Porter v Director-General, Department of Finance and Services

[2013] NSWADT 211

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:	Porter v Director-General, Department of Finance and Services [2013] NSWADT 211
Hearing dates:	31 October 2012, 12 March 2013, 5 June 2013, 12 June 2013, 17 July 2013
Decision date:	27 September 2013
Jurisdiction:	General Division
Before:	S Leal, Judicial Member
Decision:	The decision under review is set aside
Catchwords:	Real estate licensing - whether disqualified person - whether fit and proper to hold a licence - whether "fit and proper person to be involved in the direction, management or conduct of the business of a licensee".
Legislation Cited:	Administrative Decisions Tribunal Act 1997, Property, Stock and Real Estate Act 2002
Cases Cited:	McDonald v Director General of Social Security (1984) 1 FCR 354
Category:	Principal judgment
Parties:	Peta Jennifer Porter (Applicant) Director-General, Department of Finance and Services (Respondent)
Representation:	Counsel: Mr Rogers (Applicant) Solicitors: Harrington, Maguire & O’Brien (Applicant) M Nicoletti (Respondent)
File Number(s):	123250

reasons for decision

Introduction

1. The applicant, Mrs Peta Jennifer Porter, first obtained a real estate agent's licence in 2005. In 2007, she became a director of the family held company, PMD Central Coast Pty Ltd ('PMD'). NSW Fair Trading appointed a manager to PMD in 2009 and at some point in 2010, Mrs Porter resigned as director of this company. In November 2010, she returned to the family business to work as a real estate agent for PMD. Receivers were appointed to PMD on 21 April 2011 and Mrs Porter began operating as a sole trader, trading as Coastwide Real Estate, in order to take over the business from PMD. On 23 August 2012, NSW Fair Trading made a decision to:

• cancel Mrs Porter's real estate agent's licence, on the basis that she was not a fit and proper person to hold such a licence;

• declare Mrs Porter to be a disqualified person until 20 April 2014; and

• disqualify Mrs Porter from being involved in the 'direction, management and conduct of a business of a licensee' until 20 April 2014.

1. Mrs Porter lodged an application for review to this Tribunal. On 6 September 2012 this Tribunal granted a stay of the decisions by NSW Fair Trading to cancel Mrs Porter's licence, to declare her to be a disqualified person and to disqualify her from being involved in the 'direction, management and conduct of a business of a licensee.'

Jurisdiction /Review decision

1. In this case, the Tribunal is undertaking a review of the merits of the original decision. The role of the Tribunal is to make the correct and preferable decision having regard to the material before it, including any relevant factual material and any applicable written or unwritten law. It then confirms the original decision, varies it or sets it aside. (Administrative Decisions Tribunal Act 1997, s63) The Tribunal makes its own decision in place of that of the relevant administrator, in this case that of the Director-General, Department of Finance and Services, and there is no presumption that the decision of the administrator is correct. (McDonald v Director General of Social Security (1984) 1 FCR 354 at 357.)

1. According to section 3 of the Property, Stock and Real Estate Act 2002 (the Act):

"real estate agent" means a person (whether or not the person carries on any other business) who, for reward (whether monetary or otherwise), carries on business as an auctioneer of land or as an agent:

(a) for a real estate transaction, or

(b) for inducing or attempting to induce or negotiating with a view to inducing any person to enter into, or to make or accept an offer to enter into, a real estate transaction or a contract for a real estate transaction, or

(c) for the introduction, or arranging for the introduction, of a prospective purchaser, lessee or licensee of land to another licensed agent or to the owner, or the agent of the owner, of land, or

(d) collecting rents payable in respect of any lease of land and otherwise providing property management services in respect of the leasing of any land, or

(e) for any other activity in connection with land that is prescribed by the regulations for the purposes of this definition.

but does not include a person who carries on business as an auctioneer or agent in respect of any parcel of rural land unless the regulations otherwise provide.

1. Section 8(1)(a) of the Act provides that a person cannot act as or carry on the business of a real estate agent unless the person is the holder of a real estate agent's licence.

1. Section 14 of the Act states that a person must be 'fit and proper' in order to hold a real estate agent's licence.

1. Section 191 of the Act sets out the grounds upon which disciplinary action can be taken against the holder of a real estate agent's licence. Relevantly to this matter, these grounds include the following:

• where, in accordance with 191(d), the person is a disqualified person or is otherwise not eligible under section 14 to hold a licence or certificate of registration;

• where, under 191 (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;

• where, in accordance with s191(a), the person has contravened a provision of this Act or any other Act administered by the Minister, or the regulations under any such Act;

• where, in accordance with s191(b), the person has contravened a condition of the licence or certificate of registration;

• where, under s191 (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.

1. Section 192 of the Act sets out the disciplinary steps that can be taken against a person who is in breach of section 191. These include the following:

• a caution or a reprimand;

• the requirement that a person give a specific undertaking or take specified action in relation to the conduct of their business;

• the imposition of a monetary penalty;

• the imposition of a condition on the person's licence;

• the suspension of a person's licence;

• the cancellation of a person's licence;

• the declaration that a person is a disqualified person, either permanently or for a specified period;

• the disqualification of a person from being involved in the direction, management or conduct of a relevant business.

1. Section 193 of the Act allows for an administrator (and by extension this Tribunal) to take no further action in respect of a matter, whether or not the matter is the subject of a complaint or a show cause notice and whether or not the administrator determines that there are grounds for taking disciplinary action in connection with the matter.

Fit and proper

1. The question as to whether a person is fit and proper was discussed in McBride v Walton (NSW Court of Appeal, unreported, 15 July 1994). Their Honours recognised that whether a person is fit and proper involves a value judgement to be made in the context of the particular activity to be licensed. The Court said that where there is evidence of misconduct, there should be consideration of any explanation for that misconduct, its seriousness to the particular activity, the motivation of the person, whether the misconduct is an isolated incident, the person's underlying qualities of character, and the person's conduct since the incident and whether this demonstrates recognition of the misconduct and subsequent reform. 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.

Disqualified person

1. The circumstances in which a person is a 'disqualified person' are set out in section 16 of the Act.

1. Section 16 (1A) (c) provides that a person is a disqualified person for the purposes of the Act if the person 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 2001) except in a case of the voluntary winding up of the body corporate.

1. The Corporations Act provides that an externally-administered body corporate means a body corporate:

(a) that is being wound up; or

(b) in respect of property of which a receiver, or a receiver and manager, has been appointed (whether or not by a court) and is acting; or

(c) that is under administration; or

(ca) that has executed a deed of company arrangement that has not yet terminated; or

(d) that has entered into a compromise or arrangement with another person the administration of which has not been concluded.

ISSUES

1. In proceedings before the Tribunal, the respondent revised its position in relation to the particulars relied upon in relation to Mrs Porter. In particular, the respondent contended that:

• Mrs Porter was, at the relevant time, a disqualified person by operation of section 16(1A)(d) of the Act;

• while trading as Coastwide Real Estate in the period from April 2011 to December 2011, Mrs Porter operated in breach of section 86 of the Act, which provides that trust money must be paid into a trust account, and clause 21 of the Regulations made under the Act, which stipulates that a licencee who receives trust money must pay it into the licensee's trust account (a) before the end of the next banking day after the day of its receipt, if that is practicable, or (b) if that is not practicable, as soon as practicable after that day;

• Mrs Porter engaged in a course of conduct from March 2011 and thereafter to acquire and transfer the rent roll of PMD Coastwide Real Estate, contrary to the instructions of the Manager appointed to PMD Central Coast Pty Ltd;

• Mrs Porter employed a disqualified person, namely her mother Mrs Jennifer Campbell, in contravention of s43 of the Act;

• when taken together, the contentions raise a question as to whether Mrs Porter is a fit and proper person under the Act to hold any authority at all.

1. In light of the issues raised, the respondent submitted that the Tribunal should:

• affirm the decision to cancel the applicant's real estate agent's licence;

• declare the applicant a disqualified person for a period of five years from the date of decision;

• disqualify the applicant from being involved in the direction, management and conduct of the business of a licensee for a period of five years from the date of decision.

Was Mrs Porter, at the relevant time, a disqualified person by operation of section 16(1A)(d) of the Act?

1. A disqualified person is a person who was 'at any time in the last 3 years..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.' (s16(1A)(d)(i) of the Act)

1. Both parties to this application agree that Mrs Porter became a director of PMD Central Coast Pty Ltd (ACN 128 404 464) on 9 November 2007. Both also agree that on 21 April 2011, receivers were appointed to the company and that, accordingly, the company became an externally-administered body corporate on that date. This is confirmed by the Notice of Appointment of Receiver dated 21 April 2011 which is contained in the documents provided by the respondent in accordance with s58 of the Administrative Decisions Tribunal Act 1997.

1. What is not agreed between the parties is when Mrs Porter ceased to become a director of the company. The respondent contends that Mrs Porter remained a director of the company until 1 August 2010 when her brother, Mr Ryan Campbell, a director of the company, notified the Australian Securities and Investment Commission (ASIC) that Mrs Porter had ceased to be a director of the company.

1. If this is correct, the company, which became an externally-administered body corporate less than three years ago, went into externally administration within 12 months of Mrs Porter ceasing to become a director. On this basis, Mrs Porter would be a disqualified person under s16(1A)(d) of the Act.

1. Mrs Porter does not agree that she ceased to become a director of the company on 1 August 2010. She contends that she resigned as a director of the company on 14 January 2010.

1. In support of this contention is an ASIC Request for Correction lodged by Ryan Campbell on 18 June 2012 which provides the following details of correction:

The director ceasation[sic] date for Peta Porter is incorrect. The date she resigned her position from the company as well as resigning her directorship should be the 14th January 2010.

I have attached a letter received from Peta Porter and a copy of wage payments to support this.

1. The letter in question is dated 15 June 2012 and provides as follows:

I ceased employment and directorship of PMD Central Coast Pty Ltd on 14th January 2010. I was of the understanding that you were made aware of this at the time but have since found out that your records show that I ceased directorship of this company on 1/8/10. Could you please update your records accordingly to show the correct date?

1. The respondent contends that the date of Mrs Porter's resignation as director of PMD was changed from 1 August 2010 to 14 January 2010 not to correct an earlier error but simply to circumvent the provisions of s16(1A)(d) of the Act.

1. It is the respondent's contention that only after Mrs Porter had been interviewed by an investigator from NSW Fair Trading on 8 July 2010 did she made enquiries as to whether she continued to be a director of PMD according to the ASIC register.

1. According to the respondent, this explains why soon afterwards, on 30 August 2010, Mr Ryan Campbell notified ASIC that Mrs Porter had resigned as director of PMD on 1 August 2010. At that time, PMD was not under external administration and so Mrs Porter could not have appreciated that the subsequent appointment of an administrator would have the consequence that she might become a disqualified by virtue of s16(1A)(d) of the Act. According to the respondent, Mrs Porter would only have become aware that she was affected by section 16(1A)(d)(i) of the Act when served with the Notice to Show Cause dated 13 June 2012. The respondent contends that this then prompted her to have Mr Ryan Campbell notify ASIC and to change her date of resignation as director of PMD to a date outside the 12 month period set out in section 16(1A)(d)(i) of the Act, namely 14 January 2010.

1. In oral evidence before the Tribunal, Mrs Porter confirmed that she had become a director of PMD on 9 November 2007 following a request from her brother. She told the Tribunal that between late 2009 and mid-January 2010, she withdrew all her business association with PMD, including her directorship of it.

1. In her affidavit dated 4 September 2012 , she explains why she did this:

In or about October 2009, the Respondent investigated PMD in relation to a licencing issue and in or about November 2009 its corporate licence was suspended and a manager of the company, Mr Richard Porter...was appointed by the Respondent. In the light of information which came into my possession in the course of the events to which I refer in paragraph 11, I determined to withdraw from all business association with PMD and with the real estate industry itself and by January 2010 I had finally achieved that....When I withdrew from my association with PMD, I relied upon my brother to give effect to that withdrawal by notifying all relevant authorities, etc, including ASIC and he stated to me that he would do so.

1. In a further affidavit dated 6 March 2013, Mrs Porter stated that:

On 27 January 2010, my [real estate agent's] licence, having been suspended since November, was cancelled for a period of 12 months. When that occurred, I left the real estate industry and it was my intention not to return. By that time, I was aware of allegations of impropriety, including allegations that money had gone missing from the business' trust account. I knew nothing of those matters directly (and nor did anyone allege that I did). However, I was angry that I had been caught up in the possible wrongdoing of others and did not want to be further involved in the business. In July 2010, I was interviewed by Edmund Bishara form the Department of Fair Trading. Between leaving the business in January 2010 and being interviewed by Mr Bishara, I had nothing at all to do with the business or the company...My intention not to return to the industry continued until about November 2010. At about that time, I became aware that my mother..had become bankrupt. My father was also bankrupt...Additionally, I had become aware my grandfather..and my great aunt, had got caught up in the bankruptcies of my parents and were at risk of losing their abodes...For that reason, in November 2010, I returned to the industry.

1. In support of her contention that she had resigned as a director of PMD in January 2010, Mrs Porter gave evidence that she had started a new job delivering training services for Central Coast Group Training on 5 January 2010, which she finished on 19 November 2010, a date coinciding with her resumption of employment with PMD.

1. Wage records for PMD show that Mrs Porter's employment ceased on 14 January 2010. Tax return records for Mrs Porter confirm that she received income from Central Coast Group Training Limited (as identified by its ABN number) during the financial year 1 July 2010 - 30 June 2011.

1. Under cross examination, Mrs Porter confirmed that in January 2010, she had told her brother to take her off the PMD books as director and had left it to him to do so.

1. In support of his contention that, in fact, Mrs Porter had only resigned as a director of PMD on 1 August 2010, the respondent referred to a record of interview held between Mrs Porter and an investigator of the Department of Fair Trading on 8 July 2010, and in particular, to the following exchange:

Q: Okay. So you've got authority to speak on behalf of PMD Central Coast Proprietary Limited?

A: Yeah

1. The respondent cites this response as evidence that on 8 July 2010, Mrs Porter was, and still considered herself to be, a director of PMD and so had not in fact resigned as director on 14 January 2010.

1. In response, Mrs Porter claimed that the question had been taken out of context and that, in fact, she had simply been agreeing with the proposition that when PMD had started trading in 2008, she'd had the authority to speak on behalf of the company.

Q Okay. When did PMD Central Coast Proprietary Limited start trading?

A I guess it would have been a couple of years ago. What is it, '08 when Reda Holdings ceased?

Q Well, yeah, the contract's signed on 7 December.

A Yeah. So I guess it would have been around that. Yeah, well, yeah, my son was ---

Q So on or about the beginning of January/February 2008 you took over and started trading?

A Yeah. Well, my son is, yeah, a bit over two. So, yeah

Q Okay. So you've got authority to speak on behalf of PMD Central Coast Proprietary Limited?

A Yeah

Q Okay. Now when you took over, when the company started trading, what were you doing?

A Property management

1. Under cross examination, Mrs Porter said that she had understood the use of the present tense in the question Okay, so you're got authority to speak on behalf of PMD Central Coast Proprietary Limited as being simply to set the scene in the context of a line of questioning referring to Mrs Porter's involvement in PMD when it first started trading in 2008.

Q You were asked....whether you've got the authority to speak on behalf of PMD. Did you not think it's relevant to say, "Hang on a minute, I resigned some time ago?

A Well, they were asking me questions about a certain time and at that time I was a director.

Q The question you are asked...is a question that's in present tense. Do you see it says, 'Okay, so you've got authority to speak on behalf of the company?'

A And the way I interpreted it is that at that period of time they were asking me questions about, I was.

1. The Tribunal accepts that it is possible that Mrs Porter may have changed the date of her resignation purely to circumvent the provisions of s16(1A)(d) of the Act.

1. However, on the evidence before it, the Tribunal is not satisfied that this is, in fact, what happened. The Tribunal accepts Mrs Porter's evidence that in light of her family responsibilities, Mrs Porter had been reluctant to become a director of PMD at all but had agreed to do so at the request of her brother. The Tribunal accepts Mrs Porter's evidence that she remained as a director until after she became aware of fraud allegations against her brother in relation to his management of the company. It is common ground that these allegations surfaced in 2009. The Tribunal accepts that this was the catalyst for Mrs Porter ceasing her employment with PMD and for resigning as its director. The Tribunal accepts that, consistently with this decision, Mrs Porter commenced work on 5 January 2010 as a trainer at Central Coast Group Training Limited. The Tribunal accepts that Mrs Porter directed her brother, who remained a director of the company, to advise ASIC that she was no longer a director of PMD and to complete the relevant paperwork. The Tribunal also accepts Mrs Porter's evidence that it was only after she was interviewed by an investigator of NSW Fair Trading in July 2010 that Mrs Porter realised this ASIC had not been advised of her resignation as director of PMD and again asked her brother to attend to it.

1. On the evidence before it, the Tribunal accepts that on 30 August 2010, Mr Ryan Campbell advised ASIC that Mrs Porter had resigned as director of PMD and nominated her date of resignation to be 1 August 2010 when, in fact, Mrs Porter had advised her brother to advise ASIC of her resignation as director of PMD in January 2010, after she had become aware of mismanagement allegations against her brother and had subsequently ceased working for PMD, instead taking up a position as a trainer with Central Coast Group Training Ltd.

1. The Tribunal accepts that Mrs Porter only became aware that Mr Campbell had nominated her date of resignation as 1 August 2010 when she received a Notice to Show Cause from NSW Fair Trading on 13 June 2012. The Tribunal accepts that this prompted Mrs Porter to tell Mr Campbell to request a correction to the ASIC register to register the actual date of Mrs Porter's resignation, namely 14 January 2010.

1. When read in context, the Tribunal accepts that Mrs Porter's answer yeah to the investigator's question so you've got authority to speak on behalf of PMD Central Coast Proprietary Limited? referred to her status as director of PMD in 2008 rather than at the date of the interview, namely 8 July 2010.

1. For these reasons, the Tribunal accepts that Mrs Porter resigned as director of PMD on 14 January 2010 shortly following revelataions of her brother's mismanagement of the company finances and so is not a disqualified person under the provisions of s16(1A)(d) of the Act.

While trading as Coastwide Read Estate in the period from April 2011 to December 2011, did Mrs Porter operate in breach of section 86 of the Act and clause 21 of the Regulations to the Act?

1. Section 86 of the Act provides that money received for or on behalf of any person by a licensee in connection with the licensee's business as a licensee is to be paid into and retained in a trust account.

1. Clause 21 of the Regulations made under the Act stipulates that a licencee who receives trust money must pay it into the licensee's trust account before the end of the next banking day after the day of its receipt, if that is practicable, or if that is not practicable, as soon as practicable after that day.

1. The respondent contends, and Mrs Porter concedes, that between April and December 2011, tenants paid their rent into the operating or general account for Coastwide Real Estate rather than into its trust account.

1. According to Mrs Porter's evidence, this occurred due to an administrative error: letters sent out advising tenants how to deposit their rental payments provided the account details for the Coastwide operating account rather than for the Coastwide trust account. Mrs Porter submitted that whilst this was a regrettable mistake, it was one that could be explained, to some extent, by the fact that the account numbers for the two accounts were identical, apart from the two final digits.

1. Both Mrs Porter and the respondent agree that once the error had been detected, all the money wrongly transferred into the operating account was transferred into the correct trust account. In some cases, however, money stayed in the operating account for up to two weeks before being transferred to the correct trust account.

1. On the evidence before it, the Tribunal finds Mrs Porter to be in breach of s86 of the Act and clause 21 of the Regulations to the Act. The Tribunal accepts Mrs Porter's evidence that this was due to an administrative error, namely that in a letter sent to tenants providing bank details for the deposit of their rent monies, the account number for the Coastwide operating account rather than that of the relevant trust account had been provided. The Tribunal accepts that once this error was discovered, the monies were transferred from the general account to the trust account. The error does not reflect well on the applicant's administrative skills, both because the account details were not checked before the relevant letters were sent and because the error appears not to have been fully resolved for two months, in that monies were wrongly paid into the operating account between 27 April 2011 and 14 June 2011.

1. Although this reflects poorly on Mrs Porter's organisational and accounting skills, the Tribunal accepts that the deposit of the monies into the operating rather than the trust account, whilst an administrative error, was not an intentional one. The Tribunal also accepts that the error was corrected without any disadvantage to either the relevant landlords or tenants and did not involve any dishonesty by Mrs Porter.

Did Mrs Porter, in breach of s43 of the Act, employ her mother, Jennifer Campbell, in Mrs Porter's business when Mrs Campbell was a disqualified person under the Act?

1. Relevantly, s43 of the Act provides that a licensee must not employ a person in any capacity in connection with the carrying on of the business conducted by the licensee if the person is a disqualified person or has had his or her licence or certificate of registration suspended or cancelled.

1. Mrs Porter does not dispute that in 2012, she employed her mother, Mrs Jennifer Campbell, in her real estate business and that, at this time, Mrs Campbell was, and had been from 10 November 2009 to 21 January 2010 and again from 10 October 2011, a disqualified person pursuant to s16 of the Act.

1. In her affidavit dated 6 March 2013, Mrs Porter declared that:

My mother was working in the business when Rick Porter was managing it and continued working for me after I commenced trading.

I was unaware, until about September 2012, that I could not employ my mother in any capacity if she was disqualified. I had understood that I could not employ her doing work as a real estate agent or as a real estate salesperson but I had been unaware of the full effect of section 43(1) of the Act. I had, in any event, not been aware that my mother was a disqualified person (i.e. that she had lost her appeal) until told by my father after these proceedings had commenced.

I do not now employ any disqualified person (including my mother) in the business and will not do so in future if my application is successful.

1. In his affidavit dated 11 September 2012, Mr Rick Porter declares that he was appointed manager to PMD on 11 November 2009, pursuant to s126(1)(b) of the Act. In his evidence before the Tribunal, Mr Porter confirmed that he had employed Mrs Campbell as a bookkeeper for the real estate agency despite the fact that she was, at the time, a disqualified person in accordance with s16 of the Act and that he had received approval from the respondent to do so.

1. On the evidence before it, the Tribunal finds that Mrs Porter did employ her mother in breach of s43 of the Act. In making this finding, the Tribunal accepts Mrs Porter's evidence that whilst she was aware she was not permitted to employ Mrs Campbell as a real estate agent, she believed she was allowed to employ her in an administrative capacity. The Tribunal is satisfied that, in reaching this belief, Mrs Porter was influenced by the fact that Mr Rick Porter, the manager appointed to PMD by the respondent, had employed Jennifer Campbell as a bookkeeper, apparently with the approval of the respondent, despite the fact that Mrs Campbell was, at the time, a disqualified person.

1. For these reasons, the Tribunal finds that whilst in breach of s43 of the Act, Mrs Porter's actions in employing Mrs Campbell were not an intentional breach of the section.

Did Mrs Porter engage in a course of conduct from March 2011 and thereafter to acquire and transfer the rent roll of PMD Coastwide Real Estate, contrary to the instructions of the Manager appointed to PMD Central Coast Pty Ltd?

1. The respondent contends that in taking steps to acquire the rent roll of PMD Coastwide Real Estate ('The Entrance rent roll'), Mrs Porter was in breach of section 137 of the Act which provides that

A person must not hinder, obstruct or delay a manager in the exercise of his or her functions under this Division.

1. Mrs Porter admits that she took steps to acquire The Entrance rent roll by asking tenants who had already signed management agreements with PMD to sign a management agreement with Peta Porter trading as Coastwide Real Estate. She gave evidence that she took these steps on the recommendation of Mr Rick Porter who, at the time, had been appointed manager of PMD. Mr Rick Porter was subsequently appointed as receiver of PMD's business by Bankwest, who held a charge over the company's assets.

1. In evidence before the Tribunal, Mr Rick Porter agreed that until his appointment as receiver for Bankwest of the business of PMD, he did not tell Mrs Porter 'not to give effect to her intent to obtain management agreements.'

1. When Mrs Porter was later directed not to activate any of the management agreements signed over to Peta Porter trading as Coastwide Pty Ltd, Mr Rick Porter agreed that Mrs Porter had complied with this directive.

1. Mr Rick Porter agreed that in complying with this directive, Mrs Porter ensured that monies from the Entrance Rent Roll continued to be paid into the PMD trust account rather than into the trust account for Peta Porter trading as Coastwide Pty Ltd. Mr Rick Porter also agreed that any monies from the Entrance Rent Roll that had already been deposited into the trust account for Peta Porter trading as Coastwide Pty Ltd were transferred to the PMD trust account in order to give effect to Mr Rick Porter's changed instructions, subsequent to his appointment as receiver for Bankwest of the PMD business.

1. The evidence before the Tribunal is that Peta Porter trading as Coastwide Pty Ltd did not benefit from the Entrance Rent Roll in that monies received from any management agreements initially signed over to Peta Porter trading as Coastwide Pty Ltd were later transferred to the PMD trust account in accordance with Mr Rick Porter's instructions.

1. On the evidence before it, the Tribunal is not satisfied that Mrs Porter acted in breach of s137 of the Act. The evidence before the Tribunal is that Mrs Porter sought and took direction from Mr Rick Porter in his role as manager of PMD. The Tribunal accepts that Mr Rick Porter did not initially discourage Mrs Porter from seeking management agreements from tenants of The Entrance Rent Roll. The Tribunal also accepts that when, following his appointment as receiver to Bankwest of the PMD business, Mr Rick Porter told Mrs Porter not to seek any further management agreements and to transfer into the PMD trust account any monies received from tenants who had earlier signed management agreements with Coastwide Pty Ltd, Mrs Porter followed this instruction.

1. On the evidence before it, the Tribunal is not satisfied that, in taking steps to acquire the rent roll of PMD Coastwide Real Estate ('The Entrance rent roll'), Mrs Porter was in breach of section 137 of the Act.

Is Mrs Porter a fit and proper person under the Act to hold a real estate licence?

1. The meaning of the phrase 'fit and proper person' was discussed by the High Court in Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127, at [9], where Dixon CJ, McTiernan and Webb JJ said:

The expression 'fit and proper person' is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. 'Fit' (or 'idoneus') with respect to an office is said to involve three things, honesty knowledge and ability: 'honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it.'

1. The meaning of the phrase was also discussed in Australian Broadcasting Commission v Bond (1990) 170 CLR 321, where Toohey and Gaudron JJ said at [36] of their judgment:

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.

1. As their Honours recognised, at [66], whether a person is a fit and proper person involves a value judgement to be made in the context of the particular activity to be licensed.

1. In McBride v Walton (NSW Court of Appeal, unreported, 15 July 1994), the Court said where there is evidence of misconduct, there should be consideration of any explanation for that misconduct, its seriousness to the particular activity, the motivation of the person, whether the misconduct is an isolated incident, the person's underlying qualities of character, and the person's conduct since the incident and whether this demonstrates recognition of the misconduct and subsequent reform. 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.

1. In Frugtniet and Anor v Commissioner for Fair Trading; Commissioner for Fair Trading v Travel Action Pty Ltd and Anor (GD) [2004] NSWADTAP 12 (16 April 2004) at [209] the Appeal Panel summarised the principles involved in assessing fitness and propriety, derived from the Commercial Tribunal's decision in Young Taek Chong v Tomazin (1994) ASC 56-283 at 58:

'the question must be determined with reference to the particular purposes of the regulatory regime involved; .. account must be taken of the minimum standards of the profession or occupation being regulated; that matters such as 'character', 'suitability', 'integrity' and 'trustworthiness' - indeed, 'any aspect of fitness or propriety that is relevant to the public interest' - must be considered; that while an isolated act may suffice to show lack of fitness and propriety, this will not necessarily be the case, and 'deliberate prolonged conduct or a course of conduct' stands on a different footing; and finally that 'the evaluation of fitness involves a wide discretion.'

1. The respondent contends that Mrs Porter is not a fit and proper person to be licensed under the Act in light of :

• the employment of her mother, Mrs Jennifer Campbell, at Coastwide Pty Ltd, whilst Mrs Campbell was a disqualified person under the Act;

• her receipting of trust funds to the operating account of Coastwide Pty Ltd; and

• her actions in acquiring the Entrance Rent Roll.

1. For the reasons set out above, the Tribunal accepts that by banking tenants' monies in the Coastwide operating account rather than the Coastwide trust account, Mrs Porter breached s86 of the Act and clause 21 of the Regulations to the Act. The Tribunal accepts that this was not an act of dishonesty by Mrs Porter but rather an administrative error resulting in tenants wrongly depositing rent payments into the Coastwide operating account rather than the relevant trust account.

1. The Tribunal is concerned by the error and by the fact that it took Mrs Porter two months to fully resolve the problem. The Tribunal accepts that this does not reflect well on the applicant's account keeping skills. The Tribunal is satisfied, however, that once the error was discovered all monies were accounted for and deposited into the relevant trust account.

1. The Tribunal is not satisfied, however, that this error alone would warrant the cancellation of the applicant's licence or her disqualification from being involved in the direction, management and conduct of a business of a licensee.

1. For the reasons set out above, the Tribunal accepts that in employing Mrs Jennifer Campbell, a disqualified person, Mrs Porter was in breach of s43 of the Act. The Tribunal accepts Mrs Porter's evidence that, whilst she knew she was not permitted to employ Mrs Campbell as a real estate agent, she believed she was allowed to employ her in an administrative capacity, on the basis that Mr Rick Porter, the manager appointed to PMD, had also been employing Mrs Campbell in such a capacity, apparently with the approval of the respondent. The Tribunal accepts Mrs Porter's evidence that, once advised she was not allowed to employ a disqualified person such as Mrs Campbell in any capacity, she no longer did so.

1. For these reasons, the Tribunal finds that Mrs Porter's contravention of s43 of the Act was inadvertent. Taking into account all the circumstances as outlined above, the Tribunal finds that Mrs Porter's contravention of s43 of the Act does not sufficiently impact upon her fitness and propriety to hold a real estate licence as to warrant either the cancellation of her licence or her disqualification from being involved in the direction, management and conduct of a business of a licensee.

1. For the reasons set out above, the Tribunal is not satisfied that in attempting to acquire the Entrance Rent Roll, Mrs Porter deliberately hid her actions from the appointed manager, Mr Rick Porter. Rather, the Tribunal accepts the evidence of the applicant and Mr Rick Porter that prior to his appointment as receiver of PMD's business by Bankwest, Mr Rick Porter had encouraged Mrs Porter to acquire the Entrance Rent Roll. The Tribunal also accepts that once he changed his instructions to Mrs Porter and instructed her not to act upon the management agreements she had received from tenants (whose properties comprised part of The Entrance Rent Roll), she did not act upon the agreements and transferred all monies received to the PMD trust account in accordance with Mr Rick Porter's instructions. On the evidence before it, the Tribunal does not accept that, in attempting to acquire The Entrance Rent Roll, Mrs Porter acted in breach of s137 of the Act or in a way that has any bearing on her fitness and propriety to hold a real estate licence.

1. On the basis of the evidence before it, the Tribunal finds that whilst the applicant has been responsible for administrative errors in the conducting of her business, the Tribunal is not satisfied that she has behaved dishonestly in the conduct of her business. On the evidence before it, and despite the finding of administrative error on the part of Mrs Porter, the Tribunal is not satisfied that Mrs Porter's licence should be cancelled on the basis that she is not a fit and proper person to hold a licence.

1. Similarly, on the evidence before it and as set out above, the Tribunal finds that Mrs Porter is not a disqualified person in accordance with s16 of the Act.

1. On the evidence before it and despite the evidence of administrative error on the part of Mrs Porter and her employment of Mrs Campbell in contravention of s43 of the Act, the Tribunal is not satisfied that Mrs Porter's actions are such as to warrant her disqualification from being involved in the 'direction, management and conduct of the business of a licensee.' In the Tribunal's view, a more appropriate disciplinary action would be to caution or reprimand Mrs Porter.

1. In light of the circumstances of the case, however, and given that Mrs Porter's real estate licence was cancelled for the period 23 August 2012 to 6 September 2012 (when a stay of proceedings was granted by this Tribunal), the Tribunal has decided, in accordance with s193 of the Act, to take no further action against Mrs Porter.

1. For these reasons, the Tribunal finds that the correct and preferable decision is that the decision of the respondent to cancel the applicant's real estate licence, to declare the applicant a disqualified person until 20 April 2014 and to disqualify the applicant from being involved in the direction, management or conduct of the business of a licensee until 20 April 2014 should be set aside.

ORder

1. The decision of the respondent to cancel the applicant's real estate licence, to declare the applicant a disqualified person until 20 April 2014 and to disqualify the applicant from being involved in the direction, management or conduct of the business of a licensee until 20 April 2014 is set aside.

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Decision last updated: 27 September 2013