Douglas and Van May (WA) Pty Ltd & Anor
[2008] WASAT 23
•6 FEBRUARY 2008
| JURISDICTION | : | STATE ADMINISTRATIVE TRIBUNAL |
| STREAM | : VOCATIONAL REGULATION | ||
| ACT |
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| CITATION |
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| MEMBER |
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| HEARD |
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| DELIVERED |
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| FILE NO/S |
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| BETWEEN | : OLIVER GEORGE DOUGLAS |
Applicant
AND
VAN MAY (WA) PTY LTD
First Respondent
COMMISSIONER OF FAIR TRADING
Second Respondent
Catchwords:
Credit (Administration Act) 1984 - Application for review by objector to grant of credit provider's licence - Whether body corporate likely to carry on business honestly and fairly - Whether director of first respondent not of good reputation and character or in any way would not be a fit and proper person to be the holder of a licence if the director applied for the licence personally
[2008] WASAT 23
Legislation:
| Consumer Credit Code (WA), s 66 | Bills of Exchange Act 1909 (WA), s 9(1) s 32(7)(a) |
| Result: | |
| Application granted Decision under review set aside | |
| Category: B | |
| Representation: | |
| Counsel: |
| Applicant | : | Mr B Taylor |
| First Respondent | : | Mr DJ Pratt |
| Second Respondent | : | Mr AR Beech SC |
Solicitors:
| Applicant | : | Taylor Smart |
| First Respondent | : | Jackson McDonald |
| Second Respondent | : | Stephen Simpson |
Case(s) referred to in decision(s):
Briginshaw v Briginshaw (1938) 60 CLR 336
Cambridge Building Code Pty Ltd v The Builders' Registration Board of
Western Australia [2000] WADC 44
Equity Alliance Pty Ltd v Commissioner for Police, VR 163 of 2005
Hughes and Vale Pty Ltd v NSW (No 2) (1955) 93 CLR 127
Maxwell v Dixon [1965] WAR 167
Story v National Companies and Securities Commission (1988) 13 NSWLR 661
[2008] WASAT 23
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
1 On 16 May 2005, the second respondent, the Commissioner of Fair
Trading, granted the first respondent, Van May Pty Ltd, a credit provider's licence against the objection of the applicant, Oliver George Douglas.
2 The applicant applied for a review of the decision. By reason of
non-compliance with the Tribunal's directions, the response of the first respondent was eventually struck out. The hearing therefore proceeded on an unopposed basis.
3 The applicant put forward a number of bases for contending that the
application for a credit provider's licence by the first respondent should have been refused, and that, on review, remained the correct and preferable decision. The allegations made included fraudulent conduct in the treatment of payments from customers, the manufacturing of an email communication for use in legal proceedings, the provision of a loan without a credit provider's licence, as well as breaches of the Debt Collectors Licensing Act 1964 (WA) and of a violence restraining order by Mr MacDonald, a director of the first respondent.
4 The Tribunal found that there had been no intent to deceive on the
part of Mr and Mrs MacDonald in the manner in which they had dealt with payments from debtors and that the allegations of fraudulent conduct were not made out. Although the Tribunal found that a loan had been granted to a customer at a time when neither Mr and Mrs MacDonald nor Van May Pty Ltd had a credit provider's licence, there was no dishonesty evident or any conduct demonstrated which would preclude the grant of a credit provider's licence. The Tribunal also concluded that no breach of the Debt Collectors Licensing Act 1964 (WA) had been established, nor had sufficient evidence been placed before the Tribunal to enable it to conclude that it appeared that the first respondent did not have, or was not likely to continue to have, sufficient financial resources to enable it to carry on business.
5 The Tribunal considered and rejected submissions that the breaches
of a violence restraining order granted in favour of Mrs MacDonald against Mr MacDonald could be relied upon to indicate the likelihood of how a person would conduct a business. The Tribunal was not persuaded that there was sufficient evidence on which to form an adverse view of Mr Macdonald's explanation of how the breaches occurred, nor that the failure to disclose three spent convictions reflected adversely on him. The
[2008] WASAT 23
Tribunal observed that a question set out in the second respondent's application for renewal of the licence was required by s 27 of the Spent Convictions Act 1988 (WA) to be taken as not relating to a spent conviction. In any event, the Tribunal considered it was not appropriate to have regard to allegations based on breaches of the violence restraining order, as those matters had not been raised and the first respondent had not had an opportunity to deal with them. The Tribunal noted that s 12(5) of the Credit (Administration) Act 1984 (WA) specifically provided that an application for a licence should not be refused on a specified ground unless the Commissioner had informed the applicant of the ground and had afforded the applicant an opportunity to make submissions and adduce evidence.
6 After analysing the evidence in relation to the allegations that an
email communication had been manufactured, and applying the Briginshaw v Briginshaw (1938) 60 CLR 336 principles, the Tribunal concluded that Mr MacDonald had manufactured the email communication and had provided it to the State Solicitor for use in proceedings to discredit the applicant. The Tribunal concluded that, as a result of such conduct, s 12(4)(d) and s 12(4)(h) of the Credit (Administration) Act 1984 (WA) applied in that the first respondent is not likely to carry on the business of a credit provider honestly and fairly, and Mr MacDonald, as a director of the first respondent, is not of good reputation or character, nor a fit and proper person to be the holder of such a licence if he were to apply for the licence personally. Consequently, the Tribunal granted the application, set aside the decision under review and substituted a decision that the application for a credit provider's licence be refused. As the licence has since been renewed, the Tribunal issued an order that the original credit provider's licence be returned to the second respondent within 14 days of the date of service of the Tribunal's order.
The proceedings and background
7 The applicant applies under s 24 of the Credit (Administration) Act 1984 (WA) (C(A) Act) for a review of a decision made by the delegate for the Commissioner for Fair Trading (Commissioner) on 16 May 2005 granting Van May (WA) Pty Ltd (Van May) a credit provider's licence.
8 The then directors of Van May, Malcolm MacDonald and
Susan Gay MacDonald, entered into a franchise agreement by way of deed with the applicant, Interim Advance Corporation Pty Ltd (Interim Advance), on or about 9 August 2003, pursuant to which the MacDonalds
[2008] WASAT 23
operated the franchise business under the name "Aussie Cash Northam". As reflected in that deed, Interim Advance is the owner of a franchise business of short-term money lending under the trade name "Aussie Cash" and the MacDonalds wished to obtain the benefits of the knowledge, expertise and goodwill of the franchise business and demand for its products and services.
9 Van May asserts that the franchise agreement was terminated by the
MacDonalds' acceptance of Interim Advance's repudiation of the agreement as communicated by letter from their solicitors dated 11 August 2004. Interim Advance asserts that the purported termination is wrongful and amounts to a repudiation by the MacDonalds' obligations under the franchise agreement, and by letter dated 30 August 2004 from its solicitors, Interim Advance communicated its election to accept the repudiation and bring the franchise agreement to an end, save and except for obligations surviving termination. There is other litigation between the parties which may ultimately determine which purported termination of the franchise agreement is valid.
10 Prior to the termination of the franchise agreement, on either version,
the MacDonalds registered a business name "Rapid Cash" at the same address from which it conducted the "Aussie Cash Northam" business at Unit 4, 187 Fitzgerald Street, Northam, Western Australia. The application for the grant of a credit provider's licence was made only on 29 March 2005. It appears that subsequent to termination of the franchise agreement, the MacDonalds had operated as proprietors of "Rapid Cash", but that on 20 September 2004, Van May became the registered proprietor. This information is obtained from the findings of the Magistrate's Court in proceedings between Van May and Nicole Michelle Griffiths matter no 175/04 (exhibit 9). It appears that the MacDonalds, based on the method of operation of the "Aussie Cash" franchise, were of the view that a credit provider's licence was not required. On or about 10 March 2005, the Department of Consumer and Employment Protection (the Department) informed the applicant that it considered that the method of operation as devised by Interim Advance, might constitute a loan for the purposes of the C(A) Act, and if so, would require a credit provider's licence. The MacDonalds cooperated with the Department and ceased operating the business on 10 March 2005 pending resolution of whether a credit provider's licence was required. The MacDonalds were then informed by the Department that a licence was necessary, and they then caused an application for the licence to be lodged immediately in the name of Van May, a company of which they were then both directors. As
[2008] WASAT 23
at the date of hearing in this matter, Mr MacDonald is the sole director of
Van May.11 Following determination of the franchise agreement, the parties
became engaged in a series of litigation proceedings, and the relationship between the applicant (Mr Douglas) and Mr MacDonald in particular became extremely acrimonious. Reference is made to the legal proceedings which had been commenced up to the date of consideration of the licence application in the statement of reasons for decisions furnished by the Commissioner (applicant's book of documents (ABOD) 191). Further details of that litigation are also provided in a letter from Van May's and the MacDonalds' solicitors dated 2 May 2005 (ABOD 114).
12 This proceeding became protracted because of interlocutory issues
between the parties and, even after they were resolved, because all parties, including the Commissioner, were of the view that the proceeding could not be dealt with fairly until certain appeal proceedings before the District Court were resolved. It subsequently emerged that the appeal proceedings had stagnated because of a failure on the part of either Van May or Mr MacDonald to provide security for costs which had been ordered. Thereafter, further delay occurred pending consideration by Mr Douglas as to whether bankruptcy proceedings could be commenced against Mr and Mrs MacDonald. That course was not pursued, and ultimately, on 1 February 2007, the Tribunal directed that the matter be adjourned to a directions hearing on 15 March 2007, when, if there was no progress towards the hearing of the District Court appeal, the matter might be listed for final hearing. At the further directions hearing, complaint was raised on behalf of Mr Douglas that Van May had not filed and served any witness statements in compliance with an earlier directions order made on 1 September 2005. Accordingly, directions were made for such statements to be filed on or before 15 May 2007. Van May failed to file any witness statements, and finally on 14 June 2007, the Tribunal ordered that unless Van May filed and served witness statements on or before 16 July 2007, the response might be struck out.
13 No witness statements were filed by Van May. At a further
directions hearing on 2 August 2007, the Tribunal was informed by Mr MacDonald that he and/or Van May could not fund the ongoing litigation between the parties and would not be filing witness statements. Van May would not consent to the application being granted, and required that Mr Douglas satisfy the Tribunal that the application should be granted, although Mr MacDonald submitted that upon a proper
[2008] WASAT 23
consideration of the application it should be dismissed. The Tribunal accordingly struck out Van May's response to the application and set the matter down for final hearing on 4 September 2007. A hearing occurred on that day, at which evidence was taken from Mr Douglas, supplementing the witness statement which had earlier been filed by him, and evidence was also taken from a witness, Ms Nicole Rankin (formerly Griffiths), in support of Mr Douglas. Mr MacDonald was in attendance during the hearing but took no part in it.
14 Unfortunately, due to a convergence of errors, the matter was listed
before Senior Member Raymond sitting alone. Properly, the matter, concerning as it does, a decision of a vocational regulatory body, within the definition of that term as set out in s 3 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) and the C(A) Act, under a vocational act as referred to in that definition, it was necessary for the matter to be dealt with by a panel of three persons in accordance with s 11(4) of the SAT Act. Consequently, the matter was listed for a further directions hearing, and on 7 December 2007, an order was made that the matter be determined on the documents by the Tribunal once reconstituted under s 11(8) of the SAT Act, those documents to include a transcript of the hearing on 4 September 2007. Pursuant to that section, the President of the Tribunal reconstituted the Tribunal to consist of: Senior Member C Raymond, Senior Sessional Member M Anderson, an accountant, and Sessional Member H Beyer, a finance broker.
The issues for determination
15 The parties filed statements of issues, facts and contentions in order
to define the matters in issue. No account has been taken of the statement of issues, facts and contentions filed on behalf of Van May, but the statements filed on behalf of Mr Douglas and the Commissioner effectively ensured that the substantial merits of the dispute are raised for determination so that the Tribunal can arrive at the correct and preferable decision upon the review as required by s 27 of the SAT Act.
16 The statement filed on behalf of Mr Douglas, which, by leave, was
subsequently amended, raised numerous issues relevant to a review dependent on error of fact or law being demonstrated, as opposed to a merits review by way of a hearing de novo. Consequently, it was common cause at the hearing, and as reflected in the transcript of the proceedings, that the issues for determination were limited to those relevant to a merits review. Based on Mr Douglas' statement of issues, facts and contentions, and the submissions of counsel for Mr Douglas, in
[2008] WASAT 23
terms of which one ground was abandoned and a new ground raised, the
following issues fall to be determined:1) Whether Van May and Mr and Mrs MacDonald, through Van May, fraudulently debited money from the accounts of a significant number of customers of the former Northam business, including Ms Rankin, from the period on or about 25 June 2004 to 11 August 2004, to the benefit of Van May under direct debit authorities conferred in favour of Interim Advance;
2) Whether Mr MacDonald, a director of Van May, manufactured an email communication for the purpose of being tendered in other named proceedings in the Tribunal and being relied on as evidence;
3) Whether Mr and Mrs MacDonald and Van May have, in breach of the C(A) Act, provided a loan to Ms Rankin without a credit provider's licence;
4) Whether Mr MacDonald and Van May, in breach of the Debt Collectors Licensing Act 1964 (WA), acted to collect debts in the name of Van May when the debts were owed to Mr and Mrs MacDonald;
5) Whether Van May did not have (as at the date of the decision or any time since), and is not likely to have, sufficient financial resources to enable it to carry on business pursuant to any credit provider's licence;
6) The effect of breaches by Mr McDonald of a violence restraining order, and/or the failure to make a full disclosure of those breaches to the Commissioner; and
7) Whether, as a result of any of the above matters, the correct and preferable decision is that the application for a credit provider's licence should be refused.
The basis of review
17 As already pointed out, s 27 of the SAT Act requires that the review
be by way of a hearing de novo, and that the purpose of the review is to produce the correct and preferable decision, at the time of the decision upon the review. Further, the review is not confined to matters that were
[2008] WASAT 23
before the decision-maker but may involve the consideration of new
material whether or not it existed at the time the decision was made.18 By virtue of s 9(a) read with s 32(7)(a) of the SAT Act, the Tribunal
is obliged to review the decision, fairly and according to the substantial merits of the case, and must ensure that all relevant material is disclosed to the Tribunal to enable it to determine all of the relevant facts in issue. We do not have the benefit of any evidence from Van May because of their decision not to file any witness statements. We must act on all other evidence which has been put before us, which includes all of the documents relevant to the original application which were tendered as annexures to the witness statements of Mr Robert Bruce Allen dated 21 November 2005 and 25 January 2006 (exhibits 1 and 2). Mr Allen is the licensing coordinator of the finance and valuation industries branch of the Department of Consumer and Employment Protection, with the responsibility for coordinating applications for a range of licences, including credit provider's licences. The Tribunal also has before it the witness statements of Mr Douglas and Ms Rankin, to which reference was made earlier, both of which statements were supplemented by oral evidence at the hearing.
19 For the sake of brevity, we shall refer to the relevant evidence in the
context of considering the specific issues which fall to be determined. It is generally not necessary to deal with the evidence in great detail because there is no conflicting evidence which must be assessed.
20 The jurisdiction of SAT to review a decision under the C(A) Act is
bestowed by s 24 of that Act which provides that a person aggrieved by a reviewable decision may apply to SAT for a review. A reviewable decision is defined to mean, relevantly, a decision under s 12 to grant or refuse an application for a licence.
21 Accordingly, the Tribunal, on review, must apply the same criteria
for the grant or refusal of the licence as must be applied by the Commissioner or his delegate in making the original decision. Section 12 of the C(A) Act provides as follows:
"(1) Unless subsection (2) or (4) requires it to be refused, the Commissioner shall grant an application for a licence as soon as practicable after the expiration of the period allowed by or under section 11(1) for the lodging of an objection to the granting of an application.
[2008] WASAT 23
(2)
An application for a licence made by a natural person shall be refused if it appears to the Commissioner that the person -
(a) has not attained the age of 18 years; (b) is disqualified from holding a licence; (c) is an undischarged bankrupt; (d)
does not have, or is not likely to continue to have, sufficient financial resources to enable the person to carry on business pursuant to the authority that would be conferred by the licence if it were granted;
(e)
is not a person likely to carry on such a business honestly and fairly;
(f)
does not have sufficient expertise to enable the person to carry on such a business; or
(g)
is in any other way not a fit and proper person to be the holder of a licence.
(3)
Without affecting the generality of subsection (2)(g), the Commissioner may, in determining whether an applicant is not a fit and proper person to be the holder of a licence, have regard (if such be the case) to the fact that the applicant -
(a)
has, during the period of 10 years that last preceded the making of the application, been convicted of, or served any part of a term of imprisonment for, an offence in Western Australia or elsewhere involving fraud or dishonesty;
(b)
was, at the time of the making of the application, bound in relation to such an offence by a recognisance; or
(c)
had, at the time of the making of the application, a charge pending against the applicant in relation to such an offence.
[2008] WASAT 23
(4) An application for a licence made by a body corporate
shall be refused if it appears to the Commissioner that -
(a)
a person concerned in the management of the body corporate has not attained the age of 18 years;
(b)
the body corporate is disqualified from holding a licence;
(c)
the body corporate does not have, or is not likely to continue to have, sufficient financial resources to enable it to carry on business pursuant to the authority that would be conferred by the licence if it were granted;
(d)
the body corporate is not likely to carry on such a business honestly and fairly;
(e)
the officers of the body corporate are such that it would not have sufficient expertise to enable it to carry on such a business;
(f)
the reputation of the body corporate is such that it would not be a fit and proper person to be the holder of a licence;
(g)
an officer of the body corporate is disqualified from being an officer of a body corporate that is the holder of a licence;
(h)
a director of, or a person concerned in the management of, the body corporate is not of good reputation or character or in any other way would not be a fit and proper person to be the holder of a licence if the director or person were to apply for the licence personally; or
(i)
any person other than an officer of the body corporate who, in the opinion of the Commissioner, appears to have control, or substantial control, of the body corporate is not of good reputation and character or is not likely to exercise that control honestly and fairly.
[2008] WASAT 23
(5) An application for a licence shall not be refused on a ground specified in subsection (2)(d) to (g) or (4)(c) to (i) unless the Commissioner -
(a) has informed the applicant of the ground; and (b) has afforded the applicant and any person who, in accordance with section 11, has lodged an objection on that ground, an opportunity to make submissions and adduce evidence. (6) Where an application for a licence is refused, the Commissioner shall forthwith, by notice in writing, inform the applicant and each objector (if any) to the granting of the application of the refusal and of the ground on which the refusal is based and inform the applicant of the right to apply to the State Administrative Tribunal for a review of the refusal, and the Commissioner shall, as soon as practicable, refund to the applicant so much of the application fee as is appropriate to be refunded.
(7)
Where an application for a licence in respect of which an objection has been lodged in accordance with section 11 is granted, the Commissioner shall forthwith, by notice in writing, inform the person who lodged the objection of the granting of the application and the right to apply to the State Administrative Tribunal for a review of the decision to grant the application.
(8) Where an application for a licence is granted -
(a)
the applicant shall be deemed to be the holder of the licence granted; and
(b)
the Commissioner shall forthwith, by notice in writing, inform the applicant of the granting of the application and the right to apply to the State Administrative Tribunal for a review of any condition or restriction imposed.
(9)
Notwithstanding anything in this section, the Commissioner may refrain from granting an application for a licence unless -
[2008] WASAT 23
(a) where the applicant is not a body corporate - the applicant; or (b) where the applicant is a body corporate - all of the directors and officers of the body corporate, or such of them as the Commissioner specifies or refers to, has or have attended personally on the Commissioner and satisfied the Commissioner as to such relevant matters referred to in this section as the Commissioner thinks appropriate."
Consideration of issues
1) Alleged fraudulent debiting of money
22 Paragraph 29.6 of Mr Douglas' statement of issues, facts and
contentions sets out the basis upon which it is said that the fraudulent debiting of money can be inferred. Evidence from Mr Douglas during the hearing also addressed this issue.
23 Mr Douglas testified that there was a noticeable drop in the amount
of monies being credited, through the National Australia Bank direct debit system, to Interim Advance's bank account from the bank accounts of customers of the Aussie Cash Northam business from about 24 June 2004. Further, the amount credited to Interim Advance's bank account between 25 June 2004 and 11 August 2004 was less than the monies due and payable by a significant number of customers of Aussie Cash Northam who had elected to use the National Australia Bank direct debit system. Further, that during this period not all of the customers of the former Aussie Cash Northam business had repaid in full the amounts which were due. Mr Douglas referred to a list which he had prepared from Interim Advance's records of the amounts that were due from customers of Aussie Cash Northam between 1 July 2004 and 10 August 2004. The drop off in direct debit payments to Interim Advance's bank from Aussie Cash Northam is also reflected in a graph prepared by Mr Douglas. These documents are at ABOD pages 265 and 274. A further schedule prepared by Mr Douglas (ABOD 246 and following) shows, during the period 1 July 2004 - 10 August 2004, the amounts actually processed "with Aussie Cash HO", which we take to be a reference to Interim Advance and amounts processed elsewhere "without authorities". Mr Douglas' case is that the diversion of funds amounts to fraudulent conduct on the part of
[2008] WASAT 23
Mr and Mrs MacDonald who were then the proprietors of Aussie Cash
Northam.24 It is appropriate to consider what Mr and Mrs MacDonald's
obligations were under the franchise agreement. Reference to clause
numbers below are to the clause numbers in the franchise agreement.25 Clause 4.18 deals with book-keeping, records, and reporting. It
provides that the franchisee will maintain an up-to-date book-keeping, accounting and record-keeping system "which will be as prescribed from time to time by the Franchisor". It further provides that the franchisee will furnish on the first working day of each week, gross sales figures for the previous week, and within 180 days following the end of the franchisee's financial year, a financial statement prepared by a certified practising accountant. Clause 4.19 deals with the franchisee's payments, and in relation to the manner of payments and interest, provides that payments must be made in the manner set out in the first schedule. The first schedule reflects that 20% of interest collected from a debtor must be paid on collection. Clause 6 provides that the franchisor's agent will have the right, at any time during normal business hours, to audit or cause to be audited the reports and financial statements that the franchisee is required to submit to the franchisor, as well as the franchisee's books and records.
26 In fact, the system followed by Aussie Cash Northam was different
to that contemplated by the franchise agreement. As appears from Mr Douglas' statement, a centralised accounting system was operated through the Aussie Cash head office using a Quickbooks Enterprise program. In addition, the procedures followed required that, although the MacDonalds took the risk of a loss in relation to monies advanced by them, the debtors were required to sign a direct debit authority in favour of Interim Advance. Consequently, all payments went into a bank account operated by Interim Advance. It was submitted for Mr Douglas that the procedures followed were required under the franchise agreement. Reference was made to cl 5.1 which provides that on each occasion that a customer or potential customer applies to the franchisees for a loan, the franchisees will take, process, and grant or deny such application strictly in accordance with the system and the standards as varied by the franchisor from time to time. The terms "system" and "standards" are defined terms under the franchise agreement. Without setting out the full definitions the "standards" means the methodology for the supply of the products under a market plan developed by the franchisor, and methods of operation and control and manuals covering business practices, policies,
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specifications, procedures and policies. The "system" means the
comprehensive retail sales and service system of the business.
We do not consider that cl 5.1 can be read in a way that strips cl 4.18 and cl 4.19 of any meaning. Clause 5.1 must be read as referring to the operation of the business in its interaction with clients rather than the internal management and accounting systems. Although the franchisor has a right to prescribe particular record-keeping systems, Mr Douglas referred to no evidence that any other system had been prescribed.
28 These findings do not preclude a conclusion being reached that the
MacDonalds acted fraudulently, if the purpose of changing the internal management system was to deceive Interim Advance as to the amount of payments which were due to it under the franchise agreement. However, a review of the correspondence between Mr MacDonald and Mr Douglas by email shows that, as early as 2 March 2004, Mr MacDonald was expressing concern over the expense of gaining access to the Quickbooks System (see OGD 34 annexed to the statement of Mr Douglas dated 17 November 2005).
29 In the exchange of emails, Mr Douglas endeavoured to justify the
centralised system for administrative reasons. At no time did Mr Douglas refer to any provision of the franchise agreement which obliged the MacDonalds to comply, nor did he attempt to prescribe any different accounting system. The debate ended on the basis that Mr Douglas requested Mr MacDonald to provide specifics of software and hardware "to make this work", which we understand is a reference to the separate accounting system advocated by Mr MacDonald.
30 On 21 June 2004, Mr MacDonald sent an email to Mr Douglas with a
letter attached specifying alleged deficiencies with the centralised system, asserting that the cost was unacceptable, and reflecting concern that persons other than the proprietors of the business could change the record of transactions. Although not clearly expressed, the letter refers to a possible breach of taxation legislation and trade practices legislation. The letter went on to stipulate how the problems would be resolved, and included advice that Aussie Cash Northam would supply and use its own computer server and would provide Interim Advance electronic access as well as "paper-based copies of all requested documents in 48 hours" (OGD 45).
31 The allegations made by Mr Douglas are serious and require the
application of a standard of proof as determined by the High Court in
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Briginshaw v Briginshaw (1938) 60 CLR 336 (Briginshaw). At pages
361 - 362, Dixon J said:"The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. … it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal."
32 In a case such as this where fraud is alleged, it is necessary that the
Tribunal be satisfied, by evidence which is sufficiently cogent, that the
Tribunal feels an actual persuasion that the allegation is made out.33 In this instance, we are particularly cautious because of evidence
which is before us that places in doubt the credibility of Mr Douglas. That evidence is summarised in a letter to which we have already referred from Van May and the MacDonalds' solicitors dated 2 May 2005 (ABOD 114) in which reference is made to a number of court proceedings in which there were adverse findings as to Mr Douglas' credibility. Those concerns, by reference to the same proceedings, are also referred to in the reasons for decision which were provided by the Commissioner.
34 For these reasons, we are not prepared to make any express finding
accepting the accuracy of the record of transactions in the period 1 July 2004 to 10 August 2004 which is dependent on Mr Douglas' analysis of accounting records. We do, however, accept, because of the advice given by Mr MacDonald on 21 June 2004 (OGD 45), that it is probable that shortly thereafter, he commenced to implement the resolution he proposed. We therefore find that as from 1 July 2004, direct debit payments which would have been made into the account of Interim Advance were channelled into an account or accounts operated by the MacDonalds. There is, however, no evidence that the MacDonalds introduced a separate accounting system and used a separate server at any
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time prior to the purported termination of the franchise agreement on 11 August 2004. Indeed, Mr Douglas' evidence, when asked as to the source of the information included in the schedules (and also reflected in the graph), stated:
"... we still have access to the system and the files so we're still posting to that system up until 10 August, and we were able to see that these payments were made by those customers via - according to the system that had been keyed in by Mr and Mrs MacDonald by direct debits. I subsequently found out that they had arranged a direct debit facility with the National Australia bank as Aussie Cash Northam, without reference to us, some time back in June 04. So they had arranged to do - be able to do - be able to debit their own direct debits themselves without disclosing that to us as franchisor, and that is the reason that these were processed through their own direct debit system with the National Australia bank so we would not know that these payments had been collected."
35 This is understood by us to mean that, although a system had been
established which would enable the MacDonalds to operate entirely independently, they did not do so until the purported termination of the franchise agreement on 11 August 2004.
36 That raises for consideration whether it can possibly be said that the
MacDonalds attempted to deceive Interim Advance as to the amounts to which it would be entitled to payment under the franchise agreement. There was nothing done to hide any transactions, all of which were recorded within the centralised accounting system. The contract provides for the amount of royalties which is payable. Mr Douglas stated that the royalties had not been paid, but that must be considered in the context of the dispute which was developing between the parties.
37 It is clear that the MacDonalds had set about registering the name
"Rapid Cash" so that they could operate entirely independently. They must have envisaged that a termination of the franchise agreement would occur. The subsequent litigation which has occurred includes proceedings commenced by the MacDonalds on 8 October 2004 in the District Court against Interim Advance and Mr Douglas seeking damages arising from the conduct of Interim Advance and Mr Douglas in relation to the franchise agreement. It is not unusual that a party involved in a dispute will withhold payments contractually due to another in circumstances where it is alleged that such other party is liable in damages to the first
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party. An allegation of fraud, in our view, conveys an intent to deceive, and at the very least, incorporates the notion of dishonesty: see the discussion in Cambridge Building Code Pty Ltd v The Builders' Registration Board of Western Australia [2000] WADC 44 at [37] and following. If the MacDonalds had intended to act dishonestly, or with an intention to deceive, it is most improbable that they would have continued to make entries into a common accounting system to which they knew Interim Advance had access. We are not satisfied that the allegations of fraudulent conduct are made out.
2) Fabrication of email
38 Mr Douglas testified that he is a director of a company, Equity
Alliance Pty Ltd (Equity Alliance), which applied for a debt collector's licence. The application was refused. It appears, from the letter already referred to from Van May's solicitors dated 2 May 2005 (ABOD 114), that the magistrate hearing the matter, Senior Magistrate Cockram, was not persuaded that Mr Douglas is a person of good character and a fit and proper person to be a licensee under the Debt Collectors' Licensing Act 1964 (WA) (DCL Act). The refusal to grant the licence is the subject of review proceedings before the State Administrative Tribunal in the matter of Equity Alliance Pty Ltd v Commissioner for Police, VR 163 of 2005. The proceedings have not been finalised, but it appears that, by approximately mid 2005, it was contemplated that there would be a final hearing of the matter. On 11 May 2005, the State Solicitor, who was representing the Commissioner, transmitted a facsimile letter (ABOD 203) to Equity Alliance's solicitors, to which was attached a page reflecting an email sent by Mr MacDonald on Monday 12 April 2004 at 8.32 pm and a replying email sent on the same day at 8.45 pm (ABOD 204). The covering facsimile advised:
"Please find enclosed an email that was recently provided to this Office. We may wish to use this document during the cross-examination of Mr Douglas and, if so, will prove and tender the document during the testimony of Mr MacDonald."
39 The accompanying letter went on to deal with arrangements for the
receipt by the State Solicitor of Equity Alliance's responsive witness statements. The emails at ABOD 204 are important and are therefore set out in full below.
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40 Mr Douglas testified that one of the issues being contended for by
the State Solicitor's Office was that he was operating a debt collection
operation without an appropriate debt collector's licence, and that he was
operating it for franchisees as third parties. He testified that the email
communications set out above (ABOD 204) never occurred. The allegation is that Mr MacDonald manufactured the communications for the purpose of the document being tendered in the stated review proceedings. The potential prejudice of the email communication is self-evident, because it would serve to establish that debt collection was not being carried out by the franchisees, but by Interim Advance.41 Mr Douglas further testified that, at the date on which the alleged
communications occurred, relations between the parties were cordial, and that was reflected in their email communications at that time. Mr Douglas annexed to his witness statement the email communications between the
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parties from July 2003 through to 21 June 2004, when OGD 45 was received - the email attaching the letter advising of the MacDonalds' intention to set up their own accounting system. Until the receipt of this last email, it is fair to characterise the tone of the communications as cordial. It is noted that there are no communications tendered between 13 April 2004 and 21 June 2004, but it is also noted that the letter of 21 June 2004 from Mr MacDonald does not refer to any other email communications and refers only to telephone conversations which took place on 13 May and 3 June 2004. There is, therefore, no reason to suggest that there might be other email communications which might be relevant.
42 The alleged email reply forming part of ABOD 204 from
Mr Douglas can certainly not be described as cordial. The tone is anything but friendly and concludes with a statement that the MacDonalds need to get their "act together", and implies very clearly that their performance was not good enough.
43 Apart from the general inconsistency based on the tone of the
document, Mr Douglas, in his statement, and his counsel by way of submissions, raise a number of other factors, which, it is asserted, point to the communications being manufactured. We set those factors out and consider them below.
1) The alleged timing of the email commences at exactly the same time as other communications concerning the subject "DDR A/C" which is a reference to daily direct debiting reports sent by franchisees to the franchisor, advising of any requests by clients not to debit instalments falling due on that date. At 8.32 pm, on 12 April 2004, an email was addressed by Mr MacDonald to Mr Douglas saying:
"Hi Oliver
I still have a Christine Jones on the latest report forward on 08/04/04 (Rocky Client) $116.67.
Any chance of a new report. Thanks Malcolm" (OGD 41)
On 12 April 2004 at 8.44 pm, Mr Douglas responded to
Mr MacDonald as follows:[2008] WASAT 23
"Hi Mal
I faxed you a new one over the weekend. It's on your office fax dd 9/4/04
Jones is no longer on your HO DDR Statement report - Just did a search.
Call me if you have any problems
Regards
Oliver"
The original message sent at 8.32 pm is printed below the email reply sent at 8.44 pm (OGD 42).
On 12 April 2004 at 8.52 pm, that is, only eight minutes after the last-mentioned email, Mr MacDonald responded to Mr Douglas as follows.
"What are you doing at work at this time of night. I brought the paperwork home on Sat and have not been down there sorry."
The original message received from Mr Douglas at 8.45 pm is printed immediately below, together with the initiating email sent at 8.32 pm (OGD 43).
On Tuesday 13 April 2004 at 5.08 am, Mr Douglas replied to Mr MacDonald's above email as follows.
"Hi Mal
Just your royalties at work!
Regards
Oliver"
Again, the email being replied to and the previous emails in the chain of communication are printed below the above reply (OGD 44).
In each of the above emails, the subject remains "re: DDR A/C". It is a matter of common knowledge that
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by clicking on "reply" when responding to an email, the system will automatically print out below the email to which the reply refers. Further, that a repetition of this process will result ultimately in the last email reflecting the full chain of communication between the correspondents. Clearly, that is what has occurred in the above documents.
It is apparent, therefore, that if the above exchange occurred, then the communications (ABOD 204) are not only generally inconsistent with the tone of other communications as found above, but are inconsistent with the tone of emails apparently sent at times which commence at precisely the same time, and then within minutes of the alleged sending of an email at 8.45 pm which was critical of the MacDonalds.
2) The subject of the alleged email communications (ABOD 204) is "Debit Collection". It is an unusual turn of phrase which was initiated by the author of the email purported to have been sent at 8.32 pm in relation to that subject. The content of that email also refers to a "debit" collection system and to no "debits" having been collected. It concludes to express a belief that it would be better if the "debits" were collected "by us".
The response on the subject of "Debit Collection" purportedly sent at 8.45 pm also refers in its content to "debit" collection. Mr Douglas commented on the use of that term; it was something that he noticed when the email was first shown to him in May 2005. Although not made explicitly clear in evidence, the implication is that it was noticed because it was unusual. We also note that it is not a term which Mr Douglas used in an earlier communication (OGD 24), dated 16 December 2003, concerning the format of a "collection letter". Mr Douglas responded to an email from Mr MacDonald, who had indicated that he liked the format of a new letter and would use it to replace the letter which he had placed "in Quicken" (presumably a reference to the common computer software used) and went on to state that he would be on leave for the next month and would be able to assist his wife. Mr Douglas' response was:
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"That's great Malcolm.
Keep going you're both doing very well!You are now beginning to move into the next phase of the development of the business which involves debt (underlining added) collection and repayment plans for those unable to meet existing commitments.
There is more Front End software coming for that.
All my best
Oliver"
3) The language used in the purported reply (ABOD 204) at 8.45 pm is, in itself, not of the same standard as that consistently used by Mr Douglas in his email communications. A comparison of the emails tendered, as referred to above, support this contention. Mr Douglas' emails are generally well-structured and written. Obvious spelling errors are not evident. While we do note that the chain of communication on 12 April 2004 and 13 April 2004 which Mr Douglas says occurred is not properly punctuated, this is also evident in other communications, for example, OGD 33. On the other hand, in the emails forming ABOD 204, the proper name "Van May" is not capitalised, and the nominative case pronoun "you" is used where a possessive pronoun "your" should have been used, the "e" is missing from the word "note" and the "s" is missing from "runs", both words being obviously intended.
Some of the above criticisms constitute a two-edged sword. They could apply equally if it was Mr Douglas fabricating the chain of communications on 12 April 2004 and 13 April 2004 on which he relies, and not vice versa. In that regard, the caution expressed above in relation to the acceptance of Mr Douglas' evidence applies equally to our consideration of this issue.
Mr Douglas also testified that he had made a complaint in about May 2005 to the police concerning the alleged
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fabricated emails and that his computer had been removed for investigation. He stated that he had recently been informed by the police that the examination of the computer had been completed and that the inquiry was now continuing. While we are not bound by the rules of evidence, we are not prepared to act on hearsay evidence of this nature from which we are obviously being asked to draw inferences of a most serious nature.
Mr Douglas also testified that he had printed out the properties of the email communication on which he relied. These appeared as part of OGD 51. Again, given the nature of the allegation made and the animosity between Mr Douglas and Mr MacDonald, we are not prepared to place any weight on the alleged properties of the email communication. These are matters in relation to which expert evidence should have been called, having regard to the serious nature of the allegations made.
There are, however, other factors which support Mr Douglas' version concerning the emails.
(i) Mr Douglas testified that, although communications between the parties had remained cordial until receipt of the email and attached letter dated 21 June 2004, he had by then become suspicious that the MacDonalds may have been in communication with a franchisee operating in Geraldton who was acting in a manner which caused him concern. He therefore had correspondence with the Geraldton franchisee vetted by his solicitors. After receipt of the 21 June 2004 email, he stated that he copied all communications which he had had with the MacDonalds and delivered them to his solicitors, being the same solicitors acting on record in these proceedings. If true, that evidence establishes that the April chain of communications on which Mr Douglas relies was in existence on the date on which all emails were provided to his solicitors. He testified that the date on which the emails were copied appears on the bottom right-hand corner of each email, and the vast bulk of those emails were, if that is correct, created on 4 July 2004 and 5 July 2004. Mr Douglas explained that he had the emails copied and delivered, because it was
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easier to do that in view of the number concerned. It is noted that the email of 21 June 2004 (OGD 45) appears only to have been copied on 9 May 2005, although there is nothing to indicate whether it may have been forwarded to the solicitors as a single document on or about 21 June 2004. As this point was not canvassed at the hearing, we attach no weight to this possible inconsistency.
(ii) Under cross-examination by counsel for the Commissioner, Mr Douglas referred, for the first time, to having provided copies of the emails to his lawyers well prior to him first sighting the email communications provided by the State Solicitor's Office under cover of the letter of 10 May 2005. He testified:
"I asked Mr Taylor to go and independently dig out the original email, which he did, which verified the fact that prior to May '05 that I had already given Mr Taylor a copy of the original email which bore no resemblance to the text, or no resemblance to that produced to me in the State Administrative Tribunal on or around 10 May. So that verified the fact that the original did exist, that it was in the possession of Talbot Olivier since April 2004, and that this new version was produced subsequent to that date, which I then asked Mr Taylor to verify the headings and confirm that my suspicions were correct." [T:44/45]
(iii) There is a duty on counsel not to mislead the Tribunal. Counsel could not have stood by and allowed that evidence to pass without either withdrawing from the case or ensuring that the true situation was made known to the Tribunal. In this case, experienced counsel representing Mr Douglas, and a partner in the firm of solicitors effectively affirmed that evidence on re-examination of Mr Douglas. On re-examination, the following evidence was led.
"You gave some evidence, Mr Douglas about these documents being in the possession of my
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firm - in fact mine. You talked about them being printed. I think you gave evidence that that occurred in April 2004? --- Yes.
Looking at the document, do you have any reason to doubt that?
--- Yes. If you look at the bottom right hand corner it's dated 5 July 2004. My computer puts that date there whenever I print out an email from the computer, so it would have been 5 July 2004 that I printed this and I would have handed it to Talbot Olivier with the bundle of documents on or shortly after that date."
(iv) The document ABOD 204 includes only the purported original messages, the latter of which was from Mr Douglas to Mr MacDonald. There must therefore have been a reply from Mr MacDonald which was the principal communication of which the previous messages formed part, and which the State Solicitor most probably did not have in his possession. We say that because the facsimile transmission imprint appears at the head of ABOD 204 showing that it was the document which was transmitted to the State Solicitor. An obvious question arises as to why only part of a chain of communication would have been provided. The document shows that it was transmitted by facsimile from the Rapid Cash facsimile number on 10 May 2005 and the covering letter from the State Solicitor's Office indicates that, if necessary, the document would be proved through the evidence of Mr MacDonald.
45 We therefore have a sufficient degree of comfort to enable us to
accept Mr Douglas' evidence, which shows that the communications (ABOD 204) were not included in the chain of communications provided to Talbot and Olivier, Interim Advance's and Mr Douglas' solicitors. Further, it is inconceivable that Mr Douglas could have known in May 2004 that there was any need to fabricate the chain of communications on which he relies and which he provided to his solicitors. There is no evidence to suggest that there was then any legal issue about the debt collection procedures being followed by the franchise businesses.
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46 Taking into account all of the above factors together, we feel that
degree of persuasion required by the Briginshaw principle to find that Mr MacDonald manufactured the document containing the emails comprised within ABOD page 204. We shall deal with the consequences of this finding below.
47 A matter not raised before us, which also calls for explanation, is
how Mr Douglas could have made any reference in April 2004 to Van May in the document ABOD 204. It appears Van May was not used prior to September 2004. However, as this question was not raised, we place no reliance on it.
3) Provision of loan to Ms Rankin without a credit provider's licence
48 Nicole Rankin (formerly Griffiths) gave evidence of her dealings
initially with Aussie Cash Northam, and subsequent dealings with Mrs MacDonald in or about July 2004. Ms Rankin also testified in relation to proceedings commenced against her by Van May which resulted in Magistrates' Court proceedings which were determined in her favour. A transcript of the oral reasons for decision were tendered and admitted as exhibit 9.
49 Monies were loaned to Ms Rankin in accordance with Aussie Cash
franchise standard procedures. Thereafter, some arrangements were made to vary the repayment program, and it was found that the MacDonalds, trading as Aussie Cash Northam, had not issued the notices advising of the change in arrangements as required by the contract terms (presumably in compliance with the Consumer Credit Code (WA) requirements). The learned magistrate found that the correct claimant should have been Mr and Mrs MacDonald trading as Rapid Cash, not Van May. In any event, because the learned magistrate was not satisfied that the change in arrangements had been entered into with the consent of Ms Rankin, the promissory note on which the transaction was based was held to be void pursuant to s 9(1) of the Bills of Exchange Act 1909 (WA). The court also found that the MacDonalds were not, at the material times, licensed under the C(A) Act.
50 In our view, this situation adds no more than particularity to the
general position which was known to the Commissioner at the time when the Commissioner informed Mr and Mrs MacDonald that they required a credit provider's licence. The MacDonalds received no specific training in the provisions of the C(A) Act when they entered into the franchise agreement, but they understood, based on the franchise operations, that
[2008] WASAT 23
the C(A) Act did not apply to them. As outlined in the Commissioner's reasons for decision in the original application, as soon as the MacDonald's were advised that they required a licence, they ceased trading and proceeded with the application for a licence. We do not consider that there is any dishonesty evident or any conduct demonstrated which would preclude the grant of a credit provider's licence in the relevant circumstances.
4) Breach of Debt Collectors Licensing Act
51 In essence, the evidence relied on is the same as in the previous
issue. That evidence establishes that Van May commenced proceedings against Ms Griffiths, when, in fact, the only dealings with Ms Griffiths were those on behalf of Mr and Mrs MacDonald firstly trading as Aussie Cash Northam, and subsequently trading as Rapid Cash. The summons against Ms Rankin was issued in the name of Van May on 9 September 2004.
52 All that the evidence of Ms Rankin establishes is that Van May
issued a summons for the recovery of an alleged debt owed to it. A debt
collector is defined under the DCL Act as a person:"whether or not he carries on any other business who on behalf of any other person and for or in expectation of any gain, fee or reward whatever, by whomsoever paid or payable and either on his own account or in conjunction with another, carries on the business of collecting requesting or demanding payment of debts or who advertises or notifies that he carries on that business."
53 There is no evidence to suggest that the requirements of this
definition are met. Van May commenced and conducted the proceedings
on the basis, erroneously, that the debt was due to it.54 In any event, even if it were the case that Van May acted in breach of
the relevant legislation, this all occurred prior to the MacDonalds taking steps to properly regularise their operations. They had continued in business after 11 August 2004 on the assumption that they could operate as they had done as a franchisee of Interim Advance. Any breach must be regarded as technical and not reflecting on the integrity of the MacDonalds at the time of making the application for registration under the C(A) Act, or the integrity of Mr MacDonald, as at the date of the review.
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5) Financial resources
55 It is alleged that Van May did not have, (as at the date of the decision
on review or at any time since) and is not likely to ever have, sufficient financial resources to enable it to carry on business pursuant to any credit provider's licence.
56 Section 9 of the C(A) Act specifies what information must be
included within the application for a credit provider's licence, including such matters as may be prescribed relating to the financial standing of the applicant (s 9(3)(e)). The Credit (Administration) Regulations 1985 (WA) do not prescribe what matters must be provided relating to the financial standing of the applicant. Nevertheless, subsection 9(2) of the C(A) Act provides that an application shall be in writing in a form approved by the Minister. The form provided for the purpose of Van May's application for a credit provider's licence, which commences at ABOD 8, provides for financial statements to be provided (par 6.1). Information was provided at ABOD 16 and by way of a number of annexures provided with the application which included projected incomes, bank account deposits and profit and loss statements from July 2003 - June 2004 and 1 July 2004 – 14 March 2005. The information provided was sufficient to persuade the Commissioner that he should grant the application, which he was obliged to do unless he concluded, amongst other things, that the body corporate does not have, or is not likely to continue to have, financial resources to enable it to carry on business pursuant to the authority that would be conferred by the licence if it were granted (see s 12(1) and s 12(4) of the C(A) Act). Van May has not put forward any further information relating to its financial capacity.
57 In any event, the legislation requires that the Commissioner, now the
Tribunal on review, must grant the application unless it appears that there is an issue about financial capacity in the manner expressed. On the face of it, once sufficient information has been provided to meet the requirements of any approved form (which, in the circumstances, we assume the form used to be), and unless that information, on its face, reflects that the applicant has insufficient financial resources, it must be incumbent on any party wishing to demonstrate that to be the case to put evidence before the Tribunal which can satisfy it on that question.
58 There is some additional information which has been provided
relevant to the MacDonalds' financial standing which can be gleaned from the bundle of emails annexed to the statement of Mr Douglas. It reflects the then existence of a property portfolio owned by the MacDonalds,
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although it appears that their equity was then limited to 21% of the value (OGD 4). No evidence has been provided to indicate the capital required to undertake a short-term money lending business, which is how the Aussie Cash franchise business was described and which is effectively the business which the MacDonalds continued in their own name and later as Van May, trading as Rapid Cash.
59 Mr Douglas did testify that he had been informed by the managing
agents of the landlord of the premises occupied by the MacDonalds and later Van May that the premises were vacated "during June" - presumably June 2007 - and that all fittings and fixtures, plant and equipment had been removed, and further that the rent was substantially in arrears. For the reasons already given, we approach evidence from Mr Douglas with caution. Mr Douglas has devoted considerable resources to the conduct of these proceedings, resulting in a number of interim applications for the provision of documents by third parties. It would have been a relevantly simple matter to call a witness from the managing agent to provide detailed evidence concerning the payment or non-payment of rental, and any reasons which might or might not exist for that situation. Mr Douglas also testified, and the email communications reflect, that he had not insisted upon immediate payment of a $50 000 franchise fee. The email communications also reflect Mr Douglas' offer to assist the MacDonalds in obtaining finance for the purchase of the franchise. It is surprising, therefore, that Mr Douglas did not give more detailed evidence as to the MacDonalds' financial situation.
60 We are conscious that the reason given by Mr MacDonald for not
filing witness statements and proceeding with his opposition to the application was because he could not afford the further costs of litigation. We note, of course, that the proceedings in relation to the licence application were one of only several proceedings in which the parties were involved. In the circumstances, the evidence before the Tribunal is far from satisfactory, and we consider it is insufficient for us to form a view that Van May does not have, or is not likely to continue to have, sufficient financial resources to enable it to carry on business pursuant to the authority that has been conferred by the licence granted by the Commissioner if the decision to grant the licence is affirmed on review.
6) Violence restraining order breaches
61 This issue was only raised shortly prior to the hearing when an
interlocutory application was made for the issue of a summons for the Western Australian Police to produce a history of criminal convictions in
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respect to Mr MacDonald. Mr MacDonald attended the hearing at which the application was heard and informed the Tribunal that he had provided full particulars of his breaches of the violence restraining order obtained against him by his wife to the Commissioner. The representative for the Commissioner acknowledged that those details had been provided and could be furnished to the applicant. The application was refused at that point, but the application was renewed and subsequently granted when it became apparent that the issue was not simply whether or not Mr MacDonald had been convicted, but also whether he had honestly disclosed the number of convictions.
62 The history of convictions provided by the Western Australian Police
was tendered at the hearing as exhibit 3. It reflects that there were six convictions for breach of the violence restraining order, three of which were spent convictions. The disclosure to the Commissioner, which was required in applying for the annual renewal of the licence, advised only that Mr MacDonald had been convicted of three breaches of the violence restraining order. Much was made in submissions of Mr MacDonald's attempt to minimise his blameworthiness in his explanation of the circumstances in which the breaches occurred. Those explanations are of a nature which suggests that he came within 50 metres of his wife in circumstances which were accidental and not intended on his part. If those circumstances were correct, it seems unlikely that a conviction would have occurred. The fact that a global fine of $1000 was imposed for the three breaches, which were determined on the same day, namely 2 April 2007, suggests that the court took a more serious view of the breaches.
63 We do not consider that the breaches form a basis for concluding that
Mr MacDonald is not a fit and proper person to be the holder of a credit provider's licence if he were to apply for the licence personally, or as a basis for finding that Van May is not likely to carry on the business honestly and fairly. The emotional stress involved in a matrimonial breakdown may cause an otherwise very normal person to act irrationally and unreasonably. Behaviour, in such circumstances, is not considered by the Tribunal to indicate the likelihood of how a person would conduct a business. The consideration of whether a person is fit and proper must be considered in the light of the subject matter of the legislation in which the expression appears. It is necessary to assess whether the three characteristics or requirements of honesty, knowledge and ability are present in the context of the vocation for which the licence is sought: see Maxwell v Dixon [1965] WAR 167; Hughes and Vale Pty Ltd v NSW (No 2) (1955) 93 CLR 127 (Hughes) at [156] - [157]. We do not consider
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that the breaches disqualify Mr MacDonald from meeting the
requirements of being fit and proper for the purposes of the C(A) Act.64 The more significant issue is whether there has been dishonesty in
failing to disclose all the convictions, or in attempting to give exculpatory explanations, albeit that they were given under the heading of "mitigating circumstances". If Mr MacDonald had given evidence and had been available for cross-examination, there may have been a sufficient basis for the Tribunal to form a view that it appears that Mr MacDonald is not a fit and proper person to be holder of a licence if he were to apply personally. But, on the evidence before us, we are unable to come to that conclusion. We observe that three of the convictions were recorded as spent convictions and that under s 27 of the Spent Convictions Act 1988 (WA), the question set out in the renewal documentation asking if the applicant had been convicted of any offences must be taken as not relating to a spent conviction.
65 In any event, the allegations were not raised in the original
application or in Mr Douglas' statement of issues, facts and contentions at any time prior to the MacDonalds' response being struck out. The allegations raised in the hearing have never been put to Mr MacDonald and we therefore do not consider that it would be appropriate to make any adverse finding against Mr MacDonald based on the violence restraining order allegations. We observe that the Commissioner is bound not to refuse an application in such circumstances, under s 12(5) of the C(A) Act.
Correct and preferable decision
66 The application has failed on all grounds save for the second issue
discussed above, in which we have found that Mr MacDonald
manufactured the email communications concerned.67 The manufacturing of the emails is not something which could have
been done on the spur of the moment. It was a design which had to be carefully carried out, involving modification of the existing emails. Once that course had been followed, it was taken further by forwarding the manufactured emails to the State Solicitor. It was a pre-meditated course of conduct and the only purpose for doing so was to discredit Mr Douglas by the documents being used in legal proceedings.
68 Counsel for Mr Douglas relied upon s 12(4)(c), s 12(4)(d) and
s 12(4)(h) of the C(A) Act for submitting that the correct and preferable
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decision is that the application for a credit provider's licence should be
refused. The provision is to the following effect:
"(4) An application for a licence made by a body corporate
shall be refused if it appears to the Commissioner that -…
(c) the body corporate does not have, or is not likely to continue to have, sufficient financial resources to enable it to carry on business pursuant to the authority that would be conferred by the licence if it were granted; (d) the body corporate is not likely to carry on such a business honestly and fairly; …
(h) a director of, or person concerned in the management of, the body corporate is not of good reputation or character or in any way would not be a fit and proper person to be the holder of a licence if the director or person were to apply for the licence personally."
69 We have not made any findings upon which s 12(4)(c) of the
C(A) Act could apply so that the only consideration is whether the body corporate is not likely to carry on such a business honestly and fairly or whether Mr MacDonald, as a director of Van May, is not of good reputation or character or in any way would not be a fit and proper person to be the holder of a licence if the director or person were to apply for the licence personally.
70 If a natural person applies for a credit provider's licence, s 12(2) of
the C(A) Act sets out the criteria upon which an application must be refused. Those criteria include that the applicant is not a person likely to carry on such a business honestly and fairly, that the applicant does not have sufficient expertise to enable the person to carry on such a business, or is in any other way not a fit and proper person to be the holder of a licence.
71 The concept, therefore, of what is a fit and proper person is
expressed in a wide manner to include any basis on which the applicant
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might be adjudged to be not a fit and proper person, but is qualified by the expression "to be the holder of a licence". Accordingly, the consideration of whether an applicant is fit and proper must be considered in light of the subject matter of the legislation in which the expression appears as discussed above: see Hughes above. That decision requires that there be an assessment of the applicant's honesty, knowledge and ability in the context of the vocation for which the licence is sought.
72 Section 12(4)(d) of the C(A) Act adds the further concept that an
assessment must be made whether the body corporate is likely to carry out
the business honestly and fairly.73 The distinction between the "fit and proper" requirement as opposed to a requirement to be "efficient, honest and fair" was considered in Story v National Companies and Securities Commission (1988) 13 NSWLR 661. The court was there considering the requirements for the grant of a stockbroker's licence. The legislation had been amended to delete references to a fit and proper test, and to substitute therefore a requirement that the applicant be a person who was efficient, honest and fair in the performance of the duties of the holder of a broker's licence. Justice Young held that the phrase "efficiently, honestly and fairly" had to be read compendiously so that each word qualified the others. No difficulty was presented in relation to the concept of acting honestly and fairly. Justice Young expressed the view, at page 672:
"I do not think I need to dwell on the meaning of the word 'honestly' except to remark that it is significant that it is used in conjunction with the word 'fairly'. Those words tend to give the flavour of a person who not only is not dishonest, but also a person who is ethically sound, indeed, the sort of person reflected in the words of Psalm 15."
74 We consider that the effect of the additional requirements of acting
honestly and fairly is to lift the moral integrity requirement a degree higher than the requirement to be a fit and proper person to be the holder of a licence. The latter relates to the characteristics of the individual. To be fit and proper requires the criteria of honesty, knowledge and ability to be met. One can be honest but still insist on an unfair bargain, the terms of which are fully disclosed. The former relates to how the licensee will conduct business and requires fair conduct to be exhibited. For instance, can one be said to be acting fairly to insist upon an exorbitant interest rate, even if it is disclosed, when it is patently obvious that only an individual
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under extreme financial or other pressure would agree to such a rate? Certainly, it calls for the fair exercise of a discretion when there is a change of circumstances affecting a debtor, who may be obliged under s 66 of the Consumer Credit Code (WA) (Code) to apply for a change in the terms of the contract on the grounds of hardship. It may be that in some circumstances fairness would require that the parties agree to a variation in the terms of the agreement, under s 65 of the Code so that a short-term loan is converted to a longer term, but at a lower interest rate. The reference by Young J above to Psalm 15 may be particularly apt insofar as it includes "amongst those who may dwell in the House of the Lord" the man who:
"… has no slander on his tongue, who does his neighbour no
wrong and casts no slur on his fellow man …
who lends his money without usury."
75 On our findings, Mr MacDonald has acted in a deliberate manner to
falsify evidence and to provide it for use in proceedings to the prejudice of Mr Douglas. To act in this manner clearly does not constitute honest or fair conduct. We recognise that Mr MacDonald has been placed under significant pressure by the litigation which has ensued relating to the termination of the franchise and a range of related matters, but that can be no excuse for acting as we find he has done.
76 The dispute between the parties arises out of their business
relationship and the operation by the MacDonalds and Van May in the market as short-term money lenders. The conduct of Mr MacDonald is directly related to those activities in that it was clearly entered into as part of the ongoing war of attrition between the parties through litigation, aimed at advancing their respective business interests of operating in that market free of the influence of the other. The conduct reflects ruthlessness and a willingness to act dishonestly, which could result in the privileges granted to a person licensed to provide credit, particularly to the type of persons needing short-term money loans, being abused.
77 We consider that if it suited his interests, Mr MacDonald would be
prepared, as sole director of Van May, to cause the body corporate to act dishonestly and unfairly in the conduct of the business. It follows that it appears to us that Van May is not likely to carry on such a business honestly and fairly.
78 It further appears to us that Mr MacDonald is not a person of good
character and by reason of such conduct would not be a fit and proper
[2008] WASAT 23
person to be the holder of a credit provider's licence if he were to apply
personally.79 We accordingly find that s 12(4)(d) and s 12(4)(h) of the C(A) Act
apply, and that the correct and preferable decision is that the decision under review be set aside and be substituted by our decision that the application for a credit provider's licence be refused.
80 As the evidence establishes that the Credit Provider's Licence No CP
448 granted to Van May has been renewed, it is appropriate that we exercise our power under s 73 of the SAT Act to make an ancillary order that the original credit provider's licence be returned to the Commissioner.
| Order |
For the above reasons, we order as follows:
1. The decision under review, made on 16 May 2005, to grant the first respondent a credit provider's licence, being Credit Provider's Licence No CP 448, be set aside and there be substituted therefor a decision that the first respondent's application for a credit provider's licence be refused. 2. The first respondent is directed within 14 days of service of this order to return to the second respondent the original Credit Provider's Licence No CP 448.
I certify that this and the preceding [81] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR C RAYMOND, SENIOR MEMBER
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