Amazing T Investment Pty Ltd v Commissioner for Fair Trading

Relevant legislation

1. Reforms aimed to enhance educational and professional standards across the industry were introduced under the Property, Stock and Business Agents Act 2002 (the Act) which commenced on 23 March 2020. At its core, the amendments intended to provide a measure of protection to consumers in their dealings with the industry.
2. Section 111(1) of the Act relevantly states that a person who is a licensee must, within 3 months after the end of the audit period (which is the year ending on 30 June or such other period as the Secretary may fix) provide to the Respondent a trust account audit.
3. Section 191 sets out grounds for disciplinary action. These include that the person has contravened a provision of the Act, whether or not the person has been prosecuted or convicted of an offence in respect of the contravention: s 191(a) of the Act.
4. Section 192(1) of the Act outlines what disciplinary action can take against a person if a ground for disciplinary action is established under s 191 of the Act: (1) Each of the following actions is disciplinary action that the Secretary 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 Secretary 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, disqualify the person from being involved in the direction, management or conduct of the business of a licensee.
5. Any one or more of the actions may constitute disciplinary action: s 192(2) of the Act.

Tribunal's approach

1. Section 63 of the Administrative Decisions Review Act 1997 (ADR Act) provides that in determining an application for review the Tribunal is to make the correct and preferable decision having regard to the material before it, and any applicable written or unwritten law. It is well established that the Tribunal is not restricted to a consideration of the material that was before the decision-maker, but may have regard to any relevant material before it at the time of the review: Shi v Migration Agents Registration Authority [2008] HCA 31. Under s 28(2) of the Civil and Administrative Tribunal Act 2013 (CAT Act) the Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice: s 38(2) of the CAT Act. The Tribunal makes its own decision in place of the Commissioner's, and there is no presumption that the decision of the Respondent is correct: McDonald v Director General of Social Security (1984) 1FCR 353 at 357. The standard of proof that applies in these proceedings is the civil standard, that is, on the balance of probabilities. There is no onus of proof: Nakad v Commissioner of Police, New South Wales Police Force [2014] NSWCATAP 10 at [28] - [34].
2. Section 200 of the Act confers on the Tribunal jurisdiction in respect of disciplinary action.
3. Under s 50(2) of the CAT Act the Tribunal may make an order dispensing with a hearing if it is satisfied that the issues for determination can be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal. It was on that basis that the matter proceeded.

Evidence

1. The Respondent filed documents filed under s 58 of the ADR Act. The Applicant filed a brief statement by Mr Liu in support of its Application for Review, with an accompanying bank statement.

What led to the disciplinary action against the Applicant?

1. The Applicant was due to lodge its Audit for the 2019/20 year on or before 30 September 2020. However, due to the impact of COVID-19, on 1 July 2020, the Respondent determined to extend the trust account audit period for 2020 to 31 December 2020 and a notice of the extension of time was posted on the Respondent's website.
2. The Respondent said that on 27 November 2020, an e-mail was sent to the Applicant's email address as recorded in the Government Licensing System (the Applicant's email address) advising that the time for lodgment of the Audit had been extended to 31 December 2020.
3. When the Applicant's Audit was not received by the Respondent by 31 December 2020, on 9 February 2021 the Respondent sent an e-mail to Mr Liu's email address informing him, as Licensee-in-charge of the Applicant, that the 2020 Audit was outstanding and requested that it be lodged immediately. The Respondent further advised that the online portal for lodging late trust account audits would reopen between 15 February 2021 to 31 March 2021 (inclusive), and referred the recipient to the Respondent's webpage. The email also warned that failure to lodge the 2020 Audit by 31 March 2021 may result in the suspension of the Applicant's licence.
4. When the Audit was not lodged by 31 March 2021, on 9 June 2021, the Respondent issued a Notice to Suspend the Applicant's licence and a NTSC, as to why disciplinary action should not be taken against it. A response was required on or before 23 June 2021. On 23 June 2021, the Applicant lodged the 2020 Audit but did not provide a response to the NTSC.
5. On 7 September 2021, the Applicant and Mr Liu were notified by email that the delegate was satisfied that grounds for the taking of disciplinary action existed in relation to the late lodgement of the 2020 Audit and that the delegate had determined to reprimand the Applicant and to require the Applicant to pay, as a monetary penalty, an amount of $8,250 pursuant to s 191(a) of the Act.

CONSIDERATION

1. Section 191 of the Act states the grounds on which disciplinary action can be taken include if the Secretary, and hence the Tribunal on review, is satisfied the licensee has contravened a provision of the Act, whether or not the licensee has been prosecuted or convicted of an offence in respect of the contravention. In this matter, the Respondent determined that the Applicant had contravened s 111(1) of the Act. There was no dispute that the Applicant failed to lodge the Audit when it was due, even when the time for doing so was extended, contrary to s 111(1) of the Act. I find that there were grounds for taking disciplinary action against the Applicant under s 191(1) of the Act.
2. Mr Liu denied that he had received any official emails or letters from the Respondent asking him to undertake the Audit, which he blamed on making him forget to do the Audit. The available evidence was confusing about what was sent to the Applicant and/or Mr Liu. In his submission on the Applicant's behalf Mr Liu said that he immediately caused the trust account to be audited by 23 June 2021 (as specified) following the Notice to Suspend the Applicant's licence and the NTSC being emailed, apparently to Mr Liu, on 9 June 2021. The Notice to Suspend the Applicant's licence and the NTSC were sent to the same email address as the email sent to Mr Liu on 9 February 2021 reminding him, as Licensee-in-charge, that the Audit was due. I do not accept his assertion that he did not receive any notifications to lodge the Audit. Further, the submission that Mr Liu "did not find" the email sent by the Respondent dated 9 February 2021 does not mean it was not sent; in any event there was no indication when it was in fact "found".
3. The Respondent submitted that the Applicant was well aware of the requirement to lodge an audit of the trust account each year by 30 September (or such other date as may be specified). Mr Liu said in his submission that this was the first time "he" had had a trust account and he had insufficient experience. As the Respondent did not challenge this contention in its subsequent submissions, I accept that Mr Liu, as Licensee-in-charge, may not have been experienced in arranging and lodging audits. Nonetheless, in electing to conduct the Applicant's business utilising a trust account, that necessarily attracted associated obligations of which he should have made himself aware. Mr Liu also wrote that the trust account was closed after a short period of time, so he did not pay attention to auditing, which, he conceded, contrary to earlier submissions on the Applicant's behalf, was negligent. It was only when the Respondent suspended the Applicant's licence and issued the NTSC, with a deadline of 23 June 2021, that the Applicant lodged the Audit.
4. Mr Liu wrote in support of the application that COVID-19 has had an impact on the company's business, making the company unprofitable. He provided a bank statement for the period 1 October - 26 November 2021 to the effect that, at the closing date the balance of the account was $692.85. In his submission to the Tribunal Mr Liu wrote said that the imposition of the $8,250 penalty was too severe having regard to his company's "current status", but, other than the bank statement there was no evidence as to the company's financial position. It was submitted on the Applicant's behalf that it does not expect any source of income in the future and needs to borrow money to pay the penalty and runs the risk of being wound up due to debt owed to the Respondent. Again, there was no evidence in support of this contention.
5. The Respondent submitted that, as the maximum monetary penalty that can be imposed under s 192(1)(d) of the Act is $22,000, the potential penalty had been reduced by 62.5%. It had taken into account that the Applicant took steps to provide the Audit swiftly after it received the NTSC. Initially in the original decision the monetary penalty to be imposed was $11,000, but noting in mitigation that the Applicant had ultimately lodged the Audit, the penalty was reduced by 25% to $8,250. The Respondent submitted that the imposition of the monetary penalty in that sum, was warranted in circumstances where the Applicant failed to complete the Audit within the required timeframe. It submitted that the Applicant's failure had the potential to cause harm to the integrity of the real estate industry, as failure to account for money held in trust is a major risk area for the industry, and a major source of consumer detriment. The integrity of trust accounts and trust account audits are vital elements that reinforce consumer confidence in real estate agents in NSW. I agree with this assessment of trust account reporting through the audit process.
6. The Respondent further submitted that the Applicant's failure had the potential to undermine public confidence in the trust account system under the Act; moreover confidence on the part of the persons whose money is being held in trust, as a delay in providing trust account audits gives the impression misappropriation or malfeasance may be occurring. I do not accept that this necessarily follows, especially in circumstances where an unqualified Audit was ultimately lodged.
7. Real estate agents can handle very large sums of money on behalf of their clients and must be accountable and open to scrutiny in the conduct of their affairs as licensees. Requirements of the Act relating to trust accounts and trust account audits are therefore important elements that reinforce consumer confidence in real estate agents. When the Act was introduced, the then Minister, The Hon. Matt Kean, referred to the importance of trust account audits in his Second Reading Speech on 21 November 2017. If an audit is not lodged, the Minister said, it is not clear whether the audit was unqualified and did not have to be lodged or was in fact qualified but the agent had failed to lodge a copy. To assist with lodgements, an online audit portal was developed.
8. The Applicant engaged solicitors to make submissions on the internal review application. It was submitted that the monetary penalty should be reduced by 25%, having regard to the severity of the conduct being minor. It was also submitted that during the 2019/20 audit period there was little money held in the trust account, therefore there was "minor detriment" and no loss incurred by the delay of submitting the audit. The submission overlooks the fundamental purpose of the Act with respect to trust account audits.
9. The Respondent did not provide any comparison material to support the proportionality of the monetary penalty; as far as I could see, there have been no cases before the Tribunal which might assist in that regard. The cases, for the most part, concern fitness and propriety which affects whether a person is permitted to practise as a real estate agent at all; those matters clearly, are in response to more heinous or consistent and ongoing misconduct. See, for example, EBP v Commissioner for Fair Trading, Department of Finance, Services and Innovation [2019] NSWCATOD 157, Bobroff v Department of Fair Trading [2019] NSWCATOD 122.
10. In Council of the Law Society of NSW v Gurusamy [2019] NSWCATOD 89, a matter involving a solicitor, in relation to a trust account, at [30], the Tribunal said: 30. Disciplinary proceedings are concerned with the protection of the public, rather than being punitive in nature: see Beazley JA in Law Society of New South Wales v Walsh [1997] NSWCA 185, at [40] and more recently, in Council of the New South Wales Bar Association v Breeze [2015] NSWCATOD 152. However, the Tribunal's orders may be used to mark the community's disapproval of lapses from the high standard of conduct that are legitimately expected of legal practitioners. They also act as a specific deterrent to the legal practitioner involved and as a general deterrent to all other practitioners with a view to maintaining proper standards of conduct within the legal profession.
11. It is to be recognised that the Respondent, and the Tribunal on review, also, with respect to real estate agents, have an educative function when imposing an appropriate sanction for breach of statutory obligations. I consider that the imposition of a fine, in addition to the reprimand, in this matter is appropriate.
12. I consider the monetary penalty of $8,250 to be an appropriate penalty having regard to the gravity that compliance with trust accounting obligations is considered in the legislation, the educative role in imposing such a penalty, and taking into account the Applicant's ultimate compliance with the lodgement requirement, the Licensee-in-charge's unchallenged assertion of limited experience in relation to trust account audits, and the Applicant's claimed impecuniousness.
13. In addition to the reduction of the fine the Applicant sought the opportunity to pay by instalments. This is not a matter for the Tribunal, and, I suggest, the Applicant take this up with the Respondent.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 January 2022