Real Estate And Business Agents Supervisory Board and Carmello Charles Parrella T/A Charles Parrella and Associates
[2008] WASAT 115
•21 MAY 2008
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: VOCATIONAL REGULATION
ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)
CITATION: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD and CARMELLO CHARLES PARRELLA T/A CHARLES PARRELLA & ASSOCIATES [2008] WASAT 115
MEMBER: JUSTICE M L BARKER (PRESIDENT)
MS F CHILD (MEMBER)
MR D LIMNIOS (SESSIONAL MEMBER)
HEARD: 22 APRIL 2008
DELIVERED : 21 MAY 2008
FILE NO/S: VR 34 of 2008
BETWEEN: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD
Applicant
AND
CARMELLO CHARLES PARRELLA T/A CHARLES PARRELLA & ASSOCIATES
Respondent
Catchwords:
Vocational Regulation - Real Estate Agent - Unauthorised transactions from trust accounts - Deficiency in trust accounts - Penalty - Composite penalty of permanent disqualification from holding a licence and triennial certificate and maximum fine - Cooperation of agent - Bankruptcy of agent
Legislation:
Real Estate and Business Agents Act 1978 (WA), s 4, s 68(4), s 68(6)(a), s 93(1), s 103(1), s 103(2)(c), s 103(2)(d)
Result:
Application of the applicant allowed
Real Estate and Business Licence No 4400 and Triennial Certificate No 4400 cancelled
Respondent permanently disqualified from holding a Real Estate and Business Licence or Triennial Certificate
Respondent pay the Board's costs fixed in the sum of $1,000
Category: B
Representation:
Counsel:
Applicant: Mr J McGrath
Respondent: Mr G Massey
Solicitors:
Applicant: Real Estate and Business Agents Supervisory Board
Respondent: Holborn Lenhoff Massey
Case(s) referred to in decision(s):
Paridis v Settlement Agents Supervisory Board [2007] WASCA 97
Real Estate and Business Agents Supervisory Board and Landa [2008] WASAT 114
Real Estate and Business Agents Supervisory Board and Low VR 116 of 2005
Real Estate and Business Agents Supervisory Board and Parrella [2007] WASAT 122
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
Following the admission by Carmello Charles Parrella that, whilst he held a real estate and business licence and triennial certificate, he had made unauthorised withdrawals from trust accounts which resulted in a deficiency in the trust funds, the Real Estate and Business Agents Supervisory Board applied to the Tribunal for disciplinary action to be taken.
The Tribunal considered whether the appropriate penalty to be imposed on the agent for his misconduct as a real estate agent should simply involve the cancellation of his licence and triennial certificate under the Real Estate and Business Agents Act 1978 (WA), and permanent disqualification from holding such a licence, as accepted and contended for by the agent; or that penalty plus a fine, as contended for by the Board.
The Tribunal considered the various breaches of the Act committed and found that the appropriate penalty for each was the cancellation of, and permanent disqualification from holding, the licence and triennial certificate. The Tribunal held that the imposition of a fine in addition, in the circumstances of the case, would be unnecessarily punitive.
Issues
The primary issue in these proceedings is whether the appropriate penalty to be imposed on Carmello Charles Parrella for his admitted misconduct as a real estate agent should simply involve the cancellation of his licence and triennial certificate under the Real Estate and Business Agents Act 1978 (WA) (REBA Act), and permanent disqualification from holding such a licence and triennial certificate, as accepted and contended for by the agent; or that penalty plus a fine, as contended for by the Real Estate and Business Agents Supervisory Board (Board).
Facts
The material facts were agreed, or not disputed by the parties. The relevant facts are as follows.
At material times, Mr Parrella was the holder of Real Estate and Business Licence No 4400 and Triennial Certificate No 4400, and conducted a real estate agency business under the name of Carmelo Charles Parrella trading as Charles Parrella and Associates (business). He maintained and operated two trust accounts to which he was a signatory; being a general trust account and a tenancy bond trust account.
On 20 March 2007, Mr Parrella, through his legal representative, made arrangements to attend the offices of the Board. At approximately 5 pm on 20 March 2007 Mr Parrella, his legal representative and a friend met with inspectors of the Board. The meeting took the form of a recorded interview voluntarily attended by Mr Parrella. Appropriate cautions were provided at the commencement of the interview. During the interview, Mr Parrella stated that he had sole responsibility for the trust accounting of the business which included the end of month bank reconciliations of the trust accounts.
Mr Parrella stated that he had transferred moneys from the trust accounts to the general trading account of the business and then drew cheques from the general trading account to cover expenses such as marketing, consultant fees, and PAYG and GST demands from the Australian Tax Office. He indicated that the first unauthorised withdrawal from the trust accounts was made between 12 and 18 months ago, and that the most recent unauthorised withdrawal was in December 2006 or January 2007. The unauthorised internet transactions were recorded on the trust account bank statements but not in the Gee Dee trust accounting software program. He stated he had created a "corrective journal" in Gee Dee in an attempt to cover up the shortfall in the general trust account. He admitted having made unauthorised withdrawals from the tenancy bond trust account such that the balance of the account as at 21 March 2007 was only $3,040.06 whereas the bond listing indicated that $242,580.06 should have been held in the account. He advised that he believed the general trust account to be deficient to the extent of $147,000 and the tenancy bond trust account to the amount of $230,000.
On 22 March 2008 the State Administrative Tribunal (Tribunal) heard an application under s 93(1) of the REBA Act. At the hearing, Mr Parrella sought a period of grace to allow him to finalise the contract of sale of his business and rent roll for a sum of $900,000, which he argued could be used to pay compensation to those affected by his actions. The Tribunal, however, was not convinced that the sale would produce the situation Mr Parrella contended it would, particularly in light of the $850,000 or so being claimed against him by the Australia Tax Office; and found that the protection of the public interest required immediate suspension: Real Estate and Business Agents Supervisory Board and Parrella [2007] WASAT 122 at [7] - [9]. The Tribunal accordingly made orders suspending Mr Parrella from carrying on business as a licensed real estate agent until further order, restraining Mr Parrella and his bankers from dealing with any of the business bank accounts, and authorising the appointment by the Board of a supervisor to Mr Parrella’s business.
Subsequently, the Board appointed Mr Anthony Bevan of Ernest & Young (supervisor) as a supervisor of Mr Parrella’s business. The supervisor provided the Board with three reports regarding the business, dated 24 April 2007, 24 May 2007 and 23 August 2007 (the reports), and a sworn affidavit dated 14 November 2007. At par 8 of the affidavit the supervisor identified the deficiency in the trust accounts at the date of the commencement of his supervision to be $409,593.42. A review of the records relating to the trust accounts reveals that during the relevant period Mr Parrella withdrew $668,964.51 through unauthorised transactions.
The conduct of Mr Parrella has resulted in 251 claims, amounting to $399,072.29, being made to the Board under the Fidelity Guarantee Account. To date, five of these claims, amounting to $9,500, have been approved by the Board. Mr Parrella was advised in writing of the approval of these claims, but has not lodged any objections and has not notified the Board of an intention to object.
The Board alleges that:
•there is proper cause for disciplinary action against Mr Parrella pursuant to s 103(2)(c) of the REBA Act in that he acted in breach of s 68(4) and s 68(6)(a); and
•pursuant to s 103(2)(d) of the REBA Act, Mr Parrella is unfit to hold a real estate and business licence.
Mr Parrella admits that his conduct:
•was in breach of s 68(4) of the REBA Act;
•gave rise to a deficiency in the trust accounts;
•amounted to unlawful and unauthorised misappropriation of trust funds in the sum of not less than $668,964.51; and
•was a "defalcation by a licensee" under s 4 of the REBA Act.
By sequestration order made by the Federal Magistrates Court, on 26 March 2007 a trustee was appointed over the bankrupt estate of Mr Parrella.
Tribunal's findings on allegations made
Section 103(2)(c) of the REBA Act provides that there is proper cause for disciplinary action against an agent if the agent has acted in breach of the requirements of the Act.
The Board contends that two of the requirements of the REBA Act have been breached, namely s 68(4) and s 68(6)(a).
Section 68(4) provides:
“Moneys received by an agent for or on behalf of another person in respect of a transaction shall not be withdrawn from a trust account except for the purposes of the transaction, or as otherwise authorised by this Act, or as otherwise authorised by the person or persons lawfully entitled to the moneys.”
Mr Parrella, through the statement of agreed facts and through his counsel at the hearing, admits breach of this provision. The evidence adduced in the proceedings amply supports the admission made.
Section 68(6)(a) provides:
“An agent shall keep full and accurate accounts of all money received or held by him on account of any other person and of all payments made by him of that money.”
Although Mr Parrella does not expressly admit breach of this provision, the facts he does admit clearly demonstrate a breach. Mr Parrella admits falsifying accounts through the creation of a corrective journal, and admits a deficiency in the trust funds.
Accordingly, the Tribunal finds that Mr Parrella was in breach of s 68(4) and s 68(6)(a) of the REBA Act, and that pursuant to s 103(2)(c) there is proper cause for disciplinary action against him.
The Board also contends that pursuant to s 103(2)(d) of the REBA Act, Mr Parrella is unfit to hold a real estate and business licence.
Section 103(2)(d) provides:
“There shall be proper cause for disciplinary action against an agent if any other cause exists that, in the opinion of the State Administrative Tribunal, renders the agent unfit to hold a licence.”
Mr Parrella has admitted repeatedly making unauthorised withdrawals from trust accounts, with these unauthorised withdrawals involving large sums of money, such that there is a significant deficiency in the trust accounts. The proper maintenance and appropriate dealing with trust funds is a fundamental aspect of a real estate and business licence. For this reason, it is the opinion of the Tribunal, that Mr Parrella’s conduct renders him unfit to hold a licence, and accordingly the Tribunal finds that there is proper cause for disciplinary action pursuant to s 103(2)(d) of the REBA Act.
Contentions of the parties as to penalty
The Board seeks orders:
•cancelling Mr Parrella’s licence and triennial certificate and permanently disqualifying him from holding such a licence or triennial certificate under the REBA Act;
•imposing a fine of $10,000; and
•for costs fixed in the sum of $1,000.
The Board contends that under s 103(1) of the REBA Act the Tribunal has the power to impose a composite penalty of both disqualification and a fine, and that due to the seriousness of the conduct of Mr Parrella, such a penalty is appropriate. The Board points out that an agent’s obligations under the REBA Act in relation to trust accounts are paramount, and alleges Mr Parrella has demonstrated a reckless and intentional manipulation of the two trust accounts for his own benefit. Further, the Board says that the conduct embraced repetitive acts, with there being 27 identified unlawful transactions. These transactions occurred over an extended period of time, with there being some suggestion that unlawful transactions occurred even prior to 2005. The unlawful transactions involved significant sums of money, and the manner of implementing the defalcations reveals a sophisticated and well planned scheme rather than one transaction undertaken on the spur of the moment.
The Board contends that the bankruptcy of Mr Parrella and financial hardship caused by the inability to sell the rent roll and business should not be regarded as a "penalty" as it arose as a consequence Mr Parrella’s actions; it was not imposed on him.
The Board further contends that in these circumstances the protection of the public interest requires the permanent disqualification of Mr Parrella and the imposition of a substantial penalty. The Board envisages the monetary penalty having a deterrent effect. The Board also seeks its costs of the application fixed at $1,000.
The cancellation of the licence and triennial certificate and permanent disqualification from holding such a licence or triennial certificate is not contested by Mr Parrella. However, counsel for Mr Parrella contends that the monetary penalty should not be imposed in light of the mitigating aspects of his offending, in that Mr Parrella voluntarily notified the Board of his misconduct and cooperated in every respect with the subsequent investigation.
Further, counsel submits that Mr Parrella has already suffered a significant financial penalty as a result of his offending, being bankrupt and being unlikely to ever again earn a significant income. The appointment of a supervisor and the cancellation of his licence caused a proposed sale of the rent roll and business to fall through, a step which might have helped to cover the deficiency in the trust accounts. To that extent counsel for Mr Parrella says that the loss of licence has already occasioned hardship by virtue of the penalty of not being able to sell the rent roll and business, to the extent of $900,000.
Counsel emphasises that due to his bankruptcy, Mr Parrella is not in a position to pay a fine, and is unlikely to be in a position to pay a fine in the near future. Counsel points out that Mr Parrella’s financial circumstances are much reduced, with his weekly earning being approximately $500 in commission as a sales manager, training and recruiting. He has no skills apart from those he learnt in the real estate industry, an industry in which he will no longer be able to work.
Counsel submits that to impose a further financial penalty in addition to the loss of the license would be a crushing penalty in circumstances where Mr Parrella’s cooperation has assisted the Board’s investigation. That cooperation ought, it is submitted, be recognised in the penalty imposed by the Tribunal.
Further, counsel points out that Mr Parrella has worked in the real estate industry for approximately 20 years, operated his own business since 2001, and was in partnership as a licensee for approximately five years before that. Counsel submits that up until the time of his offending, he was a person of good character and a successful real estate agent who had run an audited trust account for years in a proper fashion without succumbing to temptation.
Tribunal’s findings as to penalty
Section 103 of the REBA Act provides:
“(1) If, in a proceeding commenced by an allegation under section 102(1) against an agent, the State Administrative Tribunal is satisfied that proper cause exists for disciplinary action, the State Administrative Tribunal may do any one or more of the following things -
(a)reprimand or caution the agent;
(b)impose a fine not exceeding $10 000 on him;
(c)suspend or cancel his licence and any triennial certificate in respect thereof and in addition, disqualify him either temporarily or permanently, or until the fulfilment of any condition which may be imposed by the State Administrative Tribunal, from holding a licence or triennial certificate, or both;
…”
The wording of s 103 of the REBA Act, in particular the words “may do any one or more of the following things”, confers upon the Tribunal the power to impose a composite penalty. There is nothing in the wording of this section which would appear to exclude a composite of the ultimate penalty of permanent cancellation of licence and triennial certificate and a fine. Indeed, the Tribunal has on previous occasions imposed such a composite penalty: see, for example, Real Estate and Business Agents Supervisory Board and Low VR 116 of 2005 (orders available on the Tribunal website).
The question remains whether such a composite penalty is, in all the circumstances, appropriate. Permanent disqualification from holding a licence and triennial certificate is the ultimate penalty that the Tribunal imposes under the REBA Act. It has the effect of permanently ending the career of an agent. On its face, the imposition of this penalty alone is sufficient to protect the public from the possible future misconduct of Mr Parrella. The imposition of a fine of $10,000 in addition to permanent disqualification is said to have a deterrent effect on others who contemplate breaching the REBA Act. However, it runs the risk of appearing gratuitously punitive.
As explained by the Tribunal in Real Estate and Business Agents Supervisory Board and Landa [2008] WASAT 114, it is important for the Tribunal when imposing a penalty or penalties to have regard to the particular disciplinary findings made against an affected person, to consider the appropriate penalty for each, and regard whether the effect of the penalties, in aggregate, is proportionate to the extent of the wrongdoing identified. The Tribunal is entitled in assessing this to have regard to the extent to which particular findings relate to a common transaction or dealing. Where the offences relate to the common transaction or dealing, the appropriate penalty in respect of those offences might be imposed having regard to the penalty imposed in respect of the lead or primary offence.
In the current case, the Tribunal considers the main disciplinary finding is in relation to s 103(2)(d) of the REBA Act; namely that cause exists that renders the agent unfit to hold a real estate and business licence by reason of his misappropriation.
In determining what penalty or penalties are appropriate under this provision, the total misconduct of Mr Parrella in misappropriating moneys must be taken into account. Mr Parrella’s conduct was serious. It was not an isolated transaction but a series of transactions involving significant sums of money. The manner of implementing the defalcations reveals a sophisticated and well planned scheme. This conduct clearly renders Mr Parrella totally unfit to hold a real estate and business licence and triennial certificate, and warrants cancellation of such licence and triennial certificate, as well as permanent disqualification from ever holding them.
On the other hand, Mr Parrella cooperated in all relevant respects with the investigation of the Board. It was his own admissions which brought his misconduct to light. It is also relevant that Mr Parrella was recently found bankrupt, such that a fine of $10,000 would be particularly onerous given his financial position. Disciplinary proceedings are not designed to punish the person affected: Paridis v Settlement Agents Supervisory Board [2007] WASCA 97. In light of these circumstances, the Tribunal considers that it is not an appropriate case for the imposition of a fine in addition to the cancellation and permanent disqualification from holding a license and triennial certificate.
The other relevant complaints, namely those made pursuant to s 103(2)(c) (and s 68(4) and s 68(6)(a)) of the REBA Act relate to the same course of wrongful conduct, as does the complaint under s 103(2)(d). The penalty appropriate in respect of these are, for the same reasons provided in relation to s 103(2)(d), cancellation and permanent disqualification from holding a real estate and business licence and triennial certificate.
In relation to breach of s 68(4) of the REBA Act, on numerous occasions Mr Parrella withdrew large sums from trust accounts without authorisation. The public must be protected from those who do not deal with trust monies in an appropriate manner. The repetitive and calculated way the unauthorised withdrawals were made also calls for cancellation of, and permanent disqualification from holding, a real estate and business licence and triennial certificate.
In relation to the breach of s 68(6)(a) of the REBA Act, this breach was also sufficiently serious to warrant cancellation of, and permanent disqualification from holding, the real estate and business licence and triennial certificate. Mr Parrella not only failed to properly record all transactions relating to the trust funds, he deliberately falsified accounts in an attempt to cover up his wrongdoing. His unauthorised dealings with the trust accounts resulted in a large deficiency in those accounts.
The imposition of a fine in addition to permanent disqualification, in the circumstances of this case, is not called for. The permanent disqualification is sufficient to maintain professional standards and protect the public. The imposition of an additional fine would in the circumstances be unnecessarily punitive.
Orders
For the reasons given above, the Tribunal is of the view that this is not an appropriate case for the imposition of a fine in addition to the cancellation and permanent disqualification from holding a license and triennial certificate.
Consequently, the Tribunal orders:
1. The application of the applicant is allowed.
2.The Tribunal finds:
(a)There is proper cause for disciplinary action against Carmello Charles Parrella pursuant to s 103(2)(c) of the Real Estate Business Agents Act 1978 (WA) in that he acted in breach of s 68(4) and s 68(6)(a).
(b)Pursuant to s 103(2)(d) of the Real Estate Business Agents Act 1978 (WA), Carmello Charles Parrella is unfit to hold a real estate and business licence.
3. Real Estate and Business Licence No 4400 and Triennial Certificate No 4400 of Carmello Charles Parrella are cancelled.
4. Carmello Charles Parrella is permanently disqualified from holding a Real Estate and Business Licence or Triennial Certificate.
5. Carmello Charles Parrella is to pay the Board’s costs fixed in the sum of $1,000.
I certify that this and the preceding [46] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE M L BARKER, PRESIDENT
3
3
1