to mitigate the effect of the contravention

The respondents submitted that they had endeavoured to comply with the Tribunal’s orders and had taken necessary steps to mitigate the contraventions.
I am satisfied that the respondents did finally engage an accountant who provided qualified audit reports, and a final statement, and ultimately took steps to disburse the monies in the trust account appropriately.
The Commissioner submitted that the Tribunal should note that these steps were undertaken years late, and only after persistent correspondence from the Commissioner. The Commissioner submitted that absent the Commissioner’s actions to ‘chase up’ the respondents, the amount of money standing in the trust account would still be held in that account and not disbursed, and no audit reports or final statement would have been provided. I agree with the Commissioner’s submissions in this respect.

The impact of the contravention on any other person

The failure to account for the trust monies upon ceasing to be a licensed agent impacted upon one tenant, whose overpayment of rent languished in the trust account for around two years. The tenant was ultimately reimbursed an amount of just over $1,000 in July 2019.
There is no evidence that the contraventions in any other way impacted on any other member of the public.
The Commissioner submitted that the contraventions impacted financially on the Commissioner, who was put to expense in bringing these proceedings and encouraging the respondent’s ultimate compliance with their obligations. I do not consider that merely triggering the performance by the regulator of its statutory functions is the kind of impact contemplated by section 65(3)(d). However, I note that the nature of the contraventions in this case, being the failure to provide audit reports and a final statement, impacted upon the Commissioner’s ability to protect the public.

The likelihood that the person will act in a way that is a ground for occupational discipline in the future

There is no suggestion that the Company or the Director used trust monies improperly, or breached their ethical duties to clients.
The Commissioner pointed the Tribunal to the history and correspondence between the parties, as evidence of the respondents’ ‘complacent’ attitude towards regulatory requirements while licensed and ‘avoidant’ behaviour when called to account after ceasing to be licensed in the ACT. The Commissioner submitted that the Tribunal could have no confidence that the Director or Company would not act in a similar way in the future.
The respondents did not address these descriptions of their conduct.
The oral evidence and submissions of the Director suggested that he was taken aback by what he perceived to be an overreaction by the Commissioner to the Company’s failure to meet mere technicalities.
After hearing from the Director, I had little confidence that he understood the purpose of creating and maintaining business records, other than that this activity is required by legislation.
Neither the Director nor the Company is currently licensed in the ACT, which clearly reduces the likelihood of further breaches occurring in the future.
On the one hand, I am satisfied that if the Director or the Company were to obtain a licence and resume operating their own business in the ACT, there are likely to be future record keeping and reporting failures unless further education and training, and expenditure on proper accounting systems, are undertaken. On the other hand, given the Director has worked as a licensed agent in NSW for over 10 years, with no suggestion of similar failures, I am not satisfied that the Director is likely to commit further breaches when working within an established agency which has record keeping systems and business processes already in place.

Whether the entity bringing the application has applied for particular occupational discipline to be used and, if so, the kind of occupational discipline applied for

Notwithstanding that applications were brought against both the Director and the Company, in its submissions the Commissioner sought occupational discipline consisting of a reprimand to the Director, a fine of $4,000 to the Director, and an order disqualifying the Director from applying for an agents licence for a period of two years. No orders were sought against the Company.

Any other relevant matter

What is not explicitly referred to in section 65(3) of the ACAT Act, but is common to all disciplinary proceedings, is the principle that the purpose of such proceedings is protective not punitive.[3] None of the submissions squarely addressed this principle.
[3] Psychology Board of Australia v Roychowdery [2019] ACAT 50 at [95]; Boyce v Building Professionals Board (No 2) [2020] NSWCATOD 14 at [153] citing Building Professionals Board v Hans (No 2) [2008] NSWADTAP 48 at [155] – [166]
The Commissioner’s submissions focussed on the need for orders which would underline the seriousness of the contraventions and send a message of deterrence to licensed agents in the ACT. The Commissioner’s submissions at several points referred to the attitudinal shortcomings said to be demonstrated by the respondents.
The respondents’ submissions emphasised upon a lack of any actual harm to the public, and argued that the intentions of the Director and Company to comply with reporting requirements had been rendered practically impossible by the closure of the business and move interstate. In his oral submissions, the Director also queried the size of the proposed fine in comparison to fines imposed in other disciplinary proceedings for similar failures.[4]
[4] Commissioner for Fair Trading v Property Plaza Pty Limited [2019] ACAT 109; Commissioner for Fair Trading v Yes Real Estate ACT Pty Ltd [2019] ACAT 103; Commissioner for Fair Trading v Flint [2019] ACAT 80; Commissioner for Fair Trading v McPherson [2019] ACAT 70
In determining the appropriate orders I have considered what will best achieve the protective principle, by encouraging future compliance with record keeping, reporting and auditing requirements both at a specific and general level.

Notwithstanding the Commissioner’s submission that orders be made only in relation to the Director, I considered it appropriate to impose disciplinary orders in relation to each respondent. I was advised by the Director that the Company has not been wound up, and that it remains financial.
It was appropriate to reprimand each of the respondents for the failure to comply with the auditing requirements, and failure to maintain appropriate records. A reprimand expresses to each respondent, and to licensed agents generally, the Tribunal’s disapproval of their conduct.
I have written previously, and it bears repeating in this case, that “a licensed agent’s annual audit of accounts, and the provision of those audit reports to the Commissioner, is not a mere technical requirement. It is an important obligation designed to protect the public who entrust an agent with their money. All licensed agents should be aware of their responsibility to meet this requirement.”[5]
[5] Commissioner for Fair Trading v Yes Real Estate ACT Pty Ltd [2019] ACAT 103 at [22]
In this case the failure was fundamental – no proper financial records were created or kept. The respondents’ business practice seemed to have been to use the bank statement for the trust account as the sole record of transactions. This is hopelessly inadequate from any perspective – accounting, legal, client/principal, and public to name but a few. As I expressed to the Director at the hearing, the lack of proper business systems posed an enormous risk to clients, and members of the public, and equally to the respondents. It is fortunate for all that even more serious contraventions of the agents’ obligations did not occur as a result.
I also considered it was appropriate to impose a fine upon each respondent. In the interests of consistency and parity I reviewed the outcomes of recent disciplinary proceedings involving similar transgressions by agents.
In Commissioner for Fair Trading v Property Plaza the agent had failed to provide audit reports for two years. When provided, it became apparent the agent had failed to keep proper records in some respects, including failing to provide a receipt for trust monies received. In that case, the agent was reprimanded, required to undertake further training and to put in place business systems, and fined $1,700. There were noted to be mitigating circumstances to the contraventions.
In Commissioner for Fair Trading v Flint the agent failed to provide audit reports for two years. The agent had been licensed for 23 years. The agent was fined $2,000, required to complete training and provide evidence of updated business systems, and was reprimanded.
In Commissioner for Fair Trading v Yes Real Estate six years of audit reports had not been lodged. They were still waiting to be lodged when the proceedings were brought. In that matter, the respondent company was reprimanded, the new director required to undergo training, the company required to provide evidence of updated business systems, and a fine of $4,500 imposed.
In Commissioner for Fair Trading v McPherson the agent failed to submit audit reports on time for two years. When provided, the audit reports showed multiple and repeated failures to comply with trust accounting procedures, including incorrect payments and inappropriate adjustments to the trust account. It was the second time the agent had been subject to disciplinary proceedings, for similar failings. The agent was reprimanded, required to undergo training and fined $2,500. In addition, conditions for six-monthly external auditing, and three-monthly provision of records to the Commissioner, were imposed on the agents licence.
It was against the background of those cases that the Director submitted that the proposed fine of $4,000 was excessive.
I agree that a fine to the Director of $4,000 would appear to be at the higher end of the range. A fine of $2,000 to each respondent is an appropriate amount to serve as a deterrent both to each respondent and to agents more generally.
It must be kept in mind that the conduct being addressed is not only the failure to provide the audit reports on two occasions and the final statement, but a complete failure over two years of operation to keep any form of financial records other than bank statements. Further, because the respondents are not currently licensed in the ACT the Tribunal will not impose any education or training requirements upon them. This means that the respondents will not incur any of the expenses associated with education and training imposed in comparable proceedings.
As I was assured that the Company has not been wound up and remains solvent, I will give the Company 28 days to pay its fine. Given the Director’s evidence that he is now working in an agency on commission, and the current lack of real estate activity due to COVID-19, I will allow the Director 12 months to pay his $2,000 fine.
Finally, the Commissioner had sought that the Tribunal disqualify the Director from applying for an agents licence in the ACT for a two year period. I raised with the Commissioner’s representative my concerns that this order seemed to be out of step with the outcomes in previous cases, where cancellation and disqualification were not imposed, and that it might have unintended consequences for the Director’s current NSW agents licence. The selection of two years as the disqualification period appeared to be entirely arbitrary, and punitive.
The power to disqualify a person from re-applying for a licence or occupational registration commonly appears in the tranche of powers available to a disciplinary tribunal, together with the power to cancel a person’s licence or registration. It is frequently utilised in conjunction with cancellation when a Tribunal is satisfied that the person is not currently suitable or fit for registration and can be expected to remain unsuitable or unfit for at least the specified disqualification period.[6]
[6] See for example Psychology Board of Australia v Roychowdery [2019] ACAT 50
Notwithstanding the serious failures in this case, I am not satisfied that the Director is entirely unsuitable to be a licensed agent, such that he should not be able to apply for a license in the ACT. At the time of such an application the Commissioner must be satisfied as to the suitability of the Director. It is likely the Commissioner will look to any steps taken by the Director in the intervening period to address the causes of the contraventions in this case, or may consider whether to impose conditions as to education, training, or more frequent auditing upon any licence granted in the future, in order to reduce the risk of future contraventions.
For the same protective reasons, I will direct the Commissioner to provide a copy of this decision to the equivalent regulatory body in NSW for its consideration.

………………………………..

Presidential Member MT Daniel

HEARING DETAILS

FILE NUMBER:	OR 3/2020 OR 9/2020
PARTIES, APPLICANT:	Commissioner for Fair Trading
PARTIES, RESPONDENT:	Steele Properties Pty Ltd ACN 162 699 747 Cameron Steele
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	ACT Government Solicitor
SOLICITORS FOR RESPONDENT	N/A
TRIBUNAL MEMBERS:	Presidential Member MT Daniel
DATES OF HEARING:	22 June 2020