REED and REAL ESTATE AND BUSINESS AGENTS' SUPERVISORY BOARD - [2010] WASAT 134

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: VOCATIONAL REGULATION

ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)

CITATION: REED and REAL ESTATE AND BUSINESS AGENTS' SUPERVISORY BOARD [2010] WASAT 134

MEMBER: MR C RAYMOND (SENIOR MEMBER)
MR J MAZZINI (SENIOR SESSIONAL MEMBER)
MR D LIMNIOS (SESSIONAL MEMBER)

HEARD: 23 APRIL 2010

DELIVERED : 24 SEPTEMBER 2010

FILE NO/S: VR 37 of 2010

BETWEEN: JEREMY JAMES REED
Applicant
AND
REAL ESTATE AND BUSINESS AGENTS' SUPERVISORY BOARD
Respondent

Catchwords:

Real Estate and Business Agents Act 1978 (WA) - Whether applicant a fit and proper person to hold a licence - Review of decision refusing application for a renewal of triennial certificate in respect of real estate agents licence - Failure to have trust accounts audited for years ending 2004 to 2008 - Audits completed during adjourned hearing before original decisionmaker - Qualified audit report issued

Legislation:

Real Estate and Business Agents Act 1978 (WA), s 23(1), s 27(1)(b), s 27(1)(d), s 31(3), s 68, s 68(1), s 68(2), s 68(6), s 69, s 70, s 70(3), s 134(3)
State Administrative Tribunal Act 2004 (WA), s 27, s 87(1)

Result:

Decision under review affirmed

Category: B

Representation:

Counsel:

Applicant: In Person
Respondent: Ms M Buckley

Solicitors:

Applicant: N/A
Respondent: N/A

Case(s) referred to in decision(s):

Hughes & Vale Pty Ltd v New South Wales (2) (1955) 93 CLR 127

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant applied pursuant to s 23(1) of the Real Estate and Business Agents' Act 1978 (WA) for a review of a decision by the Real Estate and Business Agents' Supervisory Board to refuse to renew his triennial certificate relating to his licence as a real estate agent.
The issues raised by the application were whether the applicant remained a fit and proper person and whether or not the applicant understood fully the duties and obligations imposed on real estate agents under the legislation.
The evidence established that the applicant had failed to properly keep and maintain his trust account, and had failed to have it audited and to submit an audit report to the Board for each of the years ending 31 December 2004 to 31 December 2008. The Tribunal found that this was due to poor time management and a failure on the part of the applicant to prioritise work. Although the applicant had operated as sole proprietor in a real estate business and had endeavoured to do everything himself without any assistance, the business was not thriving and he should have had no difficulty in properly attending to what was required. On that basis, the Tribunal found that the applicant lacked the ability necessary to properly conduct the business of a real estate agent and for that reason, concluded that he was not a fit and proper person to be so licensed.
The evidence also established that the applicant had attended training courses covering reconciliation of trust accounts, risk management, promoting a culture of compliance and the law relating to real estate and had also lectured in relation to the management of real estate businesses. Based on that evidence and the applicant's professed knowledge of his obligations under the legislation, the Tribunal did not accept submissions on behalf of the Board that the applicant did not fully understand his duties and obligations.
The decision under review was therefore affirmed. The parties were afforded a limited opportunity to make an application for costs if so advised.

Introduction

The applicant applies to the Tribunal under s 23(1) of the Real Estate and Business Agents' Act 1978 (WA) (REBA Act) for the review of a decision made by the Real Estate and Business Agents Supervisory Board (Board) on 8 February 2010 refusing to renew the applicant's triennial certificate in respect of his real estate agents' licence.

The issues for determination:

1)Whether the applicant is a person of good character and repute and a fit and proper person to hold a licence.
2)Whether the applicant understands fully the duty and obligations imposed by the REBA Act on agents as required by s 27(1)(d).

It is common cause that all other grounds upon which the Board might refuse to renew a licensee's triennial certificate have been met by the applicant.

The factual and statutory matrix

Unless otherwise expressly stated all references to legislative provisions are references to the REBA Act. Further, unless expressly stated to the contrary, none of the facts set out below are in dispute.
Section 31(3) provides that the Board may refuse to renew a licensee's triennial certificate if various statutory conditions no longer apply to the licensee, or if the licensee has not met prescribed educational requirements.
There are only two statutory conditions which are relevant to any decision to refuse to renew the applicant's triennial certificate. The first is as expressed in s 27(1)(b) which is that an applicant be a person of good character and repute and a fit and proper person to hold a licence. The second is expressed in s 27(1)(d) which is a requirement that an applicant understands fully the duties and obligations imposed by the REBA Act on agents.
Section 68 prescribes requirements for the maintenance and operation of trust accounts.
Section 68(1) provides that every agent who holds a current triennial certificate shall maintain one or more trust accounts, designated or evidenced as such, in the prescribed manner, with an authorised financial institution and shall as soon as practicable pay to the creditor of that account or those accounts all monies received by him for, or on behalf of, any other person in respect of the transactions.
By s 68(2), monies paid into any trust account shall not be available for the payment of the debt of any other creditor of the agent.
Section 68(6) provides:
An agent shall -
(a)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;
(b)before the end of the next business day after the day on which the money is received or paid, enter in the accounts particulars of the amount so received or paid and the person from whom it was so received or to whom it was so paid;
(c)keep the accounts in such manner that they can be conveniently and properly audited; and
(d)correctly balance the accounts at the end of each month.
Section 69 requires an agent to immediately give receipts for any monies received for or on behalf of any other person and to keep a record of the money received. That record must be produced to the auditor at every audit and at such other times as the auditor may reasonably require.
Section 70 requires an agent who holds a triennial certificate during the whole or any part of a year to cause his trust accounts for that year, or part of the year, as the case may be, to be audited by an auditor duly qualified or approved under that Part. Subsection (3) requires that the auditor shall, within three months after the end of each year, deliver to the Board a report of the result of the audit and deliver a copy to the agent.
The applicant's licensing history is set out in a certificate issued by the Registrar of the Board pursuant to s 134(3) and dated 23 March 2010. The certificate reflects that the applicant was first granted a real estate sales representative certificate on 18 April 1995 which expired on 18 April 2000. On 17 March 2000, the applicant was granted a real estate and business agent's licence and a triennial certificate. The triennial certificate expired on 16 March 2003 but has been renewed twice, in 2003 and 2006.
The last audit of his trust account was submitted by the applicant for the year ending 31 December 2003. At the time of the application being made for renewal of the triennial certificate, in June 2009, the applicant had failed to submit audits of his trust account for the years ending 31 December 2004, 2005, 2006 and 2007. That remained the situation as at the date of the first day of the hearing before the Board on 14 October 2009. At the conclusion of the first day of hearing which addressed all matters in issue, the Board outlined to the applicant that without the audits having been carried out, the Board did not know whether there was dishonesty involved and in the circumstances indicated that it would adjourn the hearing to enable the audits to be completed. The hearing was adjourned to 9 December 2009. On the day immediately prior to the hearing, 8 December 2009, the applicant submitted an audit report in respect of the above outstanding years and also the year ending 31 December 2008.
The audit report reflected:
(a)The trust account has not been regularly kept and properly written up although full payment and receipt records have been recently prepared for all years under review;
(b)The trust account was not ready for examination at the periods appointed by me;
(c)The agent has complied with all my requirements as auditor within the limitations described here-in;
(d)The trust account is not and has not been in order during the years of the audit;
(e)The following matters in relation to the trust account should, in my opinion, be communicated to the Board:
1Regular bank reconciliations have not been carried out
2Trust ledgers have not been kept. As a result there has been no regular balancing of client amounts in the trust account
3Disbursement of trust monies has in many instances been dealt with via agent's general account
The material which was before the Board and the transcript of the hearing on 14 October 2009 reflects the following.
An inspector of the Board, Mr James Medcraft, first contacted the applicant about the failure to provide audit reports on 4 November 2008. Thereafter, several attempts were made by Mr Medcraft and another Board inspector, Mr Rose, to meet with the applicant so that he could explain his failure to have his trust account audited in respect of the years ending 31 December 2004 to 2007, inclusive.
By an email dated 14 November 2008, the applicant advised the inspector that his business, Reed Real Estate, had been virtually dormant for the past 18 months and that he was still in the process of locating his records. Somewhat inconsistently with that advice, he also indicated that he was drawing up the 2004 to 2007 account records and expected to complete that task by the end of that month, November 2008. He stated that the audit process was started in 2005, but the auditor had retired and, regrettably, he had not finalised a replacement. He was 'currently negotiating with an auditor to commence work in finalising my accounts'.
The inspector responded by telephone on 20 November 2008 and persisted in arranging a meeting with the applicant on 26 November 2008. There is no record of what occurred, but that meeting evidently did not take place.
The next record is of email communications between the inspector and the applicant in which the applicant indicated that he would not be able to keep a meeting arranged for 19 December 2008 as he had had to change his roster. The applicant was then and remains employed as a security guard by a mining company situated in the Pilbara.
Several further attempts were made to meet with the applicant. By letter dated 14 January 2009, the inspector proposed a meeting on 27 January 2009 at 11 am which was a date and time nominated by the applicant when he would be available. An email dated 23 January 2009 from the applicant reflects that the applicant could not attend this meeting arranged for 27 January 2009 and gave as the main reason that he had not been able to complete the monthly trust account reconciliations 'as I am having difficulty compiling all of the info for 2004 and 2005'. The applicant further stated that the inspector should be assured that:
I am taking all necessary steps to correct the oversight regarding preparation of the annual audit reports, however, you must realise that for the past two months I have been working on a fly in, fly out position, two weeks on, one week off, which has created huge time management problems for me.
At this time, I expect to have the accounts ready by late February and suggest a meeting 9 March in your offices.
On 27 March 2009, the records reflect that a financial compliance officer of the Board, Mr Healy, sent an email to the applicant recording that he had failed to attend the scheduled record of interview on 9 March 2009. The applicant was asked whether he wished to take the opportunity to reschedule an alternative time, bearing in mind that he was not under any obligation to do so.
The compliance officer also asked to be advised whether it was the applicant's intention to cause an annual audit for the year ending 2008 to be carried out and if so, to advise who his current auditor then was. There is no record of any response to that email.
The evidence before the Board reflects various explanations for the applicant's failure to have his trust account audited and a report submitted in respect of the years ending 31 December 2004 to 2007, inclusive, as reflected in the following extracts.
It's an absolute oversight on my behalf, and a lack of professional attention to the detail of requiring those things to be done. Whilst it's no excuse, I would like to add that at no time, until Ken Rose contacted me, at no time did anybody from REBA submit any requests for the audits to be done. Now that I realise is not an excuse, but I do feel if that had been the case, I would have been moving a lot sooner to get these done. [Applicant's Book of Documents (ABOD) p 59).]
And you knew that you had to get your trust account audited every year, didn't you? --- I did know that. Yes.
Why didn't you attend to auditing the trust account after you had Mr Warren (an auditor) involved in 2006? --- I can only say that I was - - I didn't treat it seriously enough at the time, and partly because I wasn't being pressured by him and also REBA, as well, with respect, and that was my busy year, and that was the time at which I should have been going backwards and getting all those records up to scratch, and I should have got Mr Warren back in a lot --- well, I should have got him back in. (ABOD p64.)
Why is it that you didn't do monthly bank reconciliations by the 10th business day of the following month? --- A lack of - - lack of knowledge that I have to do it, albeit there's plenty of information to tell me I have to do it. But also I think again the fact that I was completely solo, I didn't have somebody looking over my shoulder, a partner, a friend, a - - a well, a - - there's was for this part of the business obviously. And I did not attend to those matters. I was very active in trying to make sure that my business was up and running, which it got up and running.
... How is it that you didn't have any trust ledgers? If you don't have trust ledgers, how do you possibly know what the balance should be for each respective landlord? --- Well, as he points out, I didn't maintain an individual trust ledger for each client.
Why not? --- But - - well, again it was ignorance. There's no other word for it, Mr Goddard, but I had sufficiently small business - - I was probably doing less than one property sale transaction a month, on average, so when you have the 15, $20,000 deposit or whatever it might be, it's not very hard to know that that is there, obviously, and once it's - - once the property settles, it's gone out, you'd know you've done it, you know there's no residuals, there's no short of minor amounts. (ABOD p 92.)
During the course of the hearing, the applicant conceded that he had lectured at TAFE. The following exchange occurred:
Surely if you lecture, you would realise the seriousness of this, not lodging your audits? --- There's no question that I realise how serious - -
But surely you should have done something about it? --- I should have done something, and I have no - - I'm not going to offer any silly excuses. I don't have a tangible excuse, other than I just didn't attend to things when I should have done.
Member Goddard: it is rather diabolical, Mr Reed, that I see here that you lectured at TAFE on a subject called Managing a Real Estate Business? --- Yes, I know.
The documentation also reflects that the applicant attended a compulsory professional development course on 8 May 2007 which dealt specifically with reconciliation of trust accounts. Further, on 17 June 2008, the applicant attended a TAFE course specifically addressing risk management, promoting a culture of compliance and the law relating to real estate.

The decision of the Board and the review

The Board noted that it was required to be satisfied that the applicant is a fit and proper person pursuant to s 27(1)(b) and that the applicant understands fully the duties imposed on agents by the REBA Act in accordance with s 27(1)(d). The conclusion was then stated that the Board 'is able to find the latter, but also finds that, while the applicant understands his obligations that he has refused to comply with those obligations. Put simply, the applicant well understands his obligations has not complied with them and indeed continues not to comply'.
Notwithstanding the Board's finding that the applicant understands fully the duties imposed on agents by the legislation, counsel representing the Board has argued for an adverse finding on that issue. It is open for the Board to adopt this position because under s 27 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) the review is by way of a hearing de novo and the purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review.
There was no additional evidence placed before the Tribunal which might significantly impact upon the decision. In essence, the same explanations were given by the applicant. In a similar vein, the applicant stressed that 'if the weight of the Board had been on top of me, I would have found a way to do it'.
The applicant challenged the Board's finding that he refused to comply with his obligations and we accept that this was something of an overstatement. It makes no difference, however, to the thrust of the Board's decision which was clearly based on a failure to keep the trust account properly, to have the account audited and to submit audit reports as required.
In our view, the Board was correct in its conclusion that the applicant understood his obligations under the REBA Act. He complied with those obligations in respect of the year ending 31 December 2003 and not only attended courses which would have touched upon those obligations but lectured on real estate management. The applicant acknowledged that he knew what he was supposed to have done.
In our view, a proper consideration of all the evidence, leads to the inevitable conclusion that the real problem relates to the applicant's poor time management and the inability to prioritise his responsibilities. The applicant's business was never a thriving one which is in itself part of the problem because the applicant endeavoured to do everything himself. There is no suggestion of any malfeasance or dishonesty. Ultimately, the auditor was able to report that although the trust account had not been regularly kept and properly written up, full payment and receipts records had been prepared, albeit recently, in respect of each of the audit years. But, it took an inordinate period of time for the audits to be completed - more than a year after the applicant was first contacted.
It is trite that the requirement to be 'fit and proper' gives the widest scope for judgment and indeed for rejection. Further, that to be 'fit' with respect to an office usually involves honesty, knowledge and ability: Hughes & Vale Pty Ltd v New South Wales (2) (1955) 93 CLR 127.

The applicant presented very well to the Tribunal. While he maintained explanations, which raise questions concerning his insight and appreciation of the seriousness of his conduct, we have no doubt that he has been scrupulously truthful in dealing with both the Board and the Tribunal. The applicant stated that in his five years during which he was licensed as a sales representative there had not been a single complaint against him and that was not challenged.
The decision to refuse to renew a licensee's triennial certificate must be based upon being satisfied that the various provisions referred to in s 31(3), which include s 27(1)(b) and (d), no longer apply. There is in our view, no evidence on which to doubt the applicant's honesty or knowledge to justify a conclusion that he is not a fit and proper person within the meaning of the legislation. However, the evidence overwhelmingly demonstrates that the applicant lacks the ability to properly manage the business of a real estate agent. The applicant has full knowledge of his responsibilities under the legislation but he simply could not find the time to do what was necessary to meet those obligations. If that failure had occurred in the context of a busy practice, the inquiry may have had to address different issues relating to the steps taken to employ adequately trained staff to assist in the administration of the business. But that is not the case and it is clear that the applicant had more than sufficient time available to him during the period in which he was actively engaged in the business and even later when he was not trading on a fulltime basis, but he was still not able to find the time to keep proper accounts, nor did the applicant properly apply himself to preparing the accounts so that they could be audited after the initial intervention by the Board in November 2008. It is on this third element necessary to meet the requirement of being fit and proper for the holding of a real estate licence that the applicant falls.
In his submissions, the applicant referred to various decisions of the Board either refusing or granting the renewal of triennial certificates. These cases are of little assistance to us. Each case turns on its own facts. In this instance we have found the applicant lacking in a capacity which is fundamental to the vocation of a real estate agent, and for that reason he is not a fit and proper person to be so licensed.

Conclusion

For the above reasons, we conclude that the decision under review should be affirmed on the basis that the applicant is not a fit and proper person to be licensed as a real estate agent.
We note that during the hearing, the applicant made it clear that he no longer wished to trade as the sole proprietor of a real estate business. While, as a result of the conclusion we have reached, he would be precluded from trading in partnership, it remains open to the applicant to apply for a sales representative licence which would enable him to remain in the industry to which he states he is keen to return on a fulltime basis. In time, if he is able to address and demonstrate improved time management and administration skills, he may be able to persuade the Board that he again meets the requirements necessary to be licensed as a real estate agent.
Finally, the issue of costs was not addressed. In the circumstances a limited period of time will be afforded for any application for costs to be made, if so advised, failing which the matter will be treated as having been concluded on the basis that pursuant to s 87(1) of the SAT Act, each party is to bear their own costs.

Order

The Tribunal will cause an order to issue as follows:
1.The decision under review is affirmed.
2.If a party wishes to make any application for costs:
(a)application must be made in writing to the Tribunal and given to the other party on or before 14 October 2010; and
(b)the application must:
(i)set out details of the services for which costs are claimed and the rate or rates at which costs have been charged for such services, in a manner sufficient to enable the Tribunal to fix costs, if awarded; and
(ii)be supported by an outline of written submissions addressing why costs should be awarded.
3.In the event that an application for costs is made pursuant to Order 2 above, a party opposing the application must on or before 28 October 2010 file and serve written submissions in support of such opposition.
4.Subject to further order, any costs application shall be determined on the documents.
5.Failing any application in compliance with Order 2, each party is to bear its own costs.

I certify that this and the preceding [44] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER