Frugtniet v Secretary, Department of Family and Community Services
[2004] AATA 996
•24 September 2004
[2015] AATA 128
| Division | GENERAL ADMINISTRATIVE DIVISION |
| File Number | 2014/3912 |
| Re | Rudy Noel Frugtniet |
| APPLICANT | |
| And | Australian Securities and Investments Commission |
| RESPONDENT |
DECISION
| Tribunal | G. D. Friedman, Senior Member |
| Date | 6 March 2015 |
| Place | Melbourne |
The Tribunal affirms the decision under review.
..........................[Sgd]......................................
G. D. Friedman, Senior Member
CATCHWORDS
CREDIT ACTIVITIES – banning order – whether fit and proper person to engage in credit activities – prior dishonest conduct – duration of order
LEGISLATION
National Consumer Credit Protection Act 2009 ss 37(2), 80(1), 81, 83
CASES
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Frugtniet v Board of Examiners [2002] VSC 140
Frugtniet v Board of Examiners [2005] VSC 332
Frugtniet v Law Institute of Victoria Limited [2012] VSCA 178
Frugtniet and Secretary, Department of Family and Community Services
[2004] AATA 996
Frugtniet and Tax Practitioners Board [2014] AATA 766
George and Australian Securities and Investments Commission [2014] AATA 167
Howarth and Australian Securities and Investments Commission [2008] AATA 278
Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) CLR 127
Re Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 634
Sullivan and Australian Securities and Investments Commission [2013] AATA 592
SECONDARY MATERIALS
Regulatory Guide 218 Licensing: Administrative action against persons engaging in credit activities
Regulatory Guide 204: Applying for and varying a credit licence
REASONS FOR DECISION
G. D. Friedman, Senior Member
6 March 2015
On 26 June 2014 a delegate of the respondent decided that it had reason to believe that Mr Frugtniet was not a fit and proper person to engage in credit activities and made a banning order permanently prohibiting him from engaging in any credit activities. Mr Frugtniet seeks review of the decision.
LEGISLATIVE BACKGROUND
The National Consumer Credit Protection Act 2009 (the NCCP Act) provides:
81 What is a banning order?
(1) A banning order is a written order that prohibits a person from engaging in any credit activities or specified credit activities in specified circumstances or capacities.
(2) The order may prohibit the person against whom it is made from engaging in a credit activity:
(a) permanently; or
(b) 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.
(4) A banning order is not a legislative instrument.
80 ASIC’s power to make a banning order
(1) ASIC may make a banning order against a person:
…
(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
…
(f) if ASIC has reason to believe that the person is not a fit and proper person to engage in credit activities;
…
(2) For the purposes of paragraphs (1)(e) and (f), ASIC must (subject to Part VIIC of the Crimes Act 1914) have regard to the following:
(a) if the person is a natural person—the matters set out in paragraphs 37(2)(a) to (f) and subparagraph 37(2)(g)(i) in relation to the person;
…
(c) any criminal conviction of the person, within 10 years before the banning order is proposed to be made;
(d) any other matter ASIC considers relevant;
(e) any other matter prescribed by the regulations.
Note: Part VIIC of the Crimes Act 1914 includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them.
37 When a licence may be granted—applicants other than ADIs
When ASIC must grant a licence
…
Matters ASIC must have regard to
(2) For the purposes of paragraphs (1)(b) and (c), ASIC must (subject to Part VIIC of the Crimes Act 1914) have regard to the following:
(a) whether a registration under the Transitional Act, a licence or an Australian financial services licence of the person has ever been suspended or cancelled;
(b) whether a banning order or disqualification order under Part 2-4 has ever been made against the person;
(c) whether a banning order or disqualification order under Division 8 of Part 7.6 of the Corporations Act 2001 has ever been made against the person;
(d) whether the person has ever been banned from engaging in a credit activity under a law of a State or Territory;
(e) any relevant information given to ASIC by a State or Territory, or an authority of a State or Territory, in relation to the person;
(f) if the person is not the trustees of a trust—whether the person has ever been insolvent;
(g) if the person is a single natural person:
(i) whether the person has ever been disqualified from managing corporations under Part 2D.6 of the Corporations Act 2001;
(ii) any criminal conviction of the person, within 10 years before the application was made;
…
(i) any other matter ASIC considers relevant;
83 Variation or cancellation of banning orders
(1) ASIC may vary or cancel a banning order if ASIC is satisfied that it is appropriate to do so because of a change in any of the circumstances based on which ASIC made the order.
(2) ASIC may do so:
(a) on its own initiative; or
(b) if the person against whom the order was made lodges with ASIC an application for the variation or cancellation.
…
ISSUES
The issues before the Tribunal are:
· Does the Tribunal have reason to believe that Mr Frugtniet is not a fit and proper person to engage in credit activities? If so:
· Should the Tribunal make a banning order against Mr Frugtniet? If so:
· What should be the duration of the banning order?
DOES THE TRIBUNAL HAVE REASON TO BELIEVE THAT MR FRUGTNIET IS NOT A FIT AND PROPER PERSON TO ENGAGE IN CREDIT ACTIVITIES?
Regulatory Guide 218 Licensing: Administrative action against persons engaging in credit activities (RG 218) produced by the respondent describes the administrative powers available to the respondent to enforce compliance with the NCCP Act.
·RG 218.53 states that the respondent is likely to make a banning order against a person where there are serious concerns about the person and, in particular, where there is a need to protect consumers.
·RG 218.55 provides that, in determining whether to pursue administrative action such as a banning order, consideration must be given to the particular facts of the individual case. Table 1 at the end of RG 218.55 sets out a non-exhaustive list of factors which might be taken into account in determining whether to pursue administrative action. These include:
o the nature and seriousness of a person’s conduct, including, for instance, the duration of the conduct and any dishonesty;
o the person’s conduct subsequent to any misconduct, including, for instance, any demonstrated contrition;
o the previous regulatory record of the person; and
o any mitigating factors advanced by the person.
Table 2 at the end of RG 218.55 sets out examples of conduct and indicates the potential consequences that might follow from engaging in that conduct. Table 2 states that, among other things, the following matters might be relevant to the making of a permanent banning order:
· dishonesty;
·continued, knowing and wilful contravention of the law and disregard for legal obligations;
· previous contraventions of the law;
· serious incompetence or irresponsibility;
·a likelihood that the person will engage in similar contravening conduct in the future; and
· significant adverse impact on consumer confidence.
Table 2 also provides some indicative examples of conduct which might give rise to a permanent banning order:
· engaging in fraud; and
·engaging in a pattern of persistent contraventions that indicates systemic failure or a general lack of understanding of and regard for compliance.
Regulatory Guide 204: Applying for and varying a credit licence (RG 204) provides guidance to people who want to apply for a credit licence. RG 204.177 provides that to be a fit and proper person to engage in credit activities means that the person:
(a)is competent to operate a credit business (as demonstrated by the person’s knowledge, skills and experience);
(b)has the attributes of good character, diligence, honesty, integrity and judgment;
(c)is not disqualified by law from performing their role in your credit business; and
(d)either has no conflict of interest in performing their role in your credit business, or any conflict that exists will not create a material risk that the person will fail to properly perform their role in your credit business.
Mr Frugtniet was born in Sri Lanka and spent his early years in the United Kingdom. He migrated to Australia in 1990 and is an Australian citizen. In 2001 he graduated with a Bachelor of Laws from Deakin University and completed a Master of Laws degree from Deakin University in 2003. He told the Tribunal that he commenced as a finance broker in 2004 as sole proprietor of Unique Mortgage Services (UMS) which provided mortgage and loans facilities. He said that when UMS made application for registration to engage in credit activities each of the statements he made was true and no issue was taken by the respondent. He said that he had relevant experience in the provision of credit and had completed a Certificate IV in Financial Services in 2008, plus a Diploma in Finance in 2011 at a private educational institution in Melbourne.
By way of background Mr Frugtniet disclosed to the Tribunal that on 4 January 1978 he was convicted in the Leeds Crown Court in the United Kingdom on 15 counts of handling stolen goods, forgery, obtaining property by deception and theft. He was sentenced to a term of imprisonment and served two years. Mr Frugtniet stated that the sentence is spent under Commonwealth legislation, so it was not relevant to the application under review.
On 15 November 1995 the Administrative Appeals Tribunal of Victoria found that Mr Frugtniet had been involved in the conduct of Tarson Pty Ltd, a travel agency of which his former wife was a director. This was in breach of a special condition imposed on the agency excluding Mr Frugtniet from any involvement in the business. Mr Frugtniet stated that the company breached the licence condition and he was not party to the proceedings, so the issue was not relevant to the decision under review.
On 24 November 1997 in the Broadmeadows Magistrates’ Court Mr Frugtniet was found guilty of obtaining property by deception in relation to the issue of airline tickets and was fined $1000 without conviction. Mr Frugtniet told the Tribunal that as no conviction was recorded the matter was not relevant to the decision under review.
In March 1998 Mr Frugtniet was charged with six counts of theft and three counts of attempted theft, in which it was alleged that he had given personal details of accounts to an accomplice while working at the ANZ Bank.
On 26 October 1999 Mr Frugtniet applied to the Migration Agent Registration Authority (MARA) for registration as a migration agent and answered “No” to a question asking whether he was the subject of criminal charges still pending before a court, or had been convicted of an offence which was not spent. However at the time he was the subject of the pending criminal charges concerning his employment with the ANZ Bank. In March 2000 he was acquitted of the charges, while an accomplice pleaded guilty.
In August 2001 Mr Frugtniet applied to the Board of Examiners for admission to practise as a barrister and solicitor and an officer of the Supreme Court of Victoria. His application was refused on 22 October 2001, and on 1 May 2002 the Supreme Court of Victoria dismissed Mr Frugtniet’s appeal against the decision, finding that Mr Frugtniet had failed to satisfy the Court that he was a fit and proper person for admission to legal practice (Frugtniet v Board of Examiners [2002] VSC 140). Pagone J stated at [12]:
[12] [Mr Frugtniet] accepted during his submissions to me that the perjury charges, the ANZ charges and the UK convictions were matters that ought to have been disclosed and considered in deciding whether he was a fit and proper person for admission to practice. The Board of Examiners might itself have found in his favour if he had candidly laid out these matters, and if he had done so, there would have been more prospect of the present appeal succeeding. However, these were matters that only came to light upon investigations undertaken by the Board itself after its adverse decision, after Mr Frugtniet's institution of this appeal and after Mr Frugtniet had filed his first affidavit in this court in support of the appeal. In those circumstances I have no present confidence that Mr Frugtniet would have disclosed these matters if they had not come to the Board's knowledge and had the Board not tendered the evidence in the proceeding before me.
On 21 May 2002 MARA initiated a complaint against Mr Frugtniet about his conduct as a migration agent concerning possible false declarations arising from his answers to questions about his involvement in past investigations or inquiries. On 3 February 2003 MARA decided to take no further action at this stage in relation to the complaint, but MARA informed Mr Frugtniet:
However, the Authority reminds you that the legislation requires you to declare any charges other than spent convictions and you are required to declare them in the future. Should further information regarding this matter come to the attention of the Authority or should the content of this complaint demonstrate a pattern of behaviour which is disclosed in other complaints then the Authority may take this matter into account in future deliberations.
Mr Frugtniet told the Tribunal that the respondent had been provided with documents showing that the matter of false declarations had been investigated, and MARA had found that no false declarations were made. Therefore the issue was not relevant to the decision under review.
On 27 July 2004 Mr Frugtniet applied again to the Board of Examiners for admission to practise. His application was refused on 11 February 2005 and on 24 August 2005 the Supreme Court of Victoria dismissed his appeal against the decision (Frugtniet v Board of Examiners [2005] VSC 332). Gillard J stated at [47]:
[47] The date of the declaration is 26 October 1999. On no view could that answer be correct. He admits as much now. At that time he was facing nine charges concerning his employment at the ANZ Bank. The answer to the question: "Are you the subject of any criminal charges still pending before a court?" should have been "Yes". When asked by the Court as to his explanation, the appellant prevaricated, did not initially answer the question but referred to the fact that the matter was raised years later by MARA, he gave them an explanation and no further action was taken by the authority. Eventually he admitted to the Court that his answer was wrong and he should have answered "Yes". Another matter of concern is that he did not appreciate the importance of making a false declaration. He informed the Court that he had in fact in a separate document told MARA of the charges. He was unable to produce a copy and MARA did not have any copy. I have grave doubts about his evidence. But as was put to him, if he was revealing this information to MARA in another way, then his answer should have been "Yes", and reference back to an earlier communication. The way he gave evidence in relation to this raises considerable concerns about his honesty and more importantly whether he is prepared to be frank about his past indiscretions. His seemingly ignorant attitude to the importance of a statutory declaration is also a matter of concern. As the Court asked him "Would you advise a client to do what you did in the circumstances?" He said "No".
Gillard J stated further:
[67] The appellant carries with him a massive bag of dishonest conduct. It is a pattern of conduct committed over an extensive period…
[68] His pattern of conduct raises a substantial question mark concerning his honesty and his character and reputation. He is a person who does not appear to have learned from his experiences during 1989 to 2000. He carries a very heavy burden of persuading this Court that he is a person of good character and reputation and a fit and proper person to practise law. He has not discharged that burden. The way he has presented himself to this Court shows a man who is loose with the truth and is prepared to distort the truth if he thinks it will help him. Often he was asked questions which he failed to answer and went off on some tangent seeking to minimise his criminality in the past. The evidence does not persuade me that the appellant has learned from his past experience, or that he is a person motivated to tell the truth.
…
[70] The appellant has to frankly and candidly state the level of his dishonesty in the past, and not seek to hide it. He must show that it will not reoccur. Unfortunately he has not demonstrated any of these matters to the Court. Indeed, he is one of those witnesses who, when asked a question, thinks how he should answer the question rather than answering it truthfully and accurately. It will take, in my view, many years of blameless conduct before one could have any confidence that the appellant has shed his past, turned over a new leaf and intends to pursue a blameless and honest career.
Mr Frugtniet stated that he accepted that he was unable to satisfy the requirements for admission because he had failed to make full disclosure under Victorian legislation, and this was caused by his mindset at the time, when he believed that he was not required to disclose spent convictions.
On 24 September 2004 the Tribunal made a decision on an application by Mr Frugtniet in relation to an overpayment of social security payments to him (Frugtniet and Secretary, Department of Family and Community Services [2004] AATA 996). The Tribunal found that the debt owed by Mr Frugtniet was incapable of being waived under social security legislation because the debt had resulted from Mr Frugtniet knowingly making false statements in support of his application for social security benefits. The Tribunal stated at [36]:
| [36] In this case, Mr Frugtniet was clearly aware, at the time that he made the statements, that he was employed on a full-time basis by Network Recruitment and the evidence was that his migration practice had also become active again, which explained the deductions claimed in his 2000 income tax return. Therefore, the answer "No" to a question asking whether he did any work in the relevant period must have been made in the full knowledge of the falsity of that statement… |
However the Tribunal set aside the decision to recover the debt because of the respondent’s failure to comply with data-matching legislation.
Mr Frugtniet denied making false statements and stated that he would have lodged an appeal to the Federal Court against the Tribunal’s findings, but was unable to do so because he had been successful in recovering the amount of the debt in full. He said that no further recovery action had been brought against him.
On 11 July 2005 UMS (of which Mr Frugtniet was the sole director, secretary and shareholder) and Australian Finance Group (AFG) entered into an agreement in which UMS would receive a commission for referring potential customers to AFG. Mr Frugtniet declared to AFG that he had not been convicted of an offence involving a criminal charge relating to fraud, dishonesty or deceptive conduct in the previous ten years; had not been refused membership of a statutory professional body; and had not been subject to disciplinary proceedings by a statutory professional body.
Mr Frugtniet told the Tribunal that his answers were technically correct at the time. Under cross-examination he maintained that there was no need to divulge other proceedings, including criminal proceedings and Supreme Court matters.
On 24 November 2010 UMS lodged with the respondent an application for an Australian credit licence and this was granted, effective from 24 December 2010. Mr Frugtniet was the sole director, secretary and shareholder, and he declared in the application form that all information was complete and accurate, including questions about his status as a fit and proper person.
Mr Frugtniet stated that he did not make any false statements in the application as he was not refused a right in which authorisation was required; was not the subject of disciplinary proceedings in relation to such an authorisation; was not the subject of an investigation that may result in disciplinary proceedings in relation to such an authorisation; and was not the subject of any proceedings that were determined adversely as he was not a lay associate nor intended to be one in respect of the proceedings at Werribee Magistrates’ Court.
On 8 April 2011 the Victorian Civil and Administrative Tribunal (VCAT) granted an application by the Law Institute of Victoria and decided that Mr Frugtniet was, for three years, a disqualified person under the Legal Profession Act 2004 (Vic.) (the LP Act). The basis for the decision was that on 25 May 2010 Mr Frugtniet had deliberately and falsely represented to a barrister that he was a solicitor; and had deliberately given to a magistrate the false impression that he was a solicitor. On 13 August 2012 the Victorian Court of Appeal dismissed Mr Frugtniet’s appeal against the decision other than a finding by VCAT of contempt (Frugtniet v Law Institute of Victoria Limited [2012] VSCA 178). At the time of becoming a disqualified person Mr Frugtniet was required to notify the respondent of his status as a disqualified person in respect of his connection with the Australian credit licence held by UMS.
Mr Frugtniet stated that the proceedings before VCAT were not disciplinary proceedings, and he emphasised that no contempt charges were sustained against him. Mr Frugtniet stated further that at the time of his appearance at the Werribee Magistrates’ Court he was not a lay associate or intending to be one, and appeared on a once-only basis to help a group of families. He said that the proceedings in the Magistrates’ Court were preliminary and nothing fundamental to the proceedings actually occurred, but he regretted his actions which were simply wrong. Mr Frugtniet said that at the time of becoming a disqualified person under the LP Act he was not a disqualified person for the purposes of his credit activities and was not required to notify the respondent.
As a result of Mr Frugtniet becoming a disqualified person under the LP Act the Business Licensing Authority cancelled his conveyancing licence under the Conveyancers Act 2006 (Vic) and imposed conditions on the conveyancing licence of UMS. These conditions included a prohibition on UMS allowing the involvement of Mr Frugtniet with UMS in any way. Despite these prohibitions, apparently Mr Frugtniet has continued to be involved with UMS as indicated by its website. He remained the sole director until 16 June 2011, the sole shareholder until 19 October 2011 and the company secretary until 12 January 2013.
Mr Frugtniet stated that the cancellation of his conveyancing licence was automatic as a consequence of disqualification under the LP Act and for no other reason. Hs stated that he had resigned as a director of UMS and that the conditions applied only to the conveyancing aspect of UMS (which trades as Mortgage Migration & Conveyancing Services). He did not accept that he had breached the terms of the disqualification.
On 16 January 2013 the Tax Practitioners Board terminated Mr Frugtniet’s registration as a tax agent and prohibited him from registering as a tax agent for five years on the basis that he was no longer a fit and proper person to be registered as a tax practitioner. Mr Frugtniet applied to the Tribunal for review and on 23 October 2014 the Tribunal affirmed the decision (Frugtniet and Tax Practitioners Board [2014] AATA 766). The Tribunal stated at [20]:
[20] The expression “fit and proper person” encompasses not only a range of matters to be considered, but also the activities to which the expression has been applied. This was explained by the High Court of Australia (Mason CJ, Brennan, Deane, Toohey and Gaudron JJ) in Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321. Toohey and Gaudron JJ said, 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. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
The Tribunal stated further at [105] to [108]:
[105] …If, as he contended, he had put his past misdeeds behind him, I would have expected him to have disclosed his past conduct, including charges of which he was acquitted, which would then indicate sincerity in having changed from the person he was. That he chose not to do so, must be cause for concern that he has not changed his behaviour. In fact, the judgements of Pagone and Gillard JJ are highly critical of Mr Frugtniet’s failure to disclose his past misconduct. As Gillard J said, if his past conduct shows him to be a man who is dishonest and cannot be trusted, he must show that his past is behind him and that he can be trusted to pursue an honest career. I find that Mr Frugtniet has failed to do so in answering the questions in his application in the negative.
[106] I have also found the way in which Mr Frugtniet attempted to exculpate himself to be most disturbing. For example, his arguments about the Board of Examiners not being a professional body or registration board were wholly unmeritorious in the context in which he was required to make disclosure to the Board regarding his fitness and propriety to act as a tax agent.
107] Similarly, Mr Frugtniet ’s explanation for his conduct when he appeared before the Werribee Magistrates’ Court is cause for serious concern. Despite transcript of that proceeding clearly indicating that he held himself out to be a sole practitioner (inferring that he was admitted as a legal practitioner) to the Magistrate, he then gave a totally implausible explanation including the suggestion that he was referring to the conduct of his practice as a migration agent, tax agent and conveyancer. It also appears as though Mr Frugtniet concocted a power of attorney for the purpose of establishing his right to appear on behalf of his clients. If that was the basis upon which he appeared, it begs the question why his response to the Magistrate was that he was a sole practitioner. In his supplementary submissions lodged with the Tribunal on 8 August 2014, Mr Frugtniet attempted to excuse his conduct by suggesting he had a brain snap and acted out of loyalty to a friend. I must say that every excuse Mr Frugtniet offered simply appears to make the situation worse than it was at the outset.
[108] Finally, the most recent matter for concern was the complaint lodged by Ms Galvez-Londono regarding her tax return for the 2011 income year. His conduct in that matter indicates that he has learnt nothing from the past and that his dishonest behaviour has continued unabated. I find that he is clearly not a fit and proper person to be registered as a tax agent. He should not be permitted to deal with other people’s money in any circumstances.
Mr Frugtniet stated that he does not accept many of the Tribunal’s findings and has lodged an appeal to the Federal Court of Australia on a question of law.
On 6 November 2014 MARA cancelled Mr Frugtniet’s registration as a migration agent following a complaint about the provision of false information to authorities and a finding that Mr Frugtniet was not a fit and proper person to be a registered migration agent.
Under cross-examination Mr Frugtniet agreed that during the current proceedings he had not informed the respondent of MARA’s decision, and had not referred to the decision at the time of preparing his Statement of Facts and Contentions dated 20 October 2014 because no formal finding had been made at that time. He denied that his action contradicted his contention that Mr Frugtniet appears to have been successful as a migration agent for 16 years without attracting detrimental attention. He said that he made no reference to the MARA decision in his response to the respondent’s Statement of Facts, Issues and Contentions that he filed on 27 November 2014 because he was replying to the respondent’s claims, although he maintained that he was intending to disclose the decision to the respondent at the hearing even though he did not consider that he had any obligation to do so.
In his application for a stay of implementation of the current proceedings, Mr Frugtniet stated as one of the reasons for seeking a stay: …Public protection paramount, hence, not a single complaint. He told the Tribunal that this statement was correct. Under cross-examination he agreed that there had, in fact, been a complaint about his activities as a credit facilitator, but stated that the Financial Services Ombudsman had not made a determination, so the matter could not be considered to be a complaint, as that word means a complaint that had been proved or sustained and not merely alleged.
Mr Frugtniet said that an assessment of whether he is a fit and proper person should be made in the context of his current activities in the field of providing credit facilities rather than concentrating on past matters, except where relevant. He said that there are no matters that affect adversely his character, honesty and ability to deal in credit activities.
Mr R McKinnon, an investigator with the respondent, told the Tribunal in an affidavit dated 11 November 2014 that he carried out an investigation and discovered that on 30 October 2014 the website offered a range of credit facilities including home loans through UMS and listed Mr Frugtniet as the contact person. He also produced copies of newspaper articles that referred to Mr Frugtniet’s criminal history. Mr Frugtniet explained that although the website was established in about 2009 and was in existence on 30 October 2014, it remained dormant for a considerable time and UMS has not engaged in credit facilities in recent times.
Consideration
The Tribunal should follow government policy unless there are cogent reasons for not doing so, in the particular circumstances of a given case (Re Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 634). In the application under review the Tribunal considers that there are no cogent reasons for not doing so, and the Tribunal applies the policy contained in RG 204 and RG 218, in particular the factors set out in RG 218.55.
The meaning of the term fit and proper person was considered by the High Court of Australia in Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) CLR 127 where Dixon CJ, McTiernan and Webb JJ found the word fit, in relation to an office, involves honesty, knowledge and ability. The meaning of fit and proper person was also considered by the High Court in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321. Toohey and Gaudron JJ said 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.
Mr Frugtniet maintained that his term of imprisonment in 1978 in the United Kingdom was a spent conviction under Commonwealth legislation and had no relevance to the application under review. The Tribunal does not accept this assertion because the conviction is evidence of dishonest conduct that is relevant under the policy guidelines.
In respect of the matter involving Tarson Pty Ltd the Tribunal does not accept Mr Frugtniet’s assertion that as he did not breach the terms of its licence it was the company, not him, that was at fault. Mr Frugtniet conceded in evidence that it was his own behaviour that caused the breach, and this is an example of dishonest conduct for which Mr Frugtniet has not accepted responsibility.
Although no conviction was recorded at the Broadmeadows Magistrates’ Court on 24 November 1997 Mr Frugtniet was found guilty of obtaining property by deception, and this is a further example of dishonest conduct that is relevant to the Tribunal’s proceedings.
The Tribunal takes into account that in March 2000 Mr Frugtniet was acquitted of charges of theft and attempted theft while working for the ANZ Bank. However when he made application to MARA on 26 October 1999 for registration as a migration agent he did not disclose the charges, which were still pending, and despite his assertions that MARA had investigated the matter and had cleared him of any wrongdoing, documents show that on 3 February 2003 MARA decided not to take further action against him, although he was reminded of the requirement to declare any charges other than spent convictions.
The Tribunal takes into account that in 2004 Mr Frugtniet conceded that he was unable to satisfy the Board of Examiners that he met the requirements for admission to legal practice and that he failed to make full disclosure under State legislation. However despite his claims that his failure was caused by his mindset at the time, this is another example of Mr Frugtniet’s failure to make full disclosure of relevant matters when he knew or ought to have known that he was required to do so.
In respect of the Tribunal’s findings in 2004 that Mr Frugtniet had knowingly made false statements which resulted in a debt owed to the Commonwealth under social security legislation, Mr Frugtniet stated that he would have lodged an appeal but for the fact that his application was successful on other grounds. This is a further example of Mr Frugtniet not accepting an independent decision that reached adverse conclusions about his honesty.
In the agreement between UMS and AFG on 11 July 2005 Mr Frugtniet relied on technicalities including the fact that he had not been convicted of a criminal offence involving fraud in the previous ten years. However this restrictive and narrow approach ignored the duty of full disclosure. It must have been obvious to Mr Frugtniet that AFG would have been particularly interested in previous matters involving dishonesty, including the 1997 finding of guilt, even if actual convictions did not occur within the stipulated time limit. Similarly, when completing the credit licence application on behalf of UMS in November 2010 Mr Frugtniet provided answers that were false or misleading by not revealing all his relevant history. As Pagone J noted in Frugtniet v Board of Examiners [2002] VSC 140 at [11]:
The evidence before me does not establish to my satisfaction that Mr Frugtniet is now a fit and proper person for admission. The way in which details of the perjury charges, the ANZ charges and, more particularly, the UK convictions have come to light in this proceeding have not left me with sufficient confidence in Mr Frugtniet. His obligation was to disclose matters that could inform a judgment about whether he was a fit and proper person for admission to practice. It was not an obligation merely to list convictions or charges, but was an obligation to inform the decision maker of everything that could bear upon the judgment that needed to be made about him and his character. His task was not to select or edit from his life's experiences only some events that might be relevant to the question, but to disclose every matter that might fairly assist in deciding whether Mr Frugtniet was a fit and proper person at the time of admission. Revealing more than might strictly be necessary counts in favour of an applicant; especially where the disclosure still carries embarrassment or discomfort. Revealing less than may be necessary distorts the proper assessment of Mr Frugtniet and may itself show an inappropriate desire to distort by selection and screening of relevant facts.
In respect of the false representation at the Werribee Magistrates’ Court, Mr Frugtniet conceded that his actions were wrong. However he sought to minimise his wrongdoing by claiming that he had a brain snap; the proceedings were of a preliminary nature; and he was helping a friend. He claimed to have misled by omission. This demonstrates yet again that Mr Frugtniet has not gained an insight into the serious nature of his actions.
In respect of the cancellation of the conveyancing licence held by Mr Frugtniet, UMS was required to ensure that Mr Frugtniet had no involvement with the company. However despite his evidence that the website listing his name as the contact person for UMS in the provision of credit facilities, including loans, has been dormant for some time, Mr Frugtniet appears to have continued his involvement with UMS. This is demonstrated by the evidence from Mr McKinnon that the website was in existence on 30 October 2014, which is after the date of the banning order, and shows either a complete disregard for the banning order, or at least carelessness that had the potential to mislead the public about UMS and its provision of credit services.
In respect of the Tribunal’s decision in 2014 to affirm the decision of the Tax Practitioners’ Board to cancel Mr Frugtniet’s registration as a tax agent, the Tribunal notes that in those proceedings Mr Frugtniet did not accept the independent decision that his failure to disclose all relevant past conduct was wrong, despite the earlier comments by Gillard J and Pagone J in the Supreme Court.
In respect of the MARA decision of 6 November 2014 to cancel Mr Frugtniet’s registration as a migration agent, the Tribunal does not accept his assertion that he had no obligation to disclose the decision to the respondent before the hearing. When he compiled his Statement of Facts and Contentions dated 20 October 2014 Mr Frugtniet was aware that the matter was before MARA as a result of a complaint against him because a notice was issued to him by MARA on 5 September 2014 informing him of its proceedings. His assertion that he had not attracted detrimental attention as a migration agent was incorrect and misleading, not only because of the complaint that led to the proceedings by MARA but also because of adverse media articles identified by Mr McKinnon.
Mr Frugtniet was aware of the decision by MARA to cancel his registration as a migration agent when he prepared his statement to the Tribunal dated 27 November 2014 in reply to the respondent’s Statement of Facts, Issues and Contentions, and the decision by MARA was clearly relevant to the application under review because it was another example of a finding that Mr Frugtniet was not a fit and proper person. Mr Frugtniet should have provided the decision to the respondent and to the Tribunal as soon as he became aware of it.
The Tribunal does not accept Mr Frugtniet’s statement in his application for a stay of the implementation of the decision under review that there has not been …a single complaint. The meaning of the word complaint in the Macquarie Dictionary is information in written form giving details of an alleged criminal offence. There is no requirement for proof or substantiation, because a complaint is the process by which an allegation is raised and brought to the attention of the relevant person or authority. Consequently Mr Frugtniet was aware that a person had made allegations against him when he sought a stay of the decision under review, even if the complaint had not been substantiated at the time.
On all the material before the Tribunal there is no doubt that Mr Frugtniet has been the subject of multiple findings of dishonesty by courts, tribunals and other bodies. He has been told repeatedly that his conduct is unacceptable and that he needs to demonstrate that he has changed his behaviour before he can be considered to be a person of integrity, trustworthiness and good character. However in his evidence to the Tribunal Mr Frugtniet has continued to minimise the nature and seriousness his past actions and his dishonest conduct. The Tribunal does not accept that he has shown genuine remorse for a lack of candour in the past.
Mr Frugtniet has been told that he is required to disclose his past conduct in a complete and accurate manner. Despite this, he has shown a complete lack of insight into his past conduct, and has failed to make full and frank disclosure to the Tribunal. His action in failing to disclose to the respondent and to the Tribunal, until the hearing of the application under review, the decision by MARA on 6 November 2014 to cancel his registration as a migration agent shows that he has learnt nothing from previous findings about his character. Similarly his assertion that he has not been the subject of a single complaint about his behaviour as a credit facilitator is wrong and misleading.
For these reasons the Tribunal finds that Mr Frugtniet has not shown himself to possess the attributes of good character, diligence, honesty, integrity and judgment as set out in RG 204.177, and the Tribunal is satisfied that, having regard to the relevant factors in s 80(2) and s 37(2) of the NCCP Act, it has reason to believe that Mr Frugtniet is not a fit and proper person to engage in credit activities.
SHOULD THE TRIBUNAL MAKE A BANNING ORDER AGAINST MR FRUGTNIET?
Mr Frugtniet stated that he is not involved in the provision of credit; is not a licensee; and has had no issues with consumers that have resulted in any substantiated complaint during the ten years since he became a mortgage broker until June 2014. He stated further that he has demonstrated a knowledge of financial services laws and has not been disqualified to be a manager, secretary or director of any company. He said that he has not breached any of the matters contained in s 37(2) of the NCCP Act, and other matters raised by the respondent are not relevant. He said that he is aged 60 years and has responsibility for the care of three young children. He emphasised that the banning order has impacted adversely on his ability to earn an income since June 2014.
Mr Frugtniet submitted that it would be open to the Tribunal to impose conditions on him under the NCCP Act for him to work as an employee or credit representative under the responsibility of an employer or principal.
Consideration
The purpose of a banning order is to protect the public and is not a form of punishment, and deterrence is relevant not only to the person who is subject to the order but to others in the industry or might become involved (Howarth and Australian Securities and Investments Commission [2008] AATA 278).
In Sullivan and Australian Securities and Investments Commission [2013] AATA 592 the Tribunal stated at [20] and [21]:
[20] Most of Mr Sullivan’s submissions missed the point. Credit providers play an important role in the economy, and rogues can undermine confidence in the financial system and hurt individual consumers. The poor and unsophisticated are especially vulnerable. The legislative scheme, and banning orders in particular, are designed to protect consumers and promote efficiency and confidence in the integrity of credit providers.
[21] While I note Mr Sullivan claimed he has learned from his experience and will run the business differently in the future, I am not satisfied he has demonstrated any genuine insight into his errors. In particular, he has continued to attempt to defend the indefensible behaviour that resulted in the criminal convictions against him in 2010. The regulatory system cannot function if individual participants are dishonest, and behaviour that suggests an individual is not committed to being open and honest with the regulator is of grave concern. I think a banning order is the only appropriate course; I do not have any confidence Mr Sullivan would rapidly and diligently address the shortcomings that have been identified if he were merely suspended. A banning order will protect the public from the risk he poses.
A banning order provides deterrence to Mr Frugtniet and also to others who are involved in the credit industry or who may become involved. In the circumstances where the Tribunal has concluded that Mr Frugtniet has shown no insight into his past conduct the Tribunal concludes that a banning order is appropriate.
WHAT SHOULD BE THE DURATION OF THE BANNING ORDER?
Mr Frugtniet said that a decision on the length of any banning order should not be made solely on the basis of previous unsatisfactory conduct, as this might lead to a situation where he could never be rehabilitated. He noted that in George and Australian Securities and Investments Commission [2014] AATA 167 the applicant had received and used consumers’ money improperly and provided false documents, and the Tribunal had taken into account that the conduct was out of character and the applicant had expressed remorse.The Tribunal varied a permanent banning order to a ban of three years, during which the applicant was to undergo further training and rehabilitation.
Consideration
As a result of Mr Frugtniet’s dishonest conduct over a prolonged period; his failure to show any real awareness of the nature, extent and significance of that conduct; and a demonstrated disregard for compliance with regulatory requirements, the Tribunal is satisfied that a permanent banning order is appropriate. Mr Frugtniet would need to satisfy the respondent that he has genuinely changed his character flaws that have caused his dishonest conduct before he is permitted to engage in credit activities in the future. The Tribunal notes that s 83 of the NCCP Act makes provision for a person who is the subject of a banning order to apply to the respondent for the variation or cancellation of the order if there is a change in circumstances.
DECISION
The Tribunal affirms the decision under review.
| I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for the decision of G. D. Friedman, Senior Member |
............................[Sgd]......................................
Associate
Dated 6 March 2015
| Dates of hearing | 29 and 30 January 2015 |
| Date of final submissions Applicant | 2 March 2015 In person |
| Counsel for the Respondent | Mr R Knowles |
| Solicitors for the Respondent | Australian Securities and Investments Commission |
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