Jones v Commissioner for Fair Trading, New South Wales Office of Fair Trading
[2008] NSWADT 140
•16 May 2008
CITATION: Jones and anor v Commissioner for Fair Trading, New South Wales Office of Fair Trading [2008] NSWADT 140 DIVISION: General Division PARTIES: APPLICANT
Marie Lois JonesAPPLICANT
RESPONDENT
Gateway Real Estate (Sydney) Pty Ltd
Commissioner for Fair Trading, New South Wales Office of Fair TradingFILE NUMBER: 073322; 073323 HEARING DATES: 15 February 2008 SUBMISSIONS CLOSED: 15 February 2008
DATE OF DECISION:
16 May 2008BEFORE: Molony P - Judicial Member CATCHWORDS: Property, Stock and Business Agents Act - Real Estate agent - cancellation of licence MATTER FOR DECISION: Principal matter LEGISLATION CITED: Administrative Decision Tribunal Act 1997
Property Stock and Business Agents Act 2002CASES CITED: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Brennan & Australian Casino Surveillance Authority (1995) 38 ALD 794
Clarke v Commissioner for Fair Trading [2004] 273
Davidson v Commissioner for Fair Trading [2004] NSW ADT 200
Cross v Commissioner for Fair Trading, Office of Fair Trading [2005] NSWADT 69
Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409
Duncan v Commissioner of Fair Trading [2008] NSWADT 121
Hughes & Vale Pty Ltd v The State of New South Wales (No 2) (1955) 93 CLR 127
Kioussis v Director General, Department of Fair Trading [2002] NSWADT 2
Lindfield v Commissioner for Fair Trading [2005] NSW ADT 32
Marino v Director General, Ministry of Transport [2005] NSWADT 53
McDonald v Commissioner for Fair Trading [2004] NSW ADT 124
McEvoy v Director-General Department of Fair Trading [2000] NSW LEC 183
Musa and Ministry of Transport [2005] AATA 577
Re Mayers and Casino Surveillance Authority (1993) ALD 585
Re Percival and Australian Securities Commission (1993) 30 ALD 280
Saglimbeni v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 1
Smith v Commissioner for Fair Trading [2004] NSW ADT 182REPRESENTATION: APPLICANTS
RESPONDENT
C Vindin, barrister
M Grinbergs, solicitorORDERS: 1. The decision of the Commissioner made on 24 October 2007 to cancel Ms Jones’ real estate agents and stock and station agents licences under the Property Stock and Business Agents Act 2002 is set aside
2. The decision of the Commissioner made on 24 October 2007 to cancel the corporate licence held by Gateway Real Estate (Sydney) Pty Ltd under the Property Stock and Business Agents Act 2002 is set aside.
REASONS FOR DECISION
Background
1 Ms Jones is a real estate agent of some 30 years standing. She holds a real estate agents and stock and station agents licences under the Property Stock and Business Agents Act 2002. Ms Jones is the sole director and secretary of two companies, Gateway Real Estate (Sydney) Pty Ltd (‘Gateway’) which was registered on 9 July 2007 and Sydney Harbourside Real Estate Pty Ltd (‘Sydney Harbourside’) registered on 9 October 1997. Gateway was issued with a corporate licence under the Act on 1 November 2006.
2 Sydney Harbourside is under external administration. On 11 May 2006 two receiver managers were appointed by the National Australia Bank pursuant to registered charges. On 8 August 2006 an administrator was appointed to the company, and on 4 September 2006 a liquidator was appointed under a creditors’ voluntary winding up.
3 In June 2006 Ms Jones applied for a renewal of her licences. In her renewal application, received by the Commissioner on 30 June 2006, but incorrectly dated 2 June 2005, Ms Jones answered "No" to the following questions:
4 On 17 July 2006 Gateway applied for a corporate licence. Ms Jones completed that application as director and secretary of the company. Ms Jones answered "No" to the following questions:
"Are you a director or person concerned in the management of any corporation that is the subject of a winding up order or the appointment of a controller or administrator?"
"In the preceding 3 years were you a director or person concerned in the management of any corporation which was the subject of a winding up order or the appointment of a controller or administrator?"
5 It is not disputed at that time Ms Jones applied for both her own and Gateway’s licences receiver managers were appointed to Sydney Harbourside. Those licences were issued.
"Has any director ... (d) in the preceding 3 years, been a director or person concerned in the management of any corporation when it was the subject of a winding up order or for which a controller or administrator was appointed?”
"Is any director ... currently (b) concerned in the management of any corporation that is subject of a winding up order or for which a controller or administrator has been appointed?"
6 By letters dated 18 and 21 December 2006 the Commissioner served on Ms Jones a Notice to Show Cause pursuant to section 195 of the Act why she was not a disqualified under section 16(1)(e) of the Act, as it then stood. On 13 January 2007 Ms Jones responded:
"The National Bank telephoned me in May on a Thursday afternoon between 2.30-3.30pm and advised that they wanted my overdraft of $70,000 to be reduced by $70,000 ...
... I received a telephone call at approx 9.30am the following day, Friday morning, from an administrator (Ferrier Hodgson – Newcastle) advising me that they had been appointed by the National Australia Bank, they would be in the office in an hour ...
My agency was the top agency in Umina Beach, we were selling the most properties and were positively pro-active in the market place in what can only be described as a dismal falling market, however that was our position, the bank to my knowledge, never asked or investigated the position of our business in the real estate market in our area.
... The business was sold and settled in October 2006.
... The reasons for placing the Company in receivership were:
My accountant advised that they felt this was the best option to take, my solicitor advised that this was the best thing for me to do under the circumstances ..."
1. That I was unable to refinance the business as an Administrator had been put in place.
2. I had lost control of the distribution of monies to pay accounts.
3. The Franchise was lost with Richardson & Wrench.
4. The Business was being sold.
7 On 1 March 2007 the applicable legislation was amended by the Property, Stock and Business Agents Amendment Act 2006. On 8 May 2007 the Commissioner issued further show cause notices on both Ms Jones and Gateway, this time addressing the issues in the terms required by the Act as amended. Ms Jones denies receiving either of these notices, although the Commissioner has filed an affidavit of service. Because she did not receive them Ms Jones says she did not respond to those notices.
8 On 24 October 2007 the Commissioner determined to take disciplinary action under section 192 of the Act by cancelling the licences held by Ms Jones and Gateway. Ms Jones was also disqualified from obtaining a licence for 5 years. In making these decisions the Commissioner found that Ms Jones had acted unlawfully, improperly, unfairly and incompletely, was not a fit and proper person to hold a licence, was a disqualified person and not eligible to hold a licence, and that the licences had been issued by fraud or mistake. Each of these is a ground for taking disciplinary action under section 191 of the Act.
9 On 26 October 2007 Ms Jones and Gateway filed applications to review those decisions with the Tribunal and sought a stay of the Commissioner decisions pending the determination of the reviews. On 31 October 2007 the Tribunal stayed the operation of the Commissioner’s decisions pending the determination of the reviews. The Tribunal also dispensed with the requirement that the decisions be internally reviewed under section 59(2) of the Administrative Decision Tribunal Act 1997.
10 Those reviews were heard on 15 February 2008. Section 63 of the Administrative Decision Tribunal Act 1997 says that in determining an application for review the Tribunal is to make the correct and preferable decision having regard to the material before it, and any applicable written or unwritten law. It is well established that in considering an application for review the Tribunal is not constrained to have regard only to the material that was before the Commissioner, but may have regard to any relevant material before it at the time of the review: Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409.
11 During that hearing an issue arose as to whether the provisions of the Property Stock and Business Agents Act 2002 as they were before or after the amendments made by the Property Stock & Business Agents Amendment Act 2006 applied. It was agreed by the parties that we should proceed on the basis that the applicable law is that set out in section 16 of the Property Stock & Business Agents Act 2002 in its present form. It was also agreed that if, applying that law, I reached a conclusion adverse to Ms Jones interests, I would give both parties an opportunity to make submissions as to the applicable law before finally determining the matter. For the benefit of the parties I note that since the hearing I have had occasion to consider the question the correct applicable law in Duncan v Commissioner of Fair Trading [2008] NSWADT 121.
Issues
12 In the light of the agreement I have to determine five issues in this matter. First, whether Ms Jones is a disqualified person and therefore ineligible to hold a licence under the Property Stock and Business Agents Act 2002.
13 Secondly, whether Ms Jones is a fit and proper person to hold a licence under the Act.
14 Thirdly, whether Ms Jones has in the course of carrying on business or exercising functions under the licence, acted unlawfully, improperly, unfairly or incompetently.
15 Fourthly, whether both Ms Jones’ and Gateway’s licences were obtained by fraud or mistake.
16 Fifthly, subject to inviting further submissions if a make adverse findings against Ms Jones on the disqualified person issue, to determine what disciplinary action should be taken if I am satisfied that a ground for taking disciplinary action is established.
Is Ms Jones a disqualified person?
17 The Applicable Law - Relevantly s.16 now provides:
18 Thus where a person has, in the three years before their licence application, been a director of a corporation to which an external administrator was appointed, other than on a voluntary winding up, they will be a disqualified person unless the Commissioner is satisfied that they should be exempt. The Commissioner may exempt them by certifying that they took all reasonable steps to avoid the external administration, having regard to the steps that could have been taken by the person from the time that the financial difficulties that gave rise to the outcome first arose.
“(1A) A person is also a disqualified person for the purposes of this Act (except for the purposes of eligibility to hold a certificate of registration) if the person:
…
(c) is, or was at any time in the last 3 years, concerned in the management of, or a director of, an externally-administered body corporate (within the meaning of the Corporations Act) except in a case of the voluntary winding up of the body corporate, or
…
(2) The Director-General may determine that an offence committed by a person should be ignored for the purposes of this section because of the time that has passed since the offence was committed or because of the triviality of the acts or omissions giving rise to the offence.
(2A) The Director-General may, in any case that the Director-General thinks it appropriate to do so, determine that a suspension or disqualification from holding a licence, permit or other authority under legislation administered by the Minister (as referred to in sub-section (1)(h)) is to be ignored for the purposes of this section.
(2B) The Director-General may exempt a person from the operation of sub-section (1A)(a), (b) or (c) by:
…
(c) certifying, in the case of exemption from sub-section (1A)(c), that the Director-General is satisfied that the person took all reasonable steps (while concerned in the management of, or a director of, the body corporate) to avoid the body corporate becoming an externally-administered body corporate.
(2C) Sub-section (1A)(d) does not operate to make a person a disqualified person unless the Director-General has served a notice on the person giving the person the opportunity to make oral or written submissions to the Director-General within a period (not being less than 14 days) specified in the notice with respect to the grounds on which the person believes he or she took all reasonable steps to avoid the body corporate becoming an externally-administered body corporate and the Director-General is satisfied that the person failed to take all such steps.
(2D) In determining for the purposes of sub-section (2B) or (2C) what reasonable steps could have been taken by a person to avoid a particular outcome, the Director-General is to have regard to the steps that could have been taken by the person from the time that the financial difficulties that gave rise to the outcome first arose.
…”
19 In Saglimbeni v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 1 Montgomery JM considered these provisions. He referred to a number of earlier decisions of the Tribunal (Clarke v Commissioner for Fair Trading [2004] 273; Davidson v Commissioner for Fair Trading [2004] NSW ADT 200; McDonald v Commissioner for Fair Trading [2004] NSW ADT 124; Smith v Commissioner for Fair Trading [2004] NSW ADT 182 and Cross v Commissioner for Fair Trading, Office of Fair Trading [2005] NSWADT 69) dealing with the questions of whether reasonable steps have been taken to avoid bankruptcy or insolvency. He agreed with and applied the approach set out by the Tribunal’s President, O'Connor DCJ, in Clarke, when his Honour reviewed the approach taken in the earlier cases. The President said, at [10-11]:
20 Montgomery JM concluded that, in order to determine whether all reasonable steps to avoid the body corporate becoming an externally-administered body corporate had been taken from the time that the financial difficulties that gave rise to the outcome first arose, he had to determine three issues. First, when the Applicant knew, or ought to have known, that the external administration in question was a possibility? Secondly, to determine what steps they took to avoid the external administration and, thirdly, what steps a reasonable person endowed with their knowledge and experience ought to have taken to avoid that outcome? I agree with that approach.
“10 It has expressed the following views as to the approach to be taken in examining the question of whether the licence holder took ‘reasonable steps’ to avoid the bankruptcy or insolvency:
11 To these should probably be added a fourth, though it is obvious enough from the provision:
(i) A general inquiry into the wisdom or otherwise of the original financial dealings that ultimately ended in bankruptcy or insolvency is not contemplated by the Act. The point at which the inquiry commences is when the applicant was ‘faced with the possibility’ of bankruptcy or insolvency ( Davidson at [20]) or was ‘aware’ or ‘should have been aware’ ( McDonald at [21]) of that possibility. The focus is the steps taken to avoid the relevant event (see Smith at [17]) – in cases of the present kind, administration, and later liquidation.
(ii) Subject to (i), in assessing reasonableness the Tribunal must examine all the relevant facts and circumstances. (McDonald at [25]),
(iii) The steps taken by the applicant must be objectively reasonable in the sense that they would be those taken by a ‘reasonable person endowed with the knowledge and experience of the [applicant]’. (McDonald at [26-27])
(iv) The person under notice has the task of satisfying the Commissioner that he or she took all reasonable steps to avoid the insolvency.”
21 The circumstances leading to external administration – Ms Jones established the business of Jones and Jones at Umina Beach in late 2003. She had previously owned, either solely or in partnership, a number of real estate agencies.
22 In 2004 the opportunity arose to purchase the business of Richardson & Wrench at Umina Beach. By a contract dated 18 May 2004 Sydney Harbourside purchased the business of Richardson & Wrench of Umina Beach for the price of $420,000. This included a rent roll the agreed price of which was $210,666.00.
23 The purchase was funded by a loan of $430,000 from the National Australia Bank, which was secured over both the business, and grazing property Ms Jones owned at Emmaville. The funding was secured with the assistance of a finance broker. Ms Jones had a solicitor and accountant acting for her in relation to these transactions and says she received and acted on advice with respect to them. The ASIC Historical Company Extract shows that a fixed and floating charge to the National Australia Bank was created 22 April 2004 and registered 24 May 2004.
24 The overdraft was negotiated at some stage between 2004 and 2006, Ms Jones could not recall when. This was secured over the rural lands at Emmaville and the company. Ms Jones said that in addition she had cash reserves, of which the bank was aware, which arose from her sale in 2002 of a rural property at Peat’s Ridge. The ASIC Historical Company Extract shows that a fixed and floating charge to the National Australia Bank was created 19 May 2005 and registered 30 May 2005. Ms Jones said that, if required, she had the personal resources to top up any shortfalls in the company overdraft.
25 Ms Jones said that as of May 2006 the total exposure of both herself and Sydney Harbourside to the bank was $919,000. This was secured in total and by collateral mortgages over the following assets:
26 Ms Jones said that the business was successful and thriving. Despite a downturn in the property market, which had reduced profits, it was making money and was the most successful agency in the area. It was her practice to use and rely on the advice of the company accountant, Paul Simioni, who also audited the trust account books. She agreed that there was an outstanding tax liability, but explained that she had negotiated a repayment arrangement with the ATO. Similar arrangements were in place with all the business creditors. All repayments to the bank were made on time. In her opinion, in May 2006, the business was trading solvently and able to pay its debts as and when it fell due. She said that she had not received any advice to the contrary from her accountant.
Home – valued at $460,000.00.
Business – valued at $430,000.00.
Rural Land - valued at $300,000.00.
27 In May 2006 the business overdraft was up for renewal. Ms Jones was in negotiations with the bank for its continuance. At the request of the bank she had her accountant prepare cash flow projections. These showed that the business would continue to trade profitably. They were provided to the bank. Ms Jones said that it had been indicated that favourable consideration would be given to her request by the bank.
28 In telephone discussions with the bank, on the afternoon of 5 May 2006, Ms Jones was advised that the bank was calling up the overdraft. No reason was given for this. In that conversation a time was not fixed for repayment. Ms Jones said that the next morning the receiver managers walked through the door, unannounced, and took over the operation of the business. At that time Ms Jones said the business had commissions totalling $194,000 held on trust, but awaiting final settlement of the sales.
29 The receiver managers continued to operate the business. Ms Jones and her staff continued to work in the business. While they took control of the business accounts, she insisted on retaining control of the trust account. In her view the receiver managers did considerable harm to the business. They took over all employment decisions and would not let her sack people. They reduced the advertising budget, which affected the business’s profitability. Of most concern, from her point of view, was the receiver managers’ failure to honour a commitment to continue to pay the Richardson & Wrench franchise fee, which led to the franchise being terminated. This in turn, on her estimation, resulted in a significant diminution in the value of the business. When sold the business only achieved a sale price of $180,712.08.
30 Ms Jones said that when she became aware that an administrator was being appointed to the business in August 2006 she sought legal advice and accounting advice and acted on it. She said that when the receiver managers were in, she was not clear about what was going on and worked hard at trying to keep the business trading.
31 A report as to the affairs of the company filed by the receiver managers on 10 July 2006 lists the following liabilities as of 11 May 2006: National Australia Bank (secured by registered mortgage debenture) $519,869 unsecured creditors of $163,767 (including $91,440 due to the ATO) and employee entitlements totalling $32,616(of which $30,000 was due to the ATO). This totals $716,251.
32 On 11 November 2006 the receiver managers filed a From 524 presentation of accounts and statements with ASIC. These show unsecured creditors claims of $196,382.43 (including employee entitlements), and that proofs of debts totalling $46,445.05 had been received and were being considered. By that time the amount secured had increased to $550,000. In the period of six months from 11 May 2006 to 11 November 2006 total amounts received were $419,541.98, with payments made of $240,546.63, the difference being reconciled cash at bank of $178,995.35. In submissions, the Commissioner noted that the receipts figure for this period included the proceeds of the sale of the business on 2 November 2006 for $153,912.30. The estimated value of property secured at the date of account of was $246,000.00.
33 In her evidence Ms Jones referred to the statement of receipts and payments for Sydney Harbourside for the period 11 May 2006 to 11 January 2007. This shows total receipts in that period of $427,389.54 comprised of the sale of the business of $180,712.08; commissions received of $215,413.50, management fees of $9,832.24, GST of $21,259.41 and small miscellaneous receipts. Payments during that period totalled $426,946.25 comprised of the usual running expenses of the business and a number of unusual items. $45,000 was repaid to the NAB, The receivers and mangers fees and expenses of $118, 229.93, and legal fees of $25,716.18. Ms Jones’s central point was that despite the business being run down by the receiver managers, as she saw it, it still yielded sufficient income to have enabled her to continue to pay its debts as when they fell due, if not for the costs of the receiver managers.
34 Submissions – The Commissioner submitted that:
35 The Commissioner relied on McDonald v Commissioner for Fair Trading [2004] NSWADT 124, where the Tribunal stated, in interpreting "reasonable steps to avoid bankruptcy", at 20:
“Ms Jones was a director of the company from 9 October 1997. By her admission, Ms Jones had sought at least one overdraft of $70,000 before the administration in May 2006, and given the extent of the liabilities totalling $716,251 in the Report as to Affairs, must have been aware of the financial difficulties of the company that resulted in the administration (and not necessarily that insolvency was a possibility) some time before the administration. Ms Jones has not demonstrated that any reasonable steps were taken at any time before the administration including those suggested by the authorities of selling property to pay debts, negotiating with creditors to achieve settlement and taking financial advice and acting on that advice.
Ms Jones has failed to demonstrate that reasonable steps were taken " ... from the time that the financial difficulties that gave rise to the outcome (that is, administration of the company) first arose" and is therefore a disqualified person for the purposes of section 16(1A) and section 191(d) of the Act.”
36 Ms Jones view was that she had taken all reasonable steps. Her counsel submitted that:
"20 This provision requires a court or tribunal to take into account the purpose of the legislation even if the meaning of the provision is clear. ( Mills v Meeking (1990) 91 ALR 16 at 30-31.) One purpose of the Act is to protect sellers and buyers of homes from dishonest or disreputable real estate agents. If a person became bankrupt as a result of some wrongful or improper conduct or because of financial irresponsibility, it may be necessary to protect the public by excluding such a person from being a real estate sales person. Taking all reasonable steps to avoid bankruptcy is consistent with being financially responsible. Consequently, the purpose of the Act is consistent with interpreting the phrase taking "all reasonable steps to avoid the bankruptcy" according to its ordinary meaning."
37 When did Ms Jones know, or ought she to have known, that the external administration in question was a possibility? The National Australia Bank appointed the receiver managers under the registered charges. Those charges are not in evidence before me. The only evidence relating to the circumstances in which the Bank exercised its power under the charge is that of Ms Jones, together the Report of Affairs filed by the receiver managers with ASIC. The latter records that the receiver managers were appointed and took control on 11 May 2006 “for the purpose of enforcing a charge.” Ms Jones evidence is that all payments due and payable under the charge were made as when they fell due, and that the Bank’s appointment of the receiver manager was unannounced, but followed oral advice from an officer of the bank, the afternoon before the appointment, that the bank was calling up moneys due under the overdraft. The Commissioner does not offer any direct evidence to contradict this.
The only "reasonable step to avoid the administration" which Ms Jones could have taken was to have alternative funding available when her overdraft was unexpectedly called in and the receiver and manager, equally unexpectedly, was appointed. Until those events occurred, virtually simultaneously, the business was not in financial difficulty: no concerned unsecured creditors are identified and the bank held (then!) apparently adequate security. Ms Jones had reduced her overdraft to within its limits by asset sales, the sort of action placed first in the list of reasonable steps in Cross extracted at paragraph 17 of the respondent's outline. As stated in her letter extracted at paragraph 8 of the respondent's outline, there was little she could do once the receiver and manager was appointed.
38 Rather, the Commissioner relies on circuitous reasoning to argue that “given the extent of the liabilities totalling $716,251” Ms Jones must have been aware of the financial difficulties of the company that resulted in the administration. In so doing the Commissioner relies on the fact Ms Jones admitted that she sought an extension of the over draft facility as evidence of her awareness of those difficulties. Ms Jones uncontradicted evidence, however, is that when she obtained the extension of the overdraft she provided additional security, not only in the form of a fixed and floating charge over the company’s assets, but also over her Emmaville property. She agrees that the company had debts, but says that she had made arrangements for the payment of those debts over time, and that the cash flow and profitability of the business was such that it could meet all of its liabilities as and when they fell due. Again there is no evidence to contradict this. Indeed, the statement of receipts and payments for Sydney Harbourside for the period 11 May 2006 to 11 January 2007 points to the company - despite the downturn consequent on the appointment of receiver managers and the process of winding up – deriving substantial income from its operations which supports Ms Jones’ view.
39 Insofar as the Commissioner suggests that, by obtaining of a company overdraft, and subsequently extending it, Ms Jones showed an awareness of the difficulties, which led to the ultimate, appointment of receiver managers, I do not agree. There is no evidence that the company was in financial difficulty at the time the overdraft was arranged and extended, or that the overdraft arrangement was any more than a usual and customary commercial arrangement to assist the company in meeting the exigencies of cash flow.
40 In those circumstances, I do not accept the Commissioner’s submission, based on the reported liabilities of the company, that Ms Jones “must have been aware” of the company difficulties at some time before she was advised that the Bank was calling up the overdraft. I find that the first time Ms Jones knew of the financial difficulties, which led to the appointment of the receiver managers, was on the afternoon of 10 May 2006 when the Bank advised it was calling up the overdraft. There is no evidence, which justifies a conclusion that she should have been aware of this possibility earlier.
41 What steps did Ms Jones take to avoid the external administration? From the time the bank advised her that the overdraft was being called up, on the afternoon of 10 May 2006, until the receiver managers walked through the office doors the next morning, less than a day had passed. Ms Jones’ evidence was that she had not been given a time in which the overdraft was to be repaid. In the time available she had not been able to take any action to address the repayment of the overdraft.
42 What steps would a reasonable, informed person, in Ms Jones situation, have taken to avoid the external administration? Given the very short time, which elapsed between Ms Jones being advised the overdraft was being called up and the receiver managers being appointed, there were no steps that could reasonably or practicably been taken to avoid external administration.
43 Conclusion – Ms Jones has satisfied me that she took all reasonable steps (while she was concerned in the management of, or a director of, Sydney Harbourside) to avoid it becoming an externally-administered body corporate, having regard to the steps she could have taken, from the time that the financial difficulties first arose. The correct and preferable decision is to certify this under section 16(2B)(c). As a consequence Ms Jones is not a disqualified person under section 16.
Is Ms Jones a fit and proper person?
44 The Applicable Law - Section 191 provides that one of the grounds for taking disciplinary action against a licence holder is that:
45 In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, Chief Justice Mason explained that, at 380:
“(e) the person is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee ,”
46 In Hughes & Vale Pty Ltd v The State of New South Wales (No 2) (1955) 93 CLR 127 at 156 Dixon CJ, McTiernan and Webb JJ said, in relation to the "fit and proper person" test that its purpose:
“The question whether a person is fit and proper is one of value judgment. In that process the seriousness or otherwise of particular conduct is a matter for evaluation by the decision maker. So too is the weight, if any, to be given to matters favouring the person whose fitness and propriety are under consideration.”
47 Fitness and propriety are flexible concepts. A consideration of whether a person is fit and proper involves an assessment of their knowledge, honesty and ability in the context of the role they are seeking to undertake. What fit and proper means must be viewed in the light of, "... the activities in which the person is or will be engaged”: Re Percival and Australian Securities Commission (1993) 30 ALD 280, at 290. What is fit and proper will depend on the legislative context and the nature of the particular profession, trade or occupation in question: Re Brennan & Australian Casino Surveillance Authority (1995) 38 ALD 794, at 796 paragraph [41].
... is to give the widest scope for judgment and indeed for rejection. "Fit" (or "idoneus") with respect to an office is said to involve three things, honesty knowledge and ability ...
48 In the context of the Property Stock and Business Agents Act 2002 honesty and financial propriety are essential requirements.
49 Submissions – The Commissioner submitted that:
50 Ms Jones’s counsel submitted that:
“Ms Jones did not disclose her involvement in the administration of the company in both applications of June and July 2006, within two months of the appointment of the administrators.
The respondent relies upon a line of authority to support the general principle that a failure to disclose conduct albeit of a relatively minor nature, as required, demonstrates a lack of honesty and candour which are essential for a determination of good fame and character or "fit and proper person"; Re Mayers and Casino Surveillance Authority (1993) ALD 585, McEvoy v Director-General Department of Fair Trading [2000] NSW LEC 183, Kioussis v Director General, Department of Fair Trading [2002] NSWADT 2, Musa and Ministry of Transport [2005] AATA 577 (16 June 2005), Marino v Director General, Ministry of Transport [2005] NSWADT 53 and Lindfield v Commissioner for Fair Trading [2005] NSW ADT 32 (22 February 2005).
51 Consideration – In her renewal application Ms Jones answered “No” to two questions asking whether she was or had been involved in the management of a corporation that is, or had been, “the subject of a winding up order or the appointment of a controller or administrator.” A month later in making the application for Gateways corporate licence, Ms Jones gave the same answer to question about whether any director of Gateway was or had been involved in the management of a corporation that is, or had been, “the subject of a winding up order or the appointment of a controller or administrator.”
“To move from the starting point of one wrong answer, once repeated, to a question the answer to which involves an understanding of the machinery of corporate insolvency to a conclusion that Ms Jones is not a person of honesty and candour is an unjustified leap. In a career spanning over thirty years, one would need a far firmer foundation to bring upon her the consequences of such a finding. There is no suggestion that any member of the public dealing with Ms Jones in her capacity as a licensed real estate agent need have had any concern as to her honesty and candour in those dealings.”
52 In her evidence Ms Jones acknowledged these answers were wrong. Her explanation for giving incorrect answers involved the complex circumstances in which she and Sydney Harbourside found themselves at that time, and her lack of understanding of the fact a receiver manager is an administrator or controller of a corporation. When she completed the forms she knew that receiver managers had been appointed, but they were continuing to operate the business in which she was still working, and it was not clear what would happen to Sydney Harbourside. She thought the receiver managers wanted to get rid of her. She said that when she answered the questions she believed she was answering them correctly. In retrospect, she thought she had been confused between the roles of a receiver manager and a liquidator. She said she had no prior experience with insolvency. She explained that following the appointment of the receiver manager she had sought advice from a retiring accountant to whom she had been referred who advised to get another company or business up so that she could keep trading, if necessary. That was why she sought a corporate licence for Gateway.
53 The Commissioner is correct that even a minor failure to disclose to a regulatory authority a relevant matter may impact on the assessment of a person’s honesty and integrity, and their fitness and propriety. A failure to disclose by itself does not necessarily result in an adverse assessment being justified. To draw adverse conclusions as to a persons character, honesty and integrity, the failure to disclose must occur in circumstances where the person required to disclose knows of and understands the requirement to disclose, but does not do so. In those circumstances it is open to a decision maker to draw adverse conclusions with respect to honesty and integrity of the person in their dealing with a regulator. The cases relied on by the Commissioner are replete with examples of this.
54 In Ms Jones’ case she says she believed she answered the question honestly, but now, in the light or a greater understanding of the mechanisms of corporate insolvency, realises she was mistaken. The questions she answered incorrectly encompass concepts of corporate law that are foreign to many. They require knowledge of those concepts, which many people do not have. She was correct when she answered no the questions relating to winding up. She was wrong in her understanding that receiver manager, were not controllers or administrators. Given her unblemished history of more than 30 years as a licensee, the circumstances which existed with respect to Sydney Harbourside when she answered those questions, and her consistent evidence, I have no reason to doubt that her failure to disclose was the result of her lack of understanding that the questions also applied to receiver managers. As a result her failure to disclose does not affect my assessment of her honesty and integrity.
55 I am satisfied that Ms Jones is a fit and proper person to hold a licence under the Property Stock and Business Agents Act 2002.
56 I suggest that confusion of the sort highlighted in this instance could be avoided were the questions asked by the Commissioner in application forms more carefully worded.
Did Ms Jones act unlawfully, improperly, unfairly, or incompetently?
57 The Applicable Law - Section 191 provides that one of the grounds for taking disciplinary action against a licence holder is that:
58 Consideration – The Commissioner argued that by failing to disclose that a controller or administrator had been appointed to Sydney Harbourside Ms Jones acted unlawfully, improperly, unfairly or incompetently. No details were given as to why this was so.
“(c) the person has, in the course of carrying on business or exercising functions under the licence or certificate of registration , acted unlawfully, improperly, unfairly or incompetently,”
59 There is no doubt that Ms Jones, innocently and a consequence of her lack of understanding, answered the Commissioner’s questions wrongly. She did not do so dishonestly or with an intent to mislead, but as a result of a mistake. The provision of an incorrect answer to the Commissioner is not a strict liability offence. Ms Jones has satisfied me of her bona fides and I accept she made a genuine error. There is no basis for finding that she acted unlawfully, improperly, unfairly or incompetently.
Was the issue of the Ms Jones’ or Gateways’ licence obtained by fraud or mistake?
60 The Applicable Law - Section 191 provides that one of the grounds for taking disciplinary action against a licence holder is that:
61 Consideration – The Commissioner argued that by failing to disclose that a controller or administrator had been appointed to Sydney Harbourside, Ms Jones and Gateway obtained their licences by fraud or mistake. No details were given as to why this was so.
“(j) the issue of the person’s licence or certificate of registration was obtained by fraud or mistake,”
62 I reject this contention. First there is no evidence of fraud. Secondly, with respect to mistake, as I have already found - taking into account the matters not disclosed - that Ms Jones is not a disqualified person and is a fit and proper person to hold a licence under the Act, the foundations upon which this submission is based fail. Because of those findings, Ms Jones would have been eligible for licences issued to Gateway and herself, despite her mistaken failure to disclose. As a result the licences were not “obtained” as a result of the mistake. They would have been obtained in any case.
Conclusion
63 In the light of my findings I will set aside the decisions to cancel both Ms Jones and Gateway’s licences.
Orders
The Tribunal makes the following orders:
1. The decision of the Commissioner made on 24 October 2007 to cancel Ms Jones’ real estate agents and stock and station agent’s licences under the Property Stock and Business Agents Act 2002 is set aside
2. The decision of the Commissioner made on 24 October 2007 to cancel the corporate licence held by Gateway Real Estate (Sydney) Pty Ltd under the Property Stock and Business Agents Act 2002 is set aside.
1
14
2