Youssef Nouh v Commissioner for NSW Fair Trading

[2019] NSWSC 1303

Supreme Court

New South Wales

Medium Neutral Citation:	Youssef Nouh v Commissioner for NSW Fair Trading [2019] NSWSC 1303
Hearing dates:	17 September 2019
Decision date:	27 September 2019
Jurisdiction:	Common Law
Before:	Hammerschlag J
Decision:	Proceedings dismissed
Catchwords:	ADMINISTRATIVE LAW – judicial review – Property, Stock and Business Agents Act 2002 (NSW) ss 118(2) and 222 – where a delegate of the Commissioner for NSW Fair Trading had power to issue a direction to freeze an account – whether form of direction complied with the requirements of the Act – whether there was a requirement to afford procedural fairness before or after giving the direction – whether the direction was invalid because it was unreasonable; HELD: direction valid
Legislation Cited:	Property, Stock and Business Agents Act 2002 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Category:	Principal judgment
Parties:	Youssef Nouh - Plaintiff Commissioner for NSW Fair Trading - First Defendant David Byrne in his capacity as a delegate of the Commissioner for NSW Fair Trading - Second Defendant
Representation:	Counsel: A. Hopkins - Plaintiff M. O’Brien - Defendants     Solicitors: Reuben George Lawyers - Plaintiff Department of Finance, Services and Innovation NSW - First and Second Defendants
File Number(s):	2019/145939

Judgment

Introduction

1. HIS HONOUR:   The Property, Stock and Business Agents Act 2002 (NSW) (the Act) is an Act which provides for the regulation of property, stock and business agents. Division 3 of Part 8 is entitled ‘Freezing of accounts’.

2. References below to sections are, unless the context indicates otherwise, references to sections of the Act.

3. Section 118 empowers the Commissioner for Fair Trading (who is referred to as the Secretary) to give a direction that an amount not be drawn from a specified account in a licensee’s name or in which a licensee has an interest with a financial institution other than with the Secretary’s written approval when it appears to the Secretary that a licensee, the person in charge of a licensee’s business at a place, an employee of a licensee or any other person connected or formerly connected with a licensee has, or may have, stolen, misappropriated or misapplied trust money.

4. The plaintiff, Youssef Nouh (Nouh), is, or was, the director of Prestige Management Pty Ltd (the company) which at all material times was a licensed real estate agent. Nouh is the sole shareholder in the company. The company apparently traded under the names Prestige Strata and Timberland Real Estate. Maree Kylie Lane (Lane) was previously a director of the company, but remained associated with it.

5. On 14 December 2018, acting pursuant to s 118, the second defendant, David Byrne (Byrne), the Director of the Operations Division of NSW Fair Trading and a delegate of the Secretary, gave a direction (the direction) that ‘any amount must not be drawn from the account with BSB 062-202 and account number 1032 6548 held at Commonwealth Bank of Australia in the name of Youssef Nouh.’ I shall refer to this account as the account.

6. Nouh seeks an order quashing the direction ‘by virtue of it being infected by jurisdictional error’.

7. His challenge fails. The proceedings must be dismissed.

8. The proceedings were brought outside the time limit of three months of the date of the decision prescribed in Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 59.10(1). [1] The proceedings were commenced on 9 May 2019. The period of three months had expired on 14 March 2019. Nouh seeks an order under UCPR r 59.10(2) extending the time for commencing proceedings. [2] I would not grant an extension. Nouh has not satisfactorily explained his delay, particularly given that he was legally represented from as early as 21 December 2018. Nevertheless, I heard full argument and will deal with his claim on its merits as if the extension had been granted.

   1. UCPR r 59.10(1) provides that proceedings for judicial review of a decision must be commenced within 3 months of the date of the decision.

   2. UCPR r 59.10(2) provides that the court may, at any time, extend the time for commencing proceedings fixed by subrule (1). UCPR r 59.10(3) provides that in considering whether to extend time under subrule (2), the court should take account of such factors as are relevant in the circumstances of the particular case, including the following:

Relevant statutory provisions

9. Section 3(1) defines licensee to mean the holder of a licence under the Act.

10. Division 3 of Part 8 comprises ss 117 to 122. It is appropriate to set them out in full:

117   Definitions

In this Division:

account means:

(a)   a trust account in a licensee’s name with a financial

institution, or

(b)   an account in a licensee’s name or in which a licensee

has an interest with a financial institution, or

(c)   another account to which trust money is deposited.

financial institution includes an approved deposit-taking institution.

holder of an account means the licensee or other person authorised to operate on the account.

licensee includes a former licensee and the personal representative of a deceased licensee.

trust money means money received for or on behalf of any person by a licensee (whether or not the money is deposited in a trust account required to be kept by a licensee).

118   Secretary may freeze licensee’s accounts in particular cases

(1)   A direction under this Division may be given when it appears to the Secretary that any of the following persons has, or may have, stolen, misappropriated or misapplied trust money:

(a)   a licensee,

(b)   the person in charge of a licensee’s business at a place,

(c)   an employee of a licensee,

(d)   any other person connected or formerly connected with a licensee.

(2)   The Secretary may by direction in writing direct that:

(a)   if a claim has been made against the Fund concerning the trust money, all or part of the amount to the credit of a specified account be paid to the Secretary, or

(b)   an amount must not be drawn from a specified account other than with the Secretary’s written approval, or

(c)   a specified account may be operated only under specified conditions.

(3)   The direction must be given to each holder of the account and the financial institution at which the account is kept, and must identify the account to which it relates.

(4)   Any amount paid to the Secretary pursuant to such a direction must be paid into the Fund.

119   Financial institution must comply with direction

(1)   A financial institution to which a direction under this Division is given (whether or not the direction has been given to anyone else) must not, while the direction is in force:

(a)   pay a cheque or other instrument drawn on the account concerned unless the cheque or instrument is also signed by the Secretary or a person authorised by the Secretary for the purposes of this section, or

(b)   give effect to another transaction on the account that is not authorised because of the direction.

Maximum penalty: 500 penalty units.

(2)   The signature of the Secretary or authorised person on a cheque or other instrument is sufficient evidence of the Secretary’s approval to draw an amount from the account to honour the cheque or other instrument.

(3)   A manager or principal officer in charge of an office or branch of the financial institution where an account is kept, or another officer of the financial institution, must not knowingly permit a contravention of this section by the financial institution.

Maximum penalty: 100 penalty units or imprisonment for 12 months, or both.

(4)   A person to whom a direction is given does not incur a civil liability to another person by reason only of complying with the direction.

120   Account not to be operated unless Secretary allows

After a direction under this Division has been given to the holder of an account, the holder must not (while the direction remains in force) sign a cheque or other instrument drawn on the account unless the cheque or other instrument has first been signed by the Secretary or a person authorised by the Secretary to sign the cheque or instrument.

Maximum penalty: 100 penalty units or imprisonment for 12 months, or both.

121   Secretary may operate account

(1)   The Secretary or a person authorised in writing by the Secretary (an authorised person) may operate on an account that is the subject of a direction under this Division if the holder of the account refuses to operate the account.

(2)   A statutory declaration made by the Secretary or authorised person to the effect that the account holder is refusing to operate on the account is sufficient evidence to the licensee’s financial institution of that fact.

122   Withdrawal of direction

(1)   A direction remains in force until it is withdrawn.

(2)   The Secretary may withdraw a direction under this Division at any time.

(3)   When a direction is withdrawn, the Secretary is to give all persons who were given the direction a notice that the direction has been withdrawn. Failure to give notice does not affect the withdrawal of the direction.

11. Part 9 is entitled ‘Management and receivership’. It contains provisions for the appointment by the Secretary of a manager for a licensee’s business and for the Court, on the application of the Secretary, to appoint a receiver of all or any of the property of a licensee.

12. Section 222 provides:

222   Delegation

The Secretary may delegate the exercise of any function of the Secretary under this Act (other than this power of delegation) to:

(a)   any person employed in the Department, or

(b)   any person, or any class of persons, authorised for the purposes of this section by the regulations.

The facts

13. It is not in dispute that the Secretary delegated to Byrne all her functions under the Act to the full extent permitted by s 222.

14. In mid-December 2018, the Office of NSW Fair Trading (the Office) received a letter dated 11 December 2018 from a firm of solicitors acting on behalf of an owner of two properties which were being developed into town houses. The owner had engaged the company as real estate agent to sell the town houses. The letter asserted that Lane had represented that she had sold approximately 80 town houses for the owner, that contracts of sale had been signed and purchasers had paid a 10% deposit. The owner complained that it was having difficulties getting information from Lane and the company about the transactions and had grave concerns as to the whereabouts of the deposit monies, which it said may be in excess of $3 million. The owner did not claim to have direct evidence of misappropriation or wrongdoing by Lane or the company, but suggested that it may be prudent for the Office to take urgent action to investigate the matter.

15. Byrne and a Principal Investigator from the Office met Lane on 14 December 2018. Lane told them that the owner required a cash injection and with their agreement she ‘dummied up’ an excel spreadsheet to give the impression a number of properties at the development had been sold off the plan. She said that this was sufficient for the owner to use to try and get more money from private financiers. The notion of fraud springs immediately to mind.

16. Byrne then caused statutory notices to be served on a number of banks to obtain copies of bank statements relating to the company, Lane and Nouh. [3] Inspection of bank accounts, including the company’s trust accounts, revealed that money had been transferred out of its trust accounts into personal bank accounts of Lane and Nouh. $180,000 was transferred from the company’s trust account to the account (subsequently the subject of the direction) on 21 June 2018. In two other instances, monies totalling more than $450,000 were paid from the company’s trust account to Lane and then transferred by her to Nouh. There was no evidence that the transactions were authorised.

    3. Section 106 makes provision for this.

17. Byrne came to the unsurprising, rational and reasonable conclusion that either or both of Nouh or Lane had, or at least may have, stolen, misappropriated or misapplied trust money.

18. He formed a view that urgent action was needed to prevent the dissipation of funds and further consumer detriment, and decided to give the direction.

19. At the time of the direction there was $241,004.66 in the account.

20. It is not suggested that Byrne did not form the conclusions he says he formed, or that he acted other than in good faith.

21. Joint managers were appointed over the company, under the Act, on 19 December 2018.

22. On 13 May 2019, Nouh served a notice under UCPR r 59.9(2) on the defendants requiring them to provide a copy of the decision and a statement of reasons for the decision. [4]

    4. UCPR r 59.9(2) provides that the plaintiff may, within 21 days of commencing proceedings against a public authority or within such other time as the court may direct, serve on the public authority a notice requiring the public authority to provide to the plaintiff:

23. Byrne furnished a Statement of Reasons on 30 May 2019. It is appropriate to set it out in full:

Statement of Reasons

Direction dated 14 December 2018 under s118(2) of the Property, Stock, and Business Agents Act 2002 (the Direction)

This statement of reasons is provided in response to the notice issued by the applicant pursuant to r 59.9 of the Uniform Civil Procedure Rules 2005.

The reasons I made the Direction are as follows:

1.   On an initial inspection of the trust accounts of Prestige Management Pty Ltd (trading as Prestige Strata), NSW Fair Trading identified particular transactions wherein money was transferred from trust accounts for the benefit of Mr Youssef Nouh.

2.   Mr Youssef Nouh is the sole shareholder and director of Prestige Management Pty Ltd.

3.   During the initial inspection, NSW Fair Trading identified that on 21 June 2018, $180,000.00 was debited from a trust account and was credited to Mr Nouh’s personal bank account with the description “transfer” (the Direct Transaction).

4.   During the initial inspection, NSW Fair Trading also identified that:

a.   On 19 July 2018, Ms Maree Lane transferred $250,035.00 from her personal NAB account to Mr Nouh’s personal bank account (minus the $35.00 transfer fee). The $250,035.00 originated from a trust account and was receipted in to Ms Maree Lane’s account throughout June and July 2018; and

b.   On 14 September 2018, Ms Maree Lane transferred $200,057.22 from her personal NAB account to Mr Nouh’s personal bank account (minus the $35.00 transfer fee). The $200,057.22 originated from a trust account and was receipted in to Ms Maree Lane’s account throughout September 2018 (together, the Indirect Transactions).

5.   There was no evidence that the Direct Transaction or the Indirect Transactions were authorised.

6.   The Direct Transaction and the Indirect Transactions were identified during the initial inspection as a misappropriation of funds from Prestige Strata’s trust accounts.

7.   I formed the view that further investigation was necessary to ascertain the full extent of the misappropriation of funds.

8.   It was apparent to me after the initial inspection that the total amount of misappropriated funds would exceed the balance of Mr Nouh’s personal bank account (which at the time of the Direction had a balance of $241,004.66).

9.   To prevent further consumer detriment, and preserve the integrity of the funds, the Direction was made.

David Byrne

Director of the Fair Trading Operations Division in his capacity as delegate of the Secretary

Date: 30 May 2019

The contest

24. Doing the best I can, I have recounted below what I understood to have been put on behalf of Nouh. Each argument will be dealt with in turn.

25. First, it was put that Byrne had no power to give the direction because that power is non-delegable under s 118(2). The argument is that s 118(2) gives the Secretary power to give a direction, a power is to be distinguished from a function, and s 222 authorises the Secretary to delegate only the exercise of a function under the Act not to delegate the exercise of a power.

26. This submission is unsustainable. One of the functions of the Secretary under the Act is to exercise the power given by s 118(2). One of the functions of the Secretary is to exercise the power to delegate. The words of s 222, in particular ‘(other than this power of delegation)’, make this clear. It is this function which the Secretary relevantly delegated to Byrne.

27. Second, it was put that the direction was invalid because a precondition under s 118(2)(b) for its validity, is that it must specify the particular dollar and cents amount of money which must not be drawn from a specified account, whereas, the direction made no such specification. This requirement is said to arise from the use of the words ‘an amount’ in the subsection.

28. This submission is unsustainable. The words of the section plainly do not require a dollar and cents amount to be specified, although one no doubt could be. A direction that ‘an amount’ must not be drawn can be one that no amount at all must be drawn. The direction here was precisely that. It was that ‘any amount’ must not be drawn. If the submission is, contrary to my view, correct, the direction would fix on the dollars and cents amount standing in the account as at the date of the direction because this would be ‘any amount’ in the account. The amount standing in a particular account can decrease by drawings and it can increase by, for example, accruing interest. On the construction contended for, there would have to be a new direction to capture any and every increase. The construction contended for would render the process unworkable.

29. Third, it was put that a precondition to the valid exercise of the power to give a direction is that the giver give each relevant person affected by the direction procedural fairness in the form of notice of the intention to give the direction, provision to that person of the basis upon which the intention to give it had been formed, and affording that person the opportunity to be heard on whether the direction should be given.

30. This submission is unsustainable. The section plainly does not require procedural fairness to be given. The Secretary must, of course, form the necessary opinion that a relevant person has, or may have, stolen, misappropriated or misapplied trust money. It may be accepted that the Secretary must act in good faith and reasonably. No more is required. If the submission was correct, the very mischief the section aims to avoid would be facilitated. A suspected wrongdoer or thief would be given the opportunity to deplete the account which the direction would be intended to preserve.

31. Fourth, it was put that if Byrne was not obliged to give advance notice of his intention to give the direction (or, in fact, did not give notice), he was obliged to afford procedural fairness, after giving the direction, by providing ‘the gist’ of why the direction had been given and affording an opportunity to be heard as to why the direction should not have been given. It was argued that a direction under s 118(2) is analogous to the making by a Court, ex parte, of a freezing order where, on the return date, the respondent is entitled to be heard on whether it should continue. It was argued that Byrne was obliged to give Nouh an oral hearing to permit him to vent his submissions.

32. This submission is unsustainable. A direction takes effect when given. It has no return date. It bears no analogy to the grant of ex parte relief by the Court exercising its judicial function. The Act does not envisage, either expressly or by implication, any revisiting of a power validly exercised. If the preconditions for the giving of a direction are met, it is valid. If they are not met, it is invalid. The exercise of the power is always open to later challenge. There is no room for the suggested unregulated ex post facto procedure.

33. A direction, however, can be withdrawn. It is to be observed that no submission was put that the Secretary should have, but has not, withdrawn the direction. This was, no doubt, for good reason.

24. Last, it was argued that the direction is invalid because Byrne had no, or no sufficient, reasonable basis to form the opinion that Nouh had, or may have, stolen, misappropriated or misapplied trust monies. It was argued that the original complaint had raised the possibility that trust money in the form of deposits had been stolen, but that Lane had displaced this possibility by telling Byrne, in effect, that there had been no sales, the explanation for the appearance of sales being that a false Excel spreadsheet had been brought into existence to convey that there had been sales. This explanation, it was put, meant that it was not reasonably open to Byrne to consider that deposits had been misappropriated because there were no deposits. It was argued that it was unreasonable of Byrne, in forming his view, to take into account that trust money had, or may have, been stolen, misappropriated or misapplied because there was no evidence that the transactions whereby trust monies had found their way into the personal account of Nouh were authorised because a lack of evidence of authorisation was not evidence of a lack of authorisation.

25. This submission is unsustainable. Byrne did not act unreasonably. Indeed, he acted eminently reasonably.

26. The suggestion that the information imparted by Lane, could, and does, contribute to a conclusion that Byrne acted unreasonably, borders on the eccentric. In effect, Lane told Byrne that the answer to the suggestion that there had been theft was that there was fraud instead. There had, after all, been money in the company’s trust account which was no longer there.

27. Byrne had evidence of money leaving the trust account of the company and finding its way to the pocket of Nouh, in one case directly and in two other cases indirectly. The absence of documentary evidence of authorisation in the records of the company can sensibly be taken into account as a factor contributing to an opinion as to the possibility of theft, misappropriation or misapplication. If there was no authorisation, there would be no evidence of any. Byrne acted to preserve the position.

Conclusion

38. The proceedings are dismissed.

39. I provisionally order that the plaintiff is to pay the defendants’ costs of the proceedings. This order will solidify after seven days unless, within that time, a party has notified my Associate in writing that some other order is sought, specifying briefly the grounds on which it is sought, and in which event I will relist the matter for the determination of any costs issues.

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Endnotes

   (a)   any particular interest of the plaintiff in challenging the decision,

   (b)   possible prejudice to other persons caused by the passage of time, if the relief were to be granted, including but not limited to prejudice to parties to the proceedings,

   (c)   the time at which the plaintiff became or, by exercising reasonable diligence, should have become aware of the decision,

   (d)   any relevant public interest.

   (a)   a copy of the decision, and

   (b)   a statement of reasons for the decision.

Decision last updated: 27 September 2019