Delmege v Director General NSW Fair Trading
[2013] NSWADT 269
•27 November 2013
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Delmege v Director General NSW Fair Trading [2013] NSWADT 269 Hearing dates: 19 April, 3 May 2013 Decision date: 27 November 2013 Jurisdiction: General Division Before: S Montgomery, Judicial Member Decision: The decision under review is affirmed.
Catchwords: Property, Stock and Business Agents Act - Real Estate agent - refusal of licence application - disqualified person - fit and proper person to hold a licence Legislation Cited: Administrative Decisions Tribunal Act 1997
Property Stock and Business Agents Act 2002Cases Cited: Australian Broadcasting Commission v Bond (1990) 170 CLR 321
Clarke v Commissioner for Fair Trading [2004] NSWADT 273
Director General, Department of Finance and Services v Carr (GD) [2011] NSWADTAP 64
Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127Davidson v Commissioner for Fair Trading [2004] NSWADT 200
McBride v Walton (NSW Court of Appeal, unreported, 15 July 1994)
McDonald v Commissioner for Fair Trading [2004] NSWADT 124
McDonald v Director General of Social Security (1984) 1 FCR 354
Negri v Director General, Department of Finance and Services [2013] NSWADT 257
Saglimbeni v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 1Category: Principal judgment Parties: Robbie Delmege (Applicant)
Director General NSW Fair Trading (Respondent)Representation: Counsel
A Rogers (Applicant)
Moloney Lawyers (Applicant)
B Bourke (Respondent)
File Number(s): 123319
reasons for decision
GENERAL DIVISION (S MONTGOMERY, (JUDICIAL MEMBER)): The Applicant, Mr Delmege has applied to the Tribunal for review of the determination by a delegate of the Director General of NSW Fair Trading ("the Respondent") to refuse to reinstate the Applicant's real estate agent's licence that he previously held under the Property Stock and Business Agents Act 2002 ("the Act").
Background
The Applicant applied for the restoration of a real estate agent's licence in June 2012. On the restoration application form he indicated that in the preceding 3 years he had been an undischarged bankrupt and that he had been a director or person concerned in the management of an externally-administered body corporate. The Applicant also gave detail about his involvement with a number of relevant externally-administered corporations.
The Applicant was declared bankrupt in April 2012. His bankruptcy was annulled in January 2013.
The Respondent identified the following externally-administered corporations (collectively "the various companies") as relevant to the Applicant's eligibility to hold a licence under the Act:
Corporation name and ACN
Period of the Applicant's appointment
Period of external Administration
Dewoval Pty. Limited
003 950 490
15/09/2006 - 17/04/2012
Liquidator (Court winding up) 08/07/2009 - 22/07/2009
Receiver Manager 30/06/2010 - 03/07/2012
Max Delmege Pty Limited
107 709 286
15/09/2006 - 22/07/2010
and
08/07/2011 - 15/03/2012
Receiver Manager
18/10/2010 - 10/01/2012
Surfside (Mount Street) Pty Ltd
110 094 267
15/09/2006 - 15/03/2012
Receiver Manager 20/09/2010 - 15/02/2012
Administrator 22/12/2010 - 09/02/2011
Administrator under a Deed of Company Arrangement
09/02/2011 - 14/06/2012
Surfside (Willoughby) Holdings Pty Ltd
093 522 788
15/09/2006 - 15/03/2012
Receiver Manager 26/02/2010 - 05/04/2011
Controller 22/06/2011 - to date
The Applicant completed a number of licence applications prior to the restoration of a real estate agent's licence in June 2012. These included his real estate agent's licence application signed on 7 April 2010; an application for renewal of his real estate agent's licence signed on 19 April 2011; a corporation licence application for Delmege Asset Management Pty Ltd signed on 18 May 2010; a corporation licence application for Unique Car Hire Pty Ltd signed on 27 September 2010; an application for renewal of a corporation licence for Delmege Commercial Pty Limited ("Delmege Commercial") signed on 10 March 2010; a corporation licence application for Delmege Commercial signed after 3 June 2010; and an application for renewal of a corporation licence for Delmege Commercial signed on 4 December 2011. He did not disclose the external administration of any of the various corporations in those licence applications.
On each of the licence application forms the Applicant responded to a question about whether at any time in the preceding 3 years he had been a director or person concerned in the management of any externally-administered body corporate (within the meaning of the Corporations Act 2001). In each case the Applicant had answered 'No' in response to the question.
The Respondent requested that the Applicant provide information about the steps he took to avoid his bankruptcy and the external-administration of the corporations, as well as an explanation about why he did not disclose the external administration of those corporations in the previous applications that he lodged.
The Applicant's former solicitors responded to that request and the Respondent's determination took that response into account. The delegate determined:
Mr Delmege is currently an undischarged bankrupt and was a director of 4 externally-administered bodies corporate. Mr Delmege did not disclose the external administration of the bodies corporate in 7 applications lodged with Fair Trading during 2010 and 2011.
The delegate of the Director-General is not satisfied that Mr Delmege is a fit and proper person to hold a real estate agent's licence under the Act and he is therefore ineligible to hold a licence.
The delegate of the Director-General has not exempted Mr Delmege from the operation of section 16 (1A) (a ) and (c) and he is therefore a disqualified person and, as such, ineligible to hold a licence.
As Mr Delmege is not eligible to hold a licence, his application for the restoration of a real estate agent's licence is refused.
The Applicant has applied to the Tribunal for external review of that determination.
Applicable legislation
The Act provides for the licensing, regulation and discipline of persons or companies carrying on a business in the real estate industry. The legislation is intended to regulate the industry and to provide a measure of protection to consumers in their dealings with the industry.
In this case, the Tribunal is undertaking a review of the merits of the original decision. The role of the Tribunal is to make the correct and preferable decision having regard to the material before it, including any relevant factual material and any applicable written or unwritten law. It then confirms the original decision, varies it or sets it aside: section 63 Administrative Decisions Tribunal Act 1997 ("the ADT Act"). The Tribunal makes its own decision in place of that of the relevant administrator, and there is no presumption that the decision of the administrator is correct: McDonald v Director General of Social Security (1984) 1 FCR 354 at 357.
Section 8 of the Act provides that agents are required to be licensed. It states:
8 Agents required to be licensed
(1) A natural person must not act as or carry on the business of (or advertise, notify or state that the person acts as or carries on the business of or is willing to act as or carry on the business of):
(a) a real estate agent, unless the person is the holder of a real estate agent's licence, or
(b) a stock and station agent, unless the person is the holder of a stock and station agent's licence, or
(c) a business agent, unless the person is the holder of a business agent's licence, or
(d) a strata managing agent or community managing agent, unless the person is the holder of a strata managing agent's licence, or
(e) an on-site residential property manager, unless the person is the holder of an on-site residential property manager's licence or a real estate agent's licence.
Maximum penalty: 100 penalty units.
...
Section 14 of the Act provides that a person is eligible to hold a licence only if the Director-General is satisfied that the person:
...
(b) is a fit and proper person to hold a licence and each person with whom the person is in partnership in connection with the business concerned is a fit and proper person to hold a licence, and
...
(d) is not a disqualified person, and
...
Section 16 of the Act provides that under certain specified circumstances a person is a disqualified person for the purposes of this Act.
16 Disqualified persons
(1) A person is a disqualified person for the purposes of this Act if the person:
...
(1A) A person is also a disqualified person for the purposes of this Act (except for the purposes of eligibility to hold a certificate of registration) if the person:
(a) is an undischarged bankrupt, or
...
(c) is, or was at any time in the last 3 years, concerned in the management of, or a director of, an externally-administered body corporate (within the meaning of the Corporations Act) except in a case of the voluntary winding up of the body corporate, or
...
(2B) The Director-General may exempt a person from the operation of subsection (1A) (a), (b) or (c) by:
(a) certifying, in the case of exemption from subsection (1A) (a), that the Director-General is satisfied that the person took all reasonable steps to avoid the bankruptcy concerned, or
(b) certifying, in the case of exemption from subsection (1A) (b), that the Director-General is satisfied that the person took all reasonable steps to avoid the bankruptcy or other financial difficulties concerned, or
(c) certifying, in the case of exemption from subsection (1A) (c), that the Director-General is satisfied that the person took all reasonable steps (while concerned in the management of, or a director of, the body corporate) to avoid the body corporate becoming an externally-administered body corporate.
...
(2D) In determining for the purposes of subsection (2B) or (2C) what reasonable steps could have been taken by a person to avoid a particular outcome, the Director-General is to have regard to the steps that could have been taken by the person from the time that the financial difficulties that gave rise to the outcome first arose.
...
Section 43 of the Act provides:
43 Duty of licensee not to employ certain persons
(1) A licensee must not employ a person in any capacity in connection with the carrying on of the business conducted by the licensee if the person:
(a) is a disqualified person (other than a person whose disqualification is on a ground that does not disqualify the person from eligibility to hold a certificate of registration), or
(b) has had his or her licence or certificate of registration suspended or cancelled under this Act (unless a licence or certificate of registration has subsequently been granted to the person and is not suspended or cancelled), or
(c) has had an application for a licence or certificate of registration refused on the ground that the person was not a fit and proper person to hold a licence or certificate of registration (unless a licence or certificate of registration has subsequently been granted to the person and is not suspended or cancelled).
Maximum penalty: 50 penalty units.
(2) It is a defence to a prosecution for an offence under this section if the licensee establishes that the licensee did not know, and could not reasonably be expected to have known after diligent inquiry, that the person was a person whose employment by the licensee was prohibited by this section.
In Clarke v Commissioner for Fair Trading [2004] NSWADT 273 the President of the Tribunal considered the question of whether the licence holder took 'reasonable steps' to avoid the bankruptcy or insolvency. He considered earlier decisions in the matters of Davidson v Commissioner for Fair Trading [2004] NSWADT 200 and McDonald v Commissioner for Fair Trading [2004] NSWADT 124 and stated at paragraphs [10] and [11]:
"In examining the question of whether the licence holder took 'reasonable steps' to avoid the bankruptcy or insolvency:
(i) A general inquiry into the wisdom or otherwise of the original financial dealings that ultimately ended in bankruptcy or insolvency is not contemplated by the Act. The point at which the inquiry commences is when the applicant was 'faced with the possibility' of bankruptcy or insolvency (Davidson at [20]) or was 'aware' or 'should have been aware' (McDonald at [21]) of that possibility. The focus is the steps taken to avoid the relevant event (see Smith at [17]) -in cases of the present kind, administration and later liquidation".
(ii) Subject to (i) in assessing reasonableness the Tribunal must examine all the relevant facts and circumstances.(McDonald at [25]).
(iii) The steps taken by the applicant must be objectively reasonable in the sense that they would be those taken by a 'reasonable person endowed with the knowledge and experience of the [applicant]'. (McDonald at [26-27]).
I considered the issue in Saglimbeni v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 1 and I stated at paragraph [27];
"27 The test of "reasonable steps" is that of what a reasonable person endowed with Ms Saglimbeni's knowledge and experience would do. In applying this test I must consider two issues - (i) when did Ms Saglimbeni know, or ought she to have known, that the administration in question was a possibility? and (ii) what steps did she take to avoid that liquidation or administration? "
I recently considered the approach to be taken in determining whether all reasonable steps were taken to avoid the body corporate becoming an externally-administered body corporate in the matter of Negri v Director General, Department of Finance and Services [2013] NSWADT 257. In the Negri decision I referred to the decision in Saglimbeni and adopted my earlier approach. I also noted in Negri that while the Act has been amended since the decision in Saglimbeni, in my opinion the approach remains applicable.
Fit and proper
The meaning of the phrase 'fit and proper person' was discussed by the High Court in Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127, at [9], where Dixon CJ, McTiernan and Webb JJ said:
The expression 'fit and proper person' is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. 'Fit' (or 'idoneus') with respect to an office is said to involve three things, honesty knowledge and ability: 'honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it.'
The meaning of the phrase was also discussed in Australian Broadcasting Commission v Bond (1990) 170 CLR 321, where Toohey and Gaudron JJ said at [36] of their judgment:
The expression 'fit and proper person', standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of 'fit and proper' cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur.
As their Honours recognised, at [66], whether a person is a fit and proper person involves a value judgement to be made in the context of the particular activity to be licensed.
In McBride v Walton (NSW Court of Appeal, unreported, 15 July 1994), the Court said that where there is evidence of misconduct, there should be consideration of any explanation for that misconduct, its seriousness to the particular activity, the motivation of the person, whether the misconduct is an isolated incident, the person's underlying qualities of character, and the person's conduct since the incident and whether this demonstrates recognition of the misconduct and subsequent reform. The question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur.
The issue for determination by the Tribunal
The issue for determination is whether the Respondent made the correct and preferable decision. This is to be determined having regard to any relevant factual material and any written or unwritten law: section 63(1) of the ADT Act.
The questions raised on the application are:
1) whether the Applicant is a "disqualified person"
2) whether the decision should be made to exempt the Applicant under section 16(2B) of the Act; and
3) whether the Applicant is a fit and proper person to hold a licence under the Act.
The material before the Tribunal
The Respondent relies on a bundle of material filed pursuant to section 58 of the ADT Act. In addition, it relies on the affidavit of Mr Stephen McGuire, a Senior Investigator within the Compliance and Enforcement Division of NSW Fair Trading. Ms Bourke also made submissions in regard to the evidence.
The Applicant relies on his own evidence. He provided two affidavits and also appeared at the hearing, gave evidence and was cross-examined. Mr Rogers also made submissions in regard to the evidence.
The Respondent's case
A summary of the Respondent's position is set out in the reasons given in regard to the determination. The delegate stated:
Can the Director-General be satisfied that Mr Delmege is a fit and proper person to hold a licence under the Act?
Fair Trading has identified 7 application forms, lodged during 2010 and 2011, on which Mr Delmege has not disclosed being a director of any externally-administered bodies corporate. In each of the 7 applications concerned, Mr Delmege signed a declaration in which he certified that the particulars specified in each form were correct.
In the response received from Ashurst Australia, it was indicated that Mr Delmege's failure to disclose the external administration of the relevant bodies corporate in 7 earlier applications was the result of an inadvertent clerical error.
A person's directorship of one or a number of externally administered bodies corporate potentially mean that the person is a disqualified person for the purposes of the Act and it is therefore an important factor to be considered in determining that person's eligibility to hold a licence and/or to be a director of licensed corporations under the Act.
Ashurst Australia in responding to Fair Trading's letter, advised that Mr Delmege owed nearly $29 million at the time of his bankruptcy and one company of which he was a director, owed some $46 million when it went into external administration. It would appear from the information provided by Ashurst Australia that Mr Delmege is a highly experienced business person. It is therefore difficult to believe that Mr Delmege's repeated non-disclosure of this important information in numerous applications was, on all occasions, due to an inadvertent clerical error.
On this basis, as delegate of the Director-General, I am not satisfied that Mr Delmege is a fit and proper person to hold a real estate agent's licence under the Act.
Is Mr Delmege a disqualified person for the purposes of the Act?
In relation to the external administration of the above-mentioned bodies corporate and Mr Delmege's bankruptcy, Ashurst Australia provided the following information:
- Ashurst Australia acts for the Delmege Group of companies and has at various times provided advice to the Group.
- The Global Financial Crisis had a dramatic effect on the Group and Mr Delmege personally.
- Falls in property values triggered technical covenant breaches in various facilities which in turn caused a cascade of woes for the Group.
- It also resulted in calls being made on personal guarantees provided by Mr Delmege for the benefit of various Group entities.
- The Group and Mr Delmege in particular have worked tirelessly to manage outstanding debts and relationships with the Group's and Mr Delmege's creditors.
- Ashurst Australia has advised the Group with respect to dealings and negotiations with the Group's and Mr Delmege's creditors since approximately October 2010.
- A firm of accountants had been engaged by the Group since 2005 to provide ongoing financial and accounting advice both to the Group and Mr Delmege personally.
- However, due to privilege and, where applicable "without prejudice" and or confidential nature of discussions with creditors, Ashurst Australia is not in a position to provide details of legal advice sought, content of legal advice provided, specific negotiations with creditors or settlement arrangements reached with various creditors.
- All possible steps were taken and all avenues of negotiation were canvassed to avoid the external administration of the companies and Mr Delmege's bankruptcy.
- A wholesale restructure of the Group was and continues to be undertaken to reduce outstanding debts, a process driven by Mr Delmege.
- Despite all efforts, the external administration of the companies and Mr Delmege's bankruptcy proved unavoidable.
- In terms of the amounts owing to creditors at the time of the external administration of the various companies and Mr Delmege's bankruptcy, it was suggested that NSW Fair Trading contact the external administrators for the debt figures for Dewoval Pty Ltd, Max Delmege Pty Ltd and Surfside (Willoughby) Holdings Pty Ltd (Controller Appointed). Surfside (Mount Street) Pty Ltd owed $46,201,691 and Mr Delmege owed $28,809,391.42.
As delegate of the Director-General, I do not believe that sufficient information has been made available to NSW Fair Trading to be able to determine when the financial difficulties that gave rise to the external administration of the bodies corporate and Mr Delmege's bankruptcy first arose.
There is also insufficient information available to be satisfied that Mr Delmege took all reasonable steps from the time that those financial difficulties first arose, to avoid the external administration of the bodies corporate and his bankruptcy.
It is therefore not possible to exempt Mr Delmege from the operation of section 16 (IA) (a) and (c) and he is therefore a disqualified person for the purposes of the Act.
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The reasoning processes that led the administrator to the conclusions the administrator made
Mr Delmege is currently an undischarged bankrupt and was a director of 4 externally-administered bodies corporate. Mr Delmege did not disclose the external administration of the bodies corporate in 7 applications lodged with Fair Trading during 2010 and 2011.
The delegate of the Director-General is not satisfied that Mr Delmege is a fit and proper person to hold a real estate agent's licence under the Act and he is therefore ineligible to hold a licence.
The delegate of the Director-General has not exempted Mr Delmege from the operation of section 16 (1A) (a ) and (c) and he is therefore a disqualified person and, as such, ineligible to hold a licence.
As Mr Delmege is not eligible to hold a licence, his application for the restoration of a real estate agent's licence is refused.
The Respondent subsequently advised the Applicant that it proposed to rely on the additional ground of operating without a real estate agent's licence under the Act. In relation to this ground it relies on a number of advertisements obtained from Delmege Commercial webpage. Copies of advertisements for those properties have been included in material filed with the Tribunal. These advertisements include instances where the Applicant is listed as the real estate agent dealing with either the sale or the lease of the properties.
The Respondent contends that these advertisements are evidence that the Applicant has engaged in unlicensed real estate work since his licence expired on 3 May 2012.
The Respondent contends that the Applicant is a disqualified person under the Act. Ms Bourke submitted that the Applicant is therefore captured by section 43(1) of the Act and must not be employed in any capacity in connection with the carrying on of the business conducted by a licensee under the Act.
Under cross-examination the Applicant stated that he only does odd jobs for Delmege Commercial and receives no remuneration or commission for his work. He stated that he has no other income. The Respondent relies on an article about the Applicant, with reference to his lifestyle and business activities, published in the Daily Telegraph. Ms Bourke submitted that the Tribunal could draw an inference from a contrast between this assertion and the Applicant's lifestyle as described in the article. She submits that the Applicant has the onus to confirm his non-payment for work he performs for Delmege Commercial.
Mr McGuire's evidence
Mr McGuire provided an affidavit sworn on 18 April 2013 in which he identified a number of properties that were then listed on the Delmege Commercial website. He stated that on 3 April 2013 he and Senior Investigator Robert Evans visited the office of Delmege Commercial with the intention of interviewing the Applicant about the properties he has listed whilst not holding a licence.
Mr McGuire stated that he was unable to contact the Applicant at that time and he recounted his dealings with the licensee in charge of Delmege Commercial, Rosemary Faddoul and his attempts to obtain access to the Delmege Commercial files and other information relating to the properties where the Applicant was listed as the agent dealing with either the properties. His evidence is that despite several visits to the office of Delmege Commercial over the following week and several interactions with Ms Faddoul, he was unable to obtain access to the files or to obtain the further information.
Mr McGuire stated that on 15 April 2013 he received a text message from Ms Faddoul that advised him that the files that he had requested had been produced to the Applicant's solicitor.
The Respondent's submissions
Ms Bourke submitted that many companies survived the global financial crisis ("the GFC"). She argued that it is not sufficient for the Applicant to simply assert that he had no power to influence the operations of the companies that went into external administration. There is a duty on all directors to make themselves aware of the company details.
In relation to the Applicant's bankruptcy, Ms Bourke submitted that he ought to have ensured that he had sufficient resources to meet his obligations under any guarantees that he gave.
The Applicant was receiving advice from his advisors since 2005 i.e. prior to the GFC. Ms Bourke relies on newspaper articles that discussed court action by the Australian tax Office in regard to a demand for over $225,000 against Surfside (Mount Street). She submitted that the Applicant should have been aware of the financial difficulties being experienced by Surfside (Mount Street) from at least late 2008 or early 2009.
In relation to the Applicant's failure to disclose that he had been a director of externally administered bodies corporate, Ms Bourke submitted that he was obliged to make the disclosure and had failed to do so. In regard to the Applicant's assertion that he had misunderstood the obligation because of the use of the term body corporate in connection with strata properties regulated by the Strata Schemes Management Act 1996, Ms Bourke argued that the term 'owners corporation' would have been in common usage since the Applicant has been involved in the real estate industry. She disputes the assertion that the part of the licence application form that requests the disclosure is badly framed or that it would lead to mistakes.
In relation to the allegation that the Applicant has recently been active in the industry, Ms Bourke submitted that the evidence establishes that he has done more than odd jobs. In relation to the consequences that flow from disqualification, she relies on the Appeal Panel decision in Director General, Department of Finance and Services v Carr (GD) [2011] NSWADTAP 64 where the Appeal Panel stated at paragraphs [29] - [32]:
29 Disqualification is the most draconian sanction in the scheme of the Act, and is intended, as we see it, to apply to the most egregious cases. It would not be consistent with this view, in our opinion, to draw a line that allowed the person to remain in the field regulated by the statute, in particular at the level of holding public authorities to deal directly with consumers, as is authorised by the holding of an agent's licence or a salesperson's certificate. The reference to 'the purposes of the Act' is seeking, as we see it, to reinforce the ordinary meaning of disqualification.
30 Our understanding is borne out by other provisions of the Act. A 'disqualified person' is excluded from eligibility for a licence (s 14(1)(d)). A 'disqualified person' is excluded from eligibility for a certificate (s 14(3)(d)). The Note to s 14(3) states 'The grounds of disqualification in section 16(1A) do not disqualify a person from eligibility to hold a certificate of registration.' Our understanding is reinforced by s 16(1A)(a) (the voluntary bankruptcy provision), previously mentioned. As noted, that provision specifically excepts from its operation the holding of certificates of registration.
31 Section 43 of the Act makes it an offence for licensees to employ disqualified persons 'in any capacity in connection with the carrying on of the business conducted by the licensee'. Thus, the usual effect of a disqualification order would be to exclude the subject of the order from working in the industry at a managerial level and possibly at any level ('in any capacity'). That s 43 is intended to have a comprehensive effect is reflected in the express exception of cases where 'disqualification is on a ground that does not disqualify the person from eligibility to hold a certificate of registration'. In our opinion, the Parliament saw disqualification as ordinarily having a comprehensive effect. The same point is reflected in the opening words of s 16(1A): 'A person is also a disqualified person for the purposes of this Act (except for the purposes of eligibility to hold a certificate of registration) if the person ...'.
32 The conclusion that an order under s 192(1)(h) is all encompassing is also supported, we consider, by the giving of a power to specify the period of disqualification. This is to be contrasted with the position in relation to the exercise of the power of cancellation (s 192(1)(g)) which makes no reference to a power to impose a period during which a re-application might not be considered. (Nor, we, note is there a power to impose a time bar given in s 192(1)(i), though it appears (as here) to be customary for the administrator to set one, an issue the subject of comment in Stojanovic v Commissioner for Fair Trading, New South Wales Office of Fair Trading [2008] NSWADT 109 (15 April 2008) at para [18] by Handley DP.)
Ms Bourke points to correspondence between the Applicant and Craig and Sherri Jaques ("the Jaques") in relation to the sale of a Unit in Brookvale by Delmerge Commercial. Ms Bourke submitted that the correspondence clearly shows direct contact between the Applicant and the Jaques with respect to the sale of the property. She submitted that section 43 of the Act is intended to have a comprehensive effect and that the evidence shows that the Applicant has performed a role in the industry from which he has been excluded. She further submitted that the Applicant gave inconsistent evidence in relation to the issue and that it is apparent that he was prepared to tailor his evidence to suit his own purposes.
Ms Bourke noted the Applicant's assertion that Nathan Welsh was responsible for the documents concerning the Jaques' property. In relation to that assertion, Ms Bourke submitted that an adverse inference could be drawn from the absence of evidence from Nathan Welsh. Ms Bourke also noted the Applicant's evidence that he understood that Nathan Welsh had been dismissed from Delmerge Commercial and then recently reemployed under stringent conditions. In relation to that assertion, Ms Bourke submitted that the evidence was hearsay.
Ms Bourke further submitted that as a result of the lack of cooperation between the Applicant and the various Delmege Commercial staff members, it was not possible for the Respondent to investigate properly the concerns that it had in regard to the properties that were listed on the Delmege Commercial website.
Ms Bourke submitted that the decision should be affirmed. She further submitted that the Tribunal should find on the basis of the evidence given by the Applicant that he is not a fit and proper person to hold a licence.
The Applicant's case
The Applicant provided two affidavits in support of his application. In relation to the records of the various companies that were subject to the appointment of receivers and managers, the Applicant noted that all of the companies' records were provided to the receivers and managers and/or Administrators. His evidence is therefore based on his recollection of events without the benefit of relevant documents.
The Applicant obtained a Certificate of Registration in 1994. He obtained a Real Estate Agent's Licence in July 2007.
The Applicant's evidence was that from about 2003 or 2004, his stepmother suffered serious health issues and that his father devoted significant time to her care. The Applicant's father requested the Applicant to assist him and become a director of his various companies Dewoval Pty. Ltd., Max Delmege Pty. Ltd, Surfside (Mount Street) Pty. Ltd. ("Surfside Mount Street") and Surfside (Willoughby) Holdings Pty. Ltd. ("Surfside Willoughby"). Each of the companies was predominantly involved in the acquisition and sale of real estate, or alternatively, the development of real estate. With the exception of Surfside Willoughy, there were two directors - the Applicant and his father.
Dewoval Pty. Ltd
The Applicant was appointed as director and secretary of Dewoval in September 2006. He was not a shareholder of Dewoval. His father owned the shares in Dewoval.
The Applicant says that the GFC affected the real estate market significantly. The GFC impacted upon the property businesses and investments owned and conducted by the various companies. In relation to the conduct of the companies the Applicant stated:
As the Board of each of the companies comprised myself and my father, my ability to influence the management decisions of the Board and the companies themselves, was very limited. In order for the Board of Directors to resolve to take any action, it required the unanimous agreement of both directors. Therefore, as a practical matter, the most that I could ever achieve in my position as one of two directors was to attempt to convince my father that a particular course of action was appropriate in the circumstances. I had no independent power to unilaterally take any action in respect of the various companies' business affairs. Therefore, unless I was in a position where I could convince my father that my proposed course of action was appropriate, I was unable to affect or change the course that the management of the companies took. In the event that I was unable to convince my father that the course that I proposed was appropriate and advantageous the management decision would be the subject of a deadlock and could not proceed.
Dewoval owned two properties at Mona Vale that were financed through the Bank of Western Australia. The Applicant's father had arranged two separate facilities with BankWest, which totalled approximately $4.5 million. The Applicant says that he was not involved in those transactions.
Dewoval fell into default of the BankWest facilities. The Applicant says that he approached a number of lenders in an attempt to refinance the facility but Dewoval was not in a position to either make the capital reductions of principal or to repay the entire facility when it fell due. Receivers and managers were appointed in June 2010. The Applicant says that he provided whatever assistance he could to the receivers and managers. He ultimately obtained finance approval in November 2010 but the refinance could not proceed because of insufficient funds being available to cover the debts and the costs incurred by the receivers and managers.
The Applicant says that the appointment of receivers and managers to Dewoval was the first sign to him that his father's companies were experiencing significant financial difficulties. He says that up until that time, his father had enjoyed phenomenal success as a businessman in the field of real estate. Whilst the Applicant had become a director of Dewoval, his father had remained in the position of decision-maker of that company. A similar arrangement existed in the other companies in which the Applicant was director. The Applicant says that his father very much dominated all of the decisions made with respect to Dewoval, that company's financing and its ultimate default with respect to the BankWest facilities. The Applicant says that Dewoval owned his father's personal residence and he did not feel that he was in a position to interfere in his father's personal affairs.
Max Delmege Pty. Ltd
The Applicant was appointed as a director and secretary of Max Delmege Pty. Ltd. in September 2006 and resigned in July 2010.
In about 2004, a company owned by the Applicant's father and his then partner purchased a property at Liverpool. The property comprised a commercial building. The Applicant had no involvement in that acquisition. Borrowings of approximately $24.65 million were secured against that property. Max Delmege Pty. Ltd. became a collateral borrower. At his father's request, the Applicant provided a personal guarantee in respect of approximately $8.5 million of the borrowings associated with his father's interest in the property.
In July 2009, again at his father's request, the Applicant gave personal guarantees for all of the borrowings of Max Delmege Pty. Ltd.
The Applicant resigned as a director of Max Delmege Pty. Ltd. in July 2010 - a month after receivers and managers were appointed to Dewoval. His evidence was that he had been unable to exercise any independent control over Dewoval, or to properly understand the appointment of receivers and managers, and he was concerned that he might be placed in the same situation with respect to Max Delmege Pty. Ltd. In addition, the Applicant did not regard himself as having any significant direct involvement in Max Delmege Pty. Ltd. as that company's role was only as a collateral borrower in respect of the finance facility provided by Perpetual Trustees in relation to the Liverpool property.
Max Delmege Pty. Ltd. was not the owner or the registered proprietor of the Liverpool property. The Applicant was not a director of the company that owned the property. He says that at the time he did not understand the full extent of his personal liability with respect to the borrowings of Max Delmege Pty. Ltd. He was aware that he had some involvement in the over-all transaction and he was prepared to offer whatever assistance he could to his father.
As a consequence of the declining real estate values Perpetual Trustees placed additional conditions upon the borrowings. In 2010 the Applicant secured two Government tenants for the Liverpool property, which both increased the cash-flow and value significantly. The Applicant and his father entered into a regime of weekly and monthly reporting with respect to revenue, expenditure and leasing. The Applicant engaged CB Richard Ellis and Chesterton International to market and sell the Liverpool property. The Applicant personally worked in an effort to sell that property for a sale price of approximately $28 million. Negotiations for the sale continued up and until receivers and managers were appointed by in October 2010.
Ultimately, the Liverpool property was sold for approximately $19 million. By reason of his personal guarantees the Applicant was personally liable for the short-fall of approximately $8.5 million.
Surfside Mount Street
The Applicant was appointed as a director and the secretary of Surfside Mount Street in September 2006. During 2007 Surfside Mount Street purchased a property in Mount Street, North Sydney for an amount of approximately $21 million. The Applicant was not directly involved in the negotiations for the funding of that acquisition and he did not provide personal guarantees with respect to that transaction.
In about September 2008 Surfside Mount Street entered a Joint Venture Agreement with Laing O'Rourke to develop the Mount Street property and an adjoining property. Pursuant to the Joint Venture Agreement Laing O'Rourke was to arrange and provide construction finance for the redevelopment and to undertake the development, building and construction works. Surfside Mount Street was to contribute the land, real estate services, including leasing, management and the ultimate sale of the developed land.
In accordance with the Joint Venture Agreement, once the Joint Venture Agreement was executed Surfside Mount Street could no longer deal with the Mount Street properties without the consent of Laing O'Rourke.
Pursuant to the terms of the Joint Venture Agreement, Laing O'Rourke was to facilitate a refinance of the Mount Street properties with the Bank of Scotland. Upon the execution of the Joint Venture Agreement, Laing O'Rourke paid an amount of $13 million to Surfside Mount Street by way of partial contribution to the Joint Venture. A second payment of $7 million was due to be made by Laing O'Rourke upon Surfside Mount Street obtaining Development Approval to construct an office tower upon the two properties. The $7 million contribution was not paid.
A dispute ensued between Surfside Mount Street and Laing O'Rourke, which resulted in the Joint Venture Agreement being terminated in August 2010. Laing O'Rourke commenced proceedings in the Supreme Court of NSW against Surfside Mount Street and obtained interim injunctions to restrain Surfside Mount Street from encumbering or otherwise disposing of the Mount Street properties, pending the final determination of the proceedings. The Applicant says that the effect of the interim injunctions was to prevent Surfside Mount Street from taking any steps utilising the Mount Street properties to either repay debt to the Bank of Scotland, or to otherwise sell the Mount Street properties, in order that the finance facilities could be repaid.
In September 2010 the Bank of Scotland issued default notices giving Surfside Mount Street seven days in which to repay all monies then outstanding, in default of which receivers and managers would be appointed. Shortly afterwards, receivers and managers of Surfside Mount Street were appointed.
In December 2010 a majority of creditors voted in favour of a Deed of Company Arrangement, and a Deed Administrator was appointed. Nevertheless, the company remained under the control of the receivers and managers appointed by the Bank of Scotland. Ultimately, the Mount Street properties were sold to Laing O'Rourke. By that time, Surfside Mount Street did not have the resources to pursue the Supreme Court litigation.
Surfside Willoughby
The Applicant was appointed as a director and the secretary of Surfside Willoughby in September 2006. His father continued in his role as a director.
Surfside Willoughby purchased and held a number of commercial properties. In about May 2006 it purchased a property at 247 Pacific Highway, North Sydney for $2.2 million. To assist in the purchase, Surfside Willoughby borrowed an amount of approximately $1.8 million from St. George Bank Limited.
In about mid 2006 Surfside Willoughby purchased a property at Willoughby for an amount of approximately $2.5 million. Allco Finance provided a finance facility of $1.8 million. Together with his father and siblings, the Applicant provided personal guarantees with respect to those borrowings.
The Willoughby property adjoined a larger commercial property that Surfside Willoughby had purchased some years earlier.
The Applicant's father subsequently decided not to pursue the development opportunity on the commercial property adjoining the Willoughby property. Surfside Willoughby sold the commercial property and the proceeds applied towards the purchase of the Mount Street, North Sydney property. A strata subdivision of the Willoughby property resulted in Surfside Willoughby being the owner of five strata title lots.
Also in about 2006 Surfside Willoughby purchased a property at Springwood, Queensland. The Springwood property was acquired for approximately $18 million. To assist in the purchase, Surfside Willoughby borrowed an amount of approximately $16 million from Suncorp Metway. At his father's request, the Applicant provided his personal guarantee for those borrowings.
The Applicant says that a 2008 valuation of the Springwood property valued the property at $23.75 million. In late 2009 the value of the Springwood property had dropped to $14.75 million. As a consequence of the decline in value of the Springwood property, Surfside Willoughby breached the loan to value ratio covenants contained in its funding agreements. The Applicant says that the rapid decline in the value of the Springwood property was purely as a result of the Global Financial Crisis and not as a result of any other changes that had been effected to the property during that period. Neither Surfside Willoughby nor its directors were able to restore the value of the property, or increase it by $9 million, such that the breaches of the loan to value ratio covenants were rectified.
The Applicant reached agreement with Suncorp Metway with respect to a program of monitoring whereby he would provide regular financial and leasing reports. He also engaged CB Richard Ellis and Colliers International to commence a marketing campaign for the sale of the Springwood property. Suncorp Metway agreed to postpone the appointment of receivers and managers.
In 2010 Surfside Willoughby sold four of the five Willoughby property strata title lots. All of the sale proceeds were paid to Allco Finance through its trustee, BNY Trust (Australia) Registry Limited. The sale of the remaining Willoughby property lot was not completed and in June 2011 BNY Trust was appointed as the Controller of the lot.
The Applicant resigned as a director of Surfside Willoughby in March 2012. In January 2013, Suncorp Metway appointed receivers and managers of Surfside Willoughby.
In relation to his role as director of the various companies, the Applicant says that he was unfamiliar with the complicated legal and financial matters that arose. His experience in real estate had been largely associated with the success of his father's real estate businesses. The beginning of the demise of his father's business placed him under immense personal strain and pressure. He was dealing with issues of a very complex nature, which he was inexperienced to handle.
The Applicant's Bankruptcy
As noted above, during the time that he was a director of the various companies, the Applicant provided his personal guarantee with respect to a number of loan facilities. The Applicant provided those guarantees at the request of his father. As the various companies fell into default of their finance facilities, demands were made against the Applicant with respect to his personal guarantees. Those demands amounted to many millions of dollars.
At the time of those demands, the Applicant owned a one-half share in a residential unit where he lived at St. Leonards. He owned the St. Leonards unit with his father. In addition, the Applicant owned an investment property at Mona Vale.
As soon as the demands were received in relation to his personal guarantees, the Applicant took steps to sell both the Mona Vale property and the St. Leonards unit. He sold the Mona Vale property in November 2011 but all of the proceeds of sale were applied to discharge the mortgage. There were no surplus funds available to pay any of his other creditors. The Applicant was unable to sell the St. Leonards unit.
In about June 2009, BNY Trust commenced proceedings against Surfside Willoughby. The Applicant was joined as a defendant to those proceedings by reason of his personal guarantee. Judgment was obtained against him in December 2009. BNY Trust served him with a Bankruptcy Notice in July or August 2011. The Bankruptcy Notice claimed an amount of $1,810,683.33 from the Applicant. He did not have the resources available to comply with the Bankruptcy Notice.
The Applicant says that while he did not have sufficient personal assets or resources which could be applied to meet the various personal guarantees, he was expecting that there would be a surplus of funds available upon the sale of the real estate holdings held by the various companies. He expected that the sale of the companies' real estate holdings would satisfy the majority of the primary debts, which would in turn extinguish his liabilities with respect to personal guarantees.
The sale prices that were ultimately achieved were much lower than the Applicant had anticipated and the funds were insufficient to discharge the companies' debts. Those debts were increased by the penalty interest that the financiers charged, and the fees charged by the receivers and managers.
The Applicant had insufficient assets available to him to pay all the guaranteed debts. He obtained advice that the Applicant needed to declare bankruptcy. He presented a Debtor's Petition in April 2012 and a Trustee of his bankrupt estate was appointed.
Most of the Applicant's debts were the result of personal guarantees that he had provided with respect to the various companies' borrowings. Only a very small fraction of the Applicant's debts were incurred other than because of those personal guarantees. The Applicant's debts were calculated at $28,718,636.00 but he noted that the receivers and managers subsequently sold many of the properties held by way of security, and thus his personal liability would have been reduced. Some of the properties remain under the control of receivers and managers, and thus have not been sold.
At the time of the presentation of his Debtor's Petition the Applicant had assets of $178,541 available to him.
In December 2012 the Applicant's Trustee in Bankruptcy called a meeting of creditors and put a proposal to creditors that the Applicant's bankruptcy be annulled pursuant to Section 73 of the Bankruptcy Act 1966. The Applicant's sister-in-law paid the sum of $65,000.00 was into the trust account of his Trustee in Bankruptcy. A majority of the Applicant's creditors voted to accept that amount as a compromise of his debts and liabilities. His bankruptcy was annulled in January 2013.
Incorrect declarations in Licence Renewal Applications
As has been noted above, the Applicant incorrectly indicated on a number of licence renewal application forms that he had not been director or person concerned in the management of an externally administered body corporate during the three years prior to the application.
The Applicant explained that the provision of incorrect answers on the application forms was as a result of his mistaken understanding as to the meaning of the words "body corporate" rather than because he was dishonestly answering the questions.
He says that at the time that he answered the questions, he associated the term "body corporate" with the body corporate of a strata plan. He says that he did not associate or understand the term "body corporate" to mean "company".
He says that in his experience, the term "body corporate" is used in the real estate industry to describe the manager of either a residential strata plan block of units, or alternatively a commercial strata plan. He has considerable experience dealing with strata plans and body corporates or managers of strata plans. He was involved in the small-scale subdivision by way of strata plan on behalf of Surfside Willoughby. He was involved with the establishment and registration of a 5-unit strata plan in respect of the Willoughby property. As part of that process he established a body corporate in respect of the strata plan.
In addition, the Applicant says that up until early 2010 he had been involved in a strata management business. That business provided strata management services for the body corporates of various strata plans. He says that his understanding of the term "body corporate" insofar as it related to the manager of a strata plan was fortified through his involvement with the strata management business.
Although he had been involved in a strata management business, he had not been involved in a body corporate of any strata plan that had been the subject of external administration. He says that he therefore believed his answer to be correct. Had he understood the question to be related simply to any company with which he had been involved he would have answered differently.
The Applicant says that the first time that he became aware that the term "body corporate" could also mean 'company" was when he engaged a consultant to assist with the management and compliance issues associated with Delmege Commercial. Thereafter he made all necessary disclosures and provided all necessary documents.
The Applicant did not call evidence from his advisor in relation to the advice that he received on that issue.
Delmege Commercial
Delmege Commercial was incorporated in October 2005 and is 'family-owned'. It was originally known as Surfside (Frenchs Forest) Pty Ltd. In 2007 the company changed its name to Unique Car Hire Pty Ltd and in October 2010 changed its name to Delmege Commercial Pty Ltd.
The Applicant says that he has no interest in Delmege Commercial.
Delmege Commercial holds of a corporate real estate agent's licence under the Act. Rosemary Faddoul, one of the directors of the company, is also the holder of a real estate agent's licence. The company carries on business as the agent for the sale or lease of real estate. It does not carry on any business for intending purchasers.
The Applicant says that he performs some work for Delmege Commercial. He says that he receives no remuneration from the company for the work he performs for it. He receives no salary or commission for his services nor does he receive commission or any other payment from the vendors themselves. He asserts that he does not work as an employee of the company or as a contractor to the company and does not do work in breach of the Act.
Craig and Sherri Jaques
The Respondent relies on documents relating to a proposed sale of a property by the Jaques. Included in that material is a document dated 14 November 2012 and headed "Sales & Marketing Proposal - Lot 20, Strata Plan 70852, 20 Dale Street, Brookvale". The email containing the document indicates that it was copied to the Applicant. The Applicant says that he did not prepare that document, did not read it before it was sent and nor did he send it out. He says that Nathan Welsh did the preparation and despatch of the document. He concedes that it was "copied" to him in the email in which it was dispatched to the Jaques but asserts that he did not go through it.
The document, on its final page, refers to the Applicant as the "principal" of Delmege Commercial and contains a signature purporting to be that of the Applicant. The Applicant asserts that he was not the principal of the Company and nor did he sign the original of the document. He asserted that the signature is almost certainly one that has been scanned onto the document.
The Applicant offered the explanation that Nathan Welsh may have used an earlier document in template form and then added in the additional matters relating to the agency.
The Applicant stated that he understood from Rosemary Faddoul that Nathan Welsh had been dismissed from Delmerge Commercial and then recently reemployed under stringent. No other evidence was called in relation to that issue.
Nathan Welsh was not called to give evidence in relation to the issue nor was any other Delmege Commercial staff member called to give evidence in relation to the work undertaken in relation to the Jaques' property. However, Mr Rogers submitted that no adverse inference could be drawn from the lack of evidence from Nathan Welsh because it could be anticipated that he would not be helpful because he had been dismissed and reemployed on restricted terms.
Entries at realcommercial.com
The Respondent relies on a bundle of documents extracted from the Internet website known as RealCommercial.com.au ("RealCommercial"). RealCommercial is an advertising website for commercial real estate sales and leasing. Subscribers, including Delmege Commercial, pay a fee to RealCommercial to place their listings.
The Respondent's material shows listings from the RealCommercial site from early 2013. The listings identify the Applicant as a contact person and provide a phone number where he can be contacted for further information or to arrange an inspection.
The Applicant's evidence is that he is not responsible for placing or maintaining entries on the RealCommercial website. He points to a number of errors in the listings and asserts that the inclusion of his name on the listing is erroneous.
His evidence is that he was the only sales and leasing agent for Delmege Commercial when it first subscribed to the website, so whenever a new property was listed his contact details would automatically appear. That continued to be the case and while attempts were made to rectify the problem, they were unsuccessful. He asserted that he was not responsible for the posting of information on the website or its removal.
The Applicant did not call evidence from any Delmege Commercial staff in relation to the entries on the RealCommercial website or work undertaken in relation to the advertised properties.
Applicant's submissions
Mr Rogers made submissions in relation to the issues before the Tribunal. He notes that the Applicant is now a discharged bankrupt. In relation to the question of whether he took all reasonable steps to avoid the bankruptcy Mr Rogers referred to the fact that the Applicant had given personal guarantees of more than $20 million and submitted that the bankruptcy could only have been avoided by stopping the various companies going into liquidation. He argued that it is not realistic to expect that a guarantor has the funds to meet a guarantee before it is given. Businesses commonly operate on such risks. He further submitted that the Applicant was not in a position to stop the GFC that was the cause of the company failures.
Mr Rogers contends that it is fanciful to suggest that there were any steps that the Applicant could have taken to avoid his bankruptcy or to avoid the various companies going into external administration. He submitted that in fact the Directors had a duty to put the companies into liquidation rather than to have them keep trading. He further submitted that the Respondent has not been able to identify any steps that the Applicant could have taken that might have avoided the various companies going into external administration.
Section 16 (2A) of the Act provides that the Respondent, and therefore the Tribunal, may determine that a disqualification from holding a licence is to be ignored. Mr Rogers submitted that the Tribunal should make that determination.
In relation to the issue of the Applicant's failure to disclose that he had been a director of the companies that went into external administration, Mr Rogers submitted that in fact the Applicant brought the matter to the Respondent's attention in his April 2012 licence renewal application. The Respondent had then checked whether the Applicant had previously failed to make the declaration.
In his April 2012 licence renewal application the Applicant responded 'yes' to the question:
Are you now, or were you at any time in the preceding 3 years a director or person concerned in the management of ANY externally-administered body corporate (within the meaning of the Corporations Act 2001 (Cth))?
The Applicant had previously answered 'No' to a similar question on licence application forms. Mr Rogers submitted that the Applicant brought the matter to the Respondent's attention because he had received advice that he had misunderstood the questions that sought the declaration.
Mr Rogers observed that while the term 'externally-administered body corporate' is defined in the Corporations Act, the term 'body corporate' is not in fact defined in that Act. He submitted that if the Applicant had in fact read the Corporations Act he would have been no better off in terms of his understanding of the term 'body corporate'.
Mr Rogers further submitted that section 11(2) of the Strata Schemes Management Act 1996 provides that an owners corporation is declared to be an excluded matter for the purposes of the Corporations Act 2001.
The Applicant's evidence was that an owner's corporation is commonly referred to as a body corporate. He had understood the question as a reference to an externally-administered owner's corporation. Mr Rogers submitted that a real estate agent might reasonably consider that the question on the licence application form concerned an owner's corporation.
Mr Rogers noted the Respondent's concerns in relation to a failure of Delmege Commercial to renew its Corporate Real Estate Agent's Licence and that Delmege Commercial continued to trade without a licence. He asserted that the renewal of the licence was not the Applicant's responsibility. He similarly submitted that the Applicant could not be held responsible for any lack of cooperation on the part of Delmege Commercial staff.
The Applicant's evidence was that in about May 2010 he became aware that the licence for Delmege Commercial had not been renewed. The licence had expired in February 2010. The Applicant asserted that he was not the licensee in charge at the time. The licensee in charge during that period and up until April 2010 was Mr Leonard Thomas. The Applicant stated that he would have taken all necessary steps to have the Delmege Commercial licence renewed if he had known that it had lapsed.
In relation to the allegation that the Applicant had been operating as a real estate agent without a licence, Mr Rogers submitted that the Respondent must show that the Applicant was carrying on a business. The Applicant's evidence was that he did not receive any remuneration or commission in relation to the work that he was undertaking. He therefore fell far short of trading.
The Applicant conceded that the Respondent has not exempted him from the operation of section 16 (1A) (a) and (c) and he is therefore a disqualified person and, as such, ineligible to hold a licence. However, Mr Rogers submitted that the Applicant is not disqualified from holding a certificate of registration. He argued that a disqualification of this type is to be distinguished from a disqualification under Part 12 of the Act. While the Respondent has not exempted the Applicant from the operation of section 16 (1A) of the Act, it has not declared the Applicant to be a disqualified person. He notes that section 43 relates to a disqualified person other than a person whose disqualification is on a ground that does not disqualify the person from eligibility to hold a certificate of registration. He submits that the Appeal Panel decision in Director General, Department of Finance and Services v Carr (GD) is not relevant to this matter.
While the Respondent submitted that it is implausible that the Applicant would have worked without remuneration Mr Rogers submitted that there is no evidence to contradict that given by the Applicant. He was not asked about how his lifestyle was funded and therefore no adverse inference can be drawn. Mr Rogers submitted that the allegation is not made out.
Mr Rogers submitted that the wider allegation that the Applicant is not a fit and proper person to hold a licence should not be permitted, as it is procedurally unfair. He submitted that the Applicant ought not have to meet a case that was not put against him.
Consideration
As noted above, the issues for consideration relate to whether the Applicant is a "disqualified person" and whether the Applicant is a fit and proper person to hold a licence under the Act.
Is the Applicant a disqualified person?
Where a person is, or was at any time in the last 3 years, a director of a corporation to which an external administrator was appointed, other than on a voluntary winding up, the person will be a disqualified person unless the Respondent (and by extension this Tribunal) is satisfied that they should be exempt. The Tribunal may exempt them by certifying that they took all reasonable steps to avoid the external administration, having regard to the steps that could have been taken by the person from the time that the financial difficulties that gave rise to the outcome first arose. A similar discretion exists where an applicant was an undischarged bankrupt in the last 3 years.
The test is that of what a reasonable person endowed with the Applicant's knowledge and experience would do. In applying this test I must consider two issues - (i) when did the Applicant know, or ought he to have known, that the administration/bankruptcy in question was a possibility? and (ii) what steps did he take to avoid that administration/bankruptcy?
When did the Applicant know, or ought he to have known, that the administration/ bankruptcy in question was a possibility?
The Applicant relies on his own evidence of the limited role that he played as a director of the various and professional advice that he received.
On the chronology of events as presented by the parties, it is my view that the Applicant should have been aware that the administration of Surfside (Mount Street) was a possibility well before the Australian Taxation Office moved against it in late 2008 or early 2009.
He was aware of the action taken by the Australian Taxation Office. As a director of Surfside (Mount Street) he had an obligation to be aware of its financial circumstances. He therefore should have been aware that action by the Australian Taxation Office was a real possibility.
This action should have focussed his attention in regard to the other companies of which he was a director. By the time of the Court winding up action against Dewoval in mid 2009 he should have been well aware of the potential impact of the GFC on the various companies.
What steps did the Applicant take to avoid the administration/ bankruptcy?
I note that the Applicant asserts that the impact of the GFC was the primary cause of the collapse of the various companies and that his bankruptcy followed inevitably because of his personal guarantees.
It seems that the approach taken in relation to the various companies was to attempt to trade out of the financial difficulties and to dispose of assets where possible.
The Applicant asserts that there were no steps that he could have taken that would have avoided the administration. He has not provided details of the professional advice that he received in relation to either his becoming a director of the companies, the giving of guarantees or steps to avoid external administration.
I note that in correspondence by the Applicant's former solicitors to the Respondent the claim was made that details of advice sought and provided was privilege and or confidential. However, I also note that it is for the Applicant to establish that he took all reasonable steps to avoid the external administrations and his bankruptcy. It is not clear why any claim for privilege would prevent him from providing the relevant details to the Respondent or the Tribunal that might assist in establishing that he took all reasonable steps.
The Applicant gave evidence that his father controlled the various companies and that, notwithstanding that he had been appointed as a director, the Applicant was not in a position to influence the companies' financial circumstances. He did not call any independent evidence in regard to this issue.
The Respondent correctly asserts that there is a duty on all directors to make themselves aware of their company's details. As a director of the various companies the Applicant had that obligation.
I do not consider that a reasonable person in the Applicant's circumstances would have taken on the role of director of the various companies if they were not in a position to influence the companies' financial circumstances. Nor do I consider that a reasonable person would provide personal guarantees at a time when they were or should have been aware of the potential impact of the GFC. I note that the Applicant gave personal guarantees for all of the borrowings of Max Delmege Pty. Ltd in July 2009. The potential impact of the GFC should have been apparent at that time. In my view a reasonable person endowed with the Applicant's knowledge and experience would not have given that guarantee.
Nevertheless, despite the Applicant's apparent failure to perform his obligations as a director of the various companies, and in spite of the imprudent giving of guarantees, I accept that any steps that he might have taken would not have avoided the external administration of the various companies.
The Respondent has not identified any other steps that he could have taken to achieve that outcome.
Similarly, I accept that the Applicant's bankruptcy was inevitable because of the guarantees. While I do not consider that it was prudent to give the personal guarantees for all of the borrowings of Max Delmege Pty. Ltd, the Applicant's bankruptcy would have followed even without that guarantee.
In the circumstances I am satisfied that the Applicant took all reasonable steps to avoid the various companies becoming externally administered and to avoid his bankruptcy.
For completeness I note that I agree with Mr Rogers that the Applicant was not disqualified from holding a certificate of registration and that section 43 relates to a disqualified person other than a person whose disqualification is on a ground that does not disqualify the person from eligibility to hold a certificate of registration. I agree that the Appeal Panel decision in Director General, Department of Finance and Services v Carr (GD) is not relevant to this matter.
Is the Applicant a fit and proper person to hold a licence?
Section 14 of the Act provides that a person is eligible to hold a licence only if they are a fit and proper person to hold the licence.
Whether a person is fit and proper for a particular purpose will depend on the legislative context. In the context of the Act, honesty and financial propriety are essential requirements.
Where there is evidence of misconduct, it has been held that relevant factors in determining a person's fitness and propriety are (a) the person's explanation for the misconduct, (b) its seriousness to the particular activity, (c) the motivation of the person, (d) whether the misconduct is an isolated incident, (e) the person's underlying qualities of character, and (f) the person's conduct since the incident and whether this demonstrates recognition of the misconduct and subsequent reform: see McBride v Walton per Kirby P, at paragraphs [21] to [26], and Powell JA, at paragraphs [59] to [73]).
In this matter the issue arises because the Applicant incorrectly indicated on licence renewal application forms that he had not been a director or person concerned in the management of an externally administered body corporate during the three years prior to the application. The issue also arises because of the allegation that the Applicant acted as a real estate agent when he was not the holder of a real estate agent's licence.
Incorrect declarations in Licence Renewal Applications
The Applicant explained that he provided incorrect answers in the various licence renewal application forms because he mistakenly understood the meaning of the words "body corporate". He stated that he associated the term "body corporate" with the body corporate of a strata plan i.e. an owners' corporation.
The Applicant's explanation is extraordinary given his long experience in both the real estate industry and as a company director. However, I note that his evidence on this issue was not shaken under cross-examination and there was no evidence to contradict it.
I also note that the Applicant explained that he received advice in regard to his misunderstanding and subsequently made the correct declaration in a licence renewal application. While the Applicant's own evidence is the only evidence of the asserted advice, in my view the subsequent disclosure provides some support for his explanation.
In the circumstances, I accept the Applicant's explanation. However, in my view it raises issues of whether the Applicant has the requisite knowledge to be regarded as a fit and proper person to hold a licence.
As noted above, the High Court in Hughes & Vale Pty Ltd v New South Wales observed that fitness for an office involve honesty, knowledge and ability. The Applicant's explanation for his incorrect answers on the various licence renewal application forms, along with his answers to questions from Ms Bourke regarding the operation of the agency when he was licensee in charge, suggests that he may not have the necessary knowledge and ability to be regarded as a fit and proper person to hold a licence.
Under cross-examination by Ms Bourke in regard to the maintenance of agency records and the general conduct of the agency, the Applicant was unable to demonstrate even basic knowledge.
As I have noted above, Mr Rogers argued that this wider allegation that the Applicant is not a fit and proper person to hold a licence should not be permitted, as it is procedurally unfair. I agree with that submission. If that issue were to be conclusive of this matter, the appropriate outcome would be to remit the matter for reconsideration by the Respondent so as to allow the Applicant the opportunity to present evidence in relation to that issue.
Craig and Sherri Jaques
The Respondent relies on correspondence between the Applicant and the Jaques in relation to the sale of the Jaques' property. I agree with Ms Bourke's submission that the correspondence clearly shows direct contact between the Applicant and the Jaques with respect to the sale of the property. In the absence of corroborating evidence I am unable to accept the Applicant's assertion in regard to that correspondence or his assertion in regard to Nathan Welsh's role.
I have no evidence to support the Applicant's assertion that Nathan Welsh would have been a hostile witness. Even if that were the case, the Applicant could have provided evidence from other staff of the agency. No explanation has been provided in regard to why evidence could not have been provided to support the Applicant's assertion as to the limited role that he played in the agency or his role in regard to the sale of the Jaques' property.
On the evidence before me I do not accept that the Applicant was not acting in regard to the sale of the Jaques' property.
Entries at realcommercial.com
The Respondent relies on printouts from the realcommercial.com website that identify the Applicant as a contact person within Delmege Commercial in relation to the listings. The Applicant's evidence is that he is not responsible for placing or maintaining entries on the RealCommercial website.
As noted above, the Respondent advised the Applicant that it proposed to rely on the additional ground of operating without a real estate agent's licence under the Act. The Applicant's answer to that allegation is that he was not 'operating' and therefore the Respondent has not established its allegation.
I accept that the printouts from the realcommercial.com website do not establish that the Applicant was operating a real estate agency. However, they do raise an issue to be answered regarding whether or not the Applicant was acting as an agent in breach of section 8 of the Act. In my view, that inference is open on the evidence. Given the protective nature of the jurisdiction, it is open to the Tribunal to consider the question of whether that conduct is relevant to the Applicant's fitness to hold a licence.
As I have noted above, the Applicant did not call evidence from any Delmege Commercial staff in relation to the entries on the RealCommercial website or the work undertaken in relation to the advertised properties. The Applicant has provided no reasonable explanation in regard to his failure to call that evidence.
In the absence of corroborating evidence I am unable to accept the Applicant's assertion in regard to his role in regard to the sale of the properties listed on the RealCommercial website.
Conclusion
I am satisfied that the Applicant's conduct in regard to the sale of the Jaques' property and in regard to the properties listed on the RealCommercial website occurred at a time when he was not the holder of a real estate agent's licence. As a former licensee the Applicant should have been aware of the limits of the work he could undertake without a licence.
I consider that the Applicant's conduct raises questions in regard to whether he has the requisite skills and knowledge to carry out the duties of a licensee.
On the evidence before me I am not satisfied that the Applicant is a disqualified person for the purposes of the Act. However, I am not satisfied that he is a fit and proper person to hold the licence that he is seeking.
In my view, the Applicant would need to undertake significant further training in regard to the requirements of the Act and in particular the application of section 8 of the Act before he should be permitted to again hold a licence.
In the circumstances, it is my view that the determination to refuse to reinstate the Applicant's real estate agent's licence is the correct and preferable one. It should therefore be affirmed.
Order
The decision under review is affirmed.
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Decision last updated: 27 November 2013
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