Johnson v Director of Consumer Affairs Victoria

Case •

[2011] VSC 595

•

23 November 2011
IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST

S CI 2011 01953

DEAN JOHNSON Applicant
v
DIRECTOR OF CONSUMER AFFAIRS VICTORIA Respondent

S CI 2011 01952

DEAN JOHNSON Plaintiff
v
VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL and DIRECTOR OF CONSUMER AFFAIRS VICTORIA Defendants

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JUDGE:

KYROU J

WHERE HELD:

Melbourne

DATE OF HEARING:

15 November 2011

DATE OF JUDGMENT:

23 November 2011

CASE MAY BE CITED AS:

Johnson v Director of Consumer Affairs Victoria; Johnson v Victorian Civil and Administrative Tribunal

MEDIUM NEUTRAL CITATION:

[2011] VSC 595

JUDGMENT APPEALED FROM:

Director of Consumer Affairs Victoria v Wayne Sweeney & Associates (Footscray) Pty Ltd (Unreported, Victorian Civil and Administrative Tribunal, Aird DP, 31 March 2011)

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ADMINISTRATIVE LAW – Victorian Civil and Administrative Tribunal (‘VCAT’) – Appeal on a question of law – Whether an order made without jurisdiction involves a question of law – Victorian Civil and Administrative Tribunal Act 1998 (‘VCAT Act’) s 148(1).

ADMINISTRATIVE LAW – Application for leave to appeal from an order of the VCAT cancelling a real estate agent’s licence and disqualifying the agent from holding a licence for two years – Whether the VCAT, as constituted, had jurisdiction to make the order – Victorian Civil and Administrative Tribunal Rules 2008 (‘VCAT Rules’) r 5.03(2), (4).

ADMINISTRATIVE LAW – Inquiry under s 25 of the Estate Agents Act 1980 (‘EA Act’) – Underquoting price of properties for sale – Whether the VCAT has jurisdiction to make a finding that a person is not a fit and proper person to hold a licence in an application for an inquiry into whether that person breached the EA Act and regulations made under the EA Act – The VCAT exceeded its jurisdiction – Leave to appeal granted and appeal allowed – Order of the VCAT set aside.

ADMINISTRATIVE LAW – Natural justice – Hearing rule does not apply to the exercise of the function set out in r 5.03(4) of the VCAT Rules.

ADMINISTRATIVE LAW – Natural justice – The VCAT breached the hearing rule by finding that a person is not a fit and proper person to hold a real estate agent’s licence without giving that person notice that it proposed to make such a finding.

ADMINISTRATIVE LAW – Penalty for breaches of the EA Act and regulations made under the EA Act – Whether manifestly excessive – Whether error of law established.

PRACTICE AND PROCEDURE – Circumstances in which it is appropriate for an officer of the VCAT to give evidence on affidavit in an appeal from a decision of the VCAT – Observations about how such an affidavit should be prepared and filed – Whether a member of the VCAT can be compelled to give evidence about a matter not involving the VCAT’s decision-making process.

EVIDENCE – Presumption of regularity. 

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APPEARANCES: Counsel Solicitors
For the Applicant and Plaintiff  Mr P J Riordan SC
with Mr J D Pizer 		DLA Piper Australia
For the Respondent and Secondnamed Defendant Mr P J Hanks QC
with Mr L T Brown 		Nicholas Hufton, Solicitor to the Director of Consumer Affairs Victoria
No appearance for the Firstnamed Defendant

TABLE OF CONTENTS

Introduction and summary........................................................................................................ 1

Relevant statutory provisions................................................................................................... 1

Events prior to the VCAT Proceeding...................................................................................... 4

VCAT Proceeding....................................................................................................................... 5

VCAT hearing........................................................................................................................ 5
VCAT Order and Reasons.................................................................................................... 8

Court Proceedings.................................................................................................................... 10

Threshold issue: Jurisdictional challenge in an appeal under s 148 of VCAT Act......... 12

Ground 1: Non-compliance with r 5.03(4) of the VCAT Rules.......................................... 14

Common ground relating to r 5.03(4) of the VCAT Rules................................................ 14
Facts relevant to Ground 1.................................................................................................. 15
Principles relating to the presumption of regularity.......................................................... 17
Does the presumption of regularity apply?........................................................................ 19
Was the presumption of regularity rebutted?.................................................................... 20
Was the VCAT properly constituted in relation to the VCAT Proceeding?..................... 21
Observations about the conduct of the VCAT in relation to the Court Proceedings...... 21

The absence of evidence from Aird DP........................................................................ 21
The affidavit sworn by Mr Nelms................................................................................ 23
Desirability of a written determination under r 5.03(4) of the VCAT Rules.............. 23

Ground 2: Whether natural justice applies to r 5.03(4) of the VCAT Rules.................... 24

Ground 3:  Whether the Order is invalid if ground 1 is made out..................................... 26

Ground 4:  Absence of jurisdiction to find Mr Johnson was not fit to hold a licence...... 26

Ground 5:  Finding of lack of fitness to hold a licence in breach of natural justice........ 31

Ground 6:  Error of law in imposing manifestly excessive penalties................................ 32

Proposed order.......................................................................................................................... 32

HIS HONOUR:

Introduction and summary

  1. These reasons concern two proceedings that have been commenced by Dean Johnson about a decision made by the Victorian Civil and Administrative Tribunal (‘VCAT’) on 31 March 2011 to cancel his estate agent’s licence and to disqualify him from applying for a new licence for two years (‘Decision’).

  1. The first proceeding is an application under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (‘VCAT Act’) for leave to appeal against the Decision. The second proceeding – which was instituted in the alternative out of an abundance of caution[1] – is an application for judicial review of the Decision under O 56 of the Supreme Court (General Civil Procedure) Rules 2005 (‘Court Rules’). I will refer to the first proceeding as the ‘Appeal Proceeding’, the second proceeding as the ‘Judicial Review Proceeding’ and to both proceedings as the ‘Court Proceedings’.

    [1]See below [38].

  1. Mr Johnson seeks to impugn the Decision on a number of jurisdictional and natural justice grounds. The main jurisdictional ground is that the Decision was made by a single member of the VCAT – Aird DP – rather than three members, as required by r 5.03(2) of the Victorian Civil and Administrative Tribunal Rules 2008 (‘VCAT Rules’). The main natural justice ground is that the VCAT made findings under s 25(1) of the Estate Agents Act 1980 (‘EA Act’) relating to Mr Johnson’s fitness to hold a licence in circumstances where the question of his fitness was not an issue in the proceeding before the VCAT.

  1. For the reasons set out below, I have concluded that the VCAT acted beyond its jurisdiction and in breach of the hearing rule of natural justice, and that the Decision should be set aside.

Relevant statutory provisions

  1. The key statutory provisions for the purposes of the Court Proceedings are ss 25, 28A, 47A and 47C of the EA Act, reg 25(3) of the Estate Agents (General, Accounts and Audit) Regulations 2008 (‘EA Regulations’) and r 5.03 of the VCAT Rules.

  1. Section 25(1) of the EA Act relevantly provides:

Inquiries into estate agents

(1)At any time the Director [of Consumer Affairs Victoria] … may apply to the [Victorian Civil and Administrative] Tribunal for the holding of an inquiry to determine whether an estate agent—

(a)has contravened or failed to comply with this Act or the regulations; or

(aa)has contravened or failed to comply with the Sale of Land Act 1962; or

(b)is of good character or is otherwise a fit and proper person to hold a licence; or

(c)has been guilty of conduct as an estate agent which renders him or her unfit to hold a licence; or

(d)      improperly obtained, or is improperly holding, a licence.

  1. Section 28A of the EA Act relevantly provides:

Determination of Tribunal on inquiry

(1)After conducting an inquiry in respect of a person under section 25 or 28, the Tribunal, if it considers it appropriate, may, by order, do any one or more of the following—

(a)       reprimand the person;

(b)require the person to comply within, or for, a specified time with a requirement specified by the Tribunal;

(c)cancel any licence held by the person and disqualify the person either permanently or for a specified period from holding a licence;

(d)suspend any licence held by the person for a specified period not exceeding one year;

(e)impose any condition or limitation on any licence held by the person;

(f)declare any person to be ineligible to hold a licence or to be an agent’s representative either permanently or temporarily;

(g)require the person to enter into an undertaking to perform, or not to perform, certain tasks to be specified in the undertaking.

(2)In addition to the powers conferred by subsection (1), if the Tribunal determines that the person has contravened or failed to comply with this Act or the regulations, it may impose a penalty not exceeding $5000 on the person and specify when the penalty must be paid.

  1. Section 47A(1) of the EA Act provides:

Seller must be given estimated selling price

(1)Before obtaining a person’s signature to an engagement or appointment to sell any real estate on behalf of the person, an estate agent … must ensure that the engagement or appointment states the agent’s … estimate of the selling price of the real estate, and that the estimate complies with this section.

Penalty: 100 penalty units.

  1. Section 47C of the EA Act relevantly provides:

False representation to prospective buyer

(1)This section applies to an estate agent who holds a written engagement or appointment to sell real estate …

(2)In making any statement while marketing the real estate, the agent or representative must not state as his or her estimate of the selling price of the real estate a price that is less than the estimated selling price, or in the case of a price range, less than the lower limit of that range, stated in the engagement or appointment.

Penalty: 200 penalty units.

  1. Regulation 25 of the EA Regulations relevantly provides:

Trust account reconciliation statements

…

(3)An estate agent who carries on an estate agency business, or if the estate agent is a corporation, a licensed working director or the officer in effective control, must verify that the trust account reconciliation statement is true and accurate within 14 days after the end of the preceding month.

Penalty: 20 penalty units.

  1. Rule 5.03 of the VCAT Rules relevantly provides:

Constitution of Tribunal in proceedings

…

(2)Subject to subrule (4), any matter arising under a provision of the Estate Agents Act 1980 that is allocated to the occupational and business regulation list must be determined by the Tribunal constituted by at least 3 members including—

(a)a member being a person who has been admitted to legal practice for not less than 5 years; and

(b)a member with experience in and who represents the interests of the real estate industry; and

(c)a member with knowledge of natural persons who use real estate industry services and who represents their interests.

…

(4)The President may determine that a particular matter may be determined by the Tribunal constituted otherwise than in accordance with the requirements of subrules (1), (2) or (3).

Events prior to the VCAT Proceeding

  1. Mr Johnson is a director and the officer in effective control of the real estate company, Wayne Sweeney & Associates (Footscray) Pty Ltd (‘Sweeney’). 

  1. On 9 January 2008, Mr Johnson signed an enforceable undertaking (‘Enforceable Undertaking’) under s 146 of the Fair Trading Act 1999 (‘FT Act’). In the Enforceable Undertaking, Mr Johnson admitted that in 2006 and 2007, Sweeney had:

(a) underquoted the price of two properties contrary to s 47C(2) of the EA Act;

(b)made misleading representations about one of the two properties contrary to s 12(n) of the FT Act;[2] and

(c)did not include an estimated selling price in the engagement authority for a third property, contrary to s 47A(1) of the EA Act.

[2]Section 12(n) of the FT Act was substituted by s 9 of the Fair Trading Amendment (Australian Consumer Law) Act 2010. It is now contained in s 29 of the Australian Consumer Law (sch 2 to the Competition and Consumer Act 2010 (Cth)).

  1. In the Enforceable Undertaking, Mr Johnson undertook to comply with ss 47A(1) and 47C(2) of the EA Act and s 12(n) of the FT Act in the future.

  1. In February 2010, the Director of Consumer Affairs Victoria (‘Director’) conducted an investigation into Sweeney’s compliance with the EA Act. The investigation concluded that Sweeney and Mr Johnson had breached the EA Act and the Enforceable Undertaking.

  1. Following the investigation, the Director applied to the Magistrates’ Court for an injunction restraining Sweeney and Mr Johnson from breaching s 47A(1) or s 47C(2) of the EA Act. On 5 October 2010, an injunction was granted by consent.

VCAT Proceeding

  1. On 15 September 2010, the Director commenced a VCAT proceeding against Sweeney, Mr Johnson and another officer of Sweeney, Mr Darren Dean (‘VCAT Proceeding’). 

  1. The VCAT Proceeding was commenced by the filing of a document entitled ‘Application for Inquiry’, which described the application as follows:

Application for Inquiry under Estate Agents Act, 1980, Section 25 (‘the Act’) concerning breaches of the Act and the Estate Agents (General, Accounts and Audit) Regulations 2008 (‘the Regulations’).

  1. The Application for Inquiry alleged that:

(a)in the period from August 2008 until July 2009, Mr Johnson breached s 47C(2) of the EA Act in relation to five properties;

(b)Mr Johnson breached reg 25(3) of the EA Regulations by failing to verify the accuracy of certain trust account reconciliation statements; and

(c)the further breaches of s 47C(2) of the EA Act constituted breaches of the Enforceable Undertaking.

  1. The VCAT Proceeding was allocated to the VCAT’s Occupational and Business Regulation List (‘OBR List’) and was heard by the presidential member in charge of the OBR List, Aird DP, on 21, 22 and 23 February 2011. 

VCAT hearing

  1. During the VCAT hearing on 21 February 2011, Mr Hufton, the Director’s solicitor who appeared for the Director, said the following:

The applicant has asked the tribunal to inquire into one of the five heads, s.25(1) … which is whether an estate agent has contravened or failed to comply with [the EA Act] or the [EA Regulations].

Section 28A says what the tribunal can do after conducting an inquiry under s.25 …

…

I’m submitting there is a two-stage process under [ss 25 and 28A]. The first stage is to consider whether the respondents come within any of sub‑s.25(1)(a), (aa) and (d) and whether the respondents are of good character or otherwise fit and proper people to hold a licence under sub‑s.25(1)(b) or have been guilty of conduct rendering them unfit to hold a licence. Once the respondents come within any of these subsections, the tribunal goes into the stage in s.28A. At this stage the tribunal must determine what it is appropriate to do.[3]

[3]Transcript of Proceedings, Director of Consumer Affairs Victoria v Wayne Sweeney & Associates (Footscray) Pty Ltd (Victorian Civil and Administrative Tribunal, B218/2010, Aird DP, 21 February 2011) 7-8. 

  1. On the same day, the following exchange took place between Aird DP and Mr Campbell, who appeared for Sweeney, Mr Johnson and Mr Dean:

MS AIRD:I’m interested in the step process, so tell me what you mean by a step process.

MR CAMPBELL: … under s.28A(1)(a) through to (g) there are a series of things that the tribunal may do if there has been some finding of breach on fitness and so forth. …

MS AIRD:If you are suggesting these go up in level of seriousness …

MR CAMPBELL:     Look, it is an interesting – I think they’ve got that order reversed.

… 

You can mix and match, but in terms of interfering with licences, you don’t need to go to sort of the nuclear weapon of cancellation for a period of five years which is suggested … but you can suspend or you can allow a retention of the licence, but on terms and conditions.  Mr Johnson is the officer in effective control of Wayne Sweeney and Associates, maybe he should relinquish that position?  There are a number of possibilities short of going down the nuclear weapon that’s available to the tribunal, or cancelling it because he’s not a fit and proper person.  There will be some authorities that I’ll be taking you to which provide points of distinction between when the tribunal has gone to that level and what might be appropriate in the circumstances should that arise in this particular case.[4] 

[4]Transcript of Proceedings, Director of Consumer Affairs Victoria v Wayne Sweeney & Associates (Footscray) Pty Ltd (Victorian Civil and Administrative Tribunal, B218/2010, Aird DP, 21 February 2011) 31-2.

  1. At the VCAT hearing on 23 February 2011, Mr Hufton provided a written submission to Aird DP.  That submission relevantly stated:

The application was made pursuant to section 25(1) of the Estate Agent’s Act, 1980 (‘the Act’). Section 25(1) says the Applicant may apply to the Tribunal for the holding of an inquiry to determine whether an estate agent has done various things or is of good character or is otherwise a fit and proper person to hold a licence. There are five heads in s 25(1) that the Applicant can ask the Tribunal to hold an inquiry into. The Applicant has asked the Tribunal to inquire into one of these heads, namely s 25(1)(a) which is whether an estate agent ‘has contravened or failed to comply with this Act or the regulations’.

…

The Applicant submits that there is a two-stage process under … sections [25 and 28A]. The first stage is to consider whether the Respondents come within any of sub-sections 25(1)(a), (aa) and (d) and whether the Respondents are of good character or otherwise fit and proper people to hold a licence under sub-section 25(1)(b) or have been guilty of conduct rendering them unfit to hold a licence.

Once the Respondents come within any of these sub-sections, the Tribunal goes into the stage in s 28A. At this stage, the Tribunal must determine what it is appropriate to do.

  1. Mr Hufton did not submit to Aird DP, either orally or in writing, that she should make determinations against Mr Johnson under s 25(1)(b) or (c) of the EA Act. Mr Hufton did submit, however, that Mr Johnson’s breaches of the EA Act and the EA Regulations were serious and that a determination under s 25(1)(a) about those breaches warranted an order under s 28A(1) cancelling his licence and disqualifying him from holding a licence for five years.

  1. On 23 February 2011, Aird DP delivered her findings orally.  In substance, Aird DP found that:

(a)Sweeney and Mr Johnson had breached s 47C(2) of the EA Act in relation to four properties; and

(b)Mr Johnson had breached reg 25(3) of the EA Regulations.

  1. Aird DP said that ‘they’re my findings, which will not change’ and indicated that the findings would be published in written form at a later date.[5] It is apparent from the transcript of the VCAT Proceeding that, with the pronouncement of Aird DP’s findings, Aird DP and the parties considered that the sole remaining task of the VCAT was to decide the penalties to be imposed under s 28A of the EA Act.[6]  This is reinforced by Aird DP’s statement just prior to adjourning the hearing on 22 February 2011 that, when the hearing resumed on 23 February 2011, she would deliver her ‘findings in relation to the liability issues’ orally.[7]

    [5]Transcript of Proceedings, Director of Consumer Affairs Victoria v Wayne Sweeney & Associates (Footscray) Pty Ltd (Victorian Civil and Administrative Tribunal, B218/2010, Aird DP, 23 February 2011) 116.

    [6]Transcript of Proceedings, Director of Consumer Affairs Victoria v Wayne Sweeney & Associates (Footscray) Pty Ltd (Victorian Civil and Administrative Tribunal, B218/2010, Aird DP, 23 February 2011) 116-118. 

    [7]Transcript of Proceedings, Director of Consumer Affairs Victoria v Wayne Sweeney & Associates (Footscray) Pty Ltd (Victorian Civil and Administrative Tribunal, B218/2010, Aird DP, 22 February 2011) 150.

  1. On 23 February 2011, after Aird DP had delivered her findings orally, Mr Johnson was re-called to give evidence about his history in the real estate industry, his involvement with Sweeney and the nature and scope of Sweeney’s business.  Mr Johnson was briefly cross-examined by Mr Hufton.  At the conclusion of his evidence, Mr Johnson was granted leave to file character references.  The character references were filed in early March 2011.  A further hearing did not take place.

VCAT Order and Reasons

  1. On 31 March 2011, Aird DP made the following order (‘Order’):

1        A penalty of $5,000 is … to be paid by [Sweeney] … by 30 April 2011.

2        [Mr Johnson’s] estate agent’s licence … is cancelled effective 27 May 2011 and he is disqualified from applying for a licence until 27 May 2013.

3        A penalty of $2,000 is … to be paid by [Mr Johnson] … by 23 April 2011.

  1. Aird DP also made orders in relation to Mr Dean.  As Mr Dean has not sought to challenge the orders relating to him, I will not make any further reference to him. 

  1. On 31 March 2011, Aird DP published her reasons for the Order (‘Reasons’).  Paragraph 1 of the Reasons stated:

On 15 September 2010, the applicant (‘the Director’) made application for an Inquiry under s 25 of the Estate Agents Act 1980 (‘the Act’) concerning alleged breaches of the Act and the Estate Agents (General, Accounts and Audit) Regulations 2008 (‘the Regulations’).

  1. In the Reasons, after discussing the Director’s allegations against Sweeney and Mr Johnson, Aird DP stated:

FINDINGS

36 I find the allegations of breach of s 47C(2) by Sweeney and Mr Johnson proven other than in relation to [one of the properties] which I find are not proven.

37 I find the allegations of breach of [reg] 25 of the Regulations by Mr Johnson proven.

DETERMINATION

38       After delivering my findings on 23 February 2011 I heard submissions from the parties as to the appropriate determinations.  Mr Johnson sought and was granted leave to file character references by 2 March 2011 with the Director to advise the tribunal by 9 March 2011 whether she wished the hearing to be reconvened for the purpose of cross-examination of character witnesses.  By letter dated 4 March 2011 Mr Hufton advised the Director did not wish to cross-examine the referees. 

  1. In the Reasons, Aird DP also found that Mr Johnson had breached the Enforceable Undertaking.  Aird DP then discussed the character evidence that was filed on behalf of Mr Johnson and the submissions of the parties in relation to penalty.  Aird DP stated:

56       Whilst it might seem unfortunate that a man so well respected by his character referees has found himself in this situation, it is one for which Mr Johnson is solely responsible.  The primary considerations of any disciplinary inquiry in considering the appropriate determination are protection of the public and deterrence both to the professional concerned, and other members of the profession.

  1. In the Reasons, Aird DP discussed three previous cases involving real estate agents and continued:

61However, the circumstances in this case are quite different. As mentioned to the parties during the hearing, not only am I very concerned about the repeated instances of underquoting, I have very grave concerns about Mr Johnson’s breaches of the Enforceable Undertaking within 7 months of him having signed it. There is no evidence to support Mr Johnson’s evidence that approximately 300 files had been inspected by CAV. The sworn evidence of the inspectors, which was not contested when they were cross-examined, was that a total of 15 files had been seized. I have found allegations of breaches of s 47C(1) proven for 4 of those files – more than 25% of the files which were seized. Even though this might not be an accurate reflection of the rate of the incidence of underquoting this is a high percentage of a small sample.

62My concerns are reinforced by Mr Johnson’s refusal during cross-examination, to acknowledge that he had breached his obligations under the Act or under the Undertaking. Further, it is apparent that he has little if any insight into his conduct for which he seemingly refuses to accept any responsibility.

63Breaching the Enforceable Undertaking within 7 months of having given it shows a blatant disregard by Mr Johnson of his obligations. When coupled with his persistent denial of any wrongdoing until after I delivered my findings, and then what can only be described as the grudging acceptance of those findings, I find, pursuant to s 25(1)(b) and (c) that he is not of good character; is not a fit and proper person to hold a licence and is guilty of conduct which renders him unfit to hold a licence.

64Mr Johnson has admitted the two allegations of breach of Regulation 25(3).  Although these might appear to be technical breaches in circumstances where there is no evidence of any inaccuracy in the trust records, the failure to certify the sales trust account for a period of 7 months, and the rental trust account for a period of 3 months, is a further indication of Mr Johnson’s blatant disregard of his statutory obligations.  He has been the officer in effective control of Sweeney since 17 June 1997 and should have been aware of his statutory obligations to certify the trust accounts and ensured this was done.  It is simply not good enough to say that he overlooked this requirement because he had difficulty obtaining stable book-keeping or accounting staff during this period. 

  1. In the Reasons, Aird DP then discussed additional case law and continued:

66I am satisfied that cancellation of Mr Johnson’s licence is appropriate.  However, I consider a disqualification period of 5 years to be excessive and will order that he be disqualified from applying for registration for a period of 2 years.  I consider it appropriate that the cancellation of his licence occur on 27 May 2011 to allow Mr Johnson an opportunity to make the necessary arrangements to resign as a director of Sweeney, and take care of any other legal and accounting arrangements that might be necessary in relation to his business affairs, as a director and the officer in effective control of Sweeney.  In the circumstances I also consider it appropriate to impose a penalty of $2,000 to be paid within 30 days.  

Court Proceedings

  1. The Court Proceedings were commenced on 27 April 2011.  On 8 June 2011, an Associate Justice made the following orders:

(a)the Court Proceedings be heard at the same time;

(b)in the Appeal Proceeding, the application for leave to appeal be heard by the same judge who, if leave is granted, is to hear the appeal; and

(c)in so far as the Order affects Mr Johnson, it be stayed until the hearing and determination of the Court Proceedings. 

  1. In the Appeal Proceeding, Mr Johnson is the applicant and the Director is the respondent.  Mr Johnson filed a proposed Notice of Appeal which sets out six questions of law and proposed grounds of appeal.  The grounds may be summarised as follows:

(a) Ground 1: Aird DP did not have jurisdiction to hear the VCAT Proceeding because the requirement in r 5.03(2) of the VCAT Rules that the VCAT Proceeding be heard by three members had not been displaced by a determination made under r 5.03(4).

(b) Ground 2: If Aird DP made a determination under r 5.03(4) of the VCAT Rules, she did so in breach of the hearing rule of natural justice.

(c)       Ground 3:  If ground 1 is made out, the Order is invalid.

(d) Ground 4: As the Application for Inquiry was made under s 25(1)(a) of the EA Act in relation to breaches of that Act and the EA Regulations, Aird DP did not have jurisdiction to make findings under s 25(1)(b) and (c) of the EA Act that Mr Johnson was not a fit and proper person to hold a licence.

(e) Ground 5: Aird DP’s findings under s 25(1)(b) and (c) that Mr Johnson was not a fit and proper person to hold a licence were made in breach of the hearing rule of natural justice.

(f)       Ground 6:  Aird DP erred in law by imposing penalties that are manifestly excessive. 

  1. In the Judicial Review Proceeding, Mr Johnson is the plaintiff, the VCAT is the first defendant and the Director is the second defendant.  In a letter dated 5 May 2011, the principal registrar of the VCAT, James Nelms, informed the Prothonotary that the VCAT will abide by the decision of the Court. 

  1. The Judicial Review Proceeding overlaps with the Appeal Proceeding in that it seeks to quash the Order on the bases set out in grounds 1 to 5 above.  Mr Johnson has commenced the Judicial Review Proceeding out of an abundance of caution due to the obiter remarks of the Court of Appeal in Attorney-General (Vic) v Warehouse Group (Australia) Pty Ltd[8] that a challenge to the constitution of the VCAT, which is a challenge to its jurisdiction, should be by way of judicial review and not an appeal under s 148 of the VCAT Act.

    [8][2002] VSCA 76 (17 May 2002) (‘Warehouse Group’). 

  1. Before I discuss the grounds of appeal, I will deal with the threshold issue of whether a challenge to the VCAT’s jurisdiction can be made in an appeal under s 148 of the VCAT Act.

Threshold issue: Jurisdictional challenge in an appeal under s 148 of VCAT Act

  1. In Warehouse Group,[9] Warehouse Group (Australia) Pty Ltd applied for leave to appeal against a decision of the VCAT. Proposed ground of appeal 16 alleged that the VCAT did not have jurisdiction to hear the relevant proceeding because it was not constituted by a member who had ‘sound knowledge of, and experience in, planning or environmental practice in Victoria’, as required by cl 52(1) of sch 1 to the VCAT Act. A judge in the trial division granted leave to appeal. The Court of Appeal set aside the trial judge’s order.

    [9][2002] VSCA 76 (17 May 2002).

  1. In the course of its judgment, the Court of Appeal made the following obiter comments:

there is … a fundamental objection to the exercise of jurisdiction by the Trial Division in relation to ground 16 in the notice of appeal, which stems from the commencement of an appeal under s.148. In ground 16 Warehouse was challenging the very constitution of the Tribunal which made the orders from which it was otherwise wishing to appeal. Such a challenge is to jurisdiction, as indeed the Trial Judge, in upholding the challenge, recognised in the penultimate paragraph of the reasons for judgment, that is paragraph 41. Such a challenge should have been mounted by way of judicial review and not appeal: See, for example, GJ Coles & Co v Retail Trade Industrial Tribunal in which a tribunal was wrongly constituted and prerogative relief was sought and granted. Nor, in our view, was anything to the contrary said in Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) to which Mr Morris referred. Our dealing with the question of the constitution of the Tribunal should therefore not be taken as any endorsement of the procedure adopted by Warehouse on this occasion.

In another case, the conclusion that a proceeding by way of judicial review was appropriate but not an appeal might mean that leave to appeal should never have been granted in the first place and that, once granted, the appeal should have been dismissed as incompetent. In this instance, however, there were many other grounds of appeal: only ground 16 was affected by the considerations of procedure to which we have referred, and ground 16 was determined as a preliminary question. Given the way in which the matter was heard and determined below, it is appropriate, we think, for this Court to allow the appeal, to set aside the orders made below and upon the understanding that argument has been addressed upon the remaining grounds, to remit the matter back to the Trial Division for hearing and determination according to law in the light of our reasons for judgment.[10]

[10]Warehouse Group [2002] VSCA 76 (17 May 2002) [22]-[23] (citations omitted).

  1. Before me, Peter Riordan SC, who appeared with Jason Pizer for Mr Johnson, submitted that the Court of Appeal’s obiter remarks about the scope of s 148 of the VCAT Act are erroneous. Peter Hanks QC, who appeared with Liam Brown for the Director, agreed with this submission. Both counsel relied on the detailed analysis of the Court of Appeal’s decision in the looseleaf service, Pizer’s Victorian Administrative Law.[11]  I agree with that analysis.  In particular:

(a)An error by the VCAT on a matter affecting its jurisdiction is an error of law. There is nothing in the wording of s 148 of the VCAT Act which precludes such an error of law from falling within the scope of that section.

(b)The New South Wales case of GJ Coles & Co Ltd v Retail Trade Industrial Tribunal[12] does not support the Court of Appeal’s analysis in Warehouse Group because the legislation dealt with in Coles did not provide for an appeal to the New South Wales Supreme Court.  Accordingly, the only avenue for challenging a decision under that legislation was a judicial review proceeding seeking an order in the nature of certiorari. 

(c)In Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic),[13] the High Court held that an appeal under s 148 of the VCAT Act is in the nature of a judicial review proceeding in the original jurisdiction of the Supreme Court.[14]  Contrary to the Court of Appeal’s statement in Warehouse Group, Roy Morgan contemplates that an appeal under s 148 of the VCAT Act is an appropriate and valid avenue for judicial review of a decision of the VCAT on the ground that the VCAT has exceeded its jurisdiction.

[11]Jason Pizer, Thomson Reuters, Victorian Administrative Law, vol 1 (at Update 126) [VCAT 148.60].

[12](1986) 7 NSWLR 503 (‘Coles’).

[13](2001) 207 CLR 72 (‘Roy Morgan’).

[14]Roy Morgan (2001) 207 CLR 72, 79-80 [15]. See also Osland v Secretary, Department of Justice [No 2] (2010) 241 CLR 320, 331-2 [18].

  1. Since Warehouse Group, the scope of s 148 of the VCAT Act in relation to challenges to the VCAT’s jurisdiction has been considered by the Court of Appeal in Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd,[15] Herald and Weekly Times Pty Ltd v Victoria[16] and Macedon Ranges Shire Council v Romsey Hotel Pty Ltd.[17] There is nothing in those decisions which compels an interpretation of s 148 of the VCAT Act that differs from the interpretation set out at [42] above.[18]    

    [15](2004) 22 VAR 279, 286-7 [18].

    [16](2006) 25 VAR 124, 141 [43].

    [17](2008) 19 VR 422, 447 [89].

    [18]See also Vero Insurance Ltd v Witherow [2004] VSC 272 (9 August 2004) [35]; Brimbank City Council v Westvale Community Centre Inc (2006) 24 VAR 240, 249 [48]; Casey City Council v Dennis Family Corporation [2007] VSC 238 (5 July 2007) [1], [10], [23], [28]; Deputy Commissioner of Patents v Board of Control of Michigan Technological University (1979) 43 FLR 9, 14-15, 27, 35; Director-General of Social Services v Chaney (1980) 47 FLR 80, 95, 103-4, 106.

  1. For the above reasons, all of the grounds of appeal set out at [36] above fall within s 148 of the VCAT Act. It follows that the Judicial Review Proceeding was not necessary.

Ground 1: Non-compliance with r 5.03(4) of the VCAT Rules

Common ground relating to r 5.03(4) of the VCAT Rules

  1. Before me, there was common ground between the parties on the following issues relating to r 5.03(4) of the VCAT Rules:

(a)in order for Aird DP to validly determine to hear the VCAT Proceeding on her own in accordance with r 5.03(4), it was necessary for her to turn her mind to the circumstances of the VCAT Proceeding and to decide that it was appropriate for the VCAT Proceeding to be heard by her alone rather than by three members as set out in r 5.03(2) of the VCAT Rules; and

(b)compliance with (a) did not require any formality such as the recording or the communication of the exercise of the power under r 5.03(4) of the VCAT Rules.

Facts relevant to Ground 1

  1. On 7 April 2011, Mr Johnson’s solicitor wrote to the registrar of the OBR List seeking copies of ‘all orders and determinations made in the [VCAT Proceeding]’.  The registrar of the Administrative Division of the VCAT responded by letter dated 8 April 2011.  The letter enclosed the Reasons and copies of orders that had been made by the VCAT in the VCAT Proceeding, but it did not refer to or enclose any determinations made by the VCAT.    

  1. On 14 April 2011, Mr Nelms sent a letter to Mr Hufton which relevantly stated:

I refer to your email of 8 April 2011, which was brought to my attention on my return from leave today.  Deputy President Aird determined that the Tribunal be constituted by a single Member pursuant to Instrument of Delegation dated 17 October 2005, for the hearing of this matter. 

  1. On 15 April 2011, Mr Johnson’s solicitor sent a letter to Mr Nelms which relevantly stated:

My client is concerned that the panel which heard this proceeding was not properly constituted in accordance with the Rules. I attach for your consideration a Notice of Appeal that has been settled by Mr Peter Riordan SC. My client is also considering an urgent Supreme Court application under Order 56 of the Supreme Court Rules, seeking an order that the decision be quashed on the basis that there has been a jurisdictional error.

I attach for your consideration a letter that has been sent to me by Mr Nick Hufton, solicitor for the Director of Consumer Affairs Victoria.  His letter states in the third paragraph that you have advised him that you are satisfied that the tribunal is properly constituted at all times during the proceeding. 

Rule 5.03(2) provides that any matter arising under a provision of the Estate Agents Act 1980, is to be determined by a Tribunal constituted by at least 3 members.  Rule 5.04(4) provides that the President may determine that a particular matter be determined by the Tribunal constituted otherwise than in accordance with sub-rule 5.03(2). 

…

I … ask that you provide by 2.00pm on Monday 11 April 2011, the following information:

1When was a determination made by the President pursuant to Rule 5.03(4) of the VCAT Rules … in relation to this matter?

2Are you able to provide a copy of this determination?

I look forward to hearing from you. If I do not have a response by that time I regrettably will need to issue an Originating Motion against VCAT seeking an order that the decision be quashed pursuant to Order 56 of the Supreme Court Rules. I therefore look forward to hearing from you.

  1. Mr Nelms did not respond to the letter dated 15 April 2011.

  1. On 18 May 2011, Mr Nelms swore an affidavit in the Appeal Proceeding.  The first page of the affidavit set out Mr Hufton’s contact details and stated that the affidavit was filed on behalf of the Director.  The affidavit exhibited:

(a)an instrument of delegation dated 17 October 2005 pursuant to which the President of the VCAT delegated certain powers to the presidential member in charge of the OBR List, including the President’s powers under r 5.03(4) of the VCAT Rules;[19]

(b)an Order in Council dated 18 March 2009 appointing Ms Aird as a Deputy President of the VCAT; and

(c)a letter dated 4 August 2010 from the President of the VCAT to Ms Aird nominating her as the presidential member in charge of the OBR List.[20]  

[19]The instrument of delegation referred to the rules of the VCAT that were in force on 17 October 2005. In accordance with ss 30 and 31 of the Interpretation of Legislation Act 1984, the instrument of delegation is deemed to refer to the equivalent provisions of the current VCAT Rules.

[20]See r 2.04(1) of the VCAT Rules.

  1. Mr Nelms’ affidavit did not refer to the correspondence set out at [46] to [48] above and did not repeat the assertion in his letter dated 14 April 2011 to Mr Hufton that ‘Deputy President Aird determined that the Tribunal be constituted by a single Member … for the hearing of this matter’. 

  1. It was common ground before me that, as a result of the documents exhibited to Mr Nelms’ affidavit, Aird DP had authority to determine under r 5.03(4) of the VCAT Rules that the VCAT Proceeding be heard by her alone. It was also common ground that Aird DP did not inform the parties at any stage that, in accordance with r 5.03(4) of the VCAT Rules, she had determined to hear the VCAT Proceeding on her own. Although not conceded by Mr Hanks QC, it is a compelling inference that the VCAT’s files do not contain any record of the exercise of the power under r 5.03(4) by Aird DP in relation to the hearing of the VCAT Proceeding.

  1. Mr Hanks QC submitted that the fact that Aird DP had authority to determine under r 5.03(4) of the VCAT Rules that the VCAT Proceeding be heard by her alone, coupled with the fact that she did so hear the proceeding on her own, enabled this Court to conclude, based on the presumption of regularity, that Aird DP did all that she was required to do under r 5.03(4) to confer valid jurisdiction upon herself to hear the VCAT Proceeding.

  1. Mr Riordan SC submitted that the presumption of regularity did not apply in the circumstances of this case.  In the alternative, Mr Riordan submitted that, if the presumption of regularity did apply, it was rebutted. 

  1. Before considering these conflicting submissions, it is convenient for me to summarise the principles relating to the presumption of regularity. 

Principles relating to the presumption of regularity

  1. It is a well-established principle that where an act is done which can only be done legally after the performance of some prior act, proof of the later act carries with it a presumption of the due performance of the prior act.[21]  This principle is commonly known as the ‘presumption of regularity’.  

    [21]McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835, 850 (‘McLean’), citing Knox County v Ninth National Bank (1893) 147 US 91, 97.

  1. It has been said that ‘[t]he natural home of the presumption of regularity is public law’.[22]  Its effect is that, where the exercise of a power or the performance of an act by a public officer or public authority is proved, it will be presumed that the pre‑conditions to the lawful exercise of that power or performance of that act have been met:

Where a public official or authority purports to exercise a power or to do an act in the course of his or its duties, a presumption arises that all conditions necessary to the exercise of that power or the doing of that act have been fulfilled.[23]

[22]Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154, 164 (‘Aboriginal Land Council’).

[23]Aboriginal Land Council (1987) 9 NSWLR 154, 164.

  1. The presumption applies to both acts and omissions,[24] and to matters of substance (such as compliance with statutory provisions) as well as matters of detail (such as those of form and procedure dealt with in regulations).[25]  It is based on inference from probabilities[26] and policy considerations of public and business pragmatism.[27]

    [24]R v City of Doncaster & Templestowe; Ex parte Mayor [1971] VR 466, 473.

    [25]Mallock v Tabak [1977] VR 78, 84-5.

    [26]Carpenter v Carpenter Grazing Co Pty Ltd (1987) 5 ACLC 506, 514 (‘Carpenter’).

    [27]In Morris v Kanssen [1946] AC 459, Lord Simonds said that ‘[t]he wheels of business will not go smoothly round unless it may be assumed that that is in order which appears to be in order’: at 475. See also Hardess v Beaumont [1953] VLR 315, 320.

  1. In Carpenter v Carpenter Grazing Co Pty Ltd,[28] Hope JA, with whom Samuels and Priestly JJA agreed, said that the presumption of regularity may reasonably be drawn:

where an intention to do some formal act is established, when the evidence is consistent with that intention having been carried into effect in a proper way, the observance of the formality has not been proved or disproved and its actual observance can only be inferred as a matter of probability.[29]

[28](1987) 5 ACLC 506.

[29]Carpenter (1987) 5 ACLC 506, 514, citing Harris v Knight (1890) 15 PD 170, 179-80 and In the Estate of Bercovitz [1962] 1 WLR 321, 327.

  1. The presumption of regularity is a rebuttable[30] presumption of fact, associated with a reasonable inference based on what ordinarily happens in the ordinary course of human affairs.[31]  In determining whether the presumption is rebutted, this inference from the ordinary course of human affairs bears some weight, which may vary according to the proved circumstances.[32]

    [30]Watson v Lee (1979) 144 CLR 374, 382; Mallock v Tabak [1977] VR 78, 85; Kingham v Sutton [2002] FCA 506 (26 April 2002) [57].

    [31]Hill v Woollahra Municipal Council (2003) 127 LGERA 7, 24 [52] (‘Hill’), citing McLean (1906) 4 CLR 835, 849-55.

    [32]Hill (2003) 127 LGERA 7, 24 [52].

Does the presumption of regularity apply?

  1. In accordance with the principles set out at [56] to [60] above, the presumption of regularity applies to the exercise of the power under r 5.03(4) of the VCAT Rules.

  1. Two key facts have been established. The first fact is that Aird DP had delegated authority to exercise the power under r 5.03(4) of the VCAT Rules to determine that, for the purpose of the VCAT Proceeding, the VCAT be constituted otherwise than in accordance with the requirements of r 5.03(2).[33] The second fact is that, for the purpose of the VCAT Proceeding, the VCAT was constituted otherwise than in accordance with the requirements of r 5.03(2), namely, by Aird DP sitting alone.

    [33]See above [50] and [52].

  1. The fact that has not been established by any admissible evidence is that Aird DP turned her mind to the circumstances of the VCAT Proceeding and decided that it was appropriate for the VCAT Proceeding to be heard by her alone rather than by three members as set out in r 5.03(2) of the VCAT Rules. Proof of this fact is essential to establish that the VCAT was properly constituted to hear the VCAT Proceeding.[34] 

    [34]See above [45](a).

  1. As a key rationale for the presumption of the regularity is to fill evidentiary gaps in the proof of the valid exercise of a statutory power, the presumption is appropriate for a case such as the present. Accordingly, unless the presumption of regularity is rebutted, it enables this Court to find on the balance of probabilities that, prior to the hearing of the VCAT Proceeding, Aird DP turned her mind to the circumstances of the VCAT Proceeding and decided that it was appropriate for the proceeding to be heard by her alone rather than by three members as required by r 5.03(2) of the VCAT Rules.

Was the presumption of regularity rebutted?

  1. In the light of my finding that the presumption of regularity applies, the onus is on Mr Johnson to rebut the presumption. Even if the presumption did not apply, as Mr Johnson is impugning the jurisdiction of the VCAT to hear the VCAT Proceeding on the basis that Aird DP did not comply with r 5.03(4) of the VCAT Rules, he bears the onus of establishing that matter on the balance of probabilities.

  1. The facts set out at [46] to [52] above have troubled me.  In particular, I have been concerned about:

(a)Mr Nelms’ failure to respond to the letter dated 15 April 2011 from Mr Johnson’s solicitor;

(b)the fact that Mr Nelms stated in his letter to Mr Hufton dated 14 April 2011 that Aird DP had exercised the power under r 5.03(4) of the VCAT Rules, but remained silent on that matter when he swore his affidavit on 18 May 2011;

(c)the absence of any record of Aird DP having exercised the power under r 5.03(4) of the VCAT Rules; and

(d)the absence of any communication to the parties, either prior to or during the hearing of the VCAT Proceeding, that Aird DP had exercised the power under r 5.03(4) of the VCAT Rules.

  1. While the above matters create a doubt about whether Aird DP complied with r 5.03(4) of the VCAT Rules, they do not, either alone or in combination, establish on the balance of probabilities that Aird DP did not comply with r 5.03(4). In particular, Mr Johnson cannot be assisted by the conduct of Mr Nelms, as he is unable to give admissible evidence about Aird DP’s thought processes prior to the commencement of the VCAT Proceeding.

  1. The reality is that Aird DP herself is the only person who can give admissible evidence about whether she turned her mind to the circumstances of the VCAT Proceeding and decided that it was appropriate for that proceeding to be heard by her alone rather than by three members as set out in r 5.03(2) of the VCAT Rules. The fact that Aird DP did not give any evidence on this issue cannot found a positive finding that she did not comply with r 5.03(4) of the VCAT Rules.

  1. As the evidence upon which Mr Johnson relied, at its highest, was inconclusive on whether Aird DP complied with r 5.03(4) of the VCAT Rules, the presumption of regularity is left to fill the evidentiary gap to which reference is made at [63] above.[35] 

    [35]Watson v Lee (1979) 144 CLR 374, 382.

Was the VCAT properly constituted in relation to the VCAT Proceeding?

  1. As I have concluded that the presumption of regularity applies and that it has not been rebutted, I am unable to find that the VCAT was not properly constituted to hear the VCAT Proceeding.  Accordingly, Ground 1 must be rejected. 

Observations about the conduct of the VCAT in relation to the Court Proceedings

The absence of evidence from Aird DP

  1. At [67] above, I concluded that, although there was a doubt about whether Aird DP validly determined, in accordance with r 5.03(4) of the VCAT Rules, to hear the VCAT Proceeding on her own, I was not satisfied on the balance of probabilities that she did not do so. That doubt arose because Aird DP did not give evidence on the issue.

  1. A question arises as to whether Aird DP was a compellable witness in relation to the performance of the function under r 5.03(4) of the VCAT Rules. If Aird DP was compellable, a second question is whether it would have been appropriate for her to give evidence on that issue in the Court Proceedings.

  1. It was common ground before me that the function set out in r 5.03(4) of the VCAT Rules is antecedent to, and not part of, the decision-making process of the VCAT in relation to the hearing of a proceeding; that the immunity set out in s 143(1) of the VCAT Act does not protect the person who performs that function from being compelled to give evidence about it; and that a subpoena could have been served on Aird DP to compel her to give evidence about her performance of that function.[36]  However, neither party sought to compel Aird DP to give evidence. 

    [36]See Herijanto v Refugee Review Tribunal (2000) 170 ALR 379, 383-5 [16]-[24]; Muin v Refugee Review Tribunal (2002) 190 ALR 601, 610 [25], 646 [197]-[199], 669 [298]-[299]; Towie v Victoria (2008) 19 VR 640, 655-6 [59]. Section 16(2) of the Evidence Act 2008 does not apply because the VCAT is not an ‘Australian court’ for the purpose of the definition of ‘Australian or overseas proceeding’ in the Dictionary at the end of that Act.

  1. In R v Australian Broadcasting Tribunal; Ex parte Hardiman,[37] the High Court said that ‘[t]he presentation of a case in this Court by a tribunal should be regarded as exceptional and, where it occurs should, in general, be limited to submissions going to the powers and procedures of the Tribunal’.[38]  In my opinion, consistently with Hardiman, a tribunal may provide assistance to the Court where its powers or procedures are impugned in a proceeding in the Court, particularly where there is no contradictor in the proceeding or where evidence that is solely in the possession of the tribunal is highly probative.[39]  In providing assistance to the Court, the tribunal should adopt, so far as is possible, a non-partisan role.[40]   

    [37](1980) 144 CLR 13 (‘Hardiman’).

    [38]Hardiman (1980) 144 CLR 13, 36.

    [39]TXU Electricity Ltd v Office of the Regulator-General (2001) 3 VR 93, 102 [43]-[45] (‘TXU Electricity’); Bankstown City Radio Co-operative Ltd v Australian Communications and Media Authority [2007] FCA 2053 (20 December 2007) [4]-[6]. See also Anderson v Blashki [1993] 2 VR 89, 97.

    [40]TXU Electricity (2001) 3 VR 93, 97 [19], 102 [44]-[45]. One of the key reasons for impartiality is the possibility that the Court may remit the proceeding to the tribunal for reconsideration.

  1. In his letter dated 14 April 2011 to Mr Hufton,[41] Mr Nelms stated that Aird DP had determined to hear the VCAT Proceeding on her own. It can be inferred from this statement that Mr Nelms informed Aird DP of his correspondence with the parties on the question of whether the VCAT was properly constituted for the purpose of hearing the VCAT Proceeding. Further, it can be inferred that Aird DP was aware that, in the Court Proceedings, Mr Johnson was impugning the VCAT’s jurisdiction to hear the VCAT Proceeding on the basis that she had not complied with r 5.03(4) of the VCAT Rules.

    [41]See above [47].

  1. In these circumstances, it would have been consistent with the principle in Hardiman and it would have provided unique assistance to this Court if Aird DP had sworn a brief affidavit on the issue of whether she had determined that the VCAT Proceeding would be heard by the VCAT constituted solely by her rather than by three members as set out in r 5.03(2) of the VCAT Rules.

The affidavit sworn by Mr Nelms

  1. As set out at [47] to [49] above, Mr Nelms responded to an email dated 8 April 2011 from the solicitor for the Director but did not respond to a letter dated 15 April 2011 from the solicitor for Mr Johnson, even though both communications dealt with the same issue. Moreover, as set out at [50] above, Mr Nelms swore an affidavit that was filed on behalf the Director. No explanation has been provided to the Court for this apparent differential treatment of the parties.

  1. In Shire of Sherbrooke v FL Byrne Pty Ltd,[42] one of the parties to a proceeding seeking to challenge a decision of the Planning Appeals Board filed an affidavit sworn by the Chief Chairman of the Board.  Southwell J described the Chief Chairman’s conduct as ‘extraordinary’.  His Honour made the following comments which are apposite to the circumstances of this case:

The developer has filed an affidavit, engrossed by its solicitors, endorsed ‘This affidavit is filed on behalf of FL Byrne Pty. Ltd.’ (the developer) which was sworn by the Chief Chairman. In my opinion it is highly undesirable that the Chief Chairman should swear an affidavit engrossed by the solicitor for a party, and filed on behalf of that party. If it becomes necessary or desirable for the Chief Chairman or any other officer to put facts before the court (and they will nearly always be facts as to what occurred in court, rather than out of court) the services of the Crown Solicitor or the solicitor for the Board, if it has one, should be utilized. The appearance of independence is not enhanced by the course here adopted.[43]

[42][1987] VR 353 (‘Shire of Sherbrooke’).

[43]Shire of Sherbrooke [1987] VR 353, 360.

Desirability of a written determination under r 5.03(4) of the VCAT Rules

  1. None of the difficulties set out at [71] to [78] above would have arisen if Aird DP had signed a brief written determination under r 5.03(4) of the VCAT Rules prior to the commencement of the hearing of the VCAT Proceeding. Although, as stated at [45] above, the preparation of such a document is not required, this case illustrates the wisdom of such a course.

Ground 2: Whether natural justice applies to r 5.03(4) of the VCAT Rules

  1. Mr Riordan submitted that r 5.03(2) of the VCAT Rules conferred upon Mr Johnson a right to a hearing by three members, two of whom have expertise relevant to the real estate industry, and that he was entitled to be heard before being deprived of this right. Mr Riordan contended that this right was akin to the right of a party to a trial by jury where the statutory requirements for the exercise of that right had been complied with. He relied upon well-established authority that, although r 47.02(3) of the Court Rules confers on the Court the power to direct that a trial proceed by judge alone, that power can only be exercised after giving the parties an opportunity to be heard.[44]  

    [44]Trevor Roller Shutter Service Pty Ltd v Crowe [2011] VSCA 16 (10 February 2011) [39].

  1. Mr Riordan also submitted that a hearing by three members of the VCAT as required by r 5.03(2) of the VCAT Rules was important in ensuring that a decision by the VCAT, particularly in relation to the penalty to be imposed under s 28A of the EA Act, was informed by knowledge of the real estate industry. He contended that the members with industry expertise were better placed than the legally qualified presiding member to assess the seriousness of any breach of the EA Act and the EA Regulations and to moderate any penalty accordingly.

  1. According to Mr Riordan, a three member panel constituted in accordance with r 5.03(2) of the VCAT Rules was in a different position to a three member bench of the Court of Appeal constituted in accordance with s 11 of the Supreme Court Act 1986 because that Act did not prescribe any attributes for the judges of appeal. It follows, so it was said, that while the President of the Court of Appeal could determine that a particular appeal be heard by two judges without any prior consultation with the parties, the President of the VCAT or his or her delegate could not alter the three member constitution of the VCAT under r 5.03(2) of the VCAT Rules without giving the parties an opportunity to be heard on the matter.

  1. Mr Hanks QC submitted that r 5.03 of the VCAT Rules dealt with the practice and procedure of the VCAT[45] and the management of its resources and did not confer any rights on a party to a VCAT proceeding. Accordingly, so it was said, the exercise of the power under r 5.03(4) to alter the three member constitution of the VCAT required by r 5.03(2) did not alter any rights of a party so as to attract the hearing rule of natural justice.

    [45]See r 1.01 of the VCAT Rules.

  1. I accept Mr Hanks QC’s submission. The exercise of the power under r 5.03(4) of the VCAT Rules is not akin to the exercise of the power under r 47.02(3) of the Court Rules to direct that there be a trial by judge alone, notwithstanding a party’s election to have a trial by jury. This is because r 47.02(1) of the Court Rules preserves a longstanding common law right of parties to certain types of civil proceedings to a trial by jury upon compliance with various requirements, including the payment of jury fees. By contrast, r 5.03(2) of the VCAT Rules does not confer any rights on any party to a VCAT proceeding. It simply sets out how the VCAT will ordinarily be constituted in relation to certain proceedings unless the President or his or her delegate determines otherwise in a particular case. The exercise of the power in r 5.03(4) of the VCAT Rules does not affect the rights of persons who are parties to proceedings under the EA Act.[46]  The exercise of that power may be based on a range of factors, including the availability of VCAT resources. 

    [46]See Hassan v Nisselle (2000) 17 VAR 1, 9 [27].

  1. It may be accepted that r 5.03(2) of the VCAT Rules recognises that, all other things being equal, it is desirable that proceedings under the EA Act should be heard by three members with the qualifications set out in that rule. Rule 5.03(4), however, recognises that it is appropriate that particular proceedings under the EA Act be heard by a single member. Accordingly, it cannot be said that a hearing by a single member of the VCAT will not be as fair as a hearing by a panel of three members, or that a decision by a single member will be less sound than a decision by a panel of three members.

  1. It follows that Ground 2 is not made out. 

Ground 3:  Whether the Order is invalid if ground 1 is made out

  1. As Ground 1 has not been made out, it is not necessary for me to consider Ground 3. I note, however, that it was common ground between the parties that if this Court found that Aird DP did not comply with r 5.03(4) of the VCAT Rules, she would not have had jurisdiction to hear the VCAT Proceeding and the Order would be invalid.[47] 

    [47]See Coles (1986) 7 NSWLR 503, 513-14.

Ground 4:  Absence of jurisdiction to find Mr Johnson was not fit to hold a licence 

  1. The scope of any proceeding before a court or a tribunal is ordinarily determined by the terms of the document that initiates that proceeding.  Unless such a document raises matters falling outside the jurisdiction of the court or the tribunal, it provides the framework for determining the relevance of evidence to be adduced in the proceeding and the scope of the relief that may be granted. 

  1. If the parties conduct the proceeding in a manner that extends beyond the issues raised in the initiating document, they may be held to have elected to broaden the scope of the proceeding and the scope of the relief that may be granted in the proceeding.[48]  The conduct that may give rise to such a finding is usually clear.  An ambiguous aside from counsel during the hearing would be insufficient to support a finding that the party represented by that counsel has acquiesced in the broadening of the subject matter of the proceeding. 

    [48]Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490, 517; Carter v Walker [2010] VSCA 340 (14 December 2010) [43]-[46].

  1. In the present case, the initiating document was the Application for Inquiry. As set out at [18] above, that document described the scope of the proceeding as an application for inquiry under s 25 of the EA Act concerning breaches of that Act and the EA Regulations. That description can only relate to s 25(1)(a) of the EA Act. Accordingly, the scope of the VCAT Proceeding was an inquiry under s 25(1)(a) as to whether Sweeney, Mr Johnson and Mr Dean had contravened or failed to comply with the EA Act or the EA Regulations.

  1. The Director may apply for an inquiry into one or more of the five matters set out in s 25(1) of the EA Act. The fact that there is some overlap between those matters may make it appropriate for the Director to rely on more than one matter in some cases. For example, an agent’s conduct that gives rise to contraventions of the EA Act or the EA Regulations may reveal aspects of the agent’s character that demonstrate that he or she is not a fit and proper person to hold a licence. In the present case, however, the Director did not allege in the Application for Inquiry that Mr Johnson’s character was such that he was not a fit and proper person to hold a licence or that he had been guilty of conduct which rendered him unfit to hold a licence.

  1. Mr Hanks QC submitted that the functions of the VCAT under s 25(1) of the EA Act are partly adversarial and partly inquisitorial and that this enables the VCAT to conduct the inquiry in a manner that permits it to follow the evidence called before it wherever it leads. In support of this proposition, Mr Hanks QC relied upon Hauer v Lord,[49] in which Morris P held that the VCAT’s jurisdiction to conduct an inquiry under s 90 of the Liquor Control Reform Act 1998 was partly adversarial and partly inquisitorial.[50]  Mr Hanks QC submitted that Hauer should be preferred to the earlier case of Tarson Pty Ltd v Holt,[51] in which Beach J held that the jurisdiction of the Travel Agents Licensing Authority under s 20 of the Travel Agents Act 1986 to conduct an inquiry was adversarial.[52] 

    [49][2006] VCAT 739 (4 May 2006) (‘Hauer’).

    [50]Hauer [2006] VCAT 739 (4 May 2006) [15]-[19].

    [51](1991) 25 ALD 730 (‘Tarson’).

    [52]Tarson (1991) 25 ALD 730, 734-5.

  1. It may be accepted that, in relation to some aspects of its jurisdiction, the VCAT’s role is partly inquisitorial.[53] It may also be accepted that the fact that s 25(1) of the EA Act refers to ‘the holding of an inquiry’ contemplates that a proceeding under that section will have some inquisitorial features. That is not to say, however, that the scope of the inquiry is ‘at large’ or that the protections afforded by the adversarial system do not apply.

    [53]Bausch v Transport Accident Commission (1996) 11 VAR 117, 138.

  1. Consistent with the principles set out at [88] and [89] above, the scope of an inquiry under s 25(1) of the EA Act is determined by the terms of the document that invokes the VCAT’s jurisdiction and the subsequent conduct of the parties. Further, any broadening of the initial scope of an inquiry is at all times subject to compliance with the VCAT’s obligations to act fairly and in accordance with the rules of natural justice.[54]  The notion that the VCAT may follow the evidence called before it wherever it leads should be treated with considerable caution, as such an approach may well lead to error. 

    [54]See ss 97 and 98(1)(a) of the VCAT Act.

  1. Mr Riordan SC submitted that, by virtue of the Application for Inquiry, the VCAT’s jurisdiction in the VCAT Proceeding was confined to inquiring whether Mr Johnson had contravened the EA Act or the EA Regulations. This was reinforced, so it was said, by Mr Hufton’s statement at the commencement of the hearing of the VCAT Proceeding that the Director ‘has asked the tribunal to inquire into one of the five heads, s.25(1) … which is whether an estate agent has contravened or failed to comply with [the EA Act] or the [EA Regulations]’[55] and the statement to the same effect in Mr Hufton’s written submission.[56] 

    [55]See above [21].

    [56]See above [23].

  1. Mr Hanks QC submitted that the Application for Inquiry was not confined to breaches of the EA Act or the EA Regulations because it also referred to breaches of the Enforceable Undertaking which was provided under s 146 of the FT Act. Mr Hanks QC further submitted that the parties, by their conduct at the hearing of the VCAT Proceeding, acknowledged that the VCAT Proceeding encompassed an inquiry into any of the five matters set out in s 25(1) of the EA Act. In support of this submission, Mr Hanks QC relied on the oral statements of Mr Hufton and Mr Campbell that are set out at [21] and [22] above and on Mr Hufton’s written submission that is set out at [23] above.

  1. I reject Mr Hanks QC’s submission. The only paragraph of s 25(1) of the EA Act that the Application for Inquiry invoked was para (a). The reference to breaches of the Enforceable Undertaking did not alter this because the alleged breaches of the Enforceable Undertaking by Mr Johnson were constituted exclusively by the alleged breaches of s 47C(2) of the EA Act. Further, the statements of Mr Hufton and Mr Campbell, in their context, merely explained what they described as the ‘two‑stage process’ in ss 25 and 28A of the EA Act. Their references to the five matters in s 25(1) and the differential severity of the penalties set out in s 28A cannot fairly be described as an acknowledgment that the VCAT Proceeding extended to all five matters in s 25(1). The same applies to Mr Hufton’s written submission.

  1. It is readily apparent from paras 36 to 38 of the Reasons[57] that Aird DP considered that the scope of the inquiry under s 25(1) of the EA Act was confined to determining whether Sweeney, Mr Johnson and Mr Dean had contravened the EA Act or the EA Regulations.

    [57]See above [31].

  1. What is also clear from paras 36 to 38 of the Reasons is that, prior to embarking on a consideration of what orders should be made against Mr Johnson under s 28A of the EA Act, the only findings that Aird DP had made against Mr Johnson under s 25(1) were that he had contravened the EA Act and the EA Regulations. Those paragraphs and the transcript[58] indicate that, as at 23 February 2011, Aird DP had concluded the inquiry under s 25(1) of the EA Act and subsequently embarked upon the penalty phase of the VCAT Proceeding under s 28A of the EA Act.

    [58]See above [26] and n [6].

  1. Section 28A(1) of the EA Act commences with the words, ‘After conducting an inquiry in respect of a person under section 25’. This means that the VCAT’s powers under s 28A to impose penalties only arise after the VCAT has concluded its inquiry under s 25(1). It also means that a determination about any of the matters set out in s 25(1) can only be made during the course of the inquiry under that section and cannot be made once the inquiry has concluded and the VCAT embarks upon the penalty phase under s 28A.

  1. It follows that I reject Mr Hanks QC’s submission that, notwithstanding that the VCAT has announced its findings under s 25(1) of the EA Act, it can make further findings under that provision until it makes an order under s 28A(1). Such further findings can only be made if the Director successfully applies to the VCAT to reactivate the inquiry or if the parties agree to the inquiry being reactivated. Neither of those events occurred in the present case.

  1. Aird DP used incorrect terminology in the Reasons to describe the VCAT’s functions under ss 25(1) and 28A(1) of the EA Act. She referred to ‘findings’ under s 25(1) and ‘determinations’ under s 28A(1), whereas s 25(1) requires the VCAT to make determinations and s 28A(1) requires the VCAT to make orders. These errors in terminology may have contributed to Aird DP exceeding her jurisdiction.

  1. Aird DP also appears to have overlooked the precise requirements of s 25(1) of the EA Act. Her purported findings under s 25(1)(b) and (c) are set out in para 63 of the Reasons.[59] She appears to rely on two matters in making those findings, namely, Mr Johnson’s breach of the Enforceable Undertaking and his performance as a witness in the VCAT Proceeding. Mr Johnson’s performance as a witness cannot support a finding under s 25(1)(c) that he has been guilty of conduct ‘as an estate agent’ which renders him unfit to hold a licence.

    [59]See above [33].

  1. I reject Mr Hanks QC’s submission that the VCAT’s findings about Mr Johnson’s character and conduct were, in substance, not findings under s 25(1)(b) and (c) of the EA Act, but findings of fact for the purpose of determining what order to make under s 28A. It is abundantly clear that the findings purported to be findings pursuant to s 25(1)(b) and (c).

  1. It follows from the above that, as at 23 February 2011, the inquiry under s 25(1) of the EA Act had concluded and that Aird DP did not have jurisdiction after that date to make further determinations under that section.

  1. For the above reasons, Ground 4 is made out. 

Ground 5:  Finding of lack of fitness to hold a licence in breach of natural justice

  1. As Ground 5 presupposes that Ground 4 is not upheld, it is not strictly necessary for me to consider Ground 5.  However, as the matter was argued at some length before me, I will briefly set out my views. 

  1. Based on the discussion set out at [18] to [27] above, prior to the publication of the Reasons on 31 March 2011, Mr Johnson was not aware that Aird DP proposed to determine under s 25(1)(b) and (c) of the EA Act that he was not a fit and proper person to hold a licence on the basis of his character and conduct. It follows that he was not given an opportunity to be heard on those issues and that the VCAT breached the hearing rule of natural justice.[60] 

    [60]See s 98(1)(a) of the VCAT Act. See also s 102(1)(c) of the VCAT Act.

  1. It cannot be said that the outcome of the VCAT Proceeding would not have been different if Mr Johnson had been given notice that Aird DP proposed to consider making determinations under s 25(1)(b) and (c) in addition to a determination under s 25(1)(a).

  1. It is highly likely that, if such notice had been given, Mr Johnson’s counsel would have sought particulars of the ‘character’ and ‘conduct’ matters upon which reliance was placed under those provisions and would have adduced evidence and made submissions directly on those matters. The fact that character evidence was adduced at the penalty phase under s 28A of the EA Act rather than in the inquiry phase under s 25(1) demonstrates that Mr Johnson’s case was not conducted on the basis that his character was in issue under s 25(1)(b).

  1. The manner in which the VCAT unexpectedly pronounced its adverse determinations under s 25(1)(b) and (c) of the EA Act about Mr Johnson’s fitness to hold a licence deprived Mr Johnson of the opportunity to directly deal with those provisions.

  1. It follows that, if I had not upheld Ground 4, I would have upheld Ground 5. 

Ground 6:  Error of law in imposing manifestly excessive penalties

  1. As with Ground 5, my conclusion in relation to Ground 4 makes it unnecessary for me to consider Ground 6.  Once again, however, I will briefly set out my views on this ground. 

  1. Mr Riordan SC submitted that Mr Johnson’s contraventions of the EA Act and the EA Regulations were either technical in nature or involved a low level of culpability, such that the cancellation of Mr Johnson’s licence and the two year disqualification were manifestly excessive.

  1. In Buzzo Holdings Pty Ltd v Loison,[61] Kaye J held that a decision on penalty is a discretionary decision which can only be impugned on the basis of the principles set out in House v The King.[62]  With respect, I agree. 

    [61][2007] VSC 31 (26 February 2007) [18].

    [62](1936) 55 CLR 499.

  1. In accordance with the principles established in House v The King, the exercise of a discretion will not be disturbed on appeal unless it was unreasonable or clearly unjust, or there is some ground for concluding that the primary decision-maker acted upon a wrong principle; allowed extraneous or irrelevant matters to guide or affect him or her; was  mistaken about the facts; failed to take into account a material consideration; or gave undue weight to any circumstance or matter.[63]  

    [63]House v The King (1936) 55 CLR 499, 504-5.

  1. As Aird DP erroneously relied upon her purported findings under s 25(1)(b) and (c) of the EA Act in determining the penalty to be imposed under s 28A(1), the exercise of the discretion conferred by s 28A(1) miscarried. Accordingly, Ground 6 is made out.

Proposed order

  1. For the reasons set out above:

(a)in the Appeal Proceeding, I will order that the application for leave to appeal be granted, that the appeal be allowed, that the Order be set aside in so far as it applies to Mr Johnson and that the VCAT Proceeding be remitted to the VCAT to be heard and decided again according to law; and

(b)in the Judicial Review Proceeding, I will order that the proceeding be dismissed. 

  1. I will hear from the parties on the precise form of the orders in the Court Proceedings and on the question of costs.

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