Legian Shore Pty Ltd v Office of Fair Trading, Department of Commerce
[2011] NSWADT 132
•03 June 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Legian Shore Pty Ltd v Office of Fair Trading, Department of Commerce [2011] NSWADT 132 Hearing dates: 24 - 25 March 2010, 6 - 7 May 2010, 20 - 21 May 2010, 30 June 2010 submissions by 29.11.11 Decision date: 03 June 2011 Jurisdiction: General Division Before: S Montgomery, Judicial Member Decision: The decision under review is affirmed.
Catchwords: Real estate licence - refusal of application Legislation Cited: Administrative Decisions Tribunal Act 1997
Property, Stock and Business Agents Act 2002Cases Cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; 94 ALR 11; 64 ALJR 462; 21 ALD 1.
Clarke v Commissioner for Fair Trading [2004] NSWADT 273
Davidson v Commissioner for Fair Trading [2004] NSWADT 200
Hughes & Vale P/L v New South Wales (no.2) (1955) 93 CLR 127
McDonald v Commissioner for Fair Trading [2004] NSWADT 124
Saglimbeni v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 1Category: Principal judgment Parties: Legian Shore Pty Ltd (Applicant)
Office of Fair Trading, Department of Commerce (Respondent)Representation: R Henderson (Counsel for Respondent)
Jemmeson & Fisher (Solicitors for Applicant)
NSW Fair Trading Legal Services Division (Solicitors for Respondent)
File Number(s): 093236
REASONS FOR DECISION
This matter concerns an application for the review, pursuant to section 55 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act'') of the decision by a delegate of the Director General of the Office of Fair Trading (OFT) to refuse the application by Legian Shore Pty Limited ("Legian") for the grant of a corporation licence under the Property Stock & Business Agents Act 2002 ("the Act").
Factual Background
Ms. Henderson, Counsel for the Respondent, has provided a useful summary of the relevant factual background. I do not understand that this is in dispute.
Legian was registered as a corporation in August 1998 and Mr Ali Abbas was appointed as its sole director on that date. In October 2000 Legian registered the business name "LJ Hooker Arncliffe". On 23 November 2000 a licence under the Act was issued to Legian. Mr Abbas was named in the licence as "licensee in charge". The licence was renewed annually.
On 23 April 2004 Cooks Cove Properties Pty Ltd ("Cooks Cove") was registered by ASIC, and Mr Abbas was appointed its sole director. Cooks Cove traded as L J Hooker Wolli Creek. Legian paid $10,000 towards Cooks Cove's set-up costs and $250,000 towards its running costs over the next 12 months.
In 2005 Mr Abbas closed down L J Hooker Wolli Creek because there wasn't enough business to sustain the second location.
Cooks Cove repaid part of its debt to Legian in the form of a rent roll sale to Legian. A contract for sale was drawn up in May 2005. No money changed hands in the sale. The amount of $367,000 recorded as an intangible asset in Legian's balance sheet for 2008 relates to that rent roll. As a result of the rent roll sale, Cooks Cove's debt to Legian was reduced to $25,248.
On 31 January 2006 Domali Pty Ltd ("Domali") was registered. Mr Abbas has been a director of Domali since it was registered.
Legian appointed new company accountants on 1 June 2006.
On 8 March 2007 a member of Legian's staff wrote to a superannuation fund seeking data to finalise an Australian Taxation Office ("ATO") superannuation fund audit from 1 July 2003 to 31 December 2006.
On 1 June 2007 Legian was formally cautioned by the Office of Fair Trading because a number of breaches of the Act and Regulation had been reported in the audit report for the year ended 30 June 2006. Mr Abbas, as licensee, acknowledged receipt of the caution.
During the financial year commencing 1 July 2007 Legian loaned Domali the sum of $42,154.
From 1 August 2007 onwards Legian failed to remit to the ATO the PAYG tax that it had deducted from its employees' wages. That month Mr Abbas arranged for Legian's debt facilities with the National Australia Bank to be increased from $300,000 to $400,000.
From October 2007 Mr Abbas took steps to sell Legian's business.
From 1 April 2008 Mr Abbas ceased drawing a salary or wages for himself from Legian.
Legian had entered into a payment plan with the ATO to reduce its $78,338.30 debt. Legian paid instalments of $5,000 to the ATO in May, June and July 2008 in reduction of its debt.
As at 30 June 2008 Legian was owed $25,248 by Cooks Cove and $42,154 by Domali.
From August 2008 onwards Legian failed to pay the $5,000 instalments due under the payment plan with the ATO. That month Mr Abbas first consulted Hammoud Partners as tax consultants and business advisers.
On or about 8 September 2008 the ATO served Mr Abbas with a director's penalty notice for PAYG tax for the period 1 August 2007 to 31 July 2008.
On 13 October 2008 the ATO served Legian with a creditor's statutory demand for the sum of $121,088.20. That sum represented a running balance account deficit debt of $85,048.80 plus superannuation guarantee charges for the period 1 October 2004 to 1 July 2006, which had become payable on 8 February 2007.
In November 2008 Mr Abbas reduced the number of Legian employees, and recommenced drawing a salary or wages for himself.
Legian's corporation licence expired on 22 November 2008.
On 1 February 2009 Mr Abbas signed a letter of engagement with Hammoud Partners. Mr Hammoud introduced Mr Abbas to Mr Sam Henderson of Paladin Partners in early 2009.
Mr Abbas and his accountants first raised the question of potential licensing issues with Paladin Partners in February 2009.
On 4 February 2009 Mr Abbas appointed an agent to sell the real estate business conducted by Legian. Also during February 2009 Mr Abbas appointed a firm of real estate agents to sell a property that he owned at Monterey; it was advertised on 24 February 2009.
On 27 February 2009 Mr Abbas consulted Mr Dimitrious of James Lawyers. He sought advice on the ramifications of Legian going into external administration and any legal issues which might arise as a result of any such administration. He also sought legal advice as to any other alternative courses of action available to the company to avoid external
In early March 2009 Mr Abbas attended meetings at Paladin Partners at which procedures to appoint administrators and the legal effects of any such appointment were discussed.
On 13 March 2009 Mr Abbas resigned as director and secretary of Legian.
On Wednesday 25 March 2009 Mitchell Warren Ball and Trajan John Kukulovski were appointed external administrators of Legian. On the same day, Mr Abbas signed a Services Deed in which he covenanted with the administrators to provide "real estate services" during the administration. He warranted that he held a valid real estate licence and would service the company's management agreements and trust account in his capacity as a sole trader.
On 25 March 2009 the Respondent received an Application for a Licence -Corporation that was signed by Mr Abbas and dated 23 March 2009. The application form required the signature of the director. Mr Abbas signed the form, though he was not a director of Legian at that time. That application was withdrawn after an officer of the Respondent informed Mr Abbas that the licence could not be granted because Legian was under external administration.
On 4 June 2009 the administration of Legian ceased upon execution of a Deed of Company Arrangement that Mr Abbas had proposed. On the same day Mr Abbas was appointed a director of Legian.
On 5 June 2009 the Respondent received an Application for a Licence - Corporation. The application was refused on 30 June 2009.
Mr Abbas requested an internal review of the 30 June 2009 decision. Mr Guthrie determined the internal review on 25 August 2009 and affirmed the original decision to refuse the corporate application.
On 11 September 2009 the Deed of Company Arrangement was wholly effectuated.
The issue for determination by the Tribunal
The issue for determination is whether the delegate of the Director General made the correct and preferable decision. This is to be determined having regard to any relevant factual material and any written or unwritten law: section 63(1) of the ADT Act.
The questions raised on the application are:
whether Mr Abbas is a "disqualified person"
whether Mr Abbas took "all reasonable steps to avoid Legian becoming an externally administered body corporate" and
whether Mr Abbas is a fit and proper person to hold a licence.
Applicable legislation
Section 9 of the Act provides:
9 Corporations require corporation licence
(1) A corporation must not act as or carry on the business of (or advertise, notify or state that the corporation acts as or carries on the business of or is willing to act as or carry on the business of) an agent unless the corporation holds a corporation licence. ...
Section 14 of the Act provides:
14 Eligibility for licence or certificate of registration
...
(2) A corporation is eligible to hold a corporation licence only if the Director-General is satisfied that:
(a) the corporation is a fit and proper person to hold a licence, and
(b) each director of the corporation is a fit and proper person to hold a licence, and
(c) the corporation, and each officer (within the meaning of the Corporations Act) of the corporation, is not a disqualified person, and
(d) at least one of the directors of the corporation holds a licence that a natural person is required to hold to carry on the business that the corporation carries on or proposes to carry on, and
...
Section 16 of the Act provides:
16 Disqualified persons
...
(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
(d) is a person:
(i) who was, at any time in the last 3 years, concerned in the management of, or a director of, a body corporate that, within 12 months after the person ceasing to be such a person or director, became an externally-administered body corporate (within the meaning of the Corporations Act) except in the case of a voluntary winding up of the body corporate, and
(ii) who failed (while concerned in the management of, or a director of, that body corporate) to take all reasonable steps to avoid the body corporate becoming an externally-administered body corporate.
...
(2B) The Director-General may exempt a person from the operation of subsection (1A) (a), (b) or (c) by:
(a) certifying, in the case of exemption from subsection (1A) (a), that the Director-General is satisfied that the person took all reasonable steps to avoid the bankruptcy concerned, or
(b) certifying, in the case of exemption from subsection (1A) (b), that the Director-General is satisfied that the person took all reasonable steps to avoid the bankruptcy or other financial difficulties concerned, or
(c) certifying, in the case of exemption from subsection (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) Subsection (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 subsection (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.
...
The Respondent's Case
The Respondent contends that Legian became a disqualified person on 25 March 2009 and was a disqualified person on 5 June 2009 when Mr Abbas lodged the application presently before the Tribunal. The Respondent further contends that Mr Abbas became a disqualified person on 25 March 2009 and is currently a disqualified person unless the Tribunal is satisfied that he took all reasonable steps to avoid Legian becoming an externally-administered body corporate. It submits that Mr Abbas did not take all reasonable steps.
The Respondent submits that from 1 August 2007 onwards Mr Abbas allowed Legian to stop remitting instalments to the ATO but he loaned $42,000 of Legian's funds to Domali during the 2007 - 2008 financial year. From 1 August 2008 onwards he allowed Legian to default on an arrangement to pay off a $78,000 debt to the ATO. In September 2008 Mr Abbas failed to comply with the director's penalty notice. The Respondent submits that he could have comply with the notice if Domali had repaid the $42,000 that it owed to Legian.
The Respondent further submits that Mr Abbas failed to reduce Legian's staff numbers in a timely fashion. He waited until November 2008 to stand down "about two employees." The Respondent contends that he negated any financial benefit that might have flowed to Legian from that decision when he recommenced drawing a salary or wages for himself in November 2008.
The Respondent also contends that Mr Abbas depleted Legian's funds by requiring it to pay lease instalments of $20,400 to $21,600 per annum for a Range Rover ("the Range Rover"). He did not relieve Legian of that unnecessary expense by disposing of the Range Rover and leasing something cheaper. The Range Rover was transferred into Mr Abbas' name on 30 June 2009 however, the Respondent submits that the transfer could and should have been carried out well before that time.
The Respondent also contends that Mr Abbas not a fit and proper person. It relies on the decision in Hughes & Vale P/L v New South Wales (no.2) (1955) 93 CLR 127 as authority for the submission that honesty is one of the key elements of fitness. Other elements include knowledge and ability.
The Respondent submits that Mr Abbas was aware at all relevant times that a disqualified person cannot hold a licence. It says that in the application for a corporation licence that the Respondent received on 25 March 2009, Mr Abbas falsely represented to the Respondent that he was the sole director, of Legian. However, he had resigned as director and secretary on 13 March 2009, when Mr Batrous became the sole director. The Respondent submits that Mr Abbas' attempt to explain that falsehood is unconvincing. He claimed that the period was a stressful time when he was thinking about whether to go into administration or trying to avoid administration. However, at that stage he was not trying to avoid administration. Mr Batrous had already become the sole director of Legian and had resolved on 25 March 2009 to appoint the administrators.
The Respondent also contends that Mr Abbas' evidence about the circumstances in which the licence application came to be lodged on 25 March 2009 casts serious doubts on his honesty and on whether he really remembers the events that he related in his statement. He variously stated that he attended at the Respondent 's Hurstville office and lodged an application ; that he did not go the Respondent office himself; that he would have sent someone from his office to lodge it; or that it may have been posted. He eventually accepted that it was most likely hand delivered to the Respondent Hurstville office on 25 March 2009.
The Respondent also says that in the application for a corporation licence that the Respondent received on 5 June 2009, Mr Abbas falsely represented to the Respondent that, in the preceding 3 years, he had not been a person concerned in the management of an externally-administered body corporate. However, on 25 March 2009, Mr Abbas signed a Services Deed in which he had undertaken to perform the task of managing Legian during its administration.
The Respondent also says that in that application for a corporation licence Mr Abbas falsely represented that he had not, in the preceding 3 years, been a director or a person concerned in the management of a corporation that became an externally-administered body corporate within 12 months of the date he ceased. The Respondent contends that Mr Abbas was well aware that he had been Legian's sole director from its incorporation until 13 March 2009, and that the company had become an externally-administered body corporate on 25 March 2009.
The Respondent submits that Mr Abbas' claims that he gave the false answers in good faith because he relied on his advisers should be rejected. It submits that Mr Abbas' evidence is unreliable and his account of the advice that they allegedly gave him has not been corroborated. Mr Abbas has purported at times to have relied on his advisers, and at other times has tried to dissociate himself from actions they took or statements they made on his behalf. Mr Abbas has contradicted himself. He has also contradicted Mr Hammoud, and that contradiction necessarily involves an allegation that Mr Hammoud acted without instructions.
The Respondent submits that the correct and preferable decision in this matter is that the decision under review be affirmed.
The Applicant's Case
Mr Abbas contends that Legian's financial problems were caused by poor financial and accounting advice provided by its former external advisers, the downturn in the economy which created a significant reduction in property sales and listings and extended periods of high interest rates. He further contends that he took reasonable steps to avoid external administration of the company.
The particular measures to which he referred included entering a payment plan with the ATO; not being paid any salary or wages between 1 April 2008 and 31 October 2008; reducing the number of staff employed by the company; taking advice from Hammoud Partners from August 2008; engaging an agent to find a buyer for his Monterey home unit, negotiating a revised payment plan for franchise fees; taking steps to sell the agency business and the rent roll; arranging an increase the company's debt facilities and attempting to raise additional funds by further borrowings on the security of the company's rent roll. However, all of those efforts were unsuccessful in avoiding external administration.
Mr Abbas stated that Mr Hammoud proposed a number of options including referring him to Paladin Partners. On 25 March 2009 Sam Henderson and Daniel Frisken of Paladin Partners advised him that to avoid the possible liquidation and winding up of the company, the voluntary appointment of administrators was strongly recommended.
In January and February 2009 he sought legal advice on the ramifications of Legian going into external administration and any other alternative courses of action to avoid external administration or liquidation.
He said that in an effort to do everything possible to keep the company from being placed in liquidation. Prior to the appointment of the administrators in March 2009 he agreed to assume liability for the leasing of the Range Rover. Title to the Range Rover was later transferred to him.
He proposed to attempt to either refinance or sell the business and the rent roll as an alternative and preferred course to the possible appointment of any external administrators. He said that Sam Henderson told him that Nic Batrous was prepared to be appointed as a director while the voluntary administration of the company was in progress. He was also told that Mr Batrous might be interested in purchasing the agency business.
Paladin Partners prepared the ASIC Notice of Change of Directors and Mr Abbas' resignation as a director and also arranged for the Notice to be signed by Mr Batrous. Paladin Partners also prepared a draft Memorandum of Understanding setting out the circumstances involving the change of directors and Mr Abbas' resignation as a director of Legian.
Mr Abbas stated that he had no contact with Mr Batrous but agreed with the Paladin Partners' recommendation of Mr Batrous as a suitable interim director of Legian.
On 28 April 2009 the administrators prepared a proposal to Legian's creditors for their approval of the Deed of Company Arrangement. Mr Abbas read and signed the proposal. With Mr Abbas' consent the Deed of Company Arrangement was presented to the creditors (including the ATO) on 8 May 2009. The Deed was approved by the creditors. Mr Abbas stated that he ensured that all monies due and payable under the Deed were made. A total of seventy-thousand dollars was paid.
Mr Batrous ceased to be a director of the company on 4 June 2009 and Mr Abbas was reappointed as a director on that date. On 11 September 2009 the Deed of Company Arrangement was wholly effectuated.
With respect to the issues raised by the Respondent in regard to the answers that he provided in licence applications, Mr Abbas asserted that he did not understand the intricacies of the questions and that he did not ask any solicitor for legal advice about how he should answer those questions. He stated that in June 2009 he was of the opinion that the questions only applied to any director of Legian who was a director during the period of the administration.
In regard to that issue, Mr Abbas asserts that the advice that he received was either not appropriate for a real estate agency business or entirely incorrect. However, it was advice which he and Legian relied on to make an application for a corporation licence and to complete that application form. Reliance on that advice has resulted in an erroneous application form. Mr Abbas did not intend to conceal, avoid or otherwise evade the requirements of disclosure provided for in the Application form.
These factors should not be considered when assessing the fitness and reputation of Mr Abbas. The corporation licence should not be rejected simply because of the action to omit certain disclosures, which were as a result of bad professional advice.
Mr Richardson appeared on behalf of Legian throughout the hearing and provided a brief outline of submissions in February 2010, prior to the substantive hearing. However Mr Richardson was unable to provided final written submissions on its behalf. Mr Rabadi provided written submissions without the benefit of having participated in the matter. The Respondent has taken issue with much of what is submitted by Mr Rabadi on the basis that in certain significant respects it misrepresents the evidence and the nature of the proceedings. I note that I generally agree with the Respondent in regard to those objections. Consequently those submissions a re of little assistance in determining this matter.
Discussion
As noted above, the questions raised on the application are:
whether Mr Abbas is a "disqualified person"
whether Mr Abbas took "all reasonable steps to avoid Legian becoming an externally administered body corporate" and
whether Mr Abbas is a fit and proper person to hold a licence.
Pursuant to section 14 of the Act Legion will not be eligible to hold a licence if Mr Abbas is a disqualified person or if Mr Abbas is not a fit and proper person to hold a licence.
Pursuant to section 16(1A)(c) of the Act Mr Abbas is a disqualified person if he was at any time in the last 3 years, concerned in the management of, or a director of, an externally-administered body corporate.
Pursuant to section 16(1A)(d) of the Act Mr Abbas is a disqualified person if he was, at any time in the last 3 years, concerned in the management of, or a director of, a body corporate that, within 12 months after the person ceasing to be such a person or director, became an externally-administered body corporate and failed to take all reasonable steps to avoid the body corporate becoming an externally-administered body corporate.
It is not in dispute that at the relevant time Legian had been an externally-administered body corporate. The evidence clearly shows that Legian became an externally-administered body corporate within 12 months after Mr Abbas ceasing to be a director a director. The evidence also shows that Mr Abbas was involved in the management of Legian during the period of administration.
The Director-General may certify that Mr Abbas took all reasonable steps to avoid Legion becoming an externally-administered body corporate. The Tribunal is in the same position as the Director-General and may also make that certification.
The Respondent contends that Mr Abbas is a disqualified person and that he did not take all reasonable steps to avoid Legian becoming an externally-administered body corporate. It also contends that Mr Abbas is not a fit and proper person to hold a licence.
In Clarke v Commissioner for Fair Trading [2004] NSWADT 273 the President of the Tribunal considered the question of whether the licence holder took 'reasonable steps' to avoid the bankruptcy or insolvency. He considered earlier decisions in the matters of Davidson v Commissioner for Fair Trading [2004] NSWADT 200 and McDonald v Commissioner for Fair Trading [2004] NSWADT 124 and stated at paragraphs 10 and 11:
"In examining the question of whether the licence holder took 'reasonable steps' to avoid the bankruptcy or insolvency:
(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]).
I considered the issue in Saglimbeni v Commissioner for Fair Trading, NSW Office of Fair Trading [2008] NSWADT 1 and I stated at paragraph [27];
"27 The test of "reasonable steps" is that of what a reasonable person endowed with Ms Saglimbeni's the knowledge and experience would do. In applying this test I must consider two issues - (i) when did Ms Saglimbeni know, or ought she to have known, that the administration in question was a possibility? and (ii) what steps did she take to avoid that liquidation or administration? "
Legian contends that Mr Abbas became aware that the external administration was a possibility in April 2008. The economic conditions confronting the business community of NSW from 2007 to 2009 are the principle reasons argued as the cause of Legian's difficulties. It says that Mr Abbas then took all reasonable steps that he could have taken to avoid the administration. It is submitted that Mr Abbas, with the assistance of a number of independent professional advisers, was able to steer Legian through those extremely significant difficulties. The temporary administration in 2009 enabled Legian to avoid liquidation and to continue since 12 September 2009.
In contrast, the Respondent has pointed to apparent financial difficulties experienced by Legion in 2007. From August 2007 onwards Legian failed to remit to the ATO the PAYG tax that it had deducted from its employees' wages and Mr Abbas arranged for Legian's debt facilities with the National Australia Bank to be increased from $300,000 to $400,000. From October 2007 Mr Abbas attempted to sell the business. The Respondent has identified a number of steps that Mr Abbas could have taken to avoid the administration. In particular it has referred to loans made on behalf of Legian and Mr Abbas' failure to recover the amounts owed to Legian. It also referred to Mr Abbas' delay in attending to staff numbers and outgoings in regard to the Range Rover. I agree with the Respondent in that regard.
In my view, Mr Abbas ought to have known that the administration in question was a possibility from around August 2007. From that time he ought to have taken steps to avoid that possibility. Reasonable steps would have included seeking professional advice. The evidence shows that he did not seek that advice until some time in late 2008 or early 2009.
During the financial year commencing 1 July 2007 Legian loaned Domali the sum of over $42,000. Similarly, a debt of some $25,000 was owed by Cooks Cove. Had Legion recovered those amounts it would have had a significant impact on the efforts to avoid the administration.
Notwithstanding my view of the reasonable steps that could have been taken, it remains uncertain whether the administration would have been avoided. For reasons that are discussed below, it is not necessary that I make a finding on this point.
In my view, what is more significant in the circumstances of this matter is what transpired in regard to the administration and the licence applications lodged by Mr Abbas on behalf of Legian. This is relevant to the question of whether or not Mr Abbas is a fit and proper person to hold a licence.
The meaning of the expression "fit and proper person" was the subject of consideration by the High Court in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; 94 ALR 11; 64 ALJR 462; 21 ALD 1. The Tribunal was required to refuse a licence if it was not satisfied that the applicant or the holder of a licence was a "fit and proper person". Toohey and Gaudron JJ stated (at 380) that:
The expression "fit and proper person", standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of "fit and proper" cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question. (our emphasis)
In the same case, Mason CJ stated at [63] that:
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. (our emphasis)
The discretion to issue a licence or authority must be exercised keeping in mind the activities in which the person will be engaged if an authority is granted (see Hughes and Vale Pty Ltd v State of New South Wales ; [1955] HCA 28; (1955) 93 CLR 127 at 156 and Australian Broadcasting Tribunal v Bond .)
In Hughes and Vale Pty Ltd at 156-157 Dixon CJ, McTiernan and Webb JJ stated as follows in respect of the exercise of this administrative discretion:
The expression 'fit and proper person' is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their purpose 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 ... . It is evident that the commissioner is invested with an authority to accept or reject an applicant the exercise of which depends on no certain or reliable criteria and which in truth involves a very wide discretion.
The Respondent has referred to the answers that Mr Abbas provide in the licence applications filed on behalf of Legian as raising questions about his honesty and argues that Mr Abbas' explanations were unconvincing. I agree with that view.
In my view, it is probably that the Mr Abbas deliberately completed the application form in the manner that he did. He would have done so because he was aware that Legian needed the licence to remain in business and because he was aware that the licence would not be granted if the correct information had been provided.
In my view it is implausible that Mr Abbas was not aware of the arrangements in place for the management of Legian at the time he lodged the application on 25 March 2009. He had resigned as director and secretary on 13 March 2009, and a 'Mr Nic Batrous' is purported to have been appointed as the sole director. The evidence suggests that Mr Batrous is a probably a fictitious character. In the circumstances, it is improbable that Mr Abbas would not have suspected that to be the case at the time he resigned as director or Legian. If he did not have that suspicion, he certainly suspect that to be the case shortly afterwards. A prudent person in Mr Abbas' position could reasonably be expected to have taken steps to bring that matter to the attention of the relevant authorities. He did not do so. In my view it is likely that Mr Abbas would have agreed to the arrangement, or turned a blind eye to it, because he had entered an agreement that would effectively allow him to continue to manage the business.
In my view, these matters are relevant to Mr Abbas' ability to perform the duties as both a director and as a licensee. They are relevant to his fitness and propriety to hold a licence.
On the basis of the evidence before me I am not satisfied that Mr Abbas is a fit and proper person to hold a licence. Pursuant to section 14(2) of the Act a corporation is eligible to hold a corporation licence only if each director of the corporation is a fit and proper person to hold a licence. Mr Abbas is the sole director of Legian. It follows that Legian is not eligible to hold a corporation licence. The correct and preferable decision is therefore to refuse the licence application and therefore the decision under review should be affirmed.
Order
The decision under review is affirmed.
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I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.
Registrar
Decision last updated: 03 June 2011
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