Queensland Department of Justice and Attorney General v Halmarn Pty Ltd t/as Magnetic International Resort
[2013] QCAT 750
•1 November 2013
| CITATION: | Queensland Department of Justice and Attorney General v Halmarn Pty Ltd t/as Magnetic International Resort & Anor [2013] QCAT 750 |
| PARTIES: | Queensland Department of Justice and Attorney General (Applicant) |
| v | |
| Halmarn Pty Ltd t/as Magnetic International Resort, Mr Donald McGrath (Respondents) |
| APPLICATION NUMBER: | OCR158-12 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | 23 April 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Dr B Cullen, Member |
| DELIVERED ON: | 1 November 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The parties provide two copies to the Tribunal, and one copy to the other party, of any submissions in relation to penalty and costs no later than 4.00 pm on Friday, 22 November 2013. 2. The issue of penalty and costs will then be decided on the papers by the Tribunal and without an oral hearing. |
| CATCHWORDS: | OCCUPATION REGULATION – Property Agent – Corporate Property Agent in liquidation – grounds to commence disciplinary proceedings against company and director – where owners were overcharged and where Code of Conduct was breached vis-à-vis fiduciary obligations owed to owners of property in letting pool. Property Agents and Motor Dealers Act 2000 (Qld), ss 19, 117, 496(1)(b)(i), 496(1)(g)(vi), 496(1)(g)(vii), 591(1) Property Agents and Motor Dealers (Restricted Letting Agency Practice Code of Conduct) Regulation 2001, ss 6, 16 QBSA v Harlequin Paints Pty Ltd (in liquidation) (2009) QCCTB 57 (25 March 2009). |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Richard Schulte, Counsel for the Applicant Queensland Department of Justice and Attorney General |
| RESPONDENT: | Mr Donald McGrath, self-represented Respondent |
REASONS FOR DECISION
Property agents are entrusted with the responsibility of looking after what, for many people, is their most significant asset. For this reason, it is vital that property agents act honestly and with integrity in all of their property dealings. The Property Agents and Motor Dealers Act 2000 (Qld) sets out the applicable standards, as well as the penalties that apply, when such standards are breached.
In these proceedings, the Tribunal is asked to consider whether grounds exist under section 496 of the Act for disciplinary action to be taken against Donald McGrath and Halmarn Pty Ltd.
Both Mr McGrath and Halmarn were holders of Residential Letting Agency licenses, entitling them to operate a unit letting business and collect rents, which they did from the Magnetic International Resort, located on Magnetic Island. At all periods relevant to this matter, and prior to Halmarn entering into liquidation, Mr McGrath was also the sole director, secretary and shareholder of Halmarn.
Mr McGrath has been afforded procedural fairness and natural justice in the hearing of this matter
Securing Mr McGrath’s attendance at the hearing of this matter was challenging. Initially, the hearing in this matter was set down for 22 February 2013. Whilst the Department and its Counsel appeared for the commencement of the hearing, Mr McGrath was not present. The Tribunal is obliged to afford parties natural justice and procedural fairness, and although under no obligation to attempt to contact Mr McGrath when he failed to attend, did so anyway.
As the Tribunal had not been provided with any telephone details to facilitate Mr McGrath’s attendance remotely, the Department and its Counsel waited patiently while the Tribunal’s case manager contacted Mr McGrath via email, and waited for a response. Mr McGrath did reply, and then appeared at the initial hearing via telephone from a non-Australian location.
Prior to commencing the proceedings, Mr McGrath then insisted, despite strong evidence to the contrary (including an affidavit of service), that he did not have all of the material relating to the charges against him. Out of an abundance of caution, rather than proceeding with the hearing in circumstances where Mr McGrath insisted there would be unfairness, the hearing was adjourned and directions were made for Mr McGrath, or his agent, to collect the relevant materials from the State Law Building.
Additionally, directions were made for Mr McGrath to advise the Tribunal of contact details for the purposes of his telephone attendance at the adjourned hearing to be held on 23 April 2013. It is unfortunate that Mr McGrath then supplied the Tribunal with a telephone number which would not connect at the time of the adjourned hearing. Again, the Tribunal Case Manager had to contact Mr McGrath via email to obtain a new telephone number, whilst the Department and its Counsel patiently waited for a second time.
Just prior to the hearing on 23 April 2013, Mr McGrath endeavoured to obtain an adjournment, for the reason that he had just undergone an unspecified “surgical procedure”, and claimed to be unable to undertake any “strenuous or travelling activity” for an 8-week period following 4 April 2013. This application was dismissed, for the reason that the medical evidence before the Tribunal did not explain why Mr McGrath would not be able to attend a Tribunal hearing by telephone.
In short, after much difficulty, Mr McGrath appeared by phone for the hearing on 23 April 2013. There can be no doubt that Mr McGrath has been afforded procedural fairness and natural justice in the hearing of this matter.
Orders sought by the Department
The Department seeks that the Tribunal find that grounds exist to take disciplinary action against Halmarn under the Act in that:
(a) Halmarn has contravened Section 117 of the Act on 1135 occasions by overcharging for credit or charge card transactions, Agent’s commission, charging ACCOR fees and commissions without authority; and
(b) Halmarn has contravened the Code on 23 occasions, in that it owed each of the owners of units it acted for at Magnetic International Resort a duty of undivided loyalty. Because of this duty, Halmarn was obliged not to accept an appointment to act for a unit owner if it would place Halmarn’s interests in conflict with those of the unit owner.
The Department also seeks that the Tribunal find that grounds exist to take disciplinary action against Mr McGrath under the Act in that:
(a) Mr McGrath contravened the Act by failing to ensure that Halmarn complied with the Act in respect of each of Halmarn’s 117 contraventions and 23 Code Contraventions, comprising 1158 contraventions in total.
The Tribunal can make a decision despite Halmarn’s liquidation
As Halmarn is in liquidation, the Tribunal needs to consider whether it can still make a decision with regards to Halmarn’s conduct.
The Tribunal has been assisted by the post-hearing submissions of the Department, to the effect that the liquidation that Halmarn does not affect the institution or continuation of disciplinary proceedings against it under the PAMD Act. The Department relies upon the decision of QCAT Judicial Member Thomas AM QC in QBSA v Harlequin Paints Pty Ltd (in liquidation) (2009) QCCTB 57 (25 March 2009).
In Harlequin Paints, Justice Thomas explained that in similar circumstances, there was:
no obstacle to the Tribunal making a determination as it is authorised to do, that proper grounds exist for taking disciplinary action against the respondent. This does not involve the enforcement of civil rights or any claim against the property of Harlequin.
Thus, it may eventually be the case that it will prove difficult for the Department to seek a financial penalty in relation to Halmarn’s conduct, however, there remains the important objective of ensuring that other corporate property agents are aware that the conduct of Halmarn has resulted in repercussions for it.
Disciplinary grounds exist
It is clear, for the reasons that follow, that there are grounds to take disciplinary action against both Halmarn and Mr McGrath; the evidence in this respect is overwhelming. The Department relies upon the provisions contained in sections 496(1)(b)(i) and 496(1)(g)(vii) of the Property Agents and Motor Dealers Act 2000 (Qld) as they relate to Halmarn’s conduct, and sections 496(1)(b)(i); 496(1)(g)(vi) and 496(1)(g) of the Act as they relate to Mr McGrath’s conduct.
The Department’s “over-charging” case
In systemic fashion, Halmarn, and Mr McGrath as Halmarn’s director, retained, from the owners of holiday units located at Magnetic Island resort, relatively small amounts of money over an extended period of time. In a number of circumstances, these monies were retained from owners of units for whom a Form 20a Agency Agreement could not be demonstrated to exist, as is required by the Act. This is not disputed by Mr McGrath.
In his submissions and at the hearing, Mr McGrath asserted that there “should be” Form 20a Agency Agreements, and that the Department spoke to the “wrong person”. I do not accept this evidence, and consider the Department’s evidence that their extensive enquiries did not reveal the Form 20a agreements to be more reliable. It simply does not follow that Mr McGrath would repay any of these amounts (which he has) without having taken steps to locate the Form 20a Agency Agreements. Even if he could not obtain these documents from the receivers for Halmarn as he asserts, he could have asked that the Tribunal issue a Notice to Produce. He has not done so.
Halmarn, at a point when Mr McGrath was the sole director, then retained from the owners commissions that it was not entitled to retain, consisting of excess credit card and manager’s commissions. Mr McGrath, in his closing submissions delivered on 22 August 2013 (some 3-months following the Tribunal’s timeline for the filing of same), admits these contraventions.
However, Mr McGrath attributes these contraventions to the accounting system used at the resort, and to errors he attributes to a Registered Letting Agent, at a time that he was overseas. Importantly, Mr McGrath does not dispute that the charges were made, but points out that the cumulative amounts overcharged are not substantial in the overall circumstances (approximately $4,500.00 in credit card commission overcharges and approximately $700.00 in overcharged manager’s commissions). Mr McGrath also points out that, once discovered, these amounts were repaid. These arguments, in my view, relate to possible mitigation of a penalty that might be imposed, and not to whether grounds exist to take disciplinary action.
Section 117 of the Act prohibits recovering or retaining amounts (such as the overcharges described here) without having the appropriate Form 20a Agency Agreements in place. Section 591(1) of the Act requires the executive officers of a corporation to ensure that the corporation complies with the Act. In failing to prevent Halmarn from overcharging owners for whom it had no Form 20a Agency Agreement, Mr McGrath has failed in his obligations.
Failing to comply with s 117 of the Act is a ground for commencing disciplinary proceedings. The Department has established that Halmarn has contravened s 117 of the Act on 1135 occasions by overcharging for credit or charge card transactions, agent’s commissions, or charging ACCOR fees and commissions without authority. The same grounds are established against Mr McGrath, in that as Halmarn’s director, he failed to ensure compliance by Halmarn with s 117 of the Act.
The Department’s Code of Conduct case
Section 19 of the Act provides for a Code of Conduct, which is applicable to residential letting agents, such as Halmarn. The Department contends that the Code of Conduct[1] has been breached, in that there has been a breach of the fiduciary duties owed to clients of the letting agent, and that a conflict of interest exists that should have prevented Halmarn from acting as the letting agent. I agree.
[1]Property Agents and Motor Dealers (Restricted Letting Agency Practice Code of Conduct) Regulation 2001, section 6 “Fiduciary obligations” and section 16 “Conflict of duty or interest”.
The Code of Conduct required that Halmarn advise the owners to whom it owed fiduciary duties of any relationship it had where it might be seen to be in conflict with the fiduciary duties owned to its clients with units in the letting pool managed by it. Such disclosure would then place the owners in a position to decide whether they trusted Halmarn to still look after their investments, knowing that Halmarn also had an interest in profiting from the same letting business. Indeed, s 16(2) of the Code of Conduct provides that if the agent discloses its ownership to prospective letting clients before (my emphasis) accepting an appointment, this particular provision of the Code of Conduct does not apply.
The Halmarn Units
At the time that Halmarn was obliged to act in the best financial interests of the owners of units in the letting pool, it owned Lots 97 and 99, also located at the Magnetic International Resort. Neither Halmarn nor Mr McGrath disclosed Halmarn’s ownership of these units prior to accepting an appointment to act for owners in the letting pool.[2]
[2]The affidavits of Catherine Murphy; Ross Farmer; Susan Farmer; Diane Loney; Shane Loney; Andrew Wallis and Benjamin Keech each establish that there was no disclosure of these matters to owners in the letting pool.
There was no evidence proffered by either Halmarn or Mr McGrath to the effect that it was not the owner or director of the units in question at the relevant times. Rather, Mr McGrath disputed that the Halmarn units were in the rental pool at the relevant times.
Mr McGrath alleges that the Halmarn units were both requirements under the Caretaking and Letting Agreements as the Managers Unit and Office Space. I accept Mr McGrath’s evidence on this particular point. I have drawn the conclusion that it would therefore have been difficult for the Halmarn units to be seen to be, or actually be, in possible competition for bookings with the units owned by others in the letting pool. I consider it highly unlikely that either the Manager’s unit or office area would be in the letting pool in a manner that required disclosure in the manner contemplated the Code of Conduct.
For these reasons, I do not consider that the Department has established that either Halmarn or Mr McGrath owed a duty of disclosure in relation to the Halmarn units. The Department’s case in this respect has not been substantiated to the requisite standard of civil proof (which I consider to require application of the Briginshaw test[3]).
[3]Briginshaw v Briginshaw (1938) 60 CLR 336.
The Vestavon Units
It is not disputed that the company Vestavon Pty Ltd owned Lots 50, 56 and 60 at Magnetic International Resort and that Mr McGrath was a director of Vestavon at all material times.
By reason of sharing Mr McGrath as a director, Halmarn was aware of Vestavon’s ownership. This should have been disclosed to owners of units in the letting pool, and it was not.
There has been no evidence offered by Mr McGrath that contests the Department’s case that both he and Halmarn breached the Code of Conduct in failing to disclose the interests in the Vestavon units.
I find that both Halmarn and Mr McGrath have breached the Code of Conduct in relation to the Vestavon Units on 5 occasions each.[4] Section 496(1)(b)(i) of the Act provides that such a contravention is a basis to commence disciplinary proceedings against a licensee, and I consider that grounds exist.
[4]Attachment to Applicant’s Application, Annexure F.
The Marphen Units
Halmarn transacted its letting agency business at Magnetic International Resort through Bank of Queensland accounts reflecting the name “Halmarn Pty Ltd ATF the Magnetic Island Trust – General (trading as Magnetic International Island Resort)”.
The Department has produced the Magnetic Island Trust Deed as evidence that Halmarn is the Trustee, and Mr McGrath is the sole category “A” beneficiary.[5]
[5]Affidavit of Grant Stuart Rasmussen, affirmed 3 May 2012, Exhibit GSR-87.
It is not disputed that a company called Marphen Pty Ltd owns Lots 66, 67, 68, 70 and 73 located at Magnetic International Resort. Marphen is trustee of the Dawson Family Trust under a Deed of Trust dated 2 December 2003. Both The Trustee for Magnetic Island Trust and The Trustee for the Dawson Family Trust trading as Magnetic Island Resort are alleged by the Department to utilise ABN 28 799 070 729. The Department has provided the Tribunal with the relevant extract from the Australian Business Register.[6]
[6]Affidavit of Grant Stuart Rasmussen, affirmed 3 May 2012, Exhibits GSR-88-90.
On the basis of the information above, the Department alleges that there was, at the relevant times, a relationship between Marphen and Halmarn to the effect that they were in partnership, and therefore a duty of disclosure owed by Halmarn and Mr McGrath to owners in the letting pool managed by them.
Mr McGrath says that there was a dissolution of the partnership between Halmarn and Marphen in 2005, approved by the “OFT” (which I take to mean Office of Fair Trading). He also says that the ABN was not utilised by Halmarn in the 8-years since.[7]
[7]Submissions of Donald McGrath, filed in QCAT on 22 August 2013, pages 11-12.
I do not consider that the Department has established a breach of the Code of Conduct by either Halmarn or Mr McGrath in relation to the Marphen units. As explained above in relation to the units owned by Halmarn, the requisite standard of civil proof requires application of the Briginshaw test.[8] That test is not satisfied here for the reasons that now follow.
[8] Briginshaw v Briginshaw (1938) 60 CLR 336.
I accept the evidence of Mr McGrath to the extent that he calls into question the accuracy of the ABN numbers utilised by Halmarn, Marphen and the Magnetic Island Trust. I also consider that the evidence of Mr McGrath, together with the evidence elicited from Mr Grant Rasmussen[9], to raise sufficient concerns in relation to the timing of the partnership between Halmarn and Marphen, such that it has not been safely established, in view of Briginshaw, that Halmarn had an interest in the Marphen units during the relevant period.
[9]Manager Investigations, Compliance Division, Fair Trading Operations.
Mr McGrath alleges, with a degree of believable conviction, that the partnership between Halmarn and Marphen was dissolved on 25 April 2005, as a result of “irrevocable differences” between their respective directors.
As a result, I am unable to conclude that Halmarn had an obligation to disclose the existence of any relationship with Marphen to owners in the letting pool.
The Leaseback Units
The Department alleges that, at the relevant times, Halmarn entered into “leaseback agreements” with some owners at the Magnetic International Resort. The effect of these agreements was that Halmarn would lease the unit for a period, and then endeavour to let it out at a higher rate during the period of leaseback.
The effect of the leaseback arrangement was that Halmarn was in competition for bookings with other owners in the letting pool, and should have disclosed the circumstances of the letting arrangements to the owners it owed a fiduciary obligation.
There is no evidence offered to dispute the Department’s allegations in relation to the leaseback arrangements, and I accept that Halmarn breached the Code of Conduct on 5 occasions, along with Mr McGrath who failed (as Halmarn’s director) to prevent the breach.[10] This amounts to a ground for disciplinary action against both Halmarn and Mr McGrath under the Act.
[10]Attachment to Applicant’s Application, Annexures F and G.
The Accor Franchise Agreement
It is not in dispute that at some point during March of 2009, Halmarn and Mr McGrath entered into a written franchise agreement with AAPC Properties Pty Ltd to franchise the services offered at the Magnetic Island Resort. This agreement was made under the banner “Accor – All Seasons”.
The manner in which the entry into this Agreement was announced to the owners owed a fiduciary obligation by Halmarn was entirely unacceptable. Mr McGrath asserts that owners could request to read the terms, or be sent a copy.[11] This is insufficient to discharge Halmarn’s obligations, which required that they provide each owner with sufficient information to enable the owner to understand that there was a potential for Halmarn to profit as a consequence of entering into the agreement.
[11]Submissions of Donald McGrath, filed in QCAT on 22 August 2013, page 13.
Mr McGrath asserts that the Department has not properly understood the manner in which the 3% Accor commission appeared on owner’s statements. This is not, however, the point of the matter in relation to the Code of Conduct, which requires full disclosure. Whilst it may well have been a positive move by Halmarn to affiliate with Accor, the point is that the owners were not provided with full disclosure of the circumstances surrounding the affiliation. This conduct by both Halmarn and Mr McGrath amounts to a further contravention of the Code of Conduct, and a further basis upon which to commence disciplinary proceedings against both under the Act.
Specific Findings
Grounds exist to take disciplinary action against Halmarn under the Act in that:
· Halmarn has contravened Section 117 of the Act on 1135 occasions by overcharging for credit or charge card transactions, Agent’s commission, charging ACCOR fees and commissions without authority; and
· Halmarn has contravened the Code on 11 occasions, in that it owed each of the owners of units it acted for at Magnetic International Resort a duty of undivided loyalty. Because of this duty, Halmarn was obliged not to accept an appointment to act for a unit owner if it would place Halmarn’s interests in conflict with those of the unit owner.
Grounds exist to take disciplinary action against Mr McGrath under the Act in that:
· Mr McGrath contravened the Act by failing to ensure that Halmarn complied with the Act in respect of each of Halmarn’s 117 contraventions and 11 Code Contraventions, comprising 1146 contraventions in total.
Orders in relation to penalty
The Department seeks the following orders against Halmarn[12]:
1. an order pursuant to section 529(1)(d)(i) of the Act that Halmarn’s resident letting agent’s licence number 3033865 held pursuant to the Act be cancelled;
2. an order pursuant to section 529(1)(d)(ii) of the Act that Halmarn be disqualified permanently from holding any licence pursuant to the Act;
3. any other orders, pursuant to section 529(1)(g) of the Act, which the Tribunal considers appropriate to ensure that Halmarn complies with the Act;
4. an order pursuant to section 529(1)(ba) of the Act that because of the acts or omissions of Halmarn that resulted in this disciplinary action, the Tribunal directions Halmarn to pay compensation to such persons and in such amounts as the Tribunal deems fit.
[12]Applicant Department’s Outline of Submissions, filed in the Tribunal on 3 May 2013, paragraph 26.
The Department seeks the following orders against Mr McGrath[13]:
1. an order pursuant to section 529(1)(b)(i) of the Act that Mr McGrath pay to the Department a fine of not more than 200 penalty units for each established contravention by Mr McGrath of section 117 of the Act;
2. an order pursuant to section 529(1)(b) of the Act that Mr McGrath pay to the Department a fine of not more than 200 penalty units for each established contravention by Mr McGrath of section 16 of the Code;
3. an order pursuant to section 529(1)(d)(i) of the Act that Mr McGrath’s resident letting agent’s licence number 3033863 held pursuant to the Act be cancelled;
4. an order pursuant to section 529(1)(d)(ii) of the Act that Mr McGrath be disqualified permanently from holding any licence pursuant to the Act;
5. an order pursuant to section 529(1)(e) that Mr McGrath be disqualified permanently from being an executive officer of a corporation that holds a licence under the Act;
6. any other orders, pursuant to section 529(1)(g) of the Act, which the Tribunal considers appropriate to ensure that Mr McGrath complies with the Act;
7. an order pursuant to section 529(1)(ba) of the Act that because of the acts or omissions of Mr McGrath that resulted in this disciplinary action, the Tribunal directs Mr McGrath to pay compensation to such persons and in such amounts as the Tribunal deems fit;
8. an order pursuant to section 102 of the Queensland Civil and Administrative Tribunal Act 2009 that the interests of justice require Mr McGrath pay the Department’s costs of this disciplinary proceeding.
[13]Applicant Department’s Attachment to Application, filed in the Tribunal on 15 May 2012, paragraph 8.
As the Tribunal does not have submissions in relation to penalty and costs from Mr McGrath, as a matter of fairness, it is appropriate to allow him an opportunity to raise any matters he wishes now that the Tribunal has made its decision that grounds exist to take disciplinary against him and Halmarn under the Act.
Orders
To this effect, the Tribunal orders that the parties provide two copies to the Tribunal, and one copy to the other party, of any submissions in relation to penalty and costs no later than 4.00 pm on Friday, 22 November 2013.
The issue of penalty and costs will then be decided on the papers by the Tribunal and without an oral hearing.
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