The Applicant and the Respondent agree on the following facts:-
[2]
On 1 April 2014 Inspector Brett Watson, a duly authorised inspector with Consumer Affairs Victoria (CAV), attended at the business premises of SLGH to conduct a trust account inspection.
Inspector Watson had arranged with Scott Hoare on 26 March 2014 to conduct the inspection after CAV had received several reports from SLGH's appointed trust account auditor, Mr Stephen Barker, from the end of September 2013, concerning trust account irregularities identified from audits he conducted outside of the annual audit period ended 30 June 2013.
Mr Barker's reports (which were also provided to the franchisor, Stockdale and Leggo Corporate and Scott Hoare) had at that time culminated in a report dated 25 March 2014 (the "March 2014 report"). The March 2014 report was provided by Mr Barker after he had undertaken a further audit of SLGH's trust account records on 18 March 2014.
The audit on 18 March 2013 occurred following work undertaken in relation to the trust account by [name deleted], the director of software supplier, Realty Gold Pty Ltd (A C N 119 689 655 trading as Tenacity Software ('Tenacity").
Mr Barker's March 2014 report referred to an outstanding deficiency amount of $37,490.00 as at 18 March 2014 required to be reinstated to restore the trust account and resulting from 10 instances of early sales commissions drawn, cash deposits not banked and unconfirmed disbursements outside of the annual audit period ended 30 June 2013. Mr Barker had previously notified of potential deficiencies of $51,220.00 and $40,440.00 in September and November 2013 respectively, but had not at those stages completed his review.
Subsequent to Stockdale and Leggo Corporate becoming aware of the matters in Mr Barker's notifications, SLGH engaged [the Director] of Tenacity on or about 25 February 2014 to assist in reconciling the trust account from July 2013 onwards. SLGH's staff member, [name deleted], SLGH's property manager who was also employed to do the trust accounting for SLGH, had been unable to do so due to unauthorised funds having been withdrawn from the trust account and cash receipts entered on the system not appearing on bank statements.
Tenacity's work involved creating a special ledger account in the Tenacity software specifically for SLGH's purpose, to enable isolation of anomalies which the software then entered onto two ledgers, the "Drawings from Trust Account, unaccounted" (consisting largely of early or duplicate withdrawal of sales commission and unbanked cash deposits ) and secondly, the "Unknown transaction/error" (used to enter monies deposited into the trust account without an apparent matching trust receipt).
[Tenacity's Director] advised Mr Barker and SLGH in early March 2014 that the results from her reconciliation to the end of February 2014 showed that the 'drawings' ledger had a balance of minus $73,806.86 and the 'Únknown' ledger had a balance of $6819.89 (later found to be offset against the errors in the drawings ledger). [Tenacity's Director] further noted that there were also sales commissions still listed as undrawn which she believed may be represented in some unidentified amounts in the 'Drawings' ledger and thus could be offset against the Drawings ledger). [Tenacity's Director] provided the findings to Mr Barker for the latter to check the anomalies.
The subsequent outstanding deficiency of $37,490.00 as at 18 March 2014 noted by Mr Barker's in the March 2014 report (found by him to be the amount required to be reinstated upon his further analysis of the unauthorised drawings identified by Tenacity (but subject to various ledger account transfers taking place in the Tenacity system to show commissions and account sales already paid ) consisted of the following withdrawals from the trust account (minus one of the $7700.00 transfers in relation to '[address deleted]' which transaction had subsequently settled) and cash deposits not banked into trust.
On various dates between July 2013 and September 2013 Scott Hoare withdrew monies from SLGH's trust account representing variously early/double commissions, or unconfirmed disbursements) and transferred those monies into either personal bank accounts which he held either solely or jointly with the NAB or into SLGH's NAB overdraft account.
Scott Hoare did not have any authorisation or entitlement including via statements under section 27 of the Sale of Land Act 1962 to withdraw the monies from SLGH's trust account prior to settlement. The monies were used for Scott Hoare's own private and personal purposes or those of SLGH.
On 1 July 2013 Scott Hoare withdrew an amount in the sum of $7700.00 from SLGH's trust account (early commission) referable to the property at "[address deleted]". He deposited the $7700.00 via internet transfer on that date directly into a joint personal account he held with the NAB being Account Number [number deleted] ("joint personal account"). Immediately prior to this transfer, the joint personal account balance was $4.29. After the transfer the joint personal account balance was $7704.29 on 1 July 2013. As at 6 July 2013 it was $8.31.
On 8 July 2013, Scott Hoare withdrew an amount in the sum of $2750.00 from SLGH's trust account. The amount of $2750.00 was an unconfirmed disbursement. Scott Hoare deposited the $2750.00 via internet transfer directly into the joint personal account on that date.
The balance of the joint personal account before the transfer of the $2750.00 was $8.31. Subsequent withdrawals from the joint personal account on the same date as the trust monies were deposited into it, ie.8 July 2013, including cash ATM and Eftpos withdrawals by Scott Hoare, brought the joint personal account balance to $22.56 as at 8 July 2013.
On 31 July 2013 Scott Hoare withdrew an amount in the sum of $3234.00 (early withdrawal of commission) from SLGH's trust account from trust funds referable to the property specified as "Lot [address deleted]" and deposited the $3234.00 via internet transfer directly into SLGH's overdraft account on that date.
Prior to the transfer of the $3234.00 to the overdraft account, that account had a negative balance of $19,932.60 Subsequent withdrawals and debits from the overdraft account on the same day as the transfer of trust funds to it ie 31 July 2013 produced a negative balance of $21,630.08 in the overdraft account as at 31 July 2013.
On 2 August 2013 Scott Hoare withdrew an amount in the sum of $750.00 from SLGH's trust account. The amount of $750.00 was an unconfirmed disbursement. Scott Hoare deposited the $750.00 by way of internet transfer directly into his joint personal account on that date.
Prior to the transfer of the $750.00 into the joint personal account, the balance of the joint personal account was $224.31 Subsequent withdrawals including cash ATM and Eftpos withdrawals by Scott Hoare brought the balance of the joint personal account to $34.51 as at 5 August 2013.
On 9 August 2013 Scott Hoare withdrew an amount in the sum of $1000.00 (early withdrawal of commission) from the SLGH's trust account referable to the property address known as 'Lot [address deleted]." Scott Hoare directly deposited the $1000.00 via internet transfer into his joint personal account on that date.
On the day before Scott Hoare transferred the $1000.00, the balance of the joint personal account was $61.71**.** On the day the funds were transferred into the joint personal account, 9 August 2013, Scott Hoare made ATM withdrawals from the joint personal account totalling $1105.00. bringing the account balance to $46.71.
On 9 August 2013 Scott Hoare withdrew a further amount in the sum of $1100.00 from SLGH's trust account. The amount of $1100.00 was an unconfirmed disbursement. Scott Hoare deposited the $1100.00 on that date by internet transfer directly into a personal account held in his name with NAB under Account Number [number deleted] (the "personal account.").
Prior to Scott Hoare transferring the $1100.00 the balance of the personal account was $1.73**.** On the day Scott Hoare transferred the $1100.00 into his personal account, 9 August 2013, Scott Hoare made an ATM cash withdrawal of $1000.00 from the personal account from an ATM in Broadbeach (Queensland) bringing the personal account balance to $101.73.
On 12 August 2013 Scott Hoare withdrew an amount in the sum of $2860.00 (early withdrawal of commission) from SLGH's trust account from funds referable to the property specified as "Lot [address deleted]." Scott Hoare directly deposited the $2860.00 via internet transfer into his personal account on that day.
Prior to Scott Hoare transferring the $2800.00, the balance of the personal account was $101.73**.** On the day on which the $2800.00 was transferred into his personal account, 12 August 2013, Scott Hoare made withdrawals from the personal account including an ATM cash withdrawal of $1000.00 resulting in the personal account having a balance of $432.82 on 12 August 2013.
On 27 August 2013 Scott Hoare withdrew an amount in the sum of $2970.00 (early withdrawal of commission) from SLGH's trust account from funds referable to the property specified as "Lot [address deleted]." Scott Hoare directly deposited the $2970.00 via internet transfer into SLGH's overdraft account on that date.
Prior to Scott Hoare transferring the $2970.00 to the overdraft account, that account had a negative balance of $20,039.06. Subsequent withdrawal from the overdraft account on the same day as the transfer of trust funds to it ie 27 August 2013 produced a negative balance of $19,969.06 in the overdraft account as at 27 August 2013.
On 29 August 2013 Scott Hoare withdrew an amount in the sum of $7700.00 from SLGH's trust account from funds referable to the property specified as "[address deleted]." (representing commission taken twice as an amount of $7700.00 had been withdrawn by Scott Hoare from the trust account on 1 July 2013). Scott Hoare directly deposited the $7700.00 via internet transfer into his personal account on that date.
Prior to Scott Hoare transferring the $7700.00, the balance of the personal account was $41.49**.** On the day which the $7700.00 was transferred into his personal account, 29 August 2014, withdrawals were made from the personal account including cash withdrawal of $2,500.00 thereby reducing the personal account balance to $511.49 on 29 August 2013.
On 2 September 2013 Scott Hoare withdrew an amount in the sum of $11,466.00 from SLGH's trust account from deposit trust funds referable to the property known as "[address deleted]". Scott Hoare directly deposited the $11466.00 into his personal account on that date.
Prior to Scott Hoare transferring the $11,466.00, the balance of the personal account was $50.49**.** On the day on which the $11,466.00 was transferred into his personal account, 2 September 2013, Scott Hoare made withdrawals from the personal account including an ATM cash withdrawal of $1000.00 bringing the personal account balance to $432.82 on 2 September 2013.
The amounts referred to above which were transferred by Mr Hoare from SLGH's trust account into personal and joint personal accounts (and in two cases to SLGH's overdraft account) over a period of approximately 3 months above totalled $41,530.
Further, cash payments totalling $3600.00 referable to receipts 16789 to 16797 for rent payments were recorded in SLGH's cash receipts journal for rental payments as received in respect of 9 separate ledger folio accounts in the names of [names deleted] and recorded as banked into the trust account on 25 November 2013.
Scott Hoare did not arrange to pay and did not pay the rental monies in the sum of $3600.00 into the trust account before the end of the next business day after the day on which the money was received.
There is no reference in the bank statement records for the trust account of the relevant $3600.00 in cash being banked into the trust account on 25 November 2014. Consumer Affairs Inspector Brett Watson examined trust account banking records at an inspection conducted at SLGH's business premises on 1 April 2014. There was no record in the trust account banking records from 25 November 2013 to 31 March 2014 of this amount being banked into the trust bank account.
[3]
Earlier rental payment received from [tenant] in April 2013 not paid into trust
[4]
On16 April 2013 a tenant, [name deleted], located at [address deleted], was due to pay rent to SLGH as the managing agent. It was the practice of [the tenant] to pay rent in cash. Scott Hoare directly received a sum of money in cash totalling $1430.00 comprising rental payments from [the tenant] on 16 April 2013. Scott Hoare signed and issued a manual handwritten receipt made out to [the tenant] for the sum of $1430.00. being a general account receipt No 230 dated 16 April 2013.
Scott Hoare did not arrange to pay and did not pay the rental monies in the sum of $1430.00 into the trust account before the end of the next business day after the day on which the money was received. Scott Hoare retained the $1430.00 cash payment comprising the rental payment made by [the tenant] when he received it on 16 April 2013. This sum of money was later re-receipted to trust and banked into the trust account as part of a deposit of $2860.00 on 25 June 2013 partly to replace receipts number 230.
When concerns about purported invalid withdrawals from or failures to pay in monies to trust account were raised with Scott Hoare on numerous occasions by [SLGH staff member], Scott Hoare, as a matter of practice regularly responded to [SLGH staff member] by advising her that he was " getting it sorted" or "yeap, it'll work out.." or "It settles in a few days" or "I'm waiting on the paperwork" or "I've got the paperwork somewhere" or that he "couldn't find the file" or other misleading words implying authorisation in relation to the funds.
As a result of Scott Hoare's conduct [SLGH staff member] was unable to properly reconcile the trust account and found herself in situations where, due to a cycle of late banking by Scott Hoare, she was forced to delay payments on landlord and debtor runs by several days until further rental and payments had been paid into the trust account.
At the inspection by CAV on 1 April 2014, a deficiency in accordance with Mr Barker's reports was confirmed and Scott Hoare advised Inspector Watson that he was responsible for the deficiency mainly due to him not banking monies at the time of receipt or early drawn commissions. Scott Hoare did not provide any further explanation for his actions. He stated that some of the funds had been replaced and that he had plans to sell his house to restore the deficiency. He said that because of this issue, his company was to be removed as a franchised agent of Stockdale and Leggo.
In a letter to CAV dated 2 April 2014 Mr Hoare also confirmed his responsibility for the deficiency ($37,490.00 as at 18 March 2014) and advised that he had made arrangements to refinance his personal mortgage to obtain the funds necessary to replace the monies.
In early March 2014 [Director] of Tenacity had transferred the data back to SLGH after completing her reconciliations to the end of February 2014, with instructions to Mr Hoare to transfer balances held in sales commission that should not be there, into the drawings account. Thereafter SLGH was to reconcile the accounts.
In a further follow up report at the end of May 2014 after an audit visit on 20 May 2014 to confirm if the trust account was reinstated and the Tenacity system corrected in relation to the drawings ledger.
Mr Barker advised in the May 2014 report that, on the basis that SLGH corrects trust ledgers in the Tenacity system ( to show commissions and account sales already paid) and no further commissions were drawn from the trust account until the drawings ledger has been fully cleared, a current shortfall amount of $986.36 would be required to clear the deficiency and advised that Mr Hoare had agreed to undertake the journal transfers and rectify the account immediately.
On or around end June 2014, Julie Anne Reed of Reebaz contacted [Director] of Tenacity to ask [her] to reconcile June 2014 and provide the details to the liquidator, Korda Mentha. [The Director] determined at that time that the drawings account still showed a negative balance of $13,750.36.which was required to be restored prior to closure of the bank account. The trust account was subsequently restored to balance on or about early July 2014.
[5]
[1]Words and Phrases Legally Defined, Fourth Edition, Lexis Nexis, 2007.
[3]Stroud's Judicial Dictionary of Words and Phrases, Sixth Edition, Sweet & Maxwell, 2000; Words and Phrases Legally Defined
[8]
[4] For example, see Director of Consumer Affairs Victoria v Marshall[2013] VCAT 1316, paragraph [36], Director of Consumer Affairs Victoria v Talia[2010] VCAT 1107, paragraph [43], Director of Consumer Affairs Victoria v Rounds[2013] VCAT 1882, paragraph [60].
[9]
[5] See Australian Broadcasting Tribunal v Bond[1990] HCA 33; Hughes and Vale Pty Ltd v State of New South Wales (No 2)[1955] HCA 28.
[10]
[6] Identifying bank account numbers, names and addresses have been deleted where they are not material to these reasons.
Parties
Applicant/Plaintiff:
Acting Director Consumer Affairs Victoria
Respondent/Defendant:
Hoare
Legislation Cited (3)
Agents Act 1980
Agents (Professional Conduct) Regulations 2008
Land Act 1962
Cases Cited (2)
Acting Director Consumer Affairs Victoria v Hoare (Review and Regulation) [2015] VCAT 401 (8 April 2015)