Watson v Director General, Department of Finance and Services

[2012] NSWADT 64

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:	Watson v Director General, Department of Finance and Services [2012] NSWADT 64
Hearing dates:	23 November 2011
Decision date:	16 April 2012
Jurisdiction:	General Division
Before:	S Montgomery, Judicial Member
Decision:	The decision under review is affirmed.
Catchwords:	real estate agent's and strata managing agent's licence - disqualified person
Legislation Cited:	Administrative Decisions Tribunal Act 1997 Property, Stock and Business Agents Act 2002
Cases Cited:	ACCC v Rural Press Ltd [2001] FCA 1065 ASIC v Adler (2002) NSWSC 483 ASIC v Healey [2011] FCA 717 Australian Broadcasting Tribunal v Bond [1990] HCA 33 DG Department of Transport v Z (No. 2) (GD) [2002] NSW ADTAP 37 Elliott v ASIC [2004] VSCA 54 Hughes & Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28; (1955) 93 CLR 127 Rich v ASIC [2004) HCA 42 Sawires v Commissioner of Police [2010) NSWADT 4 Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405 Trlin v Department of Fair Trading [1999] NSW ADT 72
Category:	Principal judgment
Parties:	Christine Watson (Applicant) Director General, Department of Finance and Services (Respondent)
Representation:	C Watson (Applicant in person) Department of Services, Technology and Administration (Respondent)
File Number(s):	103207

REasons for decision

1. GENERAL DIVISION (S MONTGOMERY, (JUDICIAL MEMBER)): The Applicant has been the holder of a real estate agent's and strata managing agent's licence under the Property, Stock and Business Agents Act 2002 ("the Act") since June 2005.

1. Between 8 June 2007 and 6 September 2008 the Applicant was a director of the Deeds Not Words Pty Ltd formerly known as Marquette Turner Corporation Pty Ltd ("the Corporation"). The Corporation traded as Marquette Turner Luxury Homes.

1. In August 2010 a delegate of the Director General, Department of Finance and Services ("the Respondent") determined to cancel the Applicant's licence under section 198 of the Act. She was declared a disqualified person and was disqualified from being involved in the direction, management and conduct of the business of a licensee for a period of 12 years.

1. The Applicant's business partners, Mr Michael Marquette and Mr Simon Turner, also had their licences cancelled and were disqualified for a period of 15 and 12 years respectively. The Corporation was disqualified on a permanent basis.

1. The determination against the Applicant was based on the finding that the Applicant had acted in breach of numerous provisions of the Act and the Property, Stock And Business Agents Regulation 2003 ("the Regulations").

1. In July 2011 a reconsideration of the matter by the Respondent under section 65 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") determined:

(1)In accordance with section 192(1)(g) the Applicant's real estate agent and strata managing agent's licence was cancelled;

(ii)In accordance with section 192(1)(h) the Applicant was declared a disqualified person for a period of eight years; and

(iii)In accordance with section 192(1)(i) the Applicant was disqualified from being involved in the direction, management or conduct of the business of a licensee for a period of eight years.

1. That determination is the subject of this application.

Applicable Law

1. The Act provides for the licensing, professional regulation and discipline of persons or companies carrying on business as a real estate agent and/or a certificate holder in N.S.W.

1. The legislation places express obligations on licensees and registered persons to act in the best interests of their clients. Under the Act and Regulations, agents are not only required to act lawfully, properly, fairly and competently, but must comply with their fiduciary obligations and must at all times act in the best interests of their client unless it would be unlawful to do so.

1. The Act requires all licensees and certificate holders to act in an honest, fair and competent manner where additional obligations are placed on a licensee in charge to properly supervise the particular real estate office for which they are responsible in order to ensure compliance with the Act and Regulations.

1. The following provisions are applicable to this matter.

The Act

1. Section 13 of the Act provides that the holder of a licence or certificate of registration must not let out, hire or lend the licence or certificate of registration to any other person or permit any other person to use the licence or certificate of registration.

1. Section 32 of the Act provides:

32 Duty of licensee and person in charge to properly supervise business

(1) A licensee must properly supervise the business carried on by the licensee.

(2) A licensee employed by another licensee (the principal licensee) as the person in charge of business at a place of business of the principal licensee must properly supervise the business of the principal licensee carried on at that place.

(3) The requirement to properly supervise the conduct of business includes the following requirements:

(a) a requirement to properly supervise employees engaged in the business,

(b) a requirement to establish procedures designed to ensure that the provisions of this Act and any other laws relevant to the conduct of that business are complied with,

(c) a requirement to monitor the conduct of business in a manner that will ensure as far as practicable that those procedures are complied with. ...

1. Section 37 of the Act provides:

37 Rules of conduct for licensee's business

(1) The regulations may prescribe rules of conduct to be observed in the course of the carrying on of business or the exercise of functions under a licence or certificate of registration.

(2) A licensee or registered person who without reasonable excuse contravenes a rule of conduct prescribed for the purposes of this section is guilty of an offence. ...

1. Section 86 of the Act provides:

86 Trust money to be paid into trust account

(1) Money received for or on behalf of any person by a licensee in connection with the licensee's business as a licensee:

(a) is to be held by the licensee or (if the licensee is employed by a corporation) by the corporation, exclusively for that person, and

(b) is to be paid to the person or disbursed as the person directs, and

(c) until so paid or disbursed is to be paid into and retained in a trust account (whether general or separate) at an authorised deposit-taking institution in New South Wales and approved by the Director-General for the purposes of this Part.

(2) If the licence is held by a corporation, the trust account is to be in the name of the corporation and in any other case is to be in the name of the licensee or of the firm of licensees of which the licensee is a member.

(3) The name of a trust account and the description of the trust account in the books and records of the licensee and also on all cheques drawn on the trust account:

(a) must include the name of the licensee corporation, licensee or firm of licensees in whose name the trust account is kept, and

(b) must include the words "Trust Account", and

(c) may include, at the end of the account's name, a name or other matter to identify the person on whose behalf money in the account is held.

(4) When opening a trust account at an authorised deposit-taking institution for the purpose of complying with this section, the licensee concerned must ensure that the authorised deposit-taking institution is notified in writing that the account is a trust account required by this Act.

(5) A licensee must, within 14 days after closing a trust account, notify the Director-General in writing of the closure. ...

1. Section 111 of the Act provides:

111 Requirement for audit

(1) A person who is a licensee, a former licensee or the personal representative of a licensee must, within 3 months after the end of the audit period applicable to the person:

(a) cause the records and documents relating to any money held during that period in a trust account kept by the person in accordance with this Act to be audited by a person qualified to act as an auditor for the purposes of this Division, and

(b) lodge the auditor's report on the audit with the Director-General.

(2) The Director-General may in a particular case or class of cases by order in writing extend the period of 3 months under subsection (1).

(3) The person must retain a copy of the auditor's report on the audit for a period of three years after the date on which the report was made.

(4) The auditor's report is to be in a form approved by the Director-General and is to be signed by the auditor.

1. Section 191 of the Act provides:

191 Grounds for disciplinary action

Disciplinary action under this Part can be taken against a person who is or was the holder of a licence or certificate of registration on any one or more of the following grounds:

(a) the person has contravened a provision of this Act or any other Act administered by the Minister, or the regulations under any such Act, whether or not the person has been prosecuted or convicted of an offence in respect of the contravention,

(b) the person has contravened a condition of the licence or certificate of registration,

(c) the person has, in the course of carrying on business or exercising functions under the licence or certificate of registration, acted unlawfully, improperly, unfairly or incompetently,

(d) the person is a disqualified person or is otherwise not eligible under section 14 to hold a licence or certificate of registration,

(e) the person is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee,

(f) the person has failed to pay any part of a contribution or levy that is due and payable under Part 10 (Compensation Fund),

(g) the person has breached an undertaking given by the person to the Director-General under this Act or the Fair Trading Act 1987, in respect of the person's conduct of business or exercise of functions under the licence or certificate of registration,

(h) the person has failed to comply with a direction given to the person by the Director-General pursuant to the taking of disciplinary action under this Part,

(i) the person has failed to pay a monetary penalty imposed on the person by the Director-General pursuant to the taking of disciplinary action under this Part,

(j) the issue of the person's licence or certificate of registration was obtained by fraud or mistake,

grounds specified in the regulations as grounds for the taking of disciplinary action against a person under this Act.

1. Section 192 of the Act provides:

192 Disciplinary action

(1) Each of the following actions is disciplinary action that the Director-General can take against a person under this Act:

(a) caution or reprimand the person,

(b) give a direction to the person requiring the person to give a specified undertaking to the Director-General as to the manner in which the person will conduct business or exercise functions under a licence or certificate of registration held by the person,

(c) give a direction to the person requiring the person to take specified action within a specified time in connection with the conduct of business or the exercise of functions under a licence or certificate of registration,

(d) impose a monetary penalty on the person of an amount not exceeding 100 penalty units in the case of an individual or 200 penalty units in the case of a corporation,

(e) impose a condition on the person's licence or certificate of registration,

(f) suspend the person's licence or certificate of registration for a period that does not exceed the unexpired term of the licence or certificate of registration,

(g) cancel the person's licence or certificate of registration,

(h) declare the person to be a disqualified person for the purposes of this Act, either permanently or for a specified period,

(i) disqualify the person from being involved in the direction, management or conduct of the business of a licensee. ...

1. Section 198 of the Act provides:

198 Taking of disciplinary action

(1) If the Director-General is satisfied that there are grounds for taking disciplinary action under this Act against a person on whom a show cause notice has been served, the Director-General may by order in writing served on the person take such disciplinary action against the person as the Director-General thinks is warranted.

(2) The order must include a statement of the reasons for the Director-General's decision on the matter.

1. Section 200 of the Act provides:

200 Review of disciplinary action by ADT

A person against whom disciplinary action is taken by the Director-General may apply to the Administrative Decisions Tribunal under the Administrative Decisions Tribunal Act 1997 for a review of the Director-General's decision on the disciplinary action or on a review of the disciplinary action.

1. Section 211 of the Act provides:

211 Fraudulent conversion and false accounts of money received by licensee or registered person

(1) This section applies to:

(a) any money received by a licensee or registered person on behalf of any person in respect of any transaction in the licensee's or registered person's capacity as a licensee or registered person, or any part of any such money, and

(b) any money so received that is held by the licensee or registered person as a stakeholder or in trust pending the completion of any transaction.

(2) If the licensee or registered person fraudulently converts the money or any part of that money to his or her own use or to the use of any other person, the licensee or registered person is guilty of an indictable offence and liable to imprisonment for a term of not more than 10 years.

(3) If the licensee or registered person fraudulently omits to account for, deliver or pay the money or any part of the money to the person from whom it was received or to the person or persons entitled to it, the licensee or registered person is guilty of an indictable offence and liable to imprisonment for a term of not more than 10 years.

(4) If the licensee or registered person fraudulently renders an account of the money or any part of the money knowing the account to be false in any material particular, the licensee or registered person is guilty of an indictable offence and liable to imprisonment for a term of not more than 10 years.

(5) On the prosecution of a person for an offence under this section it is not necessary to prove the fraudulent conversion by the accused of any specific sum of money if there is proof of a general deficiency on the examination of the books of account, or entries kept, or made by the accused, or otherwise, and the jury are satisfied that the accused fraudulently converted the deficient money or any part of it.

1. Section 213 of the Act provides:

213 Offences by persons other than principal offenders

A person who:

(a) aids, abets, counsels or procures a person to contravene, or

(b) induces, or attempts to induce, a person, whether by threats or promises or otherwise, to contravene, or

(c) is in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of, or

(d) conspires with others to contravene,

a provision of this Act or the regulations is guilty of an offence against this Act or the regulations and liable to the same penalty as a person who contravenes the provision.

1. Section 218 of the Act provides:

218 Offences by corporations

(1) If a corporation contravenes, whether by act or omission, any provision of this Act or the regulations, each director of the corporation, and each person concerned in the management of the corporation, is taken to have contravened the same provision unless the director or person satisfies the court that:

(a) he or she was not in a position to influence the conduct of the corporation in relation to its contravention of the provision, or

(b) he or she, being in such a position, used all due diligence to prevent the contravention by the corporation.

(1A) Subsection (1) does not apply in respect of a contravention of section 90 (1), 91 (1), (2) or (3), 92, 93, 94, 110 (3) or 119 (1).

(2) A person may be proceeded against and convicted under a provision pursuant to subsection (1) whether or not the corporation has been proceeded against or been convicted under that provision.

(3) Nothing in subsection (1) prejudices or affects any liability imposed by a provision of this Act or the regulations on any corporation by which an offence against the provision is actually committed.

The Regulations

1. Clause 11 of the Regulations relevantly provides:

11 Rules of conduct

(1) The rules set out in Schedules 1-6A are prescribed for the purposes of section 37 of the Act as rules of conduct to be observed in the course of the carrying on of business or the exercise of functions under a licence or certificate of registration, with those Schedules applying as follows:

(a) Schedule 1 applies to all licensees and registered persons (in addition to any other Schedule or Schedules that may be applicable to particular kinds of licensees or registered persons),

(b) Schedule 2, Part 1, applies to real estate agents and registered persons they employ and Schedule 2, Part 2, applies to real estate agents, registered persons they employ and on-site residential property managers,

(c) Schedule 3 applies to stock and station agents and registered persons they employ,

(d) Schedule 4 applies to business agents and registered persons they employ,

(e) Schedule 5 applies to buyers' agents and registered persons they employ,

(f) Schedule 6 applies to strata managing agents, community managing agents, on-site residential property managers and real estate agents engaged in property management, and registered persons they employ,

(g) Schedule 6A applies to real estate agents engaged in property management and on-site residential property managers, and registered persons they employ.

(2) In each of Schedules 1-6A, a reference to an agent includes a reference to a registered person to whom the Schedule applies.

(3) In Schedule 4, a reference to a business includes a reference to a professional practice. ...

1. Schedule 1 to the Regulations relevantly provides:

Schedule 1 General rules of conduct applying to all licensees and registered persons

...

1 Knowledge of Act and regulations

An agent must have a knowledge and understanding of the Act and the regulations under the Act, and such other laws relevant to the category of licence or certificate of registration held (including, laws relating to residential tenancy, fair trading, trade practices, anti-discrimination and privacy) as may be necessary to enable the agent to exercise his or her functions as agent lawfully.

2 Fiduciary obligations

An agent must comply with the fiduciary obligations arising as an agent.

3 Honesty, fairness and professionalism

(1) An agent must act honestly, fairly and professionally with all parties in a transaction.

(2) An agent must not mislead or deceive any parties in negotiations or a transaction.

4 Skill, care and diligence

An agent must exercise reasonable skill, care and diligence. ...

Material before the Tribunal

1. The parties have agreed that the matter should generally proceed on the basis of the material filed, including agreed facts, without the need for cross-examination of most witnesses.

1. Both parties rely on an Agreed Statement Of Facts that is dated 11 October 2011 that was prepared by the Respondent.

1. As required by section 58 of the ADT Act, the Respondent has lodged all relevant material in its possession. In addition to the Departmental file, the Respondent also relies on a letter of the U.S. Consulate General Sydney dated 4 March 2011 and several statements that provide evidence supporting the facts that are agreed. Statements were provided by Mr Lewis Lam; Mr Robert Crosbie, Business Development Manager with NSW Strata Management Pty Ltd; Mr John-Marc Saminaden, a Senior Investigator with the Respondent; and Mr Richard Porter, an accounts examiner appointed pursuant to section 182(1) of the Act.

1. The Applicant relies on her own statement, a bundle of material prepared in response to the Respondent's material and her response to the Agreed Statement Of Facts. The Applicant gave evidence at the hearing and was cross-examined.

1. Each party also made submissions.

Notice to Show Cause

1. In December 2009 a Notice to Show Cause was issued to the Applicant under section 195 of the Act. The Notice to Show Cause was issued on the basis that a delegate of the Respondent's Director-General was of the opinion that there was reasonable cause to believe that grounds existed for taking disciplinary action against the Applicant.

1. The Notice called upon the Applicant to show cause why disciplinary action should not be taken based on the following grounds:

• Under section 191(a) of the Act, in that the Applicant may have contravened a provision of the Act or the Regulation;
• Under section 191(c) of the Act, in that the Applicant in the course of carrying on business or exercising functions under her licence, acted unlawfully, improperly, unfairly or incompetently;
• Under section 191(e) of the Act, in that the Applicant is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee.

1. The Notice to Show Cause outlined a number of allegations, with particulars provided in support of these allegations referring to the following alleged conduct:

• That the Corporation, on 20 August 2007 held the sum of $50,750 in trust on behalf of Ms Julie Thompson pertaining to the sale of a residential home, and has failed to account to her and disperse the sum of $50,750 held in trust when directed to do so by Ms Thompson.
• That the Corporation, on 1 August 2007 held the sum of $11,300 in trust on behalf of Mr Stelios Vrocharis pertaining to the sale of a property, and has failed to account to him and disperse the sum of $11,300 held in trust when directed to do so by Mr Vrocharis.
• That the Corporation, on 11 October 2007 held the sum of $700 in trust on behalf of Mr Clayton Owers pertaining to rental monies for rental of Mr Owes property, and has failed to account to Mr Owers and disperse the sum of $700 held in trust when required.
• That the Corporation, on 7 December 2007 held the sum of $2200 in trust on behalf of Dr Kwan pertaining to rental Bond monies for rental of Dr Kwan's property, and has failed to account to Dr Kwan and disperse the sum of $2200 held in trust as required. The amount of $1,740 was paid to the Corporation by the rental bond board which the Corporation has denied. The Corporation offered the amount of $400 as "goodwill" to Dr Kwan.
• That the Corporation, between 10 September 2007 and 10 November 2007 held the sum of $4799.76 in trust on behalf of Mrs Anne Maddison pertaining to rent monies for rental of Mrs Maddison's property, and has failed to account to Mrs Maddison and disperse the sum of $4799.76 held in trust as required. Mrs Maddisnn alleges that the Corporation failed to lodge a rental bond, which it received from the tenant of her property at 302/201 Hunter Street Newcastle on 10 September 2007. She further alleges that the Corporation has billed her for repairs to her properties, on five (5) separate occasions totalling $3862 and that this work was not carried out. The Corporation has been unable to provide invoices for those repairs.
• That the Corporation, between 14 June 2007 and 26 October 2007 held the sum of $2750 in trust on behalf of Mr Dutt pertaining to rent monies for rental of Mr Dutt's property, and has failed to account to Mr Dutt and disperse the sum of $2750 held in trust as required. The Corporation charged an "annual fee" of $50.00 although it was not authorised by the managing agency agreement.
• On 12 March 2008 Solicitor Mark Marando acting of behalf of property owner, Mr Bruno Siller sent a fax to the Corporation alleging a shortfall of rent monies received. This shortfall has not been rectified to date. Mr Marando requested that the Corporation provide: all statements for the tenancy period, tenant payment history, management agency agreement and residential agency agreement. However these have not been provided. Section 86(1) [of] the Act provides that trust money must be paid into a trust account, and held there, until directed to be disbursed by the person on whose behalf it is held.
• On 25 May 2009, Fair Trading received a complaint from Mr Andy Tsai, chairperson of Owners Corporation Strata Plan SP 5565 pertaining to a block of units at 8-14 Ellis Street Chatswood NSW concerning the management of the Strata Plan by the Corporation. Mr Tsai alleges that he has not been in receipt of any financial records and a request on 31 May 2008 for those records has not been forthcoming. He alleges that the secretary of the owners Corporation has been asking for those records for 18 months, but all requests have been ignored by the Corporation. Mr Tsai alleges that due to the Corporation's persistent failure to meet its obligations satisfactorily, a motion was passed to terminate the strata agreement with the Corporation and a new strata manger (NSW Strata Management) was appointed to commence on 7 June 2009. Mr Tsai states that the new strata manager has advised that they have been unable to obtain the strata records from the Corporation.
• Rule 1 of Schedule 6, Rules of Conduct specific to Strata Managing agents and other property managers, provides that an agent who has been replaced by another agent, must facilitate the transfer of all records to the new agent. Failure to do this is an offence under section 37 of the Act.
• On 15 July 2009, Fair Trading received the Corporation's audit report, dated 14 July 2009 for the year ended 30 June 2009, and signed by Mr Benjamin J. Higgins of 80 Donald Street, Hamilton, registration number C7F8C. ASIC records show that Mr Benjamin J Higgins of 80 Donald Street Hamilton registration number C7F8C, is not a registered company auditor. Attempts by Fair Trading to contact Mr Higgins on the mobile number provided on the audit report were to no avail. Section 115(1) of the Act provides a person is qualified to act as an auditor for the purposes of the Act if the person is a registered company auditor within the meaning of the Corporations Act, or has been approved by the Director General in writing.
• Consequently it appears that the audit report for the year ended 30 June 2009 has not been prepared and lodged in accordance with section 111(1) of the Act. Section 16(1)(o) of the Act provides a person is a disqualified person for the purposes of the Act if the person has failed to provide the Director General with an auditors report that the person is required to provide under this Act. Section 191(d) of the Act provides that disciplinary that disciplinary action can be taken against a person if the person is a disqualified person.

1. The Respondent's determination made findings in regard to the Notice to Show Cause grounds. The Respondent's determination found:

7. FINDINGS IN RELATION TO THE GROUNDS

7.1.Holder of a licence or certificate of registration has contravened a provision of this Act - section 191(a)

In accordance with the accessorial liability provisions contained in section 213 and 218 of the Act, Ms Christine Watson can be dealt with on the same basis as the Corporation concerning breaches of the Act as outlined in this schedule.

Ms Christine Watson, either in concert or singularly, has been responsible for the conduct of the Corporation's business as a licensee in charge and director concerning the matters outlined in section 6 above.

It is noted, that in respect of the matters outlined concerning strata plan 5565, Ms Watson is the only person associated with the Corporation who holds a strata managing agents licence. As such, I am of the view that it was well within the responsibility and skill of Ms Watson to exercise all due diligence to either detect or prevent the conduct concerning strata plan 5565 from occurring.

The matters outlined above indicate repeated conduct concerning the Corporation's business in using funds held in trust for purposes other than what was expressly permitted by the Act, namely, to hold that money in trust until paid or disbursed to the particular person for whom it is held as required by section 86(1) of the Act.

It is apparent that the Corporation's records were completed to misrepresent the sales of 9 One Mile Close Boat Harbour and 1304/2-4 Atchinson Street St Leonards where documents were falsified in relation to the sale to avoid detection of the unlawful use of trust funds.

I am of the view that Ms Watson has failed to act honestly, fairly and professionally in breach of Rule 3 in Schedule 1 of the regulations concerning the majority of the matters outlined in this schedule which occurred whilst she was a licensee in charge and or a director of the Corporation's real estate business. I note that a breach of the rules of conduct amounts to a contravention of section 37 of the Act.

I find that the ground under section 191(a) of the Act has been made out against Ms Watson in concerning the breaches of the Act and regulations.

7.2.Person acting unlawfully, improperly, unfairly or incompetently- section 191(c)

On the basis of the conduct I have found proven in this Schedule concerning the apparent unlawful use of trust account funds, I am reasonably satisfied that the Corporation has acted unlawfully, improperly, unfairly or incompetently in the course of carrying on business or exercising functions under its own licence.

I have formed the opinion, that in accordance with the accessorial liability provisions contained in section 213 and 218 of the Act, Mr Michael Marquette, Mr Simon Turner and Ms Christine Watson can be dealt with on the same basis as the Corporation concerning breaches of the Act as outlined in this Schedule.

This behaviour is particularly apparent concerning the evident misappropriation and misuse of trust account funds in respect of strata plan 5565 and the other matters referred to in this Schedule.

The licence issued to the Corporation was issued for the purpose of conducting business in the real estate industry. It is a fundamental concern of the legislation to ensure that those who work in the industry do so honestly, competently and fairly. Members of the community are entitled to expect that licensees and certificate holders will not mislead them and will not mishandle money that is entrusted to the licensees and certificate holders.

In my opinion, the conduct of the Corporation's business fell well short of community expectations and represents a fundamental failure to properly carry out the functions of a licence holder. I am reasonably satisfied that the conduct of the Corporation's business, through its directors, officers, employees and licensees in charge, was also improper and there are numerous examples of where there has been a blatant disregard for the legal requirements when dealing with trust funds.

The community entrusts real estate agents with substantial sums of money when making one of the most expensive and significant decisions of their life. It is imperative that real estate agents can be trusted to protect the interests of the community. It is incumbent of each agent to uphold the standard expected of them and not to bring the industry into disrepute.

From my reading of the First and Second Responses received, it is clear that the persons who have been involved in the Corporation's real estate business have limited understanding of the strict legislative requirements which apply to the real estate industry. Substantial blame for the offending conduct has been alleged against a former employee of the business.

However, it is apparent that other persons authorised to operate the Corporation's business also appeared to have limited capacity to conduct the business of a real estate agent in a fair and transparent manner.

At the very least, these persons lacked competency to supervise and conduct the business of the agency. This is evident also from the lack of records provided by the agency in respect of the four section 206 notices served on the Corporation and the lack of records made available for independent audits of the Corporation's trust accounts.

In respect of these notices, I am of the view that they were validly issued to the Corporation's business and they were not complied with as required by the Act.

I am reasonably satisfied based on the above view that Ms Watson has acted unlawfully, improperly, unfairly or incompetently in the course of carrying on the business of the Corporation or exercising functions under her own licence. This is particularly apparent concerning the evident misappropriation and misuse of trust account funds by Ms Watson in respect of strata plan 5565.

It is also apparent that Ms Watson, as a licensee in charge, director and the only officer of the Corporation holding a strata managing agents licence, either by act or omission was either solely or partly responsible for the unlawful use of other strata plan trust funds belonging to strata plan 5565.

I find therefore that the ground under section 191(c) has been made out against Ms Watson.

7.3.Person is not a fit and proper person - section 191(e)

In considering whether Ms Watson is a fit and proper person to continue to hold a licence or to hold one in the future, I have had regard to the evidence available to me in the context of the following relevant considerations:

a)fitness to hold a licence is to be gauged in light of the nature and purpose of the activities to be undertaken by the person.

b)in considering whether a person is fit and proper, the fact that improper conduct has occurred is relevant as is the question of whether the community can have confidence that improper conduct will not occur in the future.

c)fitness and propriety are flexible concepts and involve possession by the person of the requisite knowledge of the duties relevant to the holding of the licence.

d)fitness and propriety also requires a licence holder to have sufficient moral integrity and rectitude of character so that they may be safely accredited to the public and entrusted to perform the work to which the licence relates; and

e)the question of fitness and propriety will be affected by special considerations applicable to the nature of the industry to which the licence relates and any policy objectives leading to the statutory regulation of the industry.

The licence issued to Ms Watson was issued for the purpose of working in the real estate industry. It is a fundamental concern of the legislation to ensure that those who work in the industry do so honestly, competently and fairly.

Members of the community are entitled to expect that licensees and certificate holders will not mislead them and will not mishandle money that is entrusted to the licensees and certificate holders.

In my opinion Ms Watson's conduct fell well short of community expectations and her conduct represents a fundamental failure to properly carry out the functions of a licence holder and director and reflects poorly on her moral integrity.

The conduct of Ms Watson was also improper and there are numerous examples of where she has had a blatant disregard for the legal requirements when dealing with trust funds or chose to ignore the activities of other officers and managers of the Corporation. The community entrusts real estate agents with substantial sums of money when making one of the most expensive and significant decisions of their life. It is imperative that real estate agents can be trusted to protect the interests of the community. It is incumbent of each agent to uphold the standard expected of them and not to bring the industry into disrepute.

From the responses received, it is clear that the persons who have been involved in the Corporation's real estate business have limited understanding of the strict legislative requirements which apply to the real estate industry. Substantial blame for the offending conduct has been alleged against a former employee of the business. However, it is apparent that other persons authorised to operate the Corporations business, including Ms Watson, also appeared to have limited capacity to conduct the business of a real estate agent in a fair and transparent manner.

At the very least, Ms Watson lacked competency to supervise and conduct the business of the agency. This is evident also from the lack of records provided by the agency in respect of section 206 notices served on the agency and the lack of records made available for independent audits of the Corporation's trust accounts. In respect of these notices, I am of the view that they were validly issued to the Corporation's business and they were not complied with as required by the Act.

I am satisfied for the reasons outlined above that Ms Watson is not a fit and proper person to hold a licence or certificate under the Act.

I find therefore that the ground under section 191(e) has been made out against Ms Watson.

Agreed Facts

1. The Respondent has prepared a document titled Agreed Statement Of Facts that is dated 11 October 2011. The parties agreed:

Purpose

1.These facts have been agreed to by the parties.

2.The parties request that the Tribunal make a determination on the issue of penalty under the Property, Stock and Business Agents Act 2002 ("the Act").

Penalty

3.In August 2010, Ms Christine Watson ("the Applicant") had her real estate agent's and strata managing agent's licence cancelled. She was declared a disqualified person and was disqualified from being involved in the direction, management and conduct of the business of a licensee for a period of 12 years.

4.In July 2011, the period of disqualification was reduced from 12 to 8 years after the matter was remitted to the Respondent for reconsideration.

5.The Applicant's business partners, Mr Michael Marquette and Mr Simon Turner also had their licences cancelled and were disqualified for a period of 15 and 12 years respectively.

6.The Applicant's former business entity, Deeds Not Words Pty Ltd formerly known as Marquette Turner Corporation Pty Ltd ("the Corporation") trading as Marquette Turner Luxury Homes ("the Agency") was disqualified on a permanent basis.

Licence and Directorship

7.The Applicant has been the holder of a real estate agent's and strata managing agent's licence since 24 June 2005.

8.The Applicant was a director of the Corporation between 8 June 2007 and 6 September 2008.

9.The Applicant was the licensee-in-charge of the Corporation's branch office between 6 August 2008 and 3 February 2009.

Defalcation of Trust Monies

10.Between June 2007 and October 2009, a total of $578,439.07 in trust monies held by the Corporation was misappropriated. The details are as follows:-

a.In June 2007, $99,400 was transferred into Mr Marquette's revolving line of credit:

b.Between August 2007 and December 2007, $29,373.44 was disbursed from the property management trust account without authority:

c.Between June 2007 and December 2007, $305,050 was banked into the Corporation's business account and used for other purposes;

d.Between March 2009 and June 2009, $32,000 was transferred from the strata management trust account to the Marquette Turner Superannuation Account;

e.Between October 2008 and July 2009, $27,400 was transferred from the strata management trust account to the personal bank account of Mr Marquette;

f.Between February 2008 and October 2009, $29,500 was transferred from the strata management trust account to the Corporation's business account and used for business purposes;

g.Between November 2007 and April 2009, $55,715.63 was transferred from the strata management trust account and used for other purposes; and

h.$170,632.59 was claimed against the Property Services Compensation Fund (the Fund) by the Owners Corporation SP 5565 for the period between January 2008 and October 2009.

11.To date, a total of $63,639.24 in trust monies has been returned.

Offences

12.A total of 123 instances was detected in relation to Mr Marquette, Mr Turner and the Corporation ("the Related Parties") and the Applicant.

13.The Applicant was responsible as a director and/or strata manager for 106 instances.

These include:-

a.Eighteen (18) instances relating to a failure to deposit trust monies into the trust account or to disburse trust monies as directed, contrary to s 86 of the Act;

b.Sixty-one (61) instances relating to a misappropriation of trust monies, contrary to s 211 of the Act; and

c.Thirteen (13) instances relating to the production of a document knowing it to be false or misleading in a material particular, contrary to section 110(1)(d) of the Act. These include false ledgers, false trust payment report, false remittance advice, false trust account reconciliation and false trial balance which were submitted to the Respondent during the suspension proceedings of December 2009;

14.The Applicant personally benefited from two transactions. They were as follows:-

a.On 29 December 2008, $3,000 in trust monies from the strata management trust account were used for a personal purpose by the Applicant to pay for her BMW Finance; and

b.On 9 April 2009, $4,000 in trust monies from the strata management trust account were used for a personal purpose by the Applicant to pay herself in cash, without authority.

15.An offence under section 86 carries a maximum penalty of $11,000.

16.An offence under section 211 is an indictable offence and carries a maximum penalty of 10 years imprisonment.

17.An offence under section 110(1)(d) carries a maximum penalty of $11,000.

The Applicants Knowledge of the Defalcation

18.The Applicant admits on page 82 that she was aware that on 26 February 2008, she paid an amount of $35,936.41 from her own personal bank account to the vendors in regards to a trust deposit held by the Corporation. The Applicant states:

"Mr and Mrs Kennedy (the vendors) were referred to Marquette Turner through my accountant... When I became aware that the bank had failed to release the invested deposit funds, I paid the remaining amounts out of my own account with Suncorp for $35,936.41, as I was embarrassed to think these people were being jeopardised by a bank error. That was the story I was told by Michael Marquette and sadly I believed him."

19.The Applicant admits on page 78 that she was aware that trust monies from one strata plan were applied to another strata plan. Between January 2008 and 25 March 2009, $2,101.35 of trust monies belonging to strata plan 5565 were used to pay for the insurance premiums of the strata plan in Mosman.

20.The Applicant admits on page 56 of her documents dated 26 April 2011, that she was aware that on 12 August 2008, $2,200 had "...come out of the (strata management trust) account, but did not know what it was for at that time." The money was used to pay Burke Elphick and Mead Lawyers in relation to litigation action against Mitchell Hartmann, a former employee of the Corporation.

21.The Applicant admits on page 56 that she was aware that on 19 October 2008, $4,000 had "...come out of the (strata management trust) account, but did not know what it was for at that time." The money was used to pay Esanda Finance for Mr Marquette's Mitsubishi Pajero.

22.The Applicant admits on page 56 that she was aware that on 29 December 2008, $3,000 had "...come out of the (strata management trust) account, but did not know what it was for at that time." The money was used to pay for the Applicant's finance in relation to her BMW.

23.The Applicant admits on page 56 that she was aware that on 9 April 2009, a cheque made payable to "cash" in the sum of $4,000 had been made from the strata management trust account and presented by her. She states:

"This was to pay for the removal company to pack and move everything from Forbes Street to Lenthall Street, Kensington. We had been evicted by the Sheriff for non payment of rent. Michael Marquette asked me to obtain the cash from the strata account and assured me he would have the money returned after Easter Weekend."

The Applicant further states on page 76 that "I was unaware that a trust account cheque could not be cashed."

24.It is an offence to make a cheque payable to "cash" from a licensee's trust account under clause 26(2)(c) of the Regulations. The offence carries a maximum penalty of $4,400.

Duty to notify of defalcation

25.A licensee has a duty to notify the Director-General of a defalcation, under section 39 of the Act. A failure to do so constitutes an offence and carries a maximum penalty of $5,500.

26.The Applicant states on page 6:

"I ... knew that my making anything public to any authority meant my family would never receive their money back. It was my intention to continue working within the business, make enough to pay my family back and leave the organisation and move to Queensland either under the banner of Marquette Turner (as I was the licensee anyway) or under my own banner."

No decision made to prosecute

27.The Applicant and the Related Parties have not been prosecuted for any offence under the Act. A decision has not been made in relation to the commencement of a prosecution action against the Applicant or the Related Parties.

28.This document will not to be used for the purposes of criminal proceedings in a NSW Court.

False Invoices

29.In June 2010, Ms Watson (and the Related Parties) submitted a number of documents to the Respondent in response to the notice to show cause. The documents included 29 invoices purportedly rendered by the Corporation in relation to the Owners Corporation SP 5565 for the period between January 2008 and October 2009 for a total sum of $119,100.

30.Under the Management Agency Agreement, the Corporation was entitled to charge $6,600 per year for its management services. However, according to the invoices, the Corporation charged, on average, $64,963 per year for its management services.

31.The Applicant admits that the invoices issued to the Owners Corporation SP 5565 were fraudulently created. The Applicant states:-

"All invoices referred to in this document were created after the strata plan was handed to the new strata managers. The invoices were created by myself after Michael Marquette went through each transaction and calculated what he felt he could charge at that time. Each invoice was completely fabricated by Michael Marquette and I typed them... At no time did I create or send any invoices during the period of managing the strata plan as I had no idea how l could as I did not know where money was going to or how it was being spent." (page 75)

"I prepared the invoices based on the information given to me by Michael Marquette. I would regularly ask Michael Marquette for print outs of the bank statements, but was unable to produce any financial accounts as I had no idea where funds had gone, who they went to or what they were for." (page 65)

32.It is an offence under section 307B of the Crimes Act 1900, if a person gives information to another person, and the person does so knowing that the information is false or misleading, and the information is given to a public authority.

33.The offence carries a maximum penalty of two years imprisonment, a fine of $22,000 or both.

Unlawful Deductions of Monies from Strata Plan 5565

34.At an extraordinary meeting of the Owners Corporation 5565 held on 6 May 2009, the owners resolved to terminate the services of the Corporation as its strata manager. Despite the termination, trust monies continued to be deducted from the Owners Corporation and transferred to the Marquette Turner Superannuation Account, the personal bank account of Mr Marquette, and the Corporation's business account until October 2009.

Unregistered Company Auditor

35.On 14 July 2009, the auditor's report for the period between 1 July 2008 and 30 June 2009 was lodged by the Corporation. The audit was purportedly carried out by Benjamin Higgins who was not a registered company auditor within the meaning of the Corporations Act 2001 (Cth), or a person approved to by the Director-General, contrary to section 115(1) of the Act.

36.The Applicant states on page 63 that "until I was notified in my suspension notice I had no idea Ben Higgins was not a registered auditor. I had been introduced to him as an auditor by Michael Marquette and Simon Turner."

37.A licensee (including a strata managing licensee) must ensure that the trust account is audited by a registered auditor, under section 111(1) of the Act. A breach of this section carries a maximum penalty of $11,000.

Contempt of the Tribunal

38.In August 2010, stay orders were granted to the Applicant (and to the Related Parties) in relation to the Respondent's decision to cancel the Applicant's licence and to disqualify her from being involved in the direction, management and conduct of the business of a licensee. The orders specifically provided that the Applicant must not operate any trust account; that she must not receive and accept any money on trust; and that she must close down all trust account.

39.On 29 October 2010 and 13 January 2011, two lots of rent monies in the amount of $12,964.02 each were received by the Applicant in relation to a rental property in NSW. The monies were deposited into the Applicant's trust account entitled "Christine Watson trading as Marquette Turner Luxury Homes" held in Queensland after she specifically advised the tenants to cease depositing rental payments into the trust account held in NSW.

40.Under section 131(1)(j) of the Administrative Decisions Tribunal Act 1997, the Tribunal may report to the Supreme Court if a person does any thing that, if the Tribunal were a court of law having power to commit for contempt, would be contempt of that court.

Licence Lending

41.In relation to her role as the strata managing agent for Strata Plan 5565, the Applicant states as follows:

"... Michael Marquette... pitched for the business...with the intention of doing so utilising me and my licence." (page 69)

"Although I was the licensed strata manager, Michael Marquette was responsible for the management of all funds." (page 69)

"Michael Marquette undertook his training as a strata manager some time late in 2006... he did not complete his assessments and was not granted his qualification. I was the person who had the qualification and licence and took all my instructions from Michael Marquette." (page 81)

42.It is an offence under section 13(1) of the Act to lend a licence to another person. The offence carries a maximum penalty of $11,000.

Dummy Bidder

43.In relation to the auction of the Neutral Bay property on or around 31 October 2007, the Applicant admits as follows:

"Prior to the day of her auction it was apparent there was only one interested party able to bid so Michael Marquette arranged a dummy bidder. Mitchell Hartmann (former employee of the Corporation) was the person on the telephone taking instructions ... and Simon Turner was giving him those instructions." (page 75)

"... was privy to the knowledge of a dummy bidder being at the auction. Michael Marquette had forged the signature of the dummy bidder ..." (page 83)

44.It is an offence under section 66 of the Act, to procure another person to make a dummy bid. The offence carries a maximum penalty of $55,000.

Supervision of the Business

45.In relation to the issue of supervision of the business, the Applicant states as follows:

"I am fully aware of what constitutes proper supervision of the business of a licensee." (page 63)

"I was totally unaware of any discrepancies with trust account monies. I had been told by Michael Marquette that normally payment of deposit monies which had been put on deposit could take in excess of one week to be returned." (page 10)

"I completely trusted both Michael Marquette and Simon Turner and I never questioned their actions as I was always given a very logical and "real" explanation as to why things had transpired, and I believed them. I had no reason to doubt them." (page 6)

46.Further, in relation to the supervision of the strata managing business, the Applicant admits on page 70:

"Our bank, NAB were not geared for strata management and it became impossible to carry out the normal structure of running a plan as most strata plans work under the Macquarie Bank system which is also the bank Rockend worked with (they were the company that provided the strata management software when we first commenced). As we were no longer trading with Macquarie Bank and everything was done manually by an excel spreadsheet, I was unable to reconcile the plan as I had no idea where monies had gone, as both Simon Turner and Michael Marquette had access to this account on line."

Acceptance of Responsibility

47.In relation to the issue of acceptance of responsibility, the Applicant states on page 7:

"... I am disappointed to think that because I was a partner, a director for a short time, not receiving any financial awards from the business, in fact quite the opposite as I continually put money in and went back to working at TAFE to enable me to fly to Queensland to continue working with the hope of earning an income ..."

Financial Reward

48.The Applicant states on page 87 that:

"I never received any income from the business (the Corporation), although my car was paid by the business in the last 18 months...."

49.The monthly payment for the Applicant's BMW was $879.67 which works out to be about $15,834.06 over 18 months.

Investors

50.The Applicant's brother and mother have each invested $100,000 and $150,000 respectively in the Corporation. Neither of them has been able to recover their monies.

History of the Applicant

51.The Applicant was born on 21 January 1955 and is 56 years of age.

52.In 2004, the Applicant undertook studies to obtain a real estate agent's and strata manager's licence.

53.Between 2004 and June 2007, the Applicant worked in various roles including that of a recruitment consultant, a trainer, a teacher at TAFE, and a real estate agent at L.J Hooker Roseville.

54.Between 8 June 2007 and November 2010, the Applicant worked as a real estate agent and strata managing agent for the Corporation. Between June 2007 and October 2008, the Applicant was a financial partner in the Corporation. Between October 2008 and November 2010, the Applicant was the Senior Vice President of the Corporation.

55.Between July 2009 and December 2010 (during her employment with the Corporation), the Applicant worked as a part-time teacher in Certificate IV and property courses at TAFE Randwick College.

The Respondent's Submissions

1. Ms Lu filed detailed written submissions on behalf of the Respondent in relation to the approach that the Tribunal should take regarding the appropriate decision. She relies on the propositions advanced by Santow J in ASIC v Adler (2002) NSWSC 483. At paragraph [56] Santow J derived 15 propositions as follows:

56 The cases on disqualification gave orders ranging from life disqualification to 3 years. The propositions that may be derived from these cases include:

(i) Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards. ...;

(ii) The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office ...;

(iii) Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors ...;

(iv) The banning order is protective against present and future misuse of the corporate structure ...;

(v) The order has a motive of personal deterrence, though it is not punitive ...;

(vi) The objects of general deterrence are also sought to be achieved ...;

(vii) In assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company ...;

(viii) Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty ...;

(ix) In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public ...;

(x) It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct ...;

(xi) A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming ...;

(xii) The eight criteria to govern the exercise of the court's powers of disqualification set out in Commissioner for Corporate Affairs v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess: - Character of the offenders

- Nature of the breaches

- Structure of the companies and the nature of their business

- Interests of shareholders, creditors and employees

- Risks to others from the continuation of offenders as company directors

- Honesty and competence of offenders

- Hardship to offenders and their personal and commercial interests; and

- Offenders' appreciation that future breaches could result in future proceedings ...;

(xiii) Factors which lead to the imposition of the longest periods of disqualification (that is disqualifications of 25 years or more) were:

- Large financial losses

- High propensity that defendants may engage in similar activities or conduct

- Activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy.

- Lack of contrition or remorse

- Disregard for law and compliance with corporate regulations.

- Dishonesty and intent to defraud

- Previous convictions and contraventions for similar activities ...;

(xiv) In cases in which the period of disqualification ranged from 7 years to 12 years, the factors evident and which lead to the conclusion that these cases were serious though not "worst cases", included:

- Serious incompetence and irresponsibility

- Substantial loss

- Defendants had engaged in deliberate courses of conduct to enrich themselves at others' expense, but with lesser degrees of dishonesty

- Continued, knowing and wilful contraventions of the law and disregard for legal obligations

- Lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform ...;

The difficulty with Roussi's case is that disqualification for 10 years was ordered, as this was the period of disqualification that the ASC had sought. Had a longer period been applied for, Einfeld J may have considered giving a longer period ...;

(xv) The factors leading to the shortest disqualifications, that is disqualifications for up to 3 years were:

- Although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated

- The defendants had no immediate or discernible future intention to hold a position as manager of a company

- In Donovan's case, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings ...

1. ASIC v Adler was cited with approval by the Court of Appeal of the Supreme Court of Victoria in Elliott v ASIC [2004] VSCA 54 and by McHugh J of the High Court of Australia in Rich v ASIC [2004) HCA 42.

1. Ms Lu relied on ASIC v Adler in support of the following submission:

"Protection of the Public (Propositions 1-4)

...

17.The applicant was involved in 106 offences as a director and/or strata manager. These offences occurred over a period of two years and four months commencing June 2007 to October 2009. A total of $578,439.07 in trust monies were misappropriated during this period.

18.The applicant was aware of the misappropriation of trust monies on six separate occasions over a period of 16 months (pages 56, 78, and 82 of her materials). On one occasion, in February 2008, the applicant paid an amount of $35,936.41 to the vendors from her own personal account as well as an amount of $25,000 from the strata management trust account in relation to a sales trust deposit held by the Corporation (page 82). The applicant did not receive reimbursement for the $35,936.41 she paid from her personal account nor did she, as a strata manager, ensure that the $25,000 was returned to the strata management trust account.

19.The applicant had a legal duty to report the defalcation on each occasion but chose not to take any action for the purpose of advancing her own personal interests.

20.The applicant's own personal interests were her hopes of having "...a fantastic business venture..." (page 12) and running "...a very successful agency..." (page 5). The applicant believed that the business venture offered by Mr Marquette and Mr Turner ".was a once in a lifetime opportunity' for someone her age (page 9) and she was excited that she "... was about to finally fulfil (her) dream" (page 9).

21.The contraventions were serious and not technical breaches. There were 61 offences relating to a misappropriation of trust monies and each offence is an indictable offence, carrying a maximum penalty of 10 years imprisonment. This conduct was coupled with lies and deceits designed to conceal her misconduct and impropriety.

22.In June 2010, the applicant submitted 29 false invoices to the respondent in response to the notice to show cause. The invoices were created to conceal significant misappropriation of trust monies in the strata management trust account.

23.The dishonesty continued whilst the Tribunal proceedings were on foot. In October 2010 and January 2011, the applicant purposely disobeyed the orders of the Tribunal and received trust monies into her Queensland trust account, contrary to the stay orders.

24.Further, the applicant's misconduct occurred during the time she taught real estate at TAFE which is at odds with community standards and expectations.

25.The respondent submits that the conduct of the applicant to impede a proper investigation and to disobey the orders of the Tribunal whilst teaching at TAFE is not the conduct of someone who should be entrusted with the direction, management or conduct of the business of a licensee.

26.It is requested that the Tribunal affirm the respondent's decision to disqualify the applicant from being involved in the direction, management or conduct of the business of a licensee for a period of eight years; any lesser period would not satisfy the public interest.

Personal and General Deterrence (Propositions 5-6)

27.Personal deterrence focuses on the individual in question. The aim of the punishment is to discourage the individual from future criminal acts by instilling an understanding of the consequences.

28.General deterrence focuses on general prevention of crime by making examples of specific individuals. The person receives punishment in full view of the public in order to deter others from engaging in criminal behaviour.

29.The respondent submits that a disqualification period of eight years will discourage the applicant from future unlawful conduct and will send a strong message to the public that serious contraventions will attract a serious penalty.

30.The respondent submits that the misappropriation of trust monies would have been detected within the first month of the applicant joining the Corporation had she carried out her duties as a licensee. The applicant had a duty to prepare trust account reconciliations at the end of each month under Clause 28(6) of the Regulations. The applicant had a duty to prepare trial balances within 21 days after the end of each month under Clause 31(1) of the Regulations.

31.The applicant did not prepare any trust account reconciliation or any trial balance during her time with the Corporation. In fact, the applicant admits on page 70 that she was unable to reconcile the trust account because the Corporation did not have a system in place for her to do so.

32.Further, the respondent submits that the applicant failed to supervise the strata managing business, contrary to section 32 of the Act and the Guidelines issued by the Commissioner for Fair Trading ('the Commissioner's Guidelines") as to what constitutes proper supervision of the business of a licensee.

33.Section 32 (3) sets out three specific requirements, concerning the licensee's duty to properly supervise. They are: to supervise employees engaged in the business; to establish procedures designed to ensure that the provisions of the Act are complied with; and to monitor the conduct of the business in a manner that will ensure as far as possible that those procedures are complied with.

34.The Commissioner's Guidelines go into further details as to what constitutes proper supervision of the business of a licensee. For example, a licensee must have written procedures instructing employees of the agency as to their duties in regards to the banking practices of the agency with respect to the receipt of trust money; the licensee must have written procedures requiring the licensee to conduct a review of trust account cash flow on a monthly basis; and the licensee must maintain documented complaint handling procedures.

35.The applicant did not properly supervise the business; did not establish procedures to ensure compliance; did not monitor the conduct of the business; did not have written procedures regarding trust money; and did not ensure that the trust accounts were audited by a registered auditor.

36.The misappropriation of trust monies of Strata Plan 5565 would not have occurred had the applicant carried out her duties as a strata managing agent. The applicant was the only person who held a strata managing agent's licence in the Corporation. She was the only person in the Corporation who held the appropriate qualification to be a strata manager. Despite this, the applicant did not hesitate to allow Mr Marquette who was unqualified and unlicensed, full responsibility for the management of all trust accounts (page 69); to take all her instructions from Michael Marquette (page 81); or to lend her strata managing agent's licence to him (page 69) which is a serious breach of the Act.

37.The respondent submits that there was a gross dereliction of duty by the applicant. Her conduct in question demonstrates a repeated and persistent pattern of absolute disregard for the law and her obligations as a licensee.

38.The respondent submits that any penalty imposed by the Tribunal would need to be substantial in order to provide personal and general deterrence.

Fitness and Propriety (Proposition 7)

39.In assessing the fitness and propriety of the applicant, it is necessary to determine whether she exercised care and due diligence.

40.In ASIC v Healey [2011] FCA 717 at paragraph 14, Middleton J stated that:

"A director is an essential component of corporate governance. Each director is placed at the apex of the structure of direction and management of a company.... The role of a director is significant as their actions may have a profound effect on the community, and not just shareholders, employees and directors."

41.Middleton J further stated at paragraph 16 that:

"... there is a core, irreducible requirement of directors to be involved in the management of the company and to take all reasonable steps to be in a position to guide and monitor".

42.A director is obliged to inform himself or herself as to the financial affairs of the company. There is a responsibility to read, understand and focus on the financial affairs of the company (Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405 at page 406).

43.Each director is expected to take a diligent and intelligent interest in the information either available to her or which she might with fairness demand from the executives or other employees and agents of the company. (Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405 at page 431)

44.Each director has a fiduciary duty to act bona fide for the benefit of the company and to act honestly at all times, despite any other conflicting duties. Directors can be in breach of this duty where their power is exercised for an improper purpose. (Statewide Tobacco Services Ltd v Morley (1990) 2 ACSR 405 at page 431)

45.The respondent submits that the applicant did not guide or monitor the Corporation; did not inform herself as to the financial affairs of the Corporation; did not take a diligent and intelligent interest in the Corporation; did not demand to be informed; did not make enquiries that was reasonably expected of a director; did not carry out the necessary checks and balances expected of a director; and did not act bona fide and honestly at all times. In fact, quite the opposite was true. The applicant was involved in the creation of false accounting records; the concealment of serious contraventions; the obstruction of a proper investigation; and contempt of the orders of the Tribunal.

46.The respondent submits that the applicant is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee (Australian Broadcasting Tribunal v Bond [1990] HCA 33). The gravity of the contraventions as well as their repetition makes a powerful case for a lengthy period of disqualification.

Conduct involving dishonesty (Proposition 8)

47.In terms of seriousness, conduct involving fraud or dishonesty will be considered to be at the higher end of the scale, whereas conduct involving technical breaches of regulations will be considered to be at the lower end of the scale (ACCC v Rural Press Ltd [2001] FCA 1065).

48.The respondent submits that the applicant's conduct involved both fraud and dishonesty.

There was fraud as evidenced by the creation of 29 false invoices to conceal the misappropriation of trust monies. There was dishonesty as evidenced by the applicant's failure to report a defalcation of trust monies on many occasions; the engagement of a dummy bidder by the Corporation whilst the applicant was a director; the lending of a strata managing agent's licence to Mr Marquette knowing that he was unqualified and unlicensed; and her contempt of the orders of the Tribunal.

49.In terms of seriousness, the respondent submits that the applicant's conduct falls at the higher end of the scale and a lengthy period of disqualification should be imposed.

Seriousness of the contraventions (Proposition 9)

50.The respondent submits that the applicant's conduct demonstrated clear flagrant breaches of the Act over a significant period of time as evidenced by the multiplicity of breaches. There were clear acts of concealment as evidenced by the false invoices. There were clear acts of moral turpitude as evidenced by the applicant's knowledge of the defalcation of trust monies and the use of a dummy bidder. The applicant's conduct amounted to a serious departure from the standards expected of the applicant in her position as a director and strata manager.

Personal Hardship to the Defendant (Proposition 10)

51.The applicant is 56 years of age. The disqualification period commenced on 24 December 2010. The applicant has served about a year of the disqualification period. Prior to this, there was a stay on the disqualification order. A prohibition of eight years will mean that the applicant will not be entitled to apply for an authority for another seven years taking her to 63 years of age.

51.Whilst a person may retire at whatever age they please, the respondent is conscious of the fact that a prohibition of eight years will effectively prevent the applicant from being involved in the direction, management or conduct of the business of a licensee for the rest of her working life.

Reformation (Proposition 11)

53.Where a person has relevant misconduct in their history, the courts put a high value on that person's recognition of their wrongdoing and contrition in deciding if there has been reformation (DG Department of Transport v Z (No. 2) (GD) [2002] NSW ADTAP 37).

54.Accepting one's responsibility and culpability in any wrongdoing is a relevant consideration in any application (Trlin v Department of Fair Trading [1999] NSW ADT 72 at paragraphs 17 and 24).

55.A person who has been guilty of reprehensible conduct in the past has the onus of establishing that he or she has now reformed (Sawires v Commissioner of Police [2010) NSWADT 4).

56.A lack of contrition has a direct bearing upon a disqualification (ASIC v Adler [2002] NSWSC 483 at paragraph 59).

57.In relation to the issue of contrition, the applicant states on page 7:

"... I am disappointed to think that because I was a partner, a director for a short time, not receiving any financial awards from the business, in fact quite the opposite as I continually put money in and went back to working at TAPE to enable me to fly to Queensland to continue working with the hope of earning an income ..."

58.The applicant continues to claim that "(she) was totally unaware of any discrepancies in the trust account monies" (page 10) and refuses to accept responsibility for the defalcation of trust monies.

59.The respondent submits that the applicant has not shown any contrition. There are still attempts to profess her ignorance and thereby refusal to accept responsibility for her conduct. There is nothing in the material before the Tribunal that would persuade the Tribunal that the applicant has addressed the defects in her character.

60.The respondent submits that there is a high propensity that the applicant will engage in similar conduct in the future and there is a need to protect the public from any repeat of the applicants conduct by imposing a substantial period of disqualification.

Other factors (Proposition 12)

61.The applicant's misconduct has resulted in significant financial loss to both consumers and investors. Both the applicant's mother and brother have lost a total of $250,000 in their investments in the Corporation. This amount coupled with $578,439.07 in misappropriation of trust monies come to a total of $828,439.07 in detriment to consumers and investors.

62.The significant loss to consumers and investors provides further argument that a substantial period of disqualification should be imposed."

The Applicant's Submissions

1. In response to the Agreed Statement Of Facts the Applicant relies on her own document titled Response By The Applicant To agreed Statement Of Facts. Dated 11 October 2011. In that document the Applicant offers an explanation for many of the agreed facts. The document also serves as a form of submissions and is supported by the evidence she gave at the hearing.

1. The Applicant contends that the Respondent acted without communicating with her but rather on the basis of evidence and information given by Mr Marquette and Mr Turner. She concedes that she attended a meeting with officers of the Respondent but stated that the meeting occurred at a time when she feared for her safety following an assault. She places the responsibility of the majority of the agreed items squarely on Mr Marquette and Mr Turner and asserts that she was unaware of most the incidents until she was advised of them by the Respondent's officers as part of these proceedings.

1. While the Applicant agrees that she was a director of the Corporation between 8 June 2007 and 6 September 2008, she stated that she did not commence working with the Corporation until July 2007 and was not aware that she had been made a director of the Corporation prior to that time. She does not suggest that her appointment as a director of the Corporation was invalid.

1. She stated that between June 2007 and December 2008 she did not spend much time in the office as she worked throughout the metropolitan area of Sydney, the Central Coast and Wollongong area, conducting training sessions.

1. The Applicant concedes that a total of $578,439.07 in trust monies held by the Corporation was misappropriated between June 2007 and October 2009. However, she asserts that she was totally unaware of most of those transactions at the time and only became aware of the misappropriation when she received the Schedule of Breaches in the course of these proceedings.

1. The Applicant concedes that she was aware that funds had been transferred from the strata management trust account between February 2008 and October 2009, however she stated that she had no idea that the funds had gone into Mr Marquette's personal account.

1. The Applicant also stated that she had no idea that claims had been made against the Property Services Compensation Fund by the Owners Corporation Strata Plan SP 5565 for the period between January 2008 and October 2009 until she received the Statement of Agreed Facts from Ms Lu on 14 October 2011.

1. The Applicant stated that false ledgers, false trust payment report, false remittance advice, false trust account reconciliation and false trial balance which were submitted to the Respondent were all prepared by Mr Marquette and Mr Turner and that she had nothing to do with putting those documents together.

1. While the Applicant agrees that on 9 April 2009 she cashed a cheque, she asserted that the $4,000 in trust monies from the strata management trust account were not used for her personal purposes. She stated that on the day before Easter 2009 Mr Marquette asked her to cash the cheque for payment to a removalist. He told her that he would put the money back into the account after the Easter holidays. She stated that she was not aware at the time that a trust account cheque could not be cashed and that she is surprised the bank allowed the transaction to occur.

1. While the Applicant agrees that on 29 December 2008, $3,000 from the strata management trust account was used in relation to her BMW car payments, she stated that Mr Marquette had offered to pay her monthly BMW car payments in or around April 2008. She stated that she was not aware of where the payments came from until she received the Schedule of Breaches.

1. The Applicant agrees that as a licensee she had a duty to notify the Director-General of a defalcation, and that she failed to do so. However her brother and mother had invested $100,000 and $150,000 respectively in the Corporation. She stated that she felt trapped and had no idea what to do, but try to make enough money to repay her family.

1. The Applicant agrees that in August 2010, stay orders were granted to the in relation to the Respondent's decision regarding the Applicant's licence and that the stay orders specifically provided that the Applicant must not operate any trust account, that she must not receive any money on trust, and that she must close down all trust accounts. She also agrees that she received two lots of rent monies, in the amount of $12,964.02 each, on 29 October 2010 and 13 January 2011. The money was received in relation to a rental property in NSW and it was deposited into the Applicant's trust account held in Queensland. However, the Applicant stated that she had advised the tenant of a change in the trust account details in September 2010. She stated that the owners of the property were close friends of Mr Marquette and Mr Turner and that Mr Marquette was going to speak to them. She also stated that the second deposit was done unbeknown to her until the owner contacted her. She then contacted the bank and arranged to have the funds deposited into the owners account. She made the Respondent aware of these matters.

1. In relation to her role as the strata managing agent for Strata Plan 5565 the Applicant agrees that she was the person who had the qualification and licence but took all her instructions from Mr Marquette. However she stated that she had no intention of lending her licence.

1. The Applicant contends that she regularly requested information from Mr Marquette and did not receive the information she required. In essence she maintains that she was naive and Mr Marquette took advantage of her naivety. She stated that she has not gained in any way from the conduct that is alleged against her. As a consequence of Mr Marquette's actions she and her family have been left with significant losses, which cannot be recovered.

1. She seeks to have the Respondent's determination set aside so that she can continue in the industry in a sales capacity.

Discussion

1. As noted above, the issue in dispute is the appropriate penalty that should result from the agreed conduct. The Respondent determined that the Applicant should be disqualified for a period of eight years. The Applicant wishes to be able to continue in a sales capacity within the industry.

1. The essence of the Applicant's case is that she acted under the influence of Mr Marquette, who took advantage of her naivety. I agree that that was most likely the case.

1. I accept the Applicant's evidence in regard to the role played by Mr Marquette and that of Mr Turner. However, in my view, a reasonable person in the Applicant's position would not have allowed himself or herself to be placed in that position. Responsibility for her actions and inactions lies squarely with her.

1. As a director of the Corporation she had significant responsibilities. It was open to her to resign from the position if circumstances prevented her from fulfilling them. She was not entitled to simply abrogate those responsibilities.

1. I agree with the Respondent's submission in regard to the obligations imposed on a director. However, as a licensee in charge, director and the only officer of the Corporation holding a strata managing agents licence, the Applicant was in a unique position. The obligations on her were greater than the obligations that would have applied had her role been limited to that of director.

1. It is clear from the evidence that the Applicant did not guide or monitor the Corporation; did not inform herself as to the financial affairs of the Corporation; did not take a diligent and intelligent interest in the Corporation; did not demand to be informed; did not make enquiries that was reasonably expected of a director; did not carry out the necessary checks and balances expected of a director; and did not act bona fide and honestly at all times. It is equally clear that by her inaction she permitted others to engage in conduct that was in breach of the applicable legislation. As a consequence of that conduct losses of over $800,000 have been incurred.

1. I accept that the evidence shows that the Applicant and her family incurred losses of some $250,000. However, I do not accept the Applicant's assertion that she did not gain from any of the conduct. As has been noted above, there were a number of instances when trust monies were used directly for her personal benefit. For example, funds were used to make payments towards her car loan and for payment of a removalist. Even if it is accepted that she knew nothing of the payments, it cannot be said that she did not benefit from them.

1. It is clear that the Applicant was aware of conduct that was in breach of the applicable legislation and that she failed to bring it to the Respondent's attention. This failure was motivated by self-interest. She hoped to be able to recover some of the losses that she and her family had incurred.

1. The Applicant should not stand to gain from her own inaction and lack of attentiveness unless that inaction has a proper basis. In my view the assertion that she was acting under the influence of Mr Marquette does not provide that basis. She cannot seek refuge from the consequences of her own inaction merely by complaining about the conduct of Mr Marquette and Mr Turner.

1. Nor can she escape liability for breaching her statutory obligations by claiming that she was unaware or ignorant of those obligations. As noted above, Schedule 1 to the Regulations requires that she have sufficient knowledge and understanding of the applicable legislation to enable her to exercise her functions as an agent lawfully.

1. As noted by the Respondent, honesty is one of the key elements of fitness. In the High Court decision in Hughes & Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28; (1955) 93 CLR 127, at [9], Dixon CJ, McTiernan and Webb JJ said:

The expression 'fit and proper person' is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. 'Fit' (or 'idoneus') with respect to an office is said to involve three things, honesty knowledge and ability: 'honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it.

1. In my view, this is not simply a matter of one person taking advantage of another's naivety. The evidence suggests that, at best, the Applicant has failed to act in circumstances where she was aware that others were acting dishonestly. This of itself is highly significant. However, even if the Applicant personally has not acted dishonestly, she has clearly demonstrated that she does not have the knowledge or the ability to perform the role that she was licensed to undertake. It follows in my view that she cannot be held out to the public as a person who is fit and proper to undertake that role.

1. The licensing regime aims to ensure that those engaged in the business of real estate have the appropriate knowledge and skill to carry on the business in a competent, honest and professional manner. The licensing regime also aims to ensure a high level of financial integrity so that consumers face minimal risks and can be confident in their dealings with licensed agents and certificate holders.

1. Through the Agreed Statement Of Facts the Applicant has conceded that she has contravened numerous provisions of the Act and the Regulations. She has also conceded that in the course of carrying on business or exercising functions under her licence, she acted unlawfully, improperly, unfairly or incompetently.

1. Given the Applicant's apparent lack of insight into her behaviour and the effect of her behaviour on others, it is my view that the general community could not have confidence that improper conduct would not occur again if the Applicant were permitted to continue in the role.

1. I agree with Ms Lu's contention that the Applicant is not a fit and proper person to hold a licence under the Act. The decision to cancel the Applicant's real estate agent and strata managing agent's licence is the correct and preferable one and should be affirmed.

1. The question then remains as to the appropriate period of disqualification. As noted above, the Applicant was declared a disqualified person for a period of eight years; and she was disqualified from being involved in the direction, management or conduct of the business of a licensee for a period of eight years.

1. Ms Lu's detailed submissions in regard to relevant considerations on the appropriate disqualification period are referred to above. She also referred to Rich v ASIC [2004] HCA 42 in which the High Court stated that disciplinary proceedings such as these are both protective and punitive in nature. Proceedings that seek relief, to disqualify a person from holding an authority, if granted, would protect the public from the abuse of trust and confidence that an authority gives but would also penalise the person against whom it is granted.

1. Ms Lu submits that a disqualification period of eight years is appropriate given that there was serious incompetence and irresponsibility on the part of the Applicant; substantial loss to the consumers and investors; deliberate actions to conceal her misconduct; continued, knowing and wilful contraventions of the law and disregard for her legal obligations; and a lack of contrition or acceptance of her responsibility.

1. Ms Lu further submits that a lesser disqualification period is not appropriate as the Applicant had personally gained from the conduct; had not endeavoured to repay or partially repay the amounts misappropriated; had not expressed remorse or contrition; and had contested the proceedings at every stage.

1. In summary, the Respondent seeks that its decision be affirmed for the following reasons:

(i)The contraventions include some very serious contraventions including misappropriation of trust monies and deliberate falsification of accounts to conceal serious misconduct;

(ii)The contraventions have led to significant loss and damage to consumers and investors, contrary to the protective purpose of the relevant provisions of the Act;

(iii)The Applicant's field of activity, namely real estate and strata management, is an area where the potential to do damage is particularly high;

(iv)The Applicant's misconduct has been recurrent, occurring over a period of three and a half years (the entire period of her business venture with Mr Marquette and Mr Turner);

(v)The Applicant's misconduct occurred during the time she taught real estate at TAFE which offends community standards and expectations;

(vi)The Applicant's misconduct included deliberate obstruction of the investigation;

(vii)The unlawfulness of the Applicant's conduct extended to contempt of the orders of the Tribunal;

(viii)The Applicant's explanations of how the contraventions occurred are at odds with her admissions;

(ix)The Applicant's conduct demonstrates serious incompetence and irresponsibility;

(x)The Applicant has not shown any contrition;

(xi)The Applicant has contested the proceedings at every juncture; and

(xii)There is a high propensity that the Applicant will engage in similar conduct if a short period of disqualification is imposed.

1. I agree with the tenor of that submission. I note however that the Applicant did not have the assistance of legal advice in preparing her response to the Agreed Statement Of Facts. For that reason I give little weight to any discrepancies between the Applicant's explanations of how the contraventions occurred and her admissions as to the facts. I am of the view that much of the Applicant's conduct is best explained in terms of naivety and incompetence rather than deliberate dishonesty.

1. As I have indicated above, I do not consider that the Applicant's explanations of how the contraventions occurred lessen the significance of the contraventions.

1. There are numerous examples of where she has had a blatant disregard for the legal requirements when dealing with trust funds or chose to ignore the activities of Mr Marquette and Mr Turner. Where Mr Marquette and Mr Turner prepared false documents and false accounts, she apparently did nothing to satisfy herself of the accuracy of that the material.

1. I do not agree that the circumstances of this matter warrant a lesser period of disqualification than that determined by the Respondent. I am satisfied that the decision is the correct and preferable one and should be affirmed.

Order

The decision under review is affirmed.

**********

Decision last updated: 16 April 2012