Director General, Department of Finance and Services v Carr (GD)

[2011] NSWADTAP 64

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:

Director General, Department of Finance and Services v Carr (GD) [2011] NSWADTAP 64

Hearing dates:

12 October 2011

Decision date:

22 December 2011

Before:

Judge K P O'Connor, President
S Montgomery, Judicial Member
M von Kolpakow, Non-judicial Member

Decision:

1. Appeal on questions of law allowed.

2. Leave to extend to merits refused.

3. Review application remitted to Tribunal differently constituted for reconsideration.

Catchwords:

PROFESSIONAL DISCIPLINE - Estate Agents - Appeal against Tribunal Orders varying Administrator's Orders - Allowed - Interpretation - Disqualification - Scope of Powers - Review application remitted - Property, Stock and Business Agents Act 2002, s 192(1)(h) and (i)

Legislation Cited:

Administrative Decisions Tribunal Act 1997
Crimes Act 1900
Property, Stock and Business Agents Act 2002

Cases Cited:

Stojanovic v Commissioner for Fair Trading, New South Wales Office of Fair Trading [2008] NSWADT 109

Category:

Principal judgment

Parties:

Director General, Department of Finance and Services (Appellant)
Rory Carr (Respondent)

Representation:

COUNSEL
G M Elliott (Appellant)
M Nicoletti, Fair Trading Legal Services (Appellant)
P B Richardson (Respondent)

File Number(s):

119035

 Decision under appeal 

Jurisdiction:

9108

Citation:

Carr v Director General, Department of Finance and Services (formerly Department of Services, Technology and Administration) [2011] NSWADT 157

Date of Decision:

2011-06-29 00:00:00

Before:

General Division

File Number(s):

103161

REASONS FOR DECISION

1. APPEAL PANEL (K P O'CONNOR (PRESIDENT), S MONTGOMERY (JUDICIAL MEMBER), M VON KOLPAKOW (NON-JUDICIAL MEMBER): The appellant is the administrator of the licensing and disciplinary provisions of the Property, Stock and Business Agents Act 2002 (the Act). The respondent is a licensed real estate agent.

1. After a show cause inquiry, the administrator took disciplinary action against the respondent, by notice issued on 22 June 2010 under s 192 of the Act:

• in accordance with section 192(1)(h) of the Act, I declare that Rory Carr (aka Rory Kalos) is a disqualified person for the purposes of the Act for a period of ten (10) years.
• in accordance with section 192(1)(i) of the Act, I declare that Rory Carr (aka Rory Kalos) is disqualified for a period of ten (10) years from being involved in the direction, management or conduct of the business of a licensee.

1. The administrator found the following grounds set out in s 191 for disciplinary action established:

191 G rounds for disciplinary action

Disciplinary action under this Part can be taken against a person who is or was the holder of a licence or certificate of registration on any one or more of the following grounds:

(a) the person has contravened a provision of this Act or any other Act administered by the Minister, or the regulations under any such Act, whether or not the person has been prosecuted or convicted of an offence in respect of the contravention, ...

(c) the person has, in the course of carrying on business or exercising functions under the licence or certificate of registration, acted unlawfully, improperly, unfairly or incompetently,

(d) the person is a disqualified person or is otherwise not eligible under section 14 to hold a licence or certificate of registration,

(e) the person is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee,

1. The administrator made orders under the following powers given by s 192:

192 Disciplinary action

(1) Each of the following actions is disciplinary action that the Director-General can take against a person under this Act: ...

(h) declare the person to be a disqualified person for the purposes of this Act, either permanently or for a specified period. and

(i) disqualify the person from being involved in the direction, management or conduct of the business of a licensee.

1. The respondent immediately applied to the Tribunal for review and for a stay of the above orders. On 1 July 2010 the Tribunal granted a stay by consent subject to six agreed conditions. The conditions had the effect of allowing the respondent to continue in the industry under supervision, and without being a signatory to any trust account. As we understand it, the respondent has been working under the supervision of his brother, who is a licensed agent.

1. The primary events of concern were seven trust account transactions in the period 2006-2007. Six of the transactions involved the respondent taking money that would in due course be payable to him prior to becoming entitled to it to meet employee wages and business expenses. The money was the commission element of the deposit held in trust for vendors for whom he was acting in respect of pending sales. The seventh transaction was of a different kind. He drew $475,000 from the trust account to pay the balance due in respect of a commercial property which he wished to purchase. The sum was restored to the account from which it was drawn within five weeks. So in no instance did any client suffer an actual loss by reason of the respondent's conduct. The details of all these matters are set out in the administrator's reasons for decision, and outlined in the Tribunal's reasons. The administrator's and the Tribunal's reasons refer to the trust account provisions that were contravened. The final event of significance was the respondent's entry into voluntary bankruptcy in April 2009.

1. All of the transactions involved a breach of trust. The withdrawal of the amount of $475,000, on any view, involved a grave breach of trust. This was not a case where it might be said that he acted prematurely in respect of moneys that he could expect to receive in due course once sales had been completed.

1. Before the Tribunal, the respondent accepted that he had violated the trust account rules in respect of the seven transactions. He sought to explain his conduct in relation to the six misappropriations used to meet business expenses by reference to the pressures he was under. In the case of the misappropriation of the $475,000 he submitted that he had taken the money under a mistaken belief that the account had been put in funds for this amount.

1. In relation to his entry into voluntary bankruptcy, he submitted that he had taken all reasonable steps to avoid the event, and the discretion not to treat it as a ground for disqualification should be exercised in his favour. The respondent acknowledged that, if his case failed, he would no longer be entitled to a licence. But he pressed a case that he remained sufficiently fit to be allowed to continue to work as a salesperson. He stated that he was prepared to submit to conditions if desired in relation to dealing with trust accounts.

1. The Tribunal issued its decision on 29 June 2011. The Tribunal varied the administrator's decision and substituted the following orders:

The decision of the [administrator] is varied as follows:

(a) to declare the [respondent] a disqualified person for the purposes of the Act until 30 April 2015; and

(b) to disqualify the [respondent] from being involved in the direction, or management (including the operation of a trust account) in the business of a licensee under the Act until 30 April 2015.

1. The Tribunal considered that the material demonstrated that he was unfit to hold a licence but not so unfit as not to be eligible to apply for a certificate. It rejected his case that he had taken all reasonable steps to avoid bankruptcy. As we understand its reasoning, it saw its first order for disqualification as only relating to the circumstance of his personal bankruptcy with the effect that his eligibility to be granted a certificate was unaffected. The second order was drafted to reflect its view of his fitness, and retained the reference to 'direction' and 'management', but dropped the reference to 'conduct'.

1. The date of 30 April 2015 specified in both orders by the Tribunal has as its background the time restraints that apply to a person who has become bankrupt. In the ordinary course the respondent will be discharged from bankruptcy on 15 April 2012. Section 16(1A) disqualifies a person from eligibility for a licence for three years after discharge from bankruptcy.

1. The net effect of the orders, therefore, was that the respondent remained eligible to be granted a certificate of registration as a salesperson, and he was restored to eligibility to be granted a licence as from 15 April 2015. On the other hand the administrator's orders had sought to exclude him from involvement of any kind in the industry until June 2020.

The Appeal

1. The appeal is made under ss 112 and 113 of the Administrative Decisions Tribunal Act 1997 (ADT Act). An appeal may be made on a question of law, and, by leave, be extended to the merits.

1. The administrator submits that the Tribunal erred in law in three respects in its reasons for decision. The three questions are:

1. Was it permissible for the Tribunal to make a declaration under s 192(1)(h) that the respondent was a 'disqualified person' for the purposes of the Act, which was limited in its reasons for decision to the respondent's licence only?

2. Was it permissible for the Tribunal to exclude the word 'conduct' when making an order pursuant to s 192(1)(i) from the terms of the disqualification?

3. Did the Tribunal misconstrue the Act by limiting s 192(1)(h) to matters flowing from s 191(d) only and s 192(1)(i) to matters flowing from s 191(e) only, thereby failing to consider relevant considerations when determining orders pursuant to s 192(1)(h) and (i) respectively?

1. There is an application for leave to extend to the merits, or, alternatively, for the Tribunal to remit the application for reconsideration in accord with the Appeal Panel's reasons.

1. The respondent submits that the Tribunal interpreted the relevant law correctly, and accepts the orders.

1. The Tribunal had under notice an order of the most draconian kind (short of 'permanent' disqualification) addressed to a relatively short history of misconduct, albeit trust account misconduct. The Tribunal plainly had the view that he should not be so severely punished as to be barred in all ways from involvement in the real estate industry for ten years. He had spent most of his adult life in the industry and was now aged in his 50s. It sought to adopt an approach in its orders which reduced the general disqualification to the period that flowed from the bankruptcy, and confined it to the holding of a licence.

1. It sought to achieve a more favourable outcome for the respondent through a re-formulation of the scope and period of operation of the disqualification orders.

Consideration

1. The administrator's view is that the imposition of a disqualification carries the consequence that the person is rendered ineligible to work in the industry in any publicly authorised capacity (unless there is an express statutory modification).

1. The two powers of disqualification belong to a hierarchy of disciplinary actions of a usual kind. They start with caution or reprimand, move to undertakings and training requirements, then to fine, imposition of conditions and finally, suspension, cancellation and disqualifications.

1. The Tribunal took the view that the disqualification powers at s 192(1)(h) and (i) were linked to grounds (d) and (e), respectively, of s 191.

1. The law is clear that a voluntary bankruptcy which is not excused only affects eligibility for a licence. The person remains eligible for a certificate to operate as a salesperson (s 16(1A)). The administrator's case against the respondent was not confined to that point. The administrator referred to seven transactions involving the trust account. The Tribunal upheld the administrator's findings in relation to all of them. The main point of disagreement to which we return at the end of these reasons concerned whether the $475,000 transaction involved criminal offences for which he might be prosecuted.

1. The administrator submits that the imposition of a general order of disqualification under s 192(1)(h) is not limited to one or other of the statutory grounds for disqualification. Nor can an order under s 192(1)(h) be restricted to disqualification from holding a licence (unless there is an express provision to that effect, as applies to voluntary bankruptcy).

1. In our view, this submission is correct.

1. Disqualification in our view carries the connotation of removal entirely from the area to which the qualifications relate. The word 'disqualify' in its usual meaning refers to outright exclusion from an event, activity or field. So for example the primary meanings given in the Macquarie Dictionary (4th ed. 2005) are:

' disqualify . 1. To deprive of qualification or fitness; render unfit; incapacitate. 2. to deprive of legal or other rights or privileges; to pronounce unqualified.'

1. These primary meanings bring that point out, especially the second meaning under heading 2 ('to pronounce unqualified').

1. The scheme of s 192(1) supports this view. In our view, the expression used in s 192(1)(h) 'disqualified for the purposes of the Act ' (emphasis added) is intended to be an all-encompassing expression.

1. 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.

1. 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.

1. 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:'.

1. 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.)

1. We uphold the appeal in relation to Question 1. In our view the Tribunal erred in seeking to give an effect to an order under s 192(1)(h) which confined its scope to licences.

1. Once an order is made under s 192(1)(h) it is difficult to see what if any work is left to be done by an order under s 192(1)(i). If a person is excluded from the industry for all purposes, then, in principle, they cannot be involved in the direction, management or conduct of a business. The administrator explained at hearing that this additional power was useful for cases where a disqualified person sought through extra-legal arrangements to continue to direct, manage or conduct a business. It is backed by an offence provision (see further below). It is also theoretically conceivable that a disciplinary case might arise where there is no disqualification order under s 192(1)(h) but only a 'direction, management and conduct' order under s 192(1)(i).

1. Questions 2 and 3 raise the issue of whether the words 'direction, management or conduct of the business of a licensee' form a single, composite expression or are open to be parsed. Is it permissible for the Tribunal to make an order under s 192(1)(i) which excludes the word 'conduct' from the expression 'direction, management or conduct'? This question has not arisen in previous agent discipline cases in the Tribunal. The words 'direction' and 'management' in our view go to the same area - leadership in the overall conduct of the business, and such matters as the making of ultimate decisions as to areas of specialisation, business and marketing strategies, recruitment, management of accounts, supervision of staff. 'Management' has a firmer connotation of involvement in an activity than 'direction'. A person who 'directs' a business may not have as much day to day involvement as a 'manager' of the business. The third word used in s 192(1)(i), 'conduct', has a more sweeping usual meaning. On its face it has a wider connotation than 'direction' or 'management'.

1. The phrase 'direction, management or conduct', is used three times in the Act - in the disciplinary grounds (s 191), in the disciplinary power under notice and in the related offence provision, s 202. The offence is expressed as:

202 Failure to comply with disqualification from involvement in business

A person who is disqualified under this Part from being involved in the direction, management or conduct of the business of a licensee must not act contrary to the disqualification.

Maximum penalty:

(a) 200 penalty units in the case of a corporation, or

(b) 100 penalty units in any other case.

1. The heading refers to 'involvement in business' and the words 'contrary to the disqualification' are indefinite in their scope. So there must be some doubt as to the precise circumstances to which this provision would apply.

1. In our opinion, the word 'conduct' is used in the three provisions to mean more than having a non-directive administrative role in the affairs of the business. It takes its colour from the words 'direction' and 'management'.

1. In our view, as submitted by the administrator, the phrase is to be seen as a composite one, using three different terms to describe roles in relation to the carrying out of the business that belong to a senior or ultimate decision making level. When used in the context of a disqualification power it is not meant to pick up people who have a subordinate role and work with little discretion and subject to direction.

1. We note that ground (d) refers as a ground for disqualification the fact that a person is a 'disqualified person'. At this point, in our opinion, the term is being used to refer back to the disabling factors that render a person disqualified set out in s 16. It does not confine the scope of the disciplinary declaration that can be made under s 192(1)(h). The disciplinary declaration could have as its only basis the possession of a disabling factor. But equally it could be made by reference to a pattern of repeated violations or in response to a grave violation of standards. The administrator's case included reference to the voluntary bankruptcy but it did not stop there. The Tribunal found the administrator's wider case made out in most respects.

1. In our view the power to make orders of disqualification under s 192(1)(h) is not confined by reference to ground (d), nor is the power under s 191(1)(i) confined by reference to (e).

1. Though, it would be often follow that a person found 'not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee' would be the subject of a parallel disqualification order under s 192(1)(h), in our view such a finding does not preclude the administrator from using another sanction that has the effect of excluding the person from the industry, the obvious alternative being cancellation (s 192(1)(g)).

1. As the administrator's submissions note, s 192 lists disciplinary actions without making any express connection to the grounds. An administrator would be deprived of flexibility, and a respondent of the ability to make countervailing submissions for a lesser penalty, if a tight link was drawn between grounds dealing with particular circumstances and disciplinary actions which refer to those circumstances, or might be seen in that way.

1. We do not agree with the Tribunal's view, therefore, that there is a strict link between ground (d) of s 191 and the action allowed by order (h); or between ground (e) and action (i), though a link would often be made.

1. We uphold the appeal in respect of Questions 2 and 3.

1. The appeal is allowed in respect of the questions of law.

Application for Leave to Extend to the Merits

1. We have an application to give leave to extend to the merits. We are of the view that the case would be better remitted for reconsideration at first instance.

1. However, we will deal with some of the issues relating to the merits, in an attempt to assist the final disposal of the case.

1. Whether there were criminal offences : The administrator questioned in the merits part of its appeal, the way the Tribunal had put to one side the administrator's conclusions that the conduct surrounding the $475,000 transaction involved two criminal offences. We will briefly refer to the circumstances.

1. The withdrawal occurred on 31 May 2007. The respondent stated to the administrator and to the Tribunal that he drew a trust account cheque for the deposit in the belief that the trust account was in funds for the amount. His explanation for his belief that the account was in funds was that he had received a cheque for $475,000 some time before from an acquaintance, had put it in his shirt pocket, and had thought he had banked it to the trust account. The respondent also stated that when he discovered the account was not in funds for the purpose, he reimbursed the account for the amount in two tranches - from his own funds within a few days in the sum of $78,000, and by way of a personal loan for the balance on 5 July 2007.

1. The administrator's delegate did not accept the explanation that he had acted innocently under a mistaken belief. She concluded that he had behaved fraudulently referring, in particular, to the raising of a false trust account receipt for the amount signed by his co-director and the intended purchaser, his wife. In the delegate's opinion, the conduct constituted the offence under s 211 of the Act of fraudulent conversion of trust account monies, and the offence under the Crimes Act 1900 , s 300 of creating a false instrument.

1. The Tribunal disbelieved the respondent's account that he had been mistaken as to the presence of the deposit amount in the trust account.

1. The Tribunal then did not give any reasons as to why it disagreed with the administrator's opinion that the raising of a false trust account receipt drawn on a client's account to document the transaction was not significant evidence of a fraudulent mind and connivance. The Tribunal should have explained why the administrator's construction of the respondent's conduct should not be adopted. There was no adequate explanation given as to why the conduct did not constitute conversion or the use of a false instrument. Any finding on matters of this kind must be reached with care, but the administrator is allowed to form an opinion in relation to possible criminal offences under ground (a) of s 191.

1. Review of Disciplinary Orders : The real issue in this case has been whether the respondent should be allowed to remain in the industry and restricted to work at certificate level perhaps with conditions restricting his access to trust accounts, as has in fact been allowed by the administrator under the Tribunal stay orders.

1. In this case the Tribunal plainly considered that the administrator's orders were too severe. It sought to achieve a lesser penalty by re-crafting the scope and duration of the powers of disqualification. It was open to it to have looked to use the other disciplinary powers. The Tribunal's authority under s 63 of the ADT Act to make the correct and preferable order does not prelude it from substituting different and lesser disciplinary orders such as cancellation of licence and grant of a certificate subject to conditions.

The Administrator's Disciplinary Actions

1. The way this case has unfolded has not been assisted by the administrator's apparent approach to the determination of the appropriate disciplinary order after making the findings as to guilt. It is not unusual in more complex disciplinary settings for these two stages to be separated.

1. The administrator's reasons were extensive in their description of the conduct of concern, and in their assessment of the respondent's explanations in mitigation. But the administrator's reasons only give the most cursory explanation for the orders chosen and there are no references to any opportunity being given to the respondent to make submissions in that regard. The reasons only gave a two sentence explanation as to why disqualification was the preferred disciplinary action, and none for the length of time specified. (See administrator's bundle, p 218.)

1. At the least, the reasons should, we think, have given some explanation as to the length of time of the disbarment especially in a case involving an older person who has spent most of his work life in the real estate industry, and for whom a disqualification for ten years might be seen as offering no real prospect of ever being able to return to the industry.

1. It may be that the need for protection of the public and other goals such as deterrence warranted an order of such duration but there is no discussion of the matter in the administrator's reasons.

Further Conduct of the Matter

1. In our view the matter should be remitted to the Tribunal differently constituted for reconsideration. The hearing should be able to proceed by reference to the transcript of the previous hearing, the administrator's material and any additional evidence or submissions as agreed.

Order

1. Appeal on questions of law allowed.

2. Leave to extend to merits refused.

3. Review application remitted to Tribunal differently constituted for reconsideration.

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Decision last updated: 22 December 2011