Frugtniet and Australian Securities and Investments Commission
[2022] AATA 295
•22 February 2022
Frugtniet and Australian Securities and Investments Commission [2022] AATA 295 (22 February 2022)
Division:Taxation and Commercial Division
File Number(s): 2014/3912
Re: Rudy Frugtniet
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Deputy President Bernard J McCabe
Senior Member D O'DonovanDate: 22 February 2022
Place:Melbourne
That the decision under review is varied as follows:
Rudy Frugtniet is permanently prohibited from:
(a) Engaging in any credit activities;
(b) Controlling whether alone or in concert with one or more other entities (as defined in section 64A of the Corporations Act 2001) another person who engages in credit activities;
(c) Performing any function involved in engaging in credit activities (including as an officer (within the meaning of the Corporations Act 2001) manager, employee, contractor, or in some other capacity).
..........................................SGD............................
Deputy President Bernard J McCabe
CATCHWORDS
Banning order under National Consumer Credit Protection Act 2009 – whether ASIC has reason to believe that the applicant is not a fit and proper person to engage in credit activities – whether a banning order should be imposed – terms of the banning order that should be imposed – reliance on decisions of other tribunals to make findings – effect of amendment of relevant provisions after reviewable decision made – transitional provisions – varied decision.
LEGISLATION
Administrative Appeals Tribunal Act 1975
Commonwealth of Australia Constitution Act (The Constitution)
Corporations Act 2001
Legal Profession Act 2004 (Vic)
National Consumer Credit Protection Act 2009
Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures) Act 2020CASES
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Briginshaw v Briginshaw [1938] HCA 34
Callychurn v Australian Securities and Investments Commission [2019] AATA 4600
Frugtniet v Australian Securities and Investments Commission [2019] HCA 16
Frugtniet v Migration Agents Review Authority [2016] AATA 299
Frugtniet and Secretary Department of Social Services [2017] AATA 577
Frugtniet v Secretary Department of Social Services [2017] FCA 1227
Frugtniet and Tax Practitioners Board [2017] AATA 1393
Frugtniet and Tax Practitioners Board [2014] AATA 766
Frugtniet v Tax Practitioners Board [2015] FCA 1066
Frugtniet T-as Karina Travel Int v Travel Agents Licensing Authority (1995/32920) [1995] VICCAT 39
Ham and Tax Practitioners Board [2017] AATA 1642
Hughes and Vale Pty Ltd v State of New South Wales (1955) 93 CLR 127
Law Institute of Victoria Limited v Frugtniet (Legal Practice) [2011] VCAT 596
Pilnara Pty Ltd v Commissioner of Taxation [1999] FCA 945
Power v Hamond [2006] VSCA 25
Re Frugtniet and Secretary, Department of Family and Community Services (2004) 84 ALD 774
Re Pochi v Minister for Immigration and Ethnic Affairs [1979] AATA 64
Schroeder v Australian Securities and Investments Commission [2020] AATA 2453
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93
Thorpe and Commissioner of Taxation [2011] AATA 638
WA Pines v Bannerman 41 FLR 175SECONDARY MATERIALS
Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)
REASONS FOR DECISION
Deputy President Bernard J McCabe
Senior Member D O'Donovan17 February 2022
Mr Frugtniet (the applicant) has a long history of involvement with occupational regulators. He has come to the attention of the Tax Practitioner’s Board (TPB), the Migration Agents Review Authority (MARA), the Travel Agent’s Licensing Authority and the Law Institute of Victoria (LIV). He has been the subject of claims of dishonesty by Centrelink in matters which have come before the Administrative Appeals Tribunal (the AAT) and he has been banned from providing conveyancing services by the Victorian Business Licensing Authority. Findings of significant dishonesty have been made against him in many of those proceedings. For example, in AAT proceedings reviewing the decision to terminate the applicant’s registration as a tax agent, findings were made that the applicant had engaged in conduct which reflected poorly ‘on his insight, ability and honesty’. In proceedings brought by the LIV, he was found to have made misleading statements to a court and a barrister. In AAT proceedings concerning his registration as a migration agent, findings were made that he was involved in an elaborate scheme to mislead Trade Recognition Australia (TRA) about the employment history and work skills of a visa applicant.[1] The present proceedings arise against this background.
[1] Frugtniet v Migration Agents Review Authority [2016] AATA 299 at [107]
On 26 June 2014 a delegate of the Australian Securities and Investments Commission made a banning order permanently prohibiting the applicant from engaging in any credit activities. The decision was made under section 80 of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act). One of the effects of the decision was that the applicant could not practice as a mortgage broker – an occupation which he had carried on since late 2010 through his company, Unique Mortgage Services Pty Ltd (UMS).
The decision was reviewed by the AAT and affirmed on 6 March 2015. After a successful appeal on a question of law the AAT’s decision was set aside and remitted to the AAT for reconsideration according to law. These proceedings deal with that remittal.
There are three primary issues which fall for determination.
First, is at least one of the statutory preconditions for exercising the discretion to impose a banning order on Mr Frugtniet met? In this case, ASIC asks this Tribunal to find one or both of the following preconditions are met:
(a)There is reason to believe the applicant is likely to contravene credit legislation; and/or
(b)There is reason to believe the applicant is not a fit and proper person to engage in credit activities.
The first precondition requires an assessment of whether there is evidence about how the applicant is likely to conduct himself in the future. Consideration of the applicant’s future conduct is an inherently complicated task made more difficult by the applicant’s age and failing health. To avoid these difficulties, we have elected to focus on the second threshold question. As we shall explain, we are satisfied the applicant is not a fit and proper person although we also point out at the end of these reasons that the findings we make also provide a basis for finding there is reason to believe the applicant is likely to contravene credit legislation.
The second issue for determination is whether a banning order should be imposed on the applicant. Consideration of this question involves more than merely identifying facts which provide a reason to believe the applicant is not a fit and proper person.[2] If this Tribunal is to make a banning order of any significant duration, it is necessary that we be positively satisfied it is appropriate to do so in all the circumstances – and, in particular, whether the applicant has engaged in identified conduct which points to such an order being appropriate. On the material available to this Tribunal, we are satisfied the applicant has engaged in dishonest conduct on several occasions that renders a permanent banning order appropriate in all the circumstances.
[2] Throughout these reasons we use this shorthand to express the full phrase ‘fit and proper person to conduct credit activities’.
ASIC has urged us to make findings of misconduct by the applicant on ten different occasions. We have not found it necessary to make factual findings in relation to all ten but have focussed on four examples of serious misconduct. On the evidence before us we are satisfied the applicant:
(a)Misled a barrister and a magistrate as to the basis on which he was appearing in court on a particular occasion;
(b)subsequently gave false evidence in relation to that conduct in proceedings brought by the LIV seeking to have him declared a disqualified person for the purposes of the Legal Profession Act 2004 (Vic);
(c)Participated in a scheme to mislead TRA about the work experience of a client of his migration practice for the purposes of assisting that client to obtain a visa;
(d)Gave dishonest answers to MARA in his 1999 application for re-registration.
We have relied on those findings in particular when deciding that a banning order should be imposed.
The third issue for determination is the appropriate terms of any banning order imposed. Given our serious adverse findings about the applicant’s previous conduct, we are satisfied the banning order should be in the widest possible terms and for the longest possible duration.
In addition to addressing these primary issues it has been necessary to reach conclusions on a number of legal issues which impact upon the resolution of the matter. The legal issues which we deal with are as follows:
(a)The provisions pursuant to which banning orders were made by ASIC were amended by the Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures) Act 2020 (the Amending Act). Those amendments were made long after the applicant applied for review in the AAT. Consequently, a question arises as to whether the application for review should be dealt with under the old provisions in place at the time of the original decision or under the new provisions which were in force at the time of the hearing before us;
(b)The applicant makes related submissions that the expanded banning powers conferred by the Amending Act cannot be utilised by the AAT. The arguments put forward on this issue are almost unintelligible but appear to fall into two categories. Arguments in the first category[3] assert something akin to a ‘vested rights’ argument that has a number of elements. First, it is said the hearing before ASIC provided for in section 80(4) is a pre-condition to the exercise of the AAT’s powers. Because the applicant had his hearing before ASIC prior to the Amending Act taking effect, he says he did not have an opportunity to have his say at his ASIC hearing on the question of whether the expanded banning orders provided for in the Amending Act should be used. As a consequence, the applicant says this Tribunal cannot make a banning order which is broader in scope than the order to which the applicant was potentially subject when ASIC conducted its hearing. The second category of submissions[4] assert that the expanded powers provided for in the Amending Act are unconstitutional because they are not supported by section 51(xxiv) of the Constitution (which relates to the service and execution of process throughout the Commonwealth.
(c)The extent to which this Tribunal can rely on the findings of other courts and tribunals to make factual findings for the purposes of this Tribunal’s decision; and
(d)Whether the expression ‘any other matter’ which appears in section 37(2)(i) has to be read down by reference to its statutory context such that certain matters cannot be taken into account in determining the application for a banning order.
[3] See in particular paragraphs 14.1-14.3 of the Applicant’s submissions dated 22 June 2020; see also paragraph 4 of the applicant’s submissions dated 3 July 2020.
[4] See in particular paragraphs 14.4- 14.6 of the Applicant’s submissions dated 22 June 2020
We deal with these issues in the body of our reasons.
EVIDENCE BEFORE THIS TRIBUNAL
These proceedings have a lengthy and complicated history. The AAT (differently constituted) made a decision on the application for review but that decision was remitted to this Tribunal by the High Court following its decision in Frugtniet v Australian Securities and Investments Commission [2019] HCA 16. The High Court ruled the AAT should not have considered certain material that was before it at the time. In the course of the remitted proceedings, we have been careful to give both parties an opportunity to object to this Tribunal taking particular material into account. Consistent with our interlocutory rulings and the reasoning in the High Court, and in accordance with the process that we identified to the parties at the hearing, we have only had regard to:
(a)the oral evidence of Mr Frugtniet (including evidence given in answer to questions asked in cross examination or by the Tribunal);
(b)material tendered by one or other of the parties that is referred to in annexure one or which is specifically referenced in submissions (and only to the extent referenced in submissions) including decisions of other courts and tribunals.
.
Legal Framework
Since the decision was made by ASIC and the applicant applied to have the matter reviewed by the AAT, the NCCP Act has been amended. Accordingly, the first question to be determined is whether the old or new provisions should be applied.
The amendments to the NCCP Act contained in the Amending Act expanded the scope of ASIC’s power to ban a person from performing functions in a business or company which engages in credit activities. The changes were said to ‘ensure that ASIC is appropriately empowered to remove individuals from continued involvement in the financial sector.’[5]
[5] Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2020 Measures)) Bill 2020: FSRC REC 7.2 (ASIC Directions) – Chapter 5
The Amending Act did this by enumerating more clearly the nature of banning orders that could be imposed. The amendments make clear ASIC has power to make banning orders which prohibit a person from controlling or performing any functions, or particular functions, in relation to a credit business. Prior to the amendments the focus of a banning order was on banning a person from conducting credit activities directly themselves. To that end, a banning order could be made against a person which banned them partially or entirely from engaging in credit activities. After the amendments, ASIC could also make a banning order specifying that a person is prohibited from (i) controlling another person that engages in credit activities, (ii) performing any function involved in the engaging in of credit activities and/or (iii) performing specified functions involved in the engaging in of credit activities including as an officer of a corporation, manager, employee, contractor or in some other capacity.
The relevant transitional provisions in relation to existing banning orders under the NCCP Act can be found in Schedule 4 of the Amending Act. The relevant provisions provide as follows:
(1)A [banning] order made under subsection 80(1) of the National Credit Act, that is in force immediately before the commencement of Part 2 of Schedule 4 to the [Amending Act] continues in force (and may be dealt with) as if it had been made under that subsection as amended by that Part.
[Emphasis added].
In Schroeder and Australian Securities and Investments Commission [2020] AATA 2453 at [40], the AAT considered the approach to identical transitional provisions in the Amending Act. In that case, the applicant asked the AAT to review a banning order made under the Corporations Act 2001 (C’th) before the commencement of the Amending Act. The AAT concluded Parliament has authorised the AAT to treat that banning order as if it had been made under the amended provisions. We agree with that approach for the reasons given therein and we are satisfied on that basis it is appropriate to apply the amended provisions in our review.
That conclusion also disposes of the applicant’s argument that the precondition of an ASIC hearing provided for in section 80(4) has not been met in relation to any expanded banning order. In the conduct of these proceedings, the transitional provisions specifically authorise the Tribunal to deal with the banning order as if it had been made under the amended provisions. The Tribunal therefore has available to it all the powers that would have been available to ASIC if it had dealt with the matter following the passage of the Amending Act. In relation to the applicant’s constitutional argument: to the extent that it is intelligible, it has no merit. The constitutional head of power relied upon for passing the NCCP Act is section 51(xxxvii) and express referral by the Parliaments of all the states.[6] Further, the law cannot be said to impose, to use the applicant’s words, ‘an incontestable impost’.[7] One of the main purposes of the hearing offered by the Tribunal is to provide the applicant with an opportunity to contest the scope of the administrative action taken against him.
[6] See Explanatory Memorandum to National Consumer Credit Protection Bill 2009
[7] See paragraph 14.6 of the applicant’s submissions dated 22 June 2020
Even if we are wrong on the question of whether the old law applies, the application of the old law would produce largely the same result. Applying the old law, we would have made a banning order of the widest possible scope and for the longest possible duration in relation to the applicant. The only practical difference in how the matter would have been disposed of is that we would not have included in the banning order those parts which prevent the applicant from:
(a)controlling another person that engages in credit activities;
(b)performing any function involved in the engaging in of credit activities; or
(c)performing specified functions involved in the engaging in of credit activities including as an officer of a corporation, manager, employee, contractor or in some other capacity.
Given the law in question has been amended, we will set out the relevant text of the provisions below rather than consigning the text to footnotes or an annexure, or assuming the reader has the text of the legislation to hand.
Section 80 of the NCCP Act relevantly provides:
Making a banning order
(1) ASIC may, in writing, make one or more orders (banning orders) against a person:
(a) if ASIC suspends or cancels a licence of the person; or
(b) if the person becomes insolvent; or
(c) for a natural person--if the person is convicted of fraud; or
(d) if the person has:
(i) contravened any credit legislation; or
(ii)been involved in a contravention of a provision of any credit legislation by another person; or
(e) if ASIC has reason to believe that the person is likely to:
(i) contravene any credit legislation; or
(ii)be involved in a contravention of a provision of any credit legislation by another person; or
(f) if ASIC has reason to believe that the person is not a fit and proper person to:
(i) engage in one or more credit activities; or
(ii)perform one or more functions as an officer (within the meaning of the Corporations Act 2001) of another person who engages in credit activities; or
(iii) control another person who engages in credit activities; or
(fa) if ASIC has reason to believe that the person is not adequately trained, or is not competent, to:
(i) engage in one or more credit activities; or
(ii)perform one or more functions as an officer (within the meaning of the Corporations Act 2001) of another person who engages in credit activities; or
(iii) control another person who engages in credit activities; or
(fb)if the person has, at least twice, been linked to a refusal or failure to give effect to a determination made by AFCA (as defined in section 910C of the Corporations Act 2001) relating to a complaint that relates to:
(i) credit activities; or
(ii)a financial services business (within the meaning of the Corporations Act 2001); or
(fc) if subsection (3) applies to the person in relation to 2 or more corporations; or
(g) if a prescribed State or Territory order is in force against the person; or
(h) in any other circumstances prescribed by the regulations.
When a person is not a fit and proper person
(2)For the purposes of paragraph (1)(f), ASIC must have regard to the matters in section 37B.
When a person has been an officer of a corporation unable to pay its debts
(3)This subsection applies to a person in relation to a corporation if, within the last 7 years:
(a) the person was an officer (within the meaning of the Corporations Act 2001) of the corporation when the corporation was:
(i) engaging in credit activities; or
(ii)carrying on a financial services business (within the meaning of the Corporations Act 2001); and
(b) the corporation was wound up either:
(i) while the person was such an officer of the corporation; or
(ii)within the 12 months after the person ceased to be such an officer of the corporation; and
(c) a liquidator lodged a report under subsection 533(1) of the Corporations Act 2001 (including that subsection as applied by section 526-35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006) about the corporation’s inability to pay its debts.
Person to be given an opportunity to be heard
(4)Despite subsection (1), ASIC may only make a banning order against a person after giving the person an opportunity:
(a)to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b) to make submissions to ASIC on the matter.
(5) Subsection (4) does not apply if:
(a)ASIC’s grounds for making a banning order against a person include that ASIC has suspended or cancelled a licence of the person (see paragraph (1)(a)); and
(b)the suspension or cancellation took place without a hearing under section 54.
(6) Subsection (4) also does not apply if:
(a)ASIC’s grounds for making a banning order against a person include that the person has been convicted of fraud (see paragraph (1)(c)); and
(b) the person has been convicted of serious fraud.
Copy of banning order to be given to the person
(7) ASIC must give a copy of a banning order to the person against whom it was made. Subsection Section 81 provides as follows:
81 What a banning order prohibits
(1) A banning order made against a person may specify that the person is prohibited from doing one or more of the following:
(a) engaging in any credit activities;
(b) engaging in specified credit activities in specified circumstances or capacities;
(c) controlling, whether alone or in concert with one or more other entities (as defined by section 64A of the Corporations Act 2001), another person who engages in credit activities;
(d) performing any function involved in the engaging in of credit activities (including as an officer (within the meaning of the Corporations Act 2001), manager, employee, contractor or in some other capacity);
(e) performing specified functions involved in the engaging in of credit activities.
(2) The banning order may specify that a particular prohibition specified in the order applies against the person:
(a) if the sole ground for the banning order is because paragraph 80(1)(fc) applies—for a specified period of up to 5 years; or
(b) otherwise—either permanently or for a specified period.
(3) A banning order may include a provision allowing the person against whom it was made, subject to any specified conditions:
(a) to do specified acts; or
(b) to do specified acts in specified circumstances;
that the order would otherwise prohibit them from doing.
81 What a banning order prohibits
(1) A banning order made against a person may specify that the person is prohibited from doing one or more of the following:
(a) engaging in any credit activities;
(b) engaging in specified credit activities in specified circumstances or capacities;
(c) controlling, whether alone or in concert with one or more other entities (as defined by section 64A of the Corporations Act 2001), another person who engages in credit activities;
(d) performing any function involved in the engaging in of credit activities (including as an officer (within the meaning of the Corporations Act 2001), manager, employee, contractor or in some other capacity);
(e) performing specified functions involved in the engaging in of credit activities.
(2) The banning order may specify that a particular prohibition specified in the order applies against the person:
(a) if the sole ground for the banning order is because paragraph 80(1)(fc) applies—for a specified period of up to 5 years; or
(b) otherwise—either permanently or for a specified period.
(3) A banning order may include a provision allowing the person against whom it was made, subject to any specified conditions:
(a) to do specified acts; or
(b) to do specified acts in specified circumstances;
that the order would otherwise prohibit them from doing.
37B Fit and proper person test—matters to which ASIC must have regard
(1) ASIC must have regard to the matters set out in subsection (2) (subject to Part VIIC of the Crimes Act 1914) for the purposes of applying any of the following provisions to a person:
(a) a paragraph of subsection 37A(1);
(b) paragraph 80(1)(f).
(2) The matters are as follows:
(a) whether any of the following of the person has ever been suspended or cancelled:
(i) a licence, or a registration under the Transitional Act;
(ii) an Australian financial services licence;
(b) whether any of the following has ever been made against the person:
(i) a banning order, or a disqualification order under Part 2‑4;
(ii) a banning order, or a disqualification order, under Division 8 of Part 7.6 of the Corporations Act 2001;
(c) if the person is an individual—whether the person has ever been disqualified under the Corporations Act 2001, or any other law of the Commonwealth or of a State or Territory, from managing corporations;
(d) whether the person has ever been banned from engaging in a credit activity under a law of a State or Territory;
(e) whether the person has ever been linked to a refusal or failure to give effect to a determination made by AFCA (as defined in section 910C of the Corporations Act 2001);
(f) if the person is not the multiple trustees of a trust—whether the person has ever been insolvent;
(g) if the person is the multiple trustees of a trust—whether a trustee of the trust has ever been insolvent;
(h) whether, in the last 10 years, the person has been convicted of an offence;
(i) any relevant information given to ASIC by a State or Territory, or an authority of a State or Territory, in relation to the person;
(j) any other matter prescribed by the regulations;
(k) any other matter ASIC considers relevant.
In this case, ASIC submits the only provision of section 37B that is relevant is sub-section 37B(2)(k) which invites consideration of matters that would be relevant to the assessment of whether an individual was a ‘fit and proper’ person at common law. Mr Frugtniet argued a proper construction of s 37B limited the matters we could take into account. He explained:
Whilst it is not suggested that the matters enumerated are exclusive ‘any other relevant matter’ must not conform or relate that which is already enumerated, the breadth of which may extend to other matters that are relevant, but not where there has been no ban of the same kind, that the activities could be taken into account, which is evidenced further upon perusing the transitional and main application for a licence it was and is not a requirement under the NCCP Act 2009 that such a matter be disclosed, therefore calls into question whether the tribunal could even consider it as relevant, before considering whether any weight ought to be given to such a matter, which if considered may lead to jurisdictional error.
These submissions are difficult to understand. In broad terms it is possible that what the applicant is saying is that a matter which falls into specific provisions of s 37B(2) cannot also be treated as falling within subparagraph 2(k).
So much may be true but for the purposes of disposing of this matter, the consideration of s 37(2) is beside the point. The considerations listed are rendered mandatory by the statute – but not exhaustive – so even if a more narrow interpretation of s 37B(2)(k) is warranted by statutory context (an argument which we note was rejected by Justice Bromberg in Frugtniet v ASIC [2016] FCA 995), it does not mean that matters which are relevant to a determination of whether the Tribunal has reason to believe that a person is not a fit and proper person must be ignored if they do not fall within the list. The list creates mandatory considerations. It does not by inference exclude relevant matters. The applicant’s argument goes nowhere.
A person who engages in conduct contrary to a banning order is potentially subject to civil and criminal penalties.[8] A person subject to a banning order cannot be granted a licence authorising the person to engage in a credit activity to which the banning order applies.[9]
[8] Section 82 NCCP Act
[9] Section 40 NCCP Act
In relation to the applicant, this legislative structure requires a two-step decision making process. First the Tribunal must satisfy itself of at least one of the following[10]:
(d)that it has ‘reason to believe’ that the applicant is not a fit and proper person to:
(i)engage in credit activities,
(ii)perform one or more functions as an officer of another person who engages in credit activities; or
(iii)control another person who engages in credit activities,
or
(e)that it has ‘reason to believe’ that the person is likely to contravene any credit legislation or be involved in a contravention of a provision of any credit legislation by another person.
[10] Section 80 NCCP Act
As noted above, our primary focus in this review is on the first limb.
If this Tribunal is satisfied we have ‘reason to believe’ in the relevant sense, we must then determine the terms of the banning order (if any) that should be imposed. In particular, we must consider whether:
(a) any order should cover engaging in any credit activities, engaging in specified credit activities in specified circumstances or capacities, or include controlling another person who engages in credit activities or include a ban on performing any function involved in the engaging in of credit activities including as an officer manager, employee, contractor;
(b) the bans should be permanent or for a specified period; and
(c) whether the order should allow the applicant to do specified acts which would otherwise be prohibited subject to specified conditions or in specified circumstances.
What constitutes a credit activity is defined in section 6. The definition includes providing a credit service which includes acting as an intermediary between a consumer and a credit provider. Mortgage broking is clearly caught in the definition of credit activity. Credit activity also includes providing credit under a credit contract, providing credit as lessor under a consumer lease, performing the role of mortgagee under a mortgage, receiving the benefit of a guarantee, and engaging in activities prescribed by the regulations in relation to credit.
Does the Tribunal have ‘reason to believe’
The ‘reason to believe’ formulation is used in other statutory contexts and has been held in those contexts to require two things. First, the relevant decision maker must actually hold the relevant belief. Second, there must be reasonable grounds or cause for that belief.[11]
[11] See WA Pines v Bannerman 41 FLR 175 at 186. See also Pilnara Pty Ltd v Commissioner of Taxation [1999] FCA 945 at [18]; Power v Hamond [2006] VSCA 25 at [106]
The test is both subjective and objective. Not only must the Tribunal have the belief but there must be facts which are sufficient to induce that belief in a reasonable person.[12] The expression carries with it the same meaning in the present statutory context.
[12] Pilnara Pty Ltd v Commissioner of Taxation [1999] FCA 945 at [18]
The phrase ‘reason to believe’ in most contexts carries with it an implication that the subjective view formed is to a degree provisional or based on imperfect information. It can, for example, be contrasted with a formulation which confers a discretion to make an order which depends on the decision maker being satisfied that a person was not a fit and proper person. The latter threshold for the making of the order would be more difficult to meet. The legislature, by requiring ASIC only to have ‘reason to believe’ that a person is not a fit and proper person, has given ASIC more leeway to proceed with a banning order of some kind in circumstances where the material available allows ASIC to form the view even though it may not have the complete picture.
This distinction has some importance in this matter as it affects the extent to which we have relied on the findings of other decision-makers. For the purposes of determining whether we have a reason to believe, we have been content to rely on the findings of other bodies. However, for the purposes of deciding what banning orders to impose we have relied upon positive findings of fact which we make based upon material before us. This distinction is more important for explaining how we have structured our reasons than it is to the substantive outcome. The evidence positively establishes the applicant is not a fit and proper person. The different standards which must be applied have however influenced how we have gone about our fact finding.
In the present matter, our attention has been drawn to numerous adverse findings made by other decision-makers which are said to reflect adversely on the character of Mr Frugtniet. While some of these findings are contained in decisions that were set aside on appeal, we are satisfied the findings (both individually and collectively) in decisions that were undisturbed provide us with reason to believe Mr Frugtniet is not a fit and proper person to engage in credit activities, perform functions as an officer of a person who engages in credit activities, or control another person who engages in credit activities.
While the fact that other bodies have made adverse findings is sufficient to (and does) induce a reasonable belief about the applicant’s fitness, more explicit factual findings are necessary to underpin the exercise of the discretionary powers which that belief triggers.
The applicant contests many of the adverse findings made against him in other places and invites this Tribunal to make different findings based on the evidence he has given and tendered to this Tribunal. ASIC on the other hand urges us to accept the findings made by others and determine the matter largely on the basis of what others have found rather than looking behind those findings and satisfying ourselves that the facts are established on the evidence.
While it may be legally open to this Tribunal to adopt the course urged by ASIC[13] we have decided to determine the facts, and evaluate the applicant’s conduct in the past, by reference to material before this Tribunal rather than simply by adopting findings made by others. This is not to say we have disregarded the previous decisions made by other bodies in relation to the applicant. We have relied upon the evidence recorded in those decisions (most of which is not disputed by the applicant even as he objects to the fairness of some of the findings made in relation to that evidence) but we make our own factual findings having regard to the material before us in these proceedings.
[13] Thorpe and Commissioner of Taxation [2011] AATA 638 at [72]
It is on the basis of our own factual findings that we have determined whether a banning order should be imposed and what the scope of that order should be.
Fit and proper person
We have already pointed out the NCCP Act requires that we have regard to the factors in s 37B(2) when making an assessment of whether a person is fit and proper. As it happens, none of the matters referred to in that sub-section arise in this case apart from the residual category referred to in s 37B(2)(k) which refers to “any other matter ASIC considers relevant”. In our view, the matters that are relevant can be discerned with reference to the cases which discuss the ‘fit and proper person’ in a variety of contexts.
The High Court explained the concept of ‘fit and proper’ in Hughes and Vale Pty Ltd v State of New South Wales (1955) 93 CLR 127 at [156][14] as follows:
The expression ‘fit and proper person’ is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed rejection. “Fit’ (or idoneous’) with respect to an office is said to involve three things, honesty, knowledge and ability: ‘honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it’ – Coke. When the question of whether a man was a fit and proper person to hold a licence for the sale of liquor it was considered that it ought not be confined to an inquiry into his character and that it would be unwise to attempt any definition of the matters which may legitimately be inquired into; each case must depend on its own circumstances.[emphasis added]
[14] Cited with approval in Shi v Migration Agents Registration Authority (2008) 235 CLR 286 at 148
The fit and proper person concept was also considered by the High Court in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321. Toohey and Gaudron JJ stated (at 380):
The expression ‘fit and proper person’, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of ‘fit and proper’ cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur.
Importantly, our assessment does not focus on establishing specific breaches of specific rules. It is a more general assessment of the character of the applicant. In the context of migration agents Keifel J (as she then was) explained in Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286 at [149]:
The topic with which s 303(1)(f) is concerned is not…one which identifies particular conduct, as is the case with respect to breaches of the Code of Conduct. The inquiry posed by the paragraph is a general one, and it may be considered by the Tribunal in that way. It does not limit assessment of an agent’s integrity and fitness to what has been conveyed by any other breaches. There is no reason why the Tribunal’s view should not extend to any information which sheds light upon the presence or absence of the necessary characteristics in the migration agent.
It follows the assessment we are to undertake is broad. However, the question is not whether Mr Frugtniet is a fit and proper person in a vacuum but whether he is a fit and proper person to engage in credit activities. It follows that some lapses of judgment or competence in pursuing other professions may be irrelevant to this question.
Importantly for present purposes, we are satisfied that in the context of assessing whether a person is a fit and proper person to engage in credit activities, honesty, knowledge and ability are the attributes of concern raised by the statutory test. A person who is not honest is unlikely to be fit to discharge the burdens of a regulated profession or vocation and is not fit to engage in credit activities. Mr Frugtniet’s honesty is the principal cause for concern in the present case.
Is there reason to believe Mr Frugtniet is not a fit and proper person to engage in credit activities?
Mr Frugtniet has been the subject of adverse findings made by various professional bodies, courts, tribunals and government authorities over a number of years. As a general proposition, adverse findings contained in published decisions of courts and tribunals could provide a ‘reason to believe’ the applicant is not a fit and proper person to carry on credit activities principally because he is not an honest person. ASIC referred to a number of adverse findings in its submissions on this point including the following:
(a)In 1995 the Victorian Civil and Administrative Tribunal (VCAT) reviewed a decision of the Travel Agent’s Licensing Authority to cancel the travel agent’s licence of Mrs Corine Frugtniet, the applicant’s ex-wife. The cancellation decision was based in part on her alleged failure as a director of Tarson Pty Ltd (a company which at one time also held a travel agent’s licence) to ensure compliance with a licence condition that excluded Mr Frugtniet from involvement in the company’s travel business.[15] In those proceedings Mr Frugtniet was not a party, but he gave evidence in relation to his involvement with Tarson Pty Ltd. VCAT found Mr Frugtniet:
[15] T3 p 29
‘was verbose and argumentative in his answers. His accounts of events, in some cases, were inconsistent…[m]oreover his evidence at some points, particularly in regard to [an IATA inspector’s] visit was simply incredible’.
Consequently VCAT ‘did not accept him uncritically as a witness of truth.’[16] VCAT went on to find ‘Mr Frugtniet’s actions indicate a systematic breach of the condition imposed on Tarson’s licence’.[17]
[16] T3 p 31
[17] T3 p 57
(b)In the context of a 2017 AAT review of a decision made by the Tax Practitioner’s Board to cancel Mr Frugtniet’s registration as a tax agent (TPB Proceedings), the AAT considered the truthfulness of an answer given by Mr Frugtniet when he was applying for repeat registration with MARA in 1999. The applicant answered ‘no’ to a question asking whether he was subject to criminal charges still pending. When Mr Frugtniet answered that question the truthful answer was ‘yes’ as he was subject to pending criminal charges (in respect of which he was later acquitted).[18] In the TPB proceedings (and before this Tribunal) Mr Frugtniet argued that at the time of responding to that question he believed he did not need to disclose the charges because he had already advised MARA of the charges on a previous occasion. In the TPB Proceedings the AAT found the applicant had not previously made disclosure to MARA.[19] Further the AAT found the question asked required the applicant to disclose the charges even if they had been previously disclosed, hence the answer given was in any event dishonest;[20]
[18] Exhibit 19b – note because there was no conviction these charges are not covered by the spent convictions regime
[19] Frugtniet and Tax Practitioners Board [2017] AATA 1393 at [36]
[20] Ibid at [38]
(c)In 2013 the applicant applied for MARA registration as a migration agent and was asked:
To the best of your knowledge and belief: Is any disciplinary action being taken, or has been taken, against you that has not previously been declared to the Authority by you?
The applicant answered ‘no’ when in truth, at the time, his registration with the TPB had already been cancelled. Partly as a consequence of this answer MARA decided to cancel the applicant’s registration as a migration agent. The applicant sought review by the AAT. The AAT affirmed MARA’s decision and found the applicant’s 2013 application to MARA for repeat registration was false and misleading and that Mr Frugtniet knew it to be so.[21]
[21] Frugtniet and Migration agents Registration Authority [2016] AATA 299 at [95] to [97]
(d)In its decision in Re Frugtniet and Secretary, Department of Family and Community Services (2004) 84 ALD 774, which related to an overpayment of social security payments to Mr Frugtniet, the AAT concluded Mr Frugtniet had received an overpayment. The AAT made the following findings about his conduct:
(i) When he first applied for Newstart Allowance on 6 March 1998 the applicant falsely stated in the application form that he had not been studying in the last six months;[22]
[22] Re Frugtniet and Secretary, Department of Family and Community Services (2004) 84 ALD 774 at [20]
(ii) In a form completed by the applicant on 10 March 1998 Mr Frugtniet falsely stated that he was not self-employed or the owner of a business;[23]
[23] At [20]
(iii) When he commenced paid employment on 27 April 1998 the applicant failed to disclose this to Centrelink;[24]
[24] At [21]
(iv)Over at least two years the applicant failed to disclose to Centrelink his employment and income;[25]
[25] At [28] and [21]
(v)On forms submitted to Centrelink in April and May 2000 the applicant falsely stated that he was not employed;[26]
[26] At [21]
(vi)During the period from 22 August 1998 to 6 July 2000 the applicant’s actual income was $76,828.66 but he only declared income of $200.[27]
[27] At [28]
(e)In Frugtniet and Secretary Department of Social Services [2017] AATA 577 the AAT had to consider Mr Frugtniet’s relationship status for the purposes of calculating his entitlement to parenting payments calculated at the single rate. The AAT rejected the key claim Mr Frugtniet made in oral evidence that he lived at a different residence to the mother of his children. The AAT commented adversely on his credibility.[28]
[28] Frugtniet v Secretary Department of Social Services [2017] FCA 1227 at [12]
(f)On 19 November 2010 the LIV applied to VCAT for an order pursuant to s 2.2.6(2) of the Legal Profession Act 2004 (Vic) (the Legal Profession Act) that the applicant for a period of time be a disqualified person for the purposes of Division 3 of Part 2.2 of that Act. On 8 April 2011 VCAT granted the application and ordered that the applicant was for a period of three years a disqualified person. VCAT’s orders were based on the following findings:
(i)On 25 May 2010 at Werribee Magistrate’s Court, the applicant had deliberately and falsely represented to a barrister that he was a solicitor when he was not;
(ii)Later the same day the applicant appeared before the Magistrate’s Court without seeking leave to appear and when asked by the Magistrate ‘what firm do you work for?’ the applicant replied ‘sole practitioner’ and consequently gave the false impression that he was a solicitor.
The Tribunal found the applicant’s intentional misrepresentations constituted dishonest conduct of a serious nature and by his conduct in the proceedings before the Tribunal he raised very serious questions as to his willingness and capacity to be an honest and reliable witness.[29]
(g)In Callychurn v Australian Securities and Investments Commission [2019] AATA 4600, a proceeding in which the applicant’s ex-wife and former business partner sought to have ASIC’s decision to ban her from engaging in credit activities overturned, the AAT found the applicant continued to be involved in the credit business of UMS after he was banned by ASIC from engaging in credit activities;[30]
(h)In Frugtniet and Tax Practitioners Board (Taxation) [2017] AATA 1393 the applicant sought review in the AAT of the TPB’s decision to terminate his registration as a tax agent and to preclude him from applying for registration for a period of five years from 22 March 2013. In those proceedings a conflict of evidence arose between the applicant and one of his clients about whether the applicant had, without instructions, made baseless claims on the client’s tax return and devised a means of retaining a portion of the larger tax refund generated as a consequence. The Tribunal concluded the applicant’s explanation was implausible: at [104]. This reflects adversely on the applicant’s honesty.
(i)In Frugtniet v Migration Agents Registration Authority [2016] AATA 299 the applicant sought review of a decision to cancel his registration as a migration agent. The AAT found Mr Frugtniet was a key player in the creation of false documents which were submitted to TRA on behalf of one of his clients. The documents submitted falsified the client’s work experience for the purposes of assisting with his application for a visa.[31]
[29] Law Institute of Victoria Limited v Frugtniet (Legal Practice) [2011] VCAT 596 at [159] to [164]
[30] Callychurn and Australian Securities and Investments Commission [2019] AATA 4600 at [138]
[31] Frugtniet and Migration Agents Registration Authority [2016] AATA 299 at [107]
Mr Frugtniet does not dispute that any of these findings were made. However, he does point out some of the decisions were set aside on appeal for various reasons. He also submits he was unable to challenge the veracity of findings in some of the cases (including Frugtniet T-as Karina Travel Int v Travel Agents Licensing Authority (1995/32920) [1995] VICCAT 39 and Callychurn v Australian Securities and Investments Commission [2019] AATA 4600) because he was not a party to those proceedings.
ASIC says adverse findings made in decisions that were successfully appealed are not inevitably to be discounted. For example, while the Tribunal’s decision in Frugtniet and Tax Practitioners Board [2014] AATA 766 was set aside on appeal in Frugtniet v Tax Practitioners Board [2015] FCA 1066, Jessup J in the Federal Court remarked that the Tribunal’s finding that the applicant had engaged in “disgraceful conduct”[32] was “conspicuously justified”.[33] ASIC argues that, taken as a whole, the findings of the various decision-makers provide a reason to believe the applicant does not have the attributes of good character, diligence, honesty, integrity and judgment, all of which go to whether or not he is a fit and proper person.
[32] Frugtniet and Tax Practitioners Board [2014] AATA 766 at [104]
[33] Frugtniet v Tax Practitioners Board [2015] FCA 1066 at [62].
Even if we disregard the adverse findings contained in decisions that were set aside on appeal or where the applicant did not have an opportunity to challenge the evidence, we are satisfied the balance of the adverse findings provide ample reason to believe the applicant is not a fit and proper person to engage in credit activities.
However, while the findings of other bodies are sufficient to enliven the discretion which ASIC (and the Tribunal standing in its shoes) has to make a banning order, a real question arises as to whether the Tribunal in the present matter can or should adopt the findings of other bodies when deciding whether to actually impose a ban. ASIC is confident we can and should do so. There is some authority to support such an approach.[34] While there are significant advantages in terms of speed and economy, we are satisfied a more conservative approach is justified in a case like the present. We reach that view in light of the Full Federal Court’s seminal discussion of fact finding in Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93. In that case, Logan J pointed out a decision-maker may be acting unreasonably if it fails to have due regard to the consequences of a finding when deciding if it is satisfied the finding should be made (at [15]). After referring to the decisions in Briginshaw v Briginshaw[1938] HCA 34; (1938) 60 CLR 336 and Re Pochi v Minister for Immigration and Ethnic Affairs[1979] AATA 64; (1979) 36 FLR 482, (1979) 2 ALD 33, his Honour explained (at [16]):
…there are particular kinds of administrative decisions which are attended with such grave consequences that to act on “inexact proofs, indefinite testimony or indirect references” (to borrow from Briginshaw at 362) may not be reasonable.
To similar effect, Flick and Perry JJ observed (at [111]):
Some findings of fact, however, have been long-recognised as calling for considerable caution before being made and for care being exercised in respect to the evidence upon which the finding is made. Findings as to a party or a witness having engaged in fraud or having lied are but examples.
[34] See, for example, Ham and Tax Practitioners Board [2017] AATA 1642 at [102] and Thorpe and Commissioner of Taxation [2011] AATA 638 at [72]
In the present matter Mr Frugtniet has sought to contextualise the decisions made by other bodies or contest those findings in his oral evidence. In some cases, this is his first opportunity to do so as he was not a party to the proceedings where the original findings were made. In those circumstances, and mindful of the observations in Sullivan, the approach we have adopted is to make findings of fact based on the material before this Tribunal rather than to simply adopt the findings of other bodies when considering whether to impose a banning order, and the terms of any such order.
Matters which justify a lengthy and comprehensive banning order
In considering the scope and length of the banning order we have focussed on three events from Mr Frugtniet’s past:
(j)Misrepresentations he made to a barrister and a magistrate about his professional status and the subsequent giving of false evidence to VCAT in response to the LIV’s application for an order that he be declared a disqualified person indefinitely for the purposes of the Legal Profession Act 2004;
(k)Involvement in the falsification of a client’s pre-immigration skills assessment;
(l)A dishonest disclosure to MARA on his 1999 re-registration form.
Mr Frugtniet’s misconduct in each of these three instances is so serious that it is sufficient to justify a permanent ban on Mr Frugtniet undertaking any credit activities.
While a number of other examples of misconduct and dishonesty on the part of Mr Frugtniet were pressed by ASIC, we have determined that our findings in relation to the above matters are sufficient. Mr Frugtniet contests many of the facts which underpin the other findings urged on the Tribunal but it is difficult for us to go behind all of those findings and determine whether the evidence in every case provides a sufficient basis for what was decided. We have restricted our findings of positive satisfaction that the applicant engaged in dishonesty or unethical conduct to the matters set below.
Misrepresentations in the Magistrate’s Court and Giving of False Evidence to VCAT
On 25 May 2010 the applicant attended Werribee Magistrate’s Court to assist some members of a swimming group with which he was involved. On that date, while the applicant held a law degree, he had been unsuccessful in gaining admission to practice. At the Court, the applicant met with the barrister for the opposing side. The barrister asked him if he was a sole practitioner and he responded ‘yes’.[35]
[35] T18/Exh 7 at [47]
Later that morning, the applicant appeared before a Magistrate. The Magistrate asked what firm the applicant worked for and the applicant responded ‘sole practitioner, your honour’[36].
[36] Exhibit 7
This much is not in dispute. Before this Tribunal the applicant’s evidence was:
… what is alleged against me that I misrepresented a barrister and I misrepresented a Magistrate. Unfortunately and regrettably that’s what I did. I did so, I can only say, not with any intention, because you see I was a sole practitioner in immigration and I was a sole practitioner in tax, and I should have understood also, and I know it’s encroaching upon more than an overview, but you see, Deputy President, at least I should be – it was one of those days where I was rushed, because normally what I would have done if that was the case, the first thing I would have done was I would have sought leave, and there’s no suggestion that leave would not have been granted…[37]
… My whole intention was to seek leave and it was as simple as, you know, “I seek leave to appear, you know, insofar as I’m not admitted as a legal” – I would have said that. What actually happened was I was confronted with a situation where the lawyer or the barrister I should say, for the other side, approached me and in the course of, I think him asking me as to from what firm I was from. I said “Sole practitioner”. I know it might seem implausible, but I didn’t intend to convey that I was a sole practitioner as in lawyer but that’s how it was read and I can’t help but feel – given that I could easily have got leave and done what I did.
But so then the situation arose in court where I think it is stated the Magistrate says to me, “please stand” and the question is put to me, “What firm are you from?” And I said, “Sole practitioner”. Looking back on it obviously it could not have done anybody any good other than to convey the impression that I was a sole practitioner practising law.’[38] [Emphasis added]
[37] Transcript p 124 line 23
[38] Transcript p 170 line 35
That evidence must be compared to the evidence the applicant gave at the disciplinary proceedings instituted by the LIV, The applicant was confronted with the evidence of the barrister to whom he had identified himself as a ‘sole practitioner’. The barrister gave evidence in those proceedings which is consistent with the evidence given by the applicant in the proceedings before this Tribunal. The barrister’s evidence was in the following terms:
… I asked him if he was a sole practitioner and he said: “Yes.”[39]
[39] Exhibit 7 para 47
The judgment records Mr Frugtniet saying in evidence (with a footnote reference to the transcript):
He denied that he said [to the barrister] ‘sole practitioner’ or ‘solicitor’.[40]
[40] Exhibit 7 para 79b.
That evidence is inconsistent with the evidence (quoted above) before this Tribunal where he acknowledged he misrepresented himself. But his attempt to deceive VCAT did not end there. Mr Frugtniet is recorded as giving the following evidence about his conversation with the barrister (starting with statements made by the barrister):
I’m Stephen Lowry, barrister, and I appear for the defendant. “I said, My name is Rudy Frugtniet.” I don’t recall him asking me to say can you spell it or anything or even repeat it, I said “Rudy Frugtniet.” I said, “I appear personally through a power of attorney as the spokesperson for the firm Vasta and Ors.”
In other words, the applicant claimed before VCAT that his entitlement to appear before the Magistrate arose out of a power of attorney executed by his clients with the consequence that he did not need to seek leave to appear.[41] That evidence cannot be squared with the evidence the applicant gave to this Tribunal where he stated:
“My whole intention was to seek leave and it was as simple, you know, as ‘I seek leave to appear, you know, insofar as I am not admitted as a legal…’.
[41] Exhibit 7 paragraphs 78-80.
There was no reason to seek leave if the applicant was appearing pursuant to a power of attorney.
It is now clear from the evidence the applicant has given to this Tribunal that he defended the LIV Proceedings before VCAT on a false basis. In particular, he denied under oath facts about a conversation which he now admits occurred as the other witness described.
We are satisfied the version the applicant gave of his conversation with the barrister in VCAT was false and knowingly false and that the false statement was made in a deliberate attempt to avoid an adverse disciplinary finding.
This is an example of very serious and comparatively recent dishonesty. These findings are based on admissions made by the applicant in these proceedings and depend only on VCAT accurately recording the evidence given to it.
We have no reason to doubt the evidence set out within Exhibit 7 accurately records the evidence given. They are the published reasons of a state tribunal and Mr Frugtniet has not established the record is inaccurate even though he has been advised the conflict between the evidence he gave to VCAT and the evidence he gave to this Tribunal had been noted.[42]
[42] Transcript p 393.
While we are mindful of the cautionary note sounded by the Full Court in Sullivan in relation to findings of dishonesty, we are satisfied a comparison between the evidence Mr Frugtniet gave to this Tribunal concerning events at Werribee Magistrate’s Court and the version he gave to VCAT are inconsistent in important respects and confirm he was dishonest in the evidence he gave to VCAT.
The deliberate decision to lie to VCAT in an attempt to avoid disciplinary action indicates very strongly that Mr Frugtniet is not an honest person.
Involvement in providing false information to Trades Recognition Australia
In Frugtniet v Migration Agents Registration Authority [2016] AATA 299 (the MARA Decision) a Deputy President of this Tribunal affirmed a decision of MARA to cancel Mr Frugtniet’s registration as a migration agent. In the course of making that decision the Tribunal had to consider whether Mr Frugtniet was involved in the fabrication of documents used to obtain a favourable skills assessment which was to be used to support a skilled visa application for a person named Mr Bastola.
Mr Frugtniet accepted in his evidence to this Tribunal that Mr Bastola was a client of his and he had assisted him to prepare an application for a visa. Mr Frugtniet denied he had any involvement with the preparation of the application to TRA which included documents which fabricated Mr Bastola’s work experience.
The details of the fabrication are set out in the MARA Decision as follows:
[29] Mr Bastola], … was named in an application to the Trades Recognition Australia . …
[30] … the application … had been lodged with the TRA on 16 August 2009. It acknowledged the application in a letter on 20 August 2007. … A list was attached setting out five separate periods during which his client had worked at a café named as Café Miro, together with a statement of the work that he had undertaken during those periods. The first period began on 1 December 2005 and the fifth began on 1 August 2007 and was continuing at the date of the letter i.e. 9 August 2007. Various documents were attached to the application. Among them was a letter signed by “Mr Glen Evans” who described himself as “Director and Executive Chef” of Café Miro Melbourne Pty Ltd (Café Miro PL) as well as various PAYG Payment Summaries and a letter signed by Mr Bastola. The application was successful.
…
[43] The letter signed by Mr Evans as the “Director and Executive Chef” of Café Miro showed a telephone and a facsimile number as well as a GPO Box number, 959. Mr Frugtniet said that the GPO Box number, 959, was that of Unique Mortgage Services of which he was a director in 2007. At the conclusion of the letter, the writer said that he was available between certain hours from Tuesday to Friday and giving a mobile telephone number. Mr Frugtniet agreed with Mr Rogers that this mobile number is his mobile number and that, had anyone chosen to call Mr Evans, he or she would have been calling him. Mr Frugtniet rejected “in totality” that he had fabricated the reference written by Mr Evans. He also rejected the suggestion that he had any hand in the creation of the letter.
[44] The documents lodged with the TRA include a statement made by “Glenn William Evans” who is a Chef. The statement was made on 24 May 2010. Mr Evans is now employed as a Trainer and Assessor and had been for the previous four years. Together with another person, Mr Evans is a director of Café Miro PL. Together, they operated Café Miro for some 12 years but sold the business in about October 2005. They kept the company and the name in case they wanted to go back into business. During the twelve years they conducted the business, they employed ten staff on either a full-time or part-time basis.
[45] In his statement, Mr Evans said that he had not written the letter dated 9 August 2007 for the following reasons:
“∙ the font used on the Café Miro Melbourne P/L is not what I used;
∙ I do not know nor do I recognise the name of ... Bastola;
∙ I did not train or have this person work for me;
∙ I have never had a PO Box number nor do I recognise the PO Box ... as belonging to anyone I know;
I do not recognise the phone number of 03 ..., the fax number ... or the mobile number ...;
∙ The business was sold and closed around October, 2005.
∙ The signature on the document is not mine and I didn’t sign it.
∙ All the hours said to have been worked are fictitious
…
In the proceedings before this Tribunal, Mr Frugtniet maintained he had nothing to do with the preparation of the false work history at Café Mira which had enabled Mr Bastola to obtain a favourable skills assessment from TRA. However he did confirm many of the critical facts found by the AAT in the MARA Decision as the following exchange before us reveals:
SENIOR MEMBER: All right. So Mr Frugtniet, I just wanted to step
through in hopefully very small increments what it is that you accept actually
factually happened occurred. So as I understand your evidence, you do
accept that - sorry, what s the gentleman’s name, Mr Bastola?
WITNESS: Bastola.
SENIOR MEMBER: Bastola, submitted a skills assessment to TRA?
WITNESS: Yes.
SENIOR MEMBER: That that s - and you accept that that skills assessment
included a letter purporting to be signed by Mr Evans who was director and
executive chef of Café Miro?
WITNESS: Yes.
SENIOR MEMBER: I suppose the contents of that letter suggested that Mr
Bastola had worked for Mr Evans in Café Miro. Is that correct?
WITNESS: Yes, that he had done 900 hours of work experience or worked
there and been remunerated, yes.
SENIOR MEMBER: That that letter included - indicated that if the TRA
wanted to discuss the contents of that document or Mr Bastola’s time
working with Café Miro, they could either send that - a request to a GPO box
or a fax number, or contact Mr Evans at that number. Is that right?
WITNESS: On the telephone as well, correct.
SENIOR MEMBER: Yes. The GPO box number that was given was the
GPO box - was it for UMS or was it your business?
WITNESS: I had it at one time and then it went over to UMS. So you could
say whether it was me or UMS, I m not sure of the actual dates but certainly
that GPO box, it belonged to me at one time.
SENIOR MEMBER: So you accept then that the GPO Box, the number that
was given was one to which you at all times had access?
WITNESS: That would be correct. On the letter head the so called
supporting letters, the Senior Member outlined, would have had the GPO box
listed which happened to be mine or UMS’s, that is correct.
SENIOR MEMBER: In addition to that the phone number for the contact to
talk to Mr Evans was your mobile phone number at the time?
WITNESS: That is correct.
SENIOR MEMBER: The letter indicated that this Mr Evans was contactable
between certain hours from Tuesday to Friday if TRA wanted to check the
veracity of the claimed work experience. Is that right?
WITNESS: That is correct.
SENIOR MEMBER: As I understand it what you’re telling us is that - so
your evidence is that you had nothing to do with that and that was a scheme
devised exclusively by someone else?
WITNESS: By Mr Bastola and others. Not me.
SENIOR MEMBER: But not you. And you had no involvement?
WITNESS: I had no involvement, sir. I produced a contract to do with Mr -
so that at least if you don t see it in the judgment, I produced a contract that
showed that my - that the contract specified what work I was supposed to do
for Mr Bastola.
SENIOR MEMBER: Yes, now if - now it would seem that the purpose of
that letter was to deceive the TRA into believing that Mr Bastola had worked
for Café Mira. Is that right?
WITNESS: Correct.
SENIOR MEMBER: Isn’t it the case that if they were to ring a number, and
I know it wasn’t common practice but if they were to ring someone s mobile
phone number, it was essential to the scheme for the scheme to work isn’t it,
that the person who answers the phone is in on the scheme?
WITNESS: Correct.
SENIOR MEMBER: Isn’t that therefore open to this tribunal as it was open
to Forgie DP to infer that you must have been in on the scheme because
otherwise the scheme would fall apart upon you being called?
WITNESS: I understand, and then that’s why I conceded that Forgie DP had
evidence upon which she could draw that conclusion… but equally I shouldn’t
be penalised for telling - or at least trying to explain the circumstances at the
time, that they weren’t checking and within a week they would send out a
positive assessment that he had access to the GPO box, he worked for
Australia Post, that he was in and out of the office, it was not just an isolated
client, that I did his immigration application, so on the other hand I agree
with the Senior Member that rightly so Forgie DP did have – that’s why she
said key player, if not necessarily - because circumstantially in that sense I
put myself - in that sense, I mean I’m doing an immigration application, I
could have been more prudent. I could have been a lot more diligent in that
respect. But nothing was brought to my attention saying Mr Bastola made a
complaint in 2011. Had he been checked - - -
SENIOR MEMBER: Sorry to interrupt you but nothing of what you’ve said
explains how the scheme could possibly work without your assistance.
Because as soon as the TRA call that mobile number and you answer the
phone, unless you’re in on the scheme, the scheme cannot work?
WITNESS: Yes, but that’s why you excluded the one possibility
notwithstanding that you recognise that TRA were not verifying. They were
not ringing…
As should be clear from the extract above, even without resorting to the MARA Decision, the basic facts of the deception of the TRA are not in dispute. A reference specifying a false work history for Mr Bastola was submitted to TRA. The contact details for verification of that false reference meant that if TRA ever sought to verify the employment history claimed, TRA would be directed to postal or telecommunication services controlled by Mr Frugtniet. Mr Frugtniet denies any involvement in the inclusion of his details on the false reference and instead effectively says that the conspirators chose the contact details for ‘Mr Evans’ without his knowledge because the TRA never checked those details.
Mr Frugtniet’s explanation is not credible. If, as he claims, the TRA never checked the material submitted to them then it would not be necessary to put the real contact details of any real person on the letter: a series of made-up details would suffice because they were never checked. Indeed, non-existent phone numbers would be preferable to having the contact details of a person who was not in on the scam. If the TRA rang the number provided (contrary to its usual practice) and Mr Frugtniet was not in on the scam, the conspirators’ dishonesty would be immediately revealed. In those circumstances, it is unlikely those responsible for submitting the false information to the TRA would have included the details of a person who was not in on the scam. The inclusion of Mr Frugtniet’s contact details in the submission to the TRA suggests – and we find – that he was involved in the deception in some capacity despite his denials of wrong-doing.
If Mr Frugtniet was aware of the fraud in relation to Mr Bastola, his denials of any involvement before this Tribunal involve the giving of false evidence under oath. We make this finding noting its seriousness and keeping firmly in mind the injunctions concerning such findings in Briginshaw v Briginshaw as applied to the Tribunal in Sullivan at [121] and [122].[43] We are satisfied that provides a basis for concluding Mr Frugtniet remains a dishonest man who cannot be trusted to tell the truth.
[43] (2014) 226 FCR 555
Making a false statement to MARA
ASIC alleges that in 1999 Mr Frugtniet completed a form to renew his registration as a migration agent. While the application form itself does not form part of the evidence before this Tribunal, there is a letter sent by MARA to Mr Frugtniet dated 19 December 2005, which sets out the terms of the question which the form asked and the answer which Mr Frugtniet gave. That letter is part of the evidence before this Tribunal.[44] Relevantly, the letter says:
In your application for repeat registration received by the Authority on 27 October 1999 and declared by you as being complete, correct and up to date in every detail on 26 October 1999 you were asked the following question:
11. Are you the subject of any criminal charges still pending before a Court, or have you ever been convicted of an offence which is not spent? Refer to Part VIIC Crimes Act 1914 (Cth) for a definition of a spent conviction.
You answered no to this question. According to the information before the Authority you were subject to criminal charges still pending before a court. You had been charged with six counts of theft and three of attempted theft, but were not acquitted of these charges until 23 March 2000.
[44] Exhibit 19b
Mr Frugtniet could not remember the question or answer exactly and he accepted on the balance of probabilities that what was recorded in MARA’s letter accurately reflected the question he was asked in the form and the answer he gave.[45] In those circumstances, we have no reason to doubt the question asked and the answer given is accurately set out in MARA’s ‘natural justice’ letter. Mr Frugtniet also accepted he was the subject of criminal charges pending before the courts at the time he answered that question on the form. Accordingly, by answering ‘no’ to the question he gave, to use his preferred word, ‘incorrect’ information.
[45] Transcript p 303
Mr Frugtniet appeared to accept (although his evidence was ultimately equivocal on this question) that there was nothing in the 1999 MARA form which rendered ‘no’ a truthful answer, nor was there any evidence that at some point prior to giving that answer he had advised MARA of the pending criminal charges. Not surprisingly Mr Frugtniet’s recollection of precisely what the form required and what he had or had not told MARA in the 1990’s was hazy. Given Mr Frugtniet’s hazy recollection and the lack of any meaningful corroborating evidence:
·We do not accept Mr Frugtniet’s claim that the 1999 form included a statement which permitted a person in Mr Frugtniet’s position to not disclose charges pending before the courts; and
·We are satisfied Mr Frugtniet had not previously disclosed such charges to MARA.
The question posed in the form was clear and the answer given was wrong. Having seen Mr Frugtniet give evidence we are satisfied that he has an exceptional ability to perceive the finest of differences in meaning conveyed by small changes in expression. He made considerable efforts to clarify the precise meaning of the words he used in answer to questions. We do not accept his contention that he misunderstood the question or the significance of the answer. We are satisfied he gave a deliberately false answer to the question.
CONCLUSION
Based on our finding that:
(a)Mr Frugtniet gave false evidence to VCAT when it considered the LIV application to seek orders under the Legal Profession Act;
(b)Mr Frugtniet gave false evidence to this Tribunal about his level of involvement in the provision of false information to the TRA by Mr Bastola (and also gave false evidence to the Tribunal in Frugtniet v MARA when the matter was heard by DP Forgie); and
(c)Mr Frugtniet gave false information to MARA in relation to his application for re-registration;
we are satisfied Mr Frugtniet has for many years been and remains a dishonest person. As honesty is essential for a person to be regarded as a fit and proper person to perform credit activities, we are satisfied not only that there is reason to believe he is not a fit and proper person, but on the evidence before us, we are positively satisfied he is not a fit and proper person to engage in credit activities.
In our assessment, given that the applicant has over many years proven himself to be a dishonest person who is willing to lie even in circumstances where he has sworn to tell the truth, he is not a fit and proper person to be involved in credit activities in any capacity. Moreover, given the long track record of dishonesty, we are satisfied the disqualification must be permanent. The applicant has demonstrated in the past a willingness to say things that are not true when it suits his interests and we are satisfied that in the course of giving evidence to us he did so again. The applicant appears unable to fully accept the scale of his past dishonesty, although he was, to his credit, able to give a more honest account of the events which gave rise to the LIV application than he has done in the past. There is however only limited evidence of reform and there remains significant evidence that the applicant continues to suffer from the character flaws which have got him into trouble in the past.
Honesty is essential in the conduct of credit activities, including when acting as a mortgage broker. It is essential that financial institutions can rely on documents prepared by mortgage brokers as honestly reflecting the credit worthiness of loan applicants. It is essential that mortgage brokers can resist the temptation to inflate the credit worthiness of an applicant in order to secure a commission from a successful loan application. The dishonest inclusion of income or assets in loan documentation can endanger the broader credit system if individual borrowers are happy with the service provided.
The applicant would very much like to be able to pursue work as a mortgage broker in some capacity, but we are not satisfied that the applicant could perform the required tasks honestly in light of his long track-record of dishonest behaviour. In our assessment it would be inappropriate to leave open any opportunities for him to participate in credit activities.
In these circumstances and in light of our conclusion that the Amending Act applies, the appropriate decision is to vary the decision under review to the following:
Rudy Frugniet is prohibited from:
(a) Engaging in any credit activities;
(b) Controlling whether alone or in concert with one or more other entities (as defined in section 64A of the Corporations Act 2001) another person who engages in credit activities;
(c) Performing any function involved in engaging in credit activities (including as an officer (within the meaning of the Corporations Act 2001) manager, employee, contractor, or in some other capacity).
If we are wrong and the Amending Act does not apply, we would have affirmed the decision under review.
We should add that we are also satisfied our factual findings about the applicant’s dishonesty also provide a reason to believe the applicant was likely to contravene credit legislation (or be involved in the contraventions of others) in the future were he to have the opportunity. We acknowledge that uncertainty over the applicant’s health and personal circumstances make the assessment of future conduct somewhat more difficult, but we are satisfied on balance that the applicant’s past conduct and the lack of insight he has demonstrated suggest he cannot be trusted to comply with the law in the future. That finding points independently to the same conclusion we have reached in relation to the ‘fit and proper person’ ground – namely, that a permanent, wide-ranging ban is appropriate and justified.
I certify that the preceding 86 (eighty-six) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe.
....................................SGD.................................
Associate
Dated: 22 February 2022
Date(s) of hearing: 17 February 2020 to 19 February 2020; 30 April 2020; 30 April 2020; 27 May 2020 to 29 April 2020; 3 August 2020 Applicant: In person Counsel for the Respondent: Ms F Bentley Solicitors for the Respondent: Self Represented
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