Travel Action Pty Limited v Director General, Department of Fair Trading

[2002] NSWADT 241

CITATION:	Travel Action Pty Limited -v- Director General, Department of Fair Trading [2002] NSWADT 241
DIVISION:	General Division
PARTIES:	APPLICANT Travel Action Pty Limited RESPONDENT Director General, Department of Fair Trading
FILE NUMBER:	023100
HEARING DATES:	04/06/2002
SUBMISSIONS CLOSED:	06/04/2002
DATE OF DECISION:	11/20/2002
BEFORE:	Hennessy N - Magistrate (Deputy President)
APPLICATION:	Fair Trading Act 1987 - Travel Agent - suspension of licence - Travel Agent - suspension of licence
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Fair Trading Act 1987 Travel Agents Act 1986
CASES CITED:	George -v- Rockett and Anor ((1990) 170 CLR 104
REPRESENTATION:	APPLICANT R Frugtniet, agent RESPONDENT A Wilson, solicitor
ORDERS:	The decision of the Director General to suspend the applicant's travel agent's licence is set aside.

1 This is a review of a decision made by the Director-General, Department of Fair Trading, (the Director-General) to suspend the travel agent’s licence of Travel Action Pty Limited (Travel Action) for 60 days. That decision was made on 10 May 2002.

2 On 13 May 2002, Travel Action applied to the Tribunal for a review of the Director-General's decision. On the same day, Travel Action applied for an urgent stay of the decision. On 17 May 2002, the Tribunal granted a stay pending the hearing of the matter on 4 June 2002.

3 On 5 June 2002, after hearing the matter, the Tribunal set aside the Director General’s decision. The parties were advised that the reasons for the decision would follow in due course.

Jurisdiction

4 The Tribunal has power to review the decision to suspend the licence under s 64A(8) of the Fair Trading Act 1987 (FT Act) and s 38 of the Administrative Decisions Tribunal Act 1997 (ADT Act). Section 63 of the ADT Act sets out the duties and powers of the Tribunal when reviewing a reviewable decision.

Legislative provisions

5 The Director General made the decision to suspend Travel Action’s licence under s 64A(2) of the FT Act. That sub-section states that:

(2) If the Director-General is of the opinion that there are reasonable grounds to believe that:
(a) a licensee has engaged in conduct that, under legislation administered by the Minister, constitutes grounds for suspension or cancellation of the licence, and
(b) it is likely that the licensee will continue to engage in that conduct, and
(c) there is a danger that a person or persons may suffer significant harm, or significant loss or damage, as a result of that conduct unless action is taken urgently,
the Director-General may, by notice served on the licensee, suspend the licence for a period of not more than 60 days specified in the notice, commencing on service of the notice.

6 When introducing s 64A into parliament the Hon Mr Watkins, then Minister for Fair Trading, noted that the purpose of s 64A(2) is to give the Director General the ability to "act swiftly" to suspend licences in order to protect the public from "unscrupulous and dishonest" traders. During the period of suspension, further long term action can be taken through "show cause" procedures. The Minister noted that show cause actions "can be cumbersome and may take many months to finalise." Consequently, further suspension orders not exceeding 60 days can be made.

Issues

7 Based on the requirements set out in s 64A(2) of the FT Act, the issues in this case are whether the Tribunal is of the opinion that there are reasonable grounds to believe that:

· Travel Action has engaged in conduct that, under legislation administered by the Minister, constitutes grounds for suspension or cancellation of their licences;
· Travel Action is likely to continue to engage in that conduct; and
· there is a danger that a person or persons may suffer significant harm, or significant loss or damage, as a result of that conduct unless action is taken urgently.

8 In Part A of the Statement of Reasons, the Director General outlined certain conduct of Travel Action which, in their submission, constituted grounds for suspension or cancellation of the licence under the Travel Agents Act 1986 (TA Act). These grounds are summarised below.

9 Insufficient financial resources. The Director General submitted that under s 20(1)(e) of the TA Act, Travel Action does not have, or is not likely to continue to have, sufficient financial resources to enable it to continue to carry on business as a travel agent. Section 20(1)(e) states that:

Where, at any time, the Director-General is of the opinion that there are reasonable grounds for believing that:
(e) a licensee does not have, or is not likely to continue to have, sufficient financial resources to enable the licensee to continue to carry on business as a travel agent,
the Director-General may, by notice in writing served on the licensee, call upon the licensee to show cause, within such period, being not less than 14 days, as is specified in the notice, why the licensee should not, for such of the reasons referred to in paragraphs (a)–(l) as are specified in the notice, be dealt with in accordance with section 21 (1).

10 The conduct in relation to financial resources was alleged to be that on 22 February 2002, Sascha Frugtniet, the sole director of Travel Action, advised the Travel Compensation Fund that he would transfer $10,000 from his savings into Travel Action’s bank account. On 20 February 2002, the balance of the corporate account was $21.78. Between 21 and 25 February 2002, $11,300 was banked into this account including $5,000 from Tanja Frugtniet (Sascha Frugtniet’s sister) described as a personal loan and $1,800 banked by “B Frugtniet.”

11 The Department’s inquiries reveal that on 28 February 2002, Sascha Frugtniet opened a St George Bank account styled Travel Action Pty Ltd, T/a Travel Action (‘business account’). The first deposit into the business account was $10,000 transferred from the personal account on 28 February 2002. According to the Director General, the $10,000 banked into Travel Action’s account on 28 February 2002 was not savings of Sascha Frugtniet.

12 The balance in Travel Action’s account as at the date of hearing was approximately $11,000.00. The Director General believed that some of this money had been loaned to Sascha Frugtniet by his sister. Mr Frugtniet's explanation is that this money was the repayment of money that he had loaned to his sister.

13 In the absence of any independent expert evidence from an officer at the bank, or some other relevant witness, I accept Mr Sasha Frugtniet’s evidence that the $5,000 was the repayment of a loan to his sister. Brian Frugtniet denied that he had deposited funds into Travel Action’s account in February 2002 under the name “B Frugtniet.” Again, in the absence of any contrary evidence, I find that Brian Frugtniet did not deposit those funds.

14 The basis for the “reasonable grounds to believe” in s 64A(2) does not have to be satisfaction on the balance of probabilities. Some things may be left to "surmise or conjecture". (George v Rockett and Anor ((1990) 170 CLR 104 at 116 Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.)

15 On the basis of all the evidence I am not of the opinion that there are reasonable grounds to believe that Travel Action does not have, or is not likely to continue to have, sufficient financial resources to enable it to continue to carry on business as a travel agent. Although Travel Action has a relatively small amount of cash on hand in bank accounts, their overheads are not great and they have other assets. There are also some potential liabilities, but I am satisfied that, as at the date of the hearing, Travel Action had and was likely to continue to have, sufficient financial resources to continue to carry on business as a travel agent. Consequently, the first limb of s 64A(2) has not been made out for this ground.

16 Fit and proper person. Pursuant to s 20(1)(i) of the FT Act, the Director General submitted that “a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates is not a fit and proper person to be so involved.”

17 The alleged conduct on which the Director General relied to support this ground was, in part, that Suzanne Frugtniet and Brian Frugtniet, Sascha Frugtniet’s parents, are involved in the direction, management and day to day control of the business. Mr Sasha Frugtniet conceded that Brian and Suzanne Frugtniet were involved in the conduct of the business, even though they both denied this in their affidavits. Since Mr Sascha Frugtniet conceded that point, there is no need to recite the evidence in relation to it.

18 The only remaining issue is whether the Tribunal is of the opinion that there are reasonable grounds to believe that either Suzanne or Brian Frugtniet is not a fit and proper person to be involved in the business.

19 According to the Director General a criminal record search shows that:

On 11 June 1997, Suzanne Frugtniet was convicted of two counts of obtaining benefit by deception and two counts of attempt to obtain benefit by deception. The convictions were upheld on appeal on 27 August 1999 and she was placed on a three year recognisance with a $3000 bond and ordered to pay $2,192 in compensation;
On 27 January 1995, Brian Frugtniet was convicted of five counts of make false instrument and five counts of ue false instrument and given a custodial sentence of 12 months.

20 In her affidavit of 3 June 2002, Suzanne Frugtniet provided an explanation of the circumstances surrounding her conviction.

21 The Director General filed statements from S. Mignacca, S. Collins and J. Anderson as well as a letter from Renuka Ranasinghe. The Director General was originally alerted to investigate Travel Action through correspondence from the Travel Compensation Fund. As part of his affidavit, S Mignacca attached a letter from Tony Whittaker of the TCF dated 16 May 2002. That letter set out the claims paid by the Travel Compensation Fund for participants in the fund managed, or associated with, Brian and Suzanne Frugtniet. The letter stated in part, that:

Brian and Suzanne Frugtniet were the directors of Travel Trend International Pty Limited (TTI), which was under investigation by the Fund. It surrendered its membership of the Fund in order to prevent the Fund examining its accounting records, because according to Mr Brian Frugtniet he carried out “sensitive” activities for the Government of Sri Lanka which were put through the company and he did not wish the TCF to examine the company’s records.
The Sydney based business of TTI was sold to Denhall Pty Limited trading as Travel Trend International (Sydney) in December 1990 and suffered a financial collapse in December 1991 resulting in claims on the Fund totalling $73,421. When the police served a search warrant on 5 December 1991 at the company’s premises Mrs S Frugtniet claimed to Detective Tony Cook of the NSW Police Service that she was a director of the company.

22 The letter contains opinion evidence and hearsay. It is not reliable enough for me to take into account in determining the fitness or propriety of Mr and Mrs Frugtniet. Brian Frugtniet provided his version of these events in his affidavit. That version contradicted the particulars in the letter in several relevant respects.

23 Ms Siobhan Collins provided a statement dated 23 May 2002 and gave oral evidence. Ms Collins commenced working with Travel Action on 20 March 2002. She was interviewed by Suzanne and Sasha Frugtniet. She said that Suzanne and Brian Frugtniet were at the premises almost every day that she worked there whereas Sasha was not there as often as his parents. She left on a Saturday after telling Brian and Suzanne Frugtniet that she was not being paid enough.

24 Ms Collins said when she first started working at Travel Action, Brian Frugtniet asked her if she could obtain references from previous employers but did not tell her the purpose of obtaining the references. In particular, Brian Frugtniet asked her if she could telephone the Kerry Airport in Ireland and ask them if they could add six months to her employment period. Ms Collins then realised that Mr Brian Frugtniet was intending to put her name down as manager of the agency. Ms Collins was not happy with this proposal and told Mr Brain Frugtniet that she was not qualified to act as a manager because of the length and nature of her experience. Ms Collins agreed that the contents of the letter of 19 March 2002 were true.

25 Ms Collins commenced working in another travel agency in April 2002. She admits that she did not tell Sasha Frugtniet that she was leaving and did not submit any formal letter of resignation. On 20 May 2002 Ms Collins had a telephone conversation with Mr Sasha Frugtniet. In that conversation Mr Frugtniet allegedly asked her to tell officers of the Department of Fair Trading that she had only informed him that she had left Travel Action a couple of days previously. Ms Collins says that she told him that she was not prepared to lie and that he knew perfectly well that she had not been working there since at least 2 April 2002.

26 Ms Collins admitted that she had received several messages from Sasha Frugtniet but had not returned any of his calls.

27 Mr Mignacca agreed that the Department of Fair Trading has not taken any formal action under any legislation administered by the Minister against either Brian or Suzanne Frugtniet. Mr Mignacca also agreed that there had been no complaints from consumers in relation to Travel Action in the few months that they had been trading.

28 The only evidence provided by Ms Collins which is directly relevant to the fitness and propriety question is her allegation that Brian Frugtniet asked her to request that her former employer add six months to her employment period. Mr Brian Frugtniet prepared an affidavit dated 3 June 2002 in which he said “I categorically deny asking Ms Collins to increase her experience by 7 months . . .”

29 I am not satisfied on the basis of this evidence alone, that Mr Brian Frugtniet is not a fit and proper person to be involved in the direction, management or conduct of the business. However, on the basis of the criminal convictions, I am satisfied that there are “reasonable grounds to believe” that Suzanne and Brian Frugtniet are not fit and proper persons to be involved in the direction, management or conduct of the business. These convictions are directly related to the activities conducted by travel agencies. In the case of Brian Frugtniet the conviction is particularly serious.

30 As the first limb of s 64A(2) has been made out, I must go on to determine whether Travel Action is likely to continue to engage in that conduct. There was no suggestion that Mr Brian Fugtniet, or Ms Suzanne Frugtniet intended removing themselves completely from the direction, management or conduct of the business, so the second requirement in s 64A(2) is made out.

31 The third limb of s 64A(2) is that “there is a danger that a person or persons may suffer significant harm, or significant loss or damage, as a result of that conduct unless action is taken urgently." According to The Macquarie Dictionary (3rd edition, The Macquarie Library, 1997) “danger” means “liability or exposure to harm or injury.” “Risk” has a similar, though slightly less extreme meaning, namely “exposure to the chance of injury or loss.” In my view, the word “danger” was used as opposed to the word “risk” because the legislature wished to convey its intention that there be more than a mere chance of harm, loss or injury occurring.

32 The second aspect of the test in s 64A(3) is that a person may suffer significant harm, loss or damage as a result of the likelihood that the licensee will continue to engage in certain conduct.

33 The third aspect of s 64A(3) is that the danger of significant harm, loss or damage can only be avoided if action is taken urgently.

34 Given this analysis, the Tribunal must look at the evidence on which the need for urgent action is based. The respondent alleged that “Travel agencies previously operated by Suzanne and Brian Frugtniet have collapsed and the current state of the business strongly suggests that it is also in danger of collapsing.” I have found that that there is no reasonable ground for believing that Travel Action does not have, or is not likely to continue to have, sufficient financial resources to continue to carry on business as a travel agent. Consequently, the business must be in danger of collapsing in some other sense. Apart from the letter from Tony Whittaker of the TCF dated 16 May 2002, which I have found to be not sufficiently reliable to make findings in accordance with its contents, there is no evidence of how Travel Action is in danger of collapsing. In the absence of such evidence, there are no reasonable grounds to believe that there is a danger persons may suffer significant harm or loss as a result of the conduct unless urgent action is taken. This conclusion means that the third requirement in s 64A(2) has not been made out and the Director General’s decision must be set aside.