RAPHAEL HOUSE PTY LTD and COMMISSIONER FOR CONSUMER PROTECTION
[2018] WASAT 40
•5 JUNE 2018
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: MOTOR VEHICLE DEALERS ACT 1973 (WA)
CITATION: RAPHAEL HOUSE PTY LTD and COMMISSIONER FOR CONSUMER PROTECTION [2018] WASAT 40
MEMBER: PRESIDENT, JUSTICE J C CURTHOYS
MR J FISHER (SENIOR SESSIONAL MEMBER)
MR AW TOWNSEND (SESSIONAL MEMBER)
HEARD: 30 APRIL 2018
DELIVERED : 5 JUNE 2018
FILE NO/S: VR 17 of 2018
BETWEEN: RAPHAEL HOUSE PTY LTD
Applicant
AND
COMMISSIONER FOR CONSUMER PROTECTION
Respondent
Catchwords:
Motor vehicle dealer's licence - 'Concerned in the management'
Legislation:
Motor Vehicle Dealers Act 1973 (WA), s 5, s 15, s 16(1), s 17(1), s 18(1), s 19(3b), s 20(1), s 54, s 55
State Administrative Tribunal Act 2004 (WA), s 27(1)
Result:
Application dismissed
Representation:
Counsel:
| Applicant | : | Johnson Kitto |
| Respondent | : | Kelli King |
Solicitors:
| Applicant | : | Kitto & Kitto Barristers And Solicitors |
| Respondent | : | In Person |
Case(s) referred to in decision(s):
Al Edany v Department of Planning and Infrastructure [2005] WASAT 165
Farquharson v Director General, Department of Transport [1999] NSWADT 53
Forge v Australian Securities and Investments Commission (2004) 213 ALR 574
Minniti v Motor Vehicle Industry Board [2011] WASCA 275
REASONS FOR DECISION OF THE TRIBUNAL
The applicant in this matter is Raphael House Pty Ltd (Raphael House).
Raphael House is a family business. The members of the Raphael family are two brothers, Tony Raphael (Tony) and John Raphael (John), their sister Suzie Pano (Suzie) and her husband Marwan Pano (Marwan).
On 5 February 2018, the Commissioner for Consumer Protection (the Commissioner) declined to grant Raphael House's application for a renewal of its corporate motor vehicle dealer's licence (the Licence) under the Motor Vehicle Dealers Act 1973 (WA) (the Act).
Tony was the subject of adverse findings by the Corruption and Crime Commission (CCC).
In simple terms, the Commissioner declined to renew the Licence because of the proposed continuing involvement of Tony in Raphael House's business.
The essential issue to be determined by the Tribunal is whether Tony will be concerned in the management or conduct of the business of Raphael House.
The nature of the hearing before the Tribunal
A hearing of a review of the Commissioner's decision is a hearing de novo (s 27(1) of the State Administrative Tribunal Act 2004 (WA)).
The legislative framework
Before turning to an analysis of the facts, it is useful to set out the legislative framework within which the facts are to be considered.
Section 15(3) of the Act provides that a body corporate which applies in the approved form for a vehicle dealer's licence and pays the prescribed fee shall be granted such a licence upon satisfying the decision-maker:
(a)that all of the persons concerned in the management or conduct of the body corporate are persons of good character and repute and are persons fit to be concerned in the management or control of the business of buying or selling vehicles; and
(b)that it has sufficient resources; and
(c)that at least one of the natural persons referred to in paragraph (a) has sufficient knowledge of this Act.
A licence confers a right on a person to pursue a regulated occupation. The considerations relevant to the exercise of a discretion in that context will be affected by the specific terms of statutory powers, the nature of the statutory scheme and its legislative objectives (Farquharson v Director General, Department of Transport [1999] NSWADT 53 at [40]; Al Edany v Department of Planning and Infrastructure [2005] WASAT 165 at [34]).
The nature and objective of the statutory scheme of the Act is to regulate the motor vehicle industry for the protection of the public, particularly consumers who buy or sell vehicles through dealers (Minniti v Motor Vehicle Industry Board [2011] WASCA 275 (Minniti) at [25]).
Dealers and, in the case of corporate dealers, all persons concerned in the management or conduct of the corporate dealer, are required to have honesty and integrity in the conduct of their business and must also be accurate and reliable in the keeping of records and information ((Minniti) at [25]).
Procedure
The parties filed a Statement of Agreed Facts (SF). The Tribunal heard oral evidence from each of John, Suzie and Marwan.
The approach to these reasons
For the purposes of these reasons, it is unnecessary to specifically consider s 15(3)(b) and s 15(3)(c) of the Act.
The Commissioner accepted that Raphael House had sufficient resources pursuant to s 15(3)(b) of the Act (AF para 34).
John and Suzie have each completed the Commissioner's Yard Manager/Dealer Licencing Course (SF para 4 and SF para 13).
The knowledge requirement (s 15(3)(c) of the Act) is therefore met by Raphael House through John and Suzie.
In opening, the Commissioner flagged that some routine questions would be put to determine whether each of John, Suzie and Marwan met the character test (s 15(3)(a) of the Act).
In closing, the Commissioner accepted that each of John, Suzi and Marwan met the requirements of s 15(3)(a) of the Act save for an issue arising from John's completion of the Licence renewal application. This will be dealt with later in these reasons (ts 4445, 30 April 2018).
In the circumstances, the essential issue to be dealt with in these reasons is whether Tony's proposed involvement in the business of Raphael House is such that it would amount to him being 'concerned in the management or control' of Raphael House.
'Concerned in the management of'
The Tribunal now turns to the meaning of the term 'concerned in the management of'.
The meaning of the phrase 'concerned in the management of' was considered by the New South Wales Court of Appeal in Forge v Australian Securities and Investments Commission (2004) 213 ALR 574. McColl JA (Handley and Santow JJA agreeing) stated:
[185]The concepts of being concerned in or taking part in the management of a corporation have been considered in different statutory contexts.
[186]In Commissioner for Corporate Affairs (Vic) v Bracht [1989] VR 821 Ormiston J considered the meaning of s 227 of the Companies (Victoria) Code which provided:
A person who is an insolvent under administration shall not be a director or promoter of or be in any way (whether directly or indirectly) concerned in or take part in the management of, a corporation without the leave of the Court.
[187]Ormiston J concluded (at 830) that for the purposes of s 227:
… the concept of 'management' … comprehends activities which involve policy and decision-making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs.
[188]His Honour pointed out (at 831) that the degree of participation encompassed in the expression 'take part in' needed little elaboration other 'than that it both connotes and proscribes the active participation of a prohibited person in the management of a corporation' and that '[s]uch participation would have to be real and direct, but not necessarily in a role in which ultimate control is exercised, although it would have to be more than the administrative carrying out of the orders of others responsible for a company's management'.
[189]As to the concept of being 'concerned in' his Honour regarded (at 832) the expression as having 'a much wider operation' and 'connot[ing] participation at a variety of levels and at differing intensities', some of which 'may be relatively modest'. He referred approvingly to Quilliam J's observation in R v Newth [1974] 2 NZLR 760 that the expression 'prohibits a person "from taking any hand in the real business affairs of the company"' but noted, in contrast, the phrase did not have as wide a meaning as 'having something to do with': cf George Hill and Co v Hill (1886) 55 LT 769 at 771 as applied in Pioneer Concrete Services Ltd v Galli [1985] VR 675 at 707.
[190]In Ormiston J's opinion (at 832) the prohibition in s 227 extended to 'activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised' and '[a]dvice given to management, participation in its decisionmaking processes, and execution of its decisions going beyond the mere carrying out of directions as an employee, would suffice.' Negotiating 'terms with bankers or providers of credit, although those terms had to be confirmed' would suffice. His Honour emphatically rejected the proposition that 'the denial of ultimate responsibility for decisions' took an insolvent (or convicted person) outside the ambit of the s 227 prohibition.
(Tribunal bold emphasis added)
The Tribunal has adopted the statement of the relevant principles above for the purposes of considering whether Tony is 'concerned in the management' of Raphael House.
Section 15(3)(b) of the Act refers to 'concerned in the management or control' of the business. Once a finding is made that a person is concerned in the management of the body corporate, it is unnecessary to consider whether they are concerned in the conduct of the body corporate because the words are used disjunctively.
The corporate structure - shareholding and licence holders up to 2017
In order to consider whether Tony is concerned in the management of Raphael House, it is necessary to put his previous role in relation to Raphael House in context.
Based on his duties, as set out below, it is clear that Tony was concerned in the management of Raphael House prior to the CCC findings.
On 4 August 1997, Tony and John were appointed as directors of Raphael House. Each held, via a corporate trustee of their respective family trusts, half of the shares in Raphael House:
(a)John's shareholding was held in the Shelby Mustang Trust, the trustee of which was, and is Mustang GT Australia Pty Ltd;
(b)Tony's shareholding was held in the TR Family Trust, the trustee of which was, and is Sunshine Holdings (WA) Pty Ltd.
(SF para 1)
On or about 16 September 1997, Raphael House was granted a motor vehicle dealer's licence under the Act and commenced trading under the registered business name 'Cannington Autohouse' (SF para 2).
Raphael House's Licence was renewed for subsequent three year periods until its expiry on 30 June 2017 (SF para 3).
Raphael House also holds a motor vehicle repairers licence under the Act which expires on 6 June 2018 (SF para 9).
On 25 November 2011, Tony Raphael and John Raphael were appointed as directors of Car Sales WA (SF para 10).
On 15 March 2012, Car Sales WA was granted a motor vehicle dealer's licence under the Act and commenced trading under the business name 'Car Sales WA'. This Licence was renewed for subsequent three year periods and expired on 14 March 2018 (SF para 11).
On 24 October 2014, Raphael House's Licence was renewed for a further three year period (SF para 14).
Following the expiry of Raphael House's Licence on 30 June 2017, Raphael House transferred the business of Cannington Autohouse to Car Sales WA (SF para 15).
No issue was raised as to the appropriate applicant.
Tony's original role
John explained the operations of Raphael House in his witness statement (Exhibit D) as follows:
5.The Raphael families (ie my brother Tony, and my sister Sue, and I) operate the Applicant (which trades as Cannington Autohouse and a related entity Car Sales WA Pty Ltd (which is also a licenced motor vehicle dealer) from our premises in 253 & 255 Star Street Welshpool. Previously, Cannington Autohouse accumulated revenue losses from its general trading activities, and on accounting advice we distribute these losses to Car Sales Pty Ltd. There is no geographic or workplace distinction, however in broad terms, the revenue streams of the two entities can be characterised as:
The Applicant (trading as Cannington Autohouse)
>Repairs to damaged vehicles (pursuant to its vehicle repair licence) for both vehicles it buys for itself, or repairs to vehicles for other retailers
> Panel and paint
> Licensing
>Until Respondent declined to renew the dealer's licence, it traded vehicles
> Employs mainly paint and panel & cleaning staff
Car Sales WA P/L
> Trading vehicles
>Importing and changing to Australian Design Rules, Harley Davidson motor cycles
> Formerly imported US cars
>Employs Raphael family members concerned with admin and management
> Pays suppliers of vehicles and parts
6.Unless I indicate otherwise in the following paragraphs, I refer to both entities as 'The Applicant' for the reason that, on professional advice I understand that the current application, whilst brought by Raphael House Pty Ltd only, will determine the future operations of both entities.
7.Broadly, the family members who work for the Applicant (and their areas of speciality within the Applicant) consists of:
a.Me (dealer principal);
b.Antonios Badih ('Tony') Raphael, (my brother, the subject of the adverse CCC findings, vehicle buyer and refurbishment)
c.Suzanne Mary Pano, ('Susie') (my sister, who is our administration manager)
d.Antoinette Raphael ('Annie') (Tony's 18 year old daughter, detailer and pin-striping)
e.Anthony Raphael ('Cougar')(my 26 year old son, used car sales team);
f.Tabitha Mary Raphael ('Tabby') (Tony's 23 year old daughter, phones and reception)
8.The Applicant deals with Ford and Toyota, but is not limited to these makes. It imports motorcycles and refurbishes them. It also undertakes repair and refurbishment works for other automotive industry retailers, including paint and panel shop, vehicle cleaning and re-fit.
9.The Applicant purchases about 100 motor vehicles (usually cars, light commercials, SUVs and four wheel drives) at wholesale auctions, from rental companies, and ex-fleet operators. Tony Raphael specialises in these purchases, and is experienced in identifying those vehicles for which there is a strong market demand. He then orders the required works to repair / repaint / refurbish the vehicles. Some of these works were done in-house, such as the resprays, the detailing, and refitment of parts. Mechanical works are usually contracted out to automotive engineers and specialist workshops.
10.All vehicles, whether licenced or not, would then be inspected and checked by our staff before being offered for retail sale. For unlicenced vehicles we wish to sell as licenced, these are pre-inspected by the Applicant's staff members so that any defects could be corrected before being inspected by a DOT licenced inspector. This reduces the chances of a vehicle being rejected by the inspector and the need to re-present it (which costs us time and cash-flow in getting the vehicle licenced and sold).
11.Formerly, Tony would arrange the licensing inspection of those vehicles which were purchased unlicensed- about 10% of the Applicant's purchases. He was assisted by Nikki Harper, who was (and remains) Tony's PA.
12.The vehicles are sold by the Applicant's sales team who are licenced sales representatives. As effective Dealer Principal, I supervise these personnel and respond to any customer concerns or after-sales warranty claims, arising from the sales.
13.I have not, to my knowledge, been the subject of any unresolved customer complaint or warranty issue, in the 20 + years I have sold motor vehicles.
…
18.Tony, Susie and I had informal directors' meeting about once a week. We reviewed the financial performance of the Applicant, and discussed employees, upcoming auctions, any consumer trends effecting vehicle sales, and marketing. I and (to the best of my recollection) Susie, never noticed any irregularities in the number of vehicles being licenced nor did we detect any payments from the Applicant suggesting Tony or Nikki were paying for the vehicles to be licenced without being inspected.
19.Vehicle inspection and licencing was Tony's department exclusively[.]
The Corruption and Crime Commission (CCC) investigation
In 20142015 the CCC carried out an investigation into the 'Activities of Certain Vehicle Examiners Contracted by the Department of Transport'.
On 31 August 2015, 1 September 2015 and 12 November 2015, Tony gave evidence at private and public hearings conducted by the CCC into the activities of certain vehicle examiners contracted by the Department of Transport (SF para.19).
The CCC did not take evidence from John, Suzie or Marwan. Nor did the CCC make any findings about them (SF para 22). In opening, the Commissioner accepted that neither John nor Suzie had any knowledge of Tony's conduct (ts 6, 30 April 2018). Marwan was not involved in the business at that time.
The CCC's final report (the CCC Report) was released on 24 January 2017 (Exhibit B, pages 3162).
The CCC Report identified evidence of misconduct by:
(1)authorised vehicle examiners, including Mr Berardis, a proprietor of Favazzos Engine Reconditioning and Service Centre (Favazzos), who passed vehicles as suitable to be licensed without inspecting the vehicles; and
(2)licensed motor vehicle dealers, including Raphael House and Car Sales WA, which did not deliver vehicles to Favazzos for inspection on many occasions.
(SF para 25)
Specifically, the CCC Report referred to evidence that an employee of the Raphael House, Ms Nikki Harper, regularly delivered MR1 forms to Favazzos for vehicles that required inspections or alternatively emailed MR1 forms to Favazzos office, without delivering the relevant vehicles for inspection (Raphael House's misconduct) (SF para 26).
Tony's conduct
The parties agree that Tony is not 'a person of good character and repute and fit to be concerned in the management or control' of the Raphael House's business under the Act. The specific basis for this conclusion arises from the CCC Report.
The Commissioner identified the concerns that arose from Tony's behaviour as a result of the CCC Report in a letter dated 16 November 2017 (Exhibit B pages 17). The letter relevantly states:
…
CCC Findings of Corruption
Chapter Four of the Corruption and Crime Commission's report titled Report on the Activities of Certain Vehicle Examiners Contracted by the Department of Transport dated 24 January 2017 (the Report) is titled 'Partners in Corruption' and names Cannington Autohouse (which is owned and operated by Raphael House Pty Ltd) and Car Sales WA as partners in corruption.
Evidence gathered by the Corruption and Crime Commission (CCC) during a three month surveillance operation involving, but not limited to, Mr Alfonso Berardis, proprietor of Favazzos Engine Reconditioning and Service Centre, resulted in the CCC concluding that Mr Berardis, who is a Department of Transport (DoT) approved examiner who operates an authorised inspection station, has acted corruptly by knowingly:
•failing to conduct vehicle examinations;
•failing the conduct vehicle examinations to the required standards; and,
•falsifying DoT vehicle inspection records.
In relation to this finding the Report notes:
'At Favazzos, rather than inspect a vehicle, the examiner completed an MR1 form either without ever sighting the vehicle, or after sighting the vehicle but not performing a physical inspection.
The examiner then made false entries in VIS showing that the vehicles had passed inspection. The vehicle examiner collected and remitted the inspection fee to DoT and received a portion of the inspection fees collected in payment.
Contrary to the approved process, at Favazzos, vehicle inspection bookings were not mandatory:
•Details that should have been obtained by the examiner when physically examining vehicles were instead provided to the examiner by email, telephone or in person.
•Vehicles appearing on the inspection records were not presented.
•The persons presenting the vehicles for inspection regularly attended at the premises without the vehicle that was recorded as inspected.
•Those same persons regularly attended at the inspection facility only to deliver or collect documents.
…
Page 12 of the CCC Report refers:
[58]Compelling evidence that Mr Berardis did not conduct offsite inspections at Cannington Auto House was an intercepted telephone conversation with the director of Cannington Auto House, Mr Tony Raphael. This conversation occurred on 20 June 2014, three years after Mr Berardis started doing vehicle examinations for DoT and three months before he stopped. During the call, he had to ask Mr Tony Raphael for detailed directions to the Cannington Auto House dealership.
…
[69]Covert surveillance did not show these vehicles at Favazzos premises. In the Commission's assessment of the evidence, Mr Berardis did not know the whereabouts of Cannington Autos and did not visit these premises for inspections as he claimed. He entered details on VIS that he had received by email without physically inspecting the vehicles.
…
Page 21 of the GCC Report refers:
Chapter Four Partners In Corruption; Licensed motor vehicle dealers and repairers; Cannington Auto House and Car Sales WA
[87]These two car dealerships are located in Welshpool and are operated by Mr Tony Raphael and Mr John Raphael. A young employee was given the task by Mr Tony Raphael of regularly delivering MR1 forms to Favazzos for vehicles that required inspection. Alternatively, MR1 forms were emailed to Favazzos office where they were printed out by Suzanne Dionisio for Mr Berardis. Telecommunication interceptions captured the young employee discussing with Mr Berardis the particulars of several vehicles and asking whether the documentation was ready for collection.
[88]The completed forms were physically picked up some days later. Covert surveillance captured the employee attending Favazzos inspection shed to collect documentation without delivering relevant vehicles for inspection. Mr Tony Raphael denied the allegation that his dealerships were involved in this conduct; and claimed that all vehicles were driven to Favazzos, or inspected at his business premises by MrBerardis. Mr Tony Raphael couid not provide evidence to substantiate his claim, and stated that he had never seen Mr Berardis do any vehicle inspections at his dealership.
[89]In the Commission's assessment, the evidence overwhelmingly establishes that Cannington Auto House and Car Sales WA did not deliver vehicles to Favazzos for inspection on many occasions[.]
Raphael House's Licence renewal application June 2017
On 26 June 2017, Raphael House submitted an application for renewal of the Licence (SF para 29). That application read:
'[s]ince its/your last application, has/is the licensee or any partner or director of the licensee:
(a)been convicted of, or found guilty of any offences, including convictions which resulted in a suspended sentence? (Include all offences which when to Court, including traffic offences. Do not include spent convictions.)'
…
[s]ince its/your last application, has/is the licensee or any partner or director of the licensee:
(c)been the subject of any adverse finding by a Government Board, Tribunal or Agency, e.g. the Corruption and Crime Commission?
…
[s]ince its/your last application, has/is the licensee or any partner or director of the licensee:
(g)had any investigations or legal proceedings commenced against you or an associated entity, which may/did result in action being taken in relation to an occupational licence currently held?'
(SF paras 3032)
To each of the questions at (a), (c) and (g) on the Licence renewal application as set out above, Raphael House answered 'No':
The Licence renewal application was signed by Tony and John (SF para 33).
The Licence renewal application was inaccurate, specifically, if answered 'No', when in fact, Tony, a director of Raphael House, had been the subject of an adverse finding by the CCC. The answer to (c) should have been 'Yes'.
In closing, the Commissioner submitted:
…
John has admitted that he was not careful in signing his renewal form which inaccurately stated that no adverse findings had been made about the applicant and a director of the applicant. In fact, he had been made aware of a report by the CCC some months before and agreed that he himself had read the adverse findings. In cross-examination, he made vague explanations about who filled out the form. It was either Tony or his accountant.
He could not actually remember reading or signing the form but agrees that he did sign it. John ultimately submitted he didn't understand the magnitude of the issue at the time and probably wasn't careful and diligent at the time he signed the form. This is not an insignificant matter, even if there is no dishonesty found by the Tribunal in his evidence. It is self-evidently important to be careful and diligent in filling out character and fitness questions on an application or renewal form.
Non-disclosure has been a factor in findings against an applicant. However, the case law suggests that additional adverse matters would be required to render a person unfit to hold a vocational licence …
(ts 45, 30 April 2018)
The Tribunal accepts the Commissioner's submissions. The Tribunal does not find John to be dishonest. Whilst the Tribunal is concerned about the level of attention John paid to the completion of the Licence renewal form, the Tribunal is nevertheless satisfied that he is a person of good character and repute and fit to be concerned in the management of Raphael House.
The Commissioner's preliminary view of the Licence renewal application by Raphael House
On 16 November 2017, the Commissioner advised Raphael House that a preliminary view had been formed to decline Raphael House's Licence renewal application on the basis that:
(1)Raphael House did not satisfy the requirements of s 15 of the Act;
(2)In particular, the Commissioner was not satisfied, under s 15(3)(a) of the Act, that all of the persons concerned in the management or conduct of the business were persons of good character and fit to be concerned in the management or control of the business of buying and selling vehicles; and
(3)The evidence referenced in the CCC's Report provided by the Commissioner provided a basis for an application to the Tribunal under s 20(1) of the Act alleging that Tony and John engaged in conduct that rendered them unfit to be concerned in the management or conduct of Raphael House and rendered Raphael House itself unfit to be the holder of an authorisation to buy and sell vehicles.
(SF para 38)
Raphael House was invited, within 14 days, to provide additional information, including any mitigating circumstances, that might address the concerns of the Commissioner (SF para 39).
By letter dated 24 November 2017, Raphael House's solicitors requested that the Commissioner identify the following:
(1)In regard to John, the acts and statements which may be relied upon in the Commissioner's preliminary view, that he might not be a person of good character and repute and fit to be concerned in the management or control of the Raphael House's business; and
(2)In regard to Tony, any guidelines or published authorities which might assist in advising Raphael House as the level of management he might exercise in the restructured corporation which would enable the Commissioner to renew the Licence.
(SF para 40)
On 17 January 2018, the Commissioner wrote to Raphael House and further outlined the view that:
(1)As John and Tony were the only directors of Raphael House, both were responsible for the conduct of Raphael House and for its partnering with Mr Berardis to facilitate his corrupt conduct;
(2)Their participation in this scheme impacted on the Commissioner's capacity to find that John and Tony are persons of good character or repute and that they are fit to be concerned in the management and control of Raphael House's dealership; and
(3)The conduct of Raphael House referenced in the Commissioner's preliminary view letter, including omitting to deliver vehicles for inspection and arranging to email and collect forms from Mr Berardis without having delivered vehicles for inspection, also provided grounds for refusal under s 18(1) of the Act as the conduct rendered Raphael House and its directors unfit to hold a licence, or unfit to be concerned in the management or conduct of Raphael House, respectively.
(SF para 41)
By letter dated 17 January 2018, Raphael House was also invited, by 31 January 2018, to make a submission on any additional matters for the Commissioner to take into account in relation to the licence renewal (SF para 42).
Attempts by Raphael House to comply with s 15(3)(a) of the Act
On or about 19 January 2018, following Raphael House receiving the Commissioner's preliminary view that it would not renew Raphael House's Licence, Tony resigned as a director. He was replaced by Suzie, as a codirector (with John) of Car Sales (SF para 16).
On or about 14 February 2018, Tony caused Sunshine Holdings Pty Ltd to transfer its shares in Car Sales, without consideration, to Marsuze Pty Ltd, a company directed by Marwan Pano and share-held by Suzie (SF para 17).
The current directors of Car Sales WA are John and Suzie (SF para 18).
On or about 19 January 2018, following Raphael House receiving the Commissioner's preliminary view that it would not renew the Licence, Tony resigned as a director. He was replaced by Suzie (SF para 5).
On or about 14 February 2018, Tony caused Sunshine Holdings Pty Ltd to transfer its shares in Raphael House, without consideration, to Marsuze Pty Ltd, a company directed by Marwan and share-held by Marwan and his wife Suzie (SF para 6).
The current directors of Raphael House are John and Suzie (SF 7).
The current shareholders of Raphael House are:
(a) John (via his control of the Shelby Mustang Trust); and
(b)Marwan and Suzie (via their joint shareholding in Marsuze Pty Ltd).
On 23 January 2018, Raphael House's solicitors emailed a letter informing the Commissioner that:
(1)Tony had resigned as a director of Raphael House;
(2)Tony was prepared to enter into a deed of undertaking by which he will be excluded from all managerial involvement in Raphael House;
(3)They do not accept the Commissioner's conclusion that John was not a person of good character fit to be concerned in the ongoing control of the business; and,
(4)Unless the Commissioner wished to identify evidence or information suggesting that John was not a person of good character, they would seek to prevent the Commissioner from refusing to renew the Licence of any corporation by virtue of John's directorship.
(SF para 43)
The role Raphael House wishes Tony to have
John explained the proposed role of Tony in his witness statement (Exhibit D) as follows:
22.Tony's conduct has caused considerable strain in both our family and business relationship. I am not happy with the now published association of the Applicant to the corrupt vehicle examiners. I feel it has brought discredit to the family name, and to our business reputation, especially in the Peth Lebanese business community.
23.Susie and I cannot operate the Applicant completely without Tony: he has years of experience in attending auctions and other vehicle sales, and buying vehicles which the Applicant can, after repair and refurbishment, sell at profit. Tony is adept at getting the vehicles in a sales ready condition, and, when necessary, getting them repaired to licensable standard.
24.The Applicant has no other business interests or capital investment base that would enable it to operate in any venture other than its existing operation. Nor do the family members identified above have any significant experience in any other industry. Unless the Applicant's is permitted to lawfully trade as a licenced motor vehicle dealer, it cannot continue to trade.
25.Subject to the application succeeding, Tony will remain as an employee of the Applicant responsible for the above tasks, but he and Nikki will be removed from any aspect of:
a.vehicle licencing;
b.liaison with vehicle licencing inspectors;
c.de facto directorship or influence of the Applicant;
The Commissioner's final decision
In a letter to Raphael House dated 5 February 2018, the Commissioner:
(1)acknowledged Tony's resignation as a director of Raphael House;
(2)noted that Tony is the director of one of the two companies that hold shares in Raphael House and so may continue to have influence in relation to the management and control of Raphael House;
(3)noted that it was not just the directors who engaged in conduct that renders them unfit to be concerned in the management of Raphael House, but also Raphael House itself is unfit to hold a Licence;
(4)otherwise ignored Raphael House's written offer that Tony undertake by deed to be excluded from managerial involvement in Raphael House; and
(5)confirmed that the Commissioner's final decision was to refuse the Licence renewal application.
(SF para 44)
In these proceedings, Raphael House proposed that Tony should continue to be 'involved in Raphael House on the basis of the following protocol:
Protocol Tony
•Tony will not be involved in any transactions re buying and selling vehicles.
•Tony's involvement will include but not be limited to following tasks before the auction or before purchasing the vehicles:
▫Look up auctioneer's website to see if any vehicles that are suitable for the applicant's purchase will be auctioned or are for sale;
▫Inspecting some vehicles on a needs basis (as required by the purchasers) visually to determine if the exterior meets standards and expectations;
▫Open trunk, hood compartment and all doors to confirm they open and close properly;
▫Inspecting the interior to ensure it meets standard and expectations;
▫Starting engine and listening to any noises, squeaks or rattles, investigate further if any sounds are unusual;
▫Engage transmission to confirm it can engage in both 'drive' and 'reverse';
▫If possible take vehicle for a test drive;
▫Inspect log and service books for service history to value the vehicle's possible resale price on its own merits;
▫Inspect vehicles for any previous damages or modifications, for road worthiness;
▫Once examination is completed to utilise all gathered data to determine whether the vehicle is suitable for the applicant's business purpose of refurbishment and resale;
▫To advise buyer (John or Anthony - John's son) about the condition of the car and its value, and whether the inspected vehicle is suitable for the applicant's purchase;
•Once Tony has consulted John or Anthony, he will not further be involved in the process of purchasing or bidding on vehicles.
•John or Anthony will attend auction and make an independent and final decision whether to make an offer or purchase a vehicle.
•Tony's role will solely be to consult on vehicles before an auction takes place in regard to achieve the best deal for the applicant.
•All clients that previously purchased vehicles through Tony will now contact John or Anthony.
•Tony will not be involved in selling vehicles, this will be done by the sales team.
In crossexamination, John described his and Tony's proposed roles as follows:
Well, how is that going to work into the future? - - - It's not. It's not going to - that's not going to be - like, we spoke about it on many occasions in your office and I understand what actually the outcome is and I will - his role is now just look after the workshop. So the workshop side of things, we do a lot of vehicles there. We get a lot of lease vehicles. We might buy 10 Landcruisers. Now, they need to be refurbished before we can re-sell them. Some of them are in very good condition. But our main job is we buy a lot of lease vehicles, government vehicles, and then they've got scratches, they've got dents and whatever have you, and we rectify them and put them back on the market. We've got I think it's roughly 18 (indistinct) that we hire in, like, doing all sorts of jobs on vehicles and Tony would be looking after them because I will have to concentrate on buying the cars and in that area there.
Would you agree with me that previously Tony was the main vehicle buyer? - - -Yes.
…
Well, has that been your job? - - - That's my job. Yes.
Sorting out consumer complaints? - - - Any - any complaint that comes I handle the complaints. Yes.
But after sales warranty work, who handles that? - - - My son, Anthony.
All right. You mentioned before briefly that Tony Raphael was the main vehicle buyer? - - -Yes.
Would you please the tribunal in your own words, first of all, where do most of your vehicles come from? - - - Like I said, with the lease vehicles, the hire companies. We've been dealing with some of these guys for 30-odd years and they're all old school people like - I don't know if you're familiar with the term old school, like, 'We're old school'.
Do you also buy cars from auctions, Mr Raphael? - - - Yes. Yes. Government auctions, Pickles, Manheim. They - see it has become - the government even share it around with certain identities. They don't just have their cars in one particular auction. So a car could be - that we bought - and it was repossessed. So in that status we look at a car, if we think that it's - we need that car to sell and make a little dollar out of it, well we will buy that car.
All right. Now, you've indicated previously Tony did most of that work? - - - Because when you get to an auction you're talking an auction that is - virtually it's a 24 hour thing looking at vehicles. And now why I say Tony was buying dominantly of the cars is we've got these so-called people we've known for many, many years and Tony was - when I was sick I would - I've obviously helped and sometimes I would go and see some people he would see. But it was never, ever two of us going to do one job because it didn't - it was like wasting time. Only one of us would go. Because whatever they sold my brother they knew that I'm part of it and vice versa. So realistically the - the people who have been loyal to us selling cars for many years know that it's one identity, not two. Not - if they're selling to my brother because they love my brother more than me, or whatever have you, it's loyalty. If you look after that client buying their cars, we will take the good and the bad[.]
…
… I would do most of the buying. Tony would look after the workshop and the yard. Then if someone can in, they wanted a price on their car, or whatever - because people come into our yard to get prices as well to sell their car. We get phone calls all day long. Now, just to let you understand something. Tony used to go and fly to Broome and Port Hedland and price cars for Pilbara Motor Group. And he has built a relationship with Pilbara Motor Group and people in the Pilbara know my brother more than myself, even though I know them. But they ring him if they're trading a car. In hindsight, they now can ring him, but he will have to get permission from me if we buy them or not. But they will be still calling him and that's - I - I can't help that. I can't. If he goes to an auction he will be taking my son. My son is still a junior. 26 years of age he's still a junior. So if anything he will be going with him as like an apprentice. My son will be buying them. Obviously he's not wanting to buy cars. So
…
… what was Tony's role? He used to buy some cars and look after the people at the workshop
…
So Tony will be inspecting the vehicles - - -? Yes.
- - - to help you out there and he will inspect the logbooks, obviously? - - Books what do you mean by books?
The logbook as part of the inspection? - - - See, a lot of people when they buy a car these days, they like to see the history of the vehicle.
That's right. Is that to assess the value as well? - - - Yes, very much so.
And Tony will do the test drive? - - - Or my son. He has to learn so, obviously, my boy is going to take a bigger role.
So they will go together in every case? - - - Just for the start. Until he he gets - virtually, just ease him in it slowly by himself and then Tony won't be involved after.
…
And that's that it takes skill to determine the damage and the value of a car, and that's a skill that Tony has acquired over many years? - - - Many years. That's correct.
Okay. So he has got the skill to do that? - - - Yes, he has.
And Anthony doesn't yet? - - - He's starting to too, but not in the same category.
And it's Tony that determines what the car is worth. He will be able to tell you that? - - - He will - he will lead him in the right direction. Yes.
So who will decide what the value of the car is? Who has got the skill to do that? - - - Besides myself, Tony has and my son is getting there. At the moment, to say he has got the skills to do it right now - yes, he has got the skills to go buy cars on his own, but on the - the volume that we buy, you know, it has got to be hard for him.
And then Tony - he decides what the refurbishments will be? - - - Not necessarily. If - if I've sold the car and the guy wants to put a tray instead of a - a ute body back on it (indistinct) what the - the end result - the car - which (indistinct) it's going to go to.
Okay. And Tony is in charge of the refurbishment now in terms of the - - ? - - - When you say - - - painting and - - ? - - - Yes. No. He will run the workshop. Yes.
…
KING, MS: So what you're saying is that, at the moment, Tony is going to be around advising you about the cars to purchase and he will tell you which cars to purchase so that you can purchase - you can actually make the purchase instead of him? - - - That's correct, but there's certain people that I deal with myself that I won't have to get any advice from Tony because I - - -
…
- - - going to - okay. So do you think he's very good at what he does, now that he has developed that? - - - Listen, that's - that's - - -
Skills in assessing vehicle value? - - - I would - if I said no, I would be lying. No. He is good. He's a good buyer.
So you would purchase what he would recommend you to purchase? - Of course. Yes.
And you would have no reason to reject his recommendation? - - - That's correct. I wouldn't.
And you wouldn't be doing all that research and inspecting yourself anyway? - - - I can't do that that that much because - - -
(ts 1522, 30 April 2017)
It is apparent from John's evidence in crossexamination that, despite the statements in the Protocol that 'John or Anthony will attend auction and make an independent and final decision whether to make an offer or purchase a vehicle', the decision, in reality, will be Tony's.
Suzie's role
From at least June 2012, Suzie had worked in an administrative role for Car Sales WA and Raphael House.
Suzie's evidence as to her new role (in her witness statement) (Exhibit E) was:
8.Marwan and I, while supportive of both Tony and John, and while having joint business interests by virtue of MarSuze Pty Ltd owning half the issued shares in the Applicant, have always acted independently of my brothers. We consult with them, and have a good workable business relationship, but we have never overly influenced by either John or Tony. Marwan is a successful, hard-working business operator in the tough café industry. He is very independent, and has his own views on what should be done.
9.I have exclusive password protected control of the Applicant's Department of Transport on-line portal for the transfer of motor vehicle licence plates, and on-line payment of duties and government charges. I conduct payroll, accounts, PPSR checks, updating the yard registry and other compliance in accordance with the Motor Vehicle Dealers Act, stamp duty online, DOT dealer network online, supervise reception and admin staff, parts ordering, credit management, BAS submission, invoicing and ATO liaison.
The Tribunal accepts that Tony will have no role in relation to the applications for relicensing of vehicles by Raphael House
Will Tony be 'concerned in the management of' Raphael House?
The Tribunal accepts that Tony does not have any formal role in the management of Raphael House. He has resigned as a director. The Tribunal also accepts that Tony does not have any financial interest in the business of Raphael House. He has transferred the shareholding he controlled to an entity controlled by Suzie and Marwan. Tony is now an employee.
The Tribunal accepts the evidence of John, Suzie and Marwan that they will make board decisions independently of Tony. Marwan struck the Tribunal as someone who is not going to be swayed by Tony.
The question of whether Tony is concerned in the management of Raphael House goes beyond decisions taken by the board of Raphael House.
Notwithstanding that Tony has resigned as director of Raphael House, it does not follow that he will no longer be concerned in the management or conduct of Raphael House. Section 15(3)(a) does not refer to directors or de facto directors. Its scope is not so limited.
Further, the scope of s 15(3)(a) of the Act is not limited to 'real executive control' as Raphael House's counsel submitted (ts 49, 30 April 2018).
Raphael House has proposed to exclude Tony from managerial involvement while allowing him to retain his fundamental role as the 'vehicle buyer' of the business (Raphael House's SIFC para 45; John's Statement paras 21 and 23).
It is apparent from John's evidence that Tony will continue to be a 'buyer' for the business. Other than the fact that John or John's son, Anthony, will formally buy a vehicle by, for example, bidding at auction, the decision to buy will be made by Tony. John and Anthony will purchase on Tony's recommendation. Raphael House's counsel conceded in closing that Tony will be influencing the decisions of the car buyers, that is, John and Anthony (ts 48, 30 April 2018). In effect, John or Anthony is going to make the formal purchase instead of Tony. Otherwise, Tony's role in buying remains largely unchanged from the previous operations of Raphael House.
Tony's role is not, as submitted by his counsel (ts 4849, 30 April 2018), limited to recommendations. Tony is concerned in management. Tony is making the actual decision to buy and that decision is given effect by Anthony or John. Importantly, Tony is making decisions which will have a significant bearing on the financial standing of Raphael House.
Although John will have a larger role in buying, it remains the case that Tony will be concerned in the buying of vehicles. Raphael House's business is largely concerned with the buying and trading of vehicles. Tony will also be responsible for how purchased stock is dealt with between purchase and sale. His conduct in this latter area led to the adverse finding against him by the CCC.
A buyer employed in a large company could simply perform the role of a buyer/employee, a role not linked to management, whereas a buyer, related to family, and employed in a small family operated company, would be making decisions to buy which are fundamental to the management of the company. Tony's role in the buying of vehicles for Raphael House, as proposed by John, would amount to giving advice to management, participating in the company's decisionmaking processes, (that is, to buy vehicles), and the execution of Raphael House's decisions, going beyond the mere carrying out of directions as an employee.
In the case of a motor vehicle dealer's licence which is concerned with the buying and selling of vehicles it is particularly important to have regard to Tony's role in the buying of vehicles.
In those circumstances, under the proposal advanced by John, on behalf of Raphael House, Tony will continue to be concerned in the management of Raphael House.
Adverse effect on Raphael House's business
The Tribunal accepts Raphael House's submission that not allowing Tony to be involved in the buying of vehicles will have an adverse impact on the financial position of Raphael House. Nonetheless, the role of the Act is to protect the public.
As has often been stated in the context of penalty proceedings, the weight to be given to personal circumstances cannot override the fundamental obligation of the Tribunal to provide appropriate protection of the public interest.
In the circumstances, to renew the Licence, when Tony will be concerned with the management of Raphael House, would be to defeat the protection of the public. Therefore the application to renew the Licence must be refused.
Conclusion
The Tribunal finds that the role proposed for Tony in John's evidence would constitute Tony being concerned in the management of Raphael House. It is common ground that he cannot meet the requirements of s 15(3)(a).
Accordingly, Raphael House's application for a renewal of the Licence is declined.
Orders
1. The applicant's application for a renewal of its corporate motor vehicle license under the Motor Vehicle Dealers Act 1973 (WA) is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
JUSTICE J CURTHOYS, PRESIDENT
5 JUNE 2018
0
3
2