Appellant v Respondent

(1) That Mr Lukauskas failed to comply with reg.11(1) of the Regulations, which provides that an agent must not engage in conduct that is contrary to good estate agency practice.

(2) That Mr Lukauskas failed to comply with reg.11(3), which provides that an agent must not engage in conduct which is detrimental to the reputation or interests of the estate agents' profession.

(3) That Mr Lukauskas failed to comply with reg.11(4), which provides that an agent must complete all work on behalf of his or her principal as soon as is reasonably possible.

(4) That Mr Lukauskas failed to comply with reg.16, which provides that an agent must not engage in any form of exaggeration or concealment.

(5) That Mr Lukauskas failed to comply with reg.7(2), which provides that an agent must act in the best interests of his or her principal unless it would be unreasonable or improper to do so.

(6) That Mr Lukauskas failed to comply with reg.7(3), which provides that an agent must not knowingly mislead or deceive any parties involved in negotiations or a transaction.

(7) That Mr Lukauskas failed to comply with reg.10 (which provides that an agent, while engaged in the practice of the profession, must not contravene or fail to comply with any statute, rule or regulation in force in Victoria to the extent that it is relevant to proper professional conduct) in that he contravened s.32(1A) of the Sale of Land Act 1952. He did this by failing to give to the purchaser, before the purchaser signed the contract, a statement signed by the vendor containing the particulars specified in the sub-section.

(8) That Mr Lukauskas failed to comply with reg.10 in that he contravened s.9 of the Fair Trading Act 1999, which prohibits a person in trade or commerce from engaging in conduct that is misleading or deceptive or is likely to mislead or deceive.

(9) That Mr Lukauskas failed to comply with reg.6, which provides that an agent must at all times, in the conduct of his or her profession, act fairly and honestly and to the best of his or her knowledge and ability.

3 According to the Director of Consumer Affairs, therefore, Mr Lukauskas engaged in conduct that was contrary to good estate agency practice (allegation 1), and was detrimental to the reputation or interests of the profession (allegation 2); he failed to complete all work on behalf of his principal, being the vendor, as soon as was reasonably practicable (allegation 3); he engaged in a form of concealment (allegation 4); he failed to act in the best interests of the vendor (allegation 5); he knowingly misled or deceived the vendor and her representatives (allegation 6); he obtained the purchaser's signature on the vendor's statement and contract of sale without first having obtained the vendor's signature on the vendor's statement (allegation 7); he described the purchaser as "a young couple", a description "that was misleading and deceptive, or was likely to mislead or deceive the vendor and her representatives as to the identity of the purchaser and [Mr Lukauskas'] relationship with him" (allegation 8); and, finally, he failed to act fairly and honestly in the practice of his profession.

4 All this arose out of one transaction. Lengthy particulars of it are given in the Director's notice of application. They are generally uncontentious. They begin with the allegation that Mr Lukauskas was at all material times employed by Hocking Stuart (Kensington) Pty Ltd, an estate agent licensed under the Act, as an agent's representative. Ms Felicity Hamerston had known Mr Lukauskas since they were at kindergarten, and then the first years of primary school, together; and he had subsequently and satisfactorily acted for her in the sale of her Kensington house in 2002. Mrs Dorothy Raw was Ms Hamerston's grandmother. She had been living at Unit 10, 14 Yendon Road Carnegie; but age and infirmity necessitated a move to aged care accommodation. Her daughter, Ms Hamerston's mother (Mrs Gillian Hamerston), held a power of attorney from her.

5 The decision was made to sell the Carnegie unit so as to provide the finance necessary to acquire for Mrs Raw an interest in a facility for the elderly known as Delbridge Gardens in Sydenham. On 30 November 2003, Mr Lukauskas was engaged for that purpose. An exclusive sales authority was signed. It specified that marketing costs would be $655, an amount that would cover advertising the unit in Hocking Stuart's sales magazine, internet advertising, and the erection of a "For Sale" board at the property. There was no reference to a minimum or estimated selling price for the property.

6 During the course of the discussion that led to his appointment, Mr Lukauskas was informed that Mrs Raw was shortly to go into aged care accommodation. Because of her long association with him, and for that reason alone, Ms Hamerston also told Mr Lukauskas, she says, that the family:

" ... may accept a slightly lower price for a quick sale. Facts I would not want a buyer to know."[1] [Emphasis as in the original.]

7 Mr Lukauskas denied that this latter conversation took place, although he admitted that, on or about 9 December, Ms Hamerston raised the need for a "quick sale". The Director's application for an inquiry having on 2 May 2005 come before a Senior Member of the Tribunal, the Senior Member, as she was entitled to do, accepted the evidence of Ms Hamerston.

8 Within a week, Mr Lukauskas obtained an offer from "an investor" to purchase the unit for $150,000. This was rejected. On 11 December, or thereabouts, he informed Ms Hamerston of another offer. It was for $160,000. It was accepted. At the time it was obtained, no advertising board had been erected at the unit, and no advertisement had been placed in the advertising magazine published by the firm by which Mr Lukauskas was employed. According to the particulars, he "advised that the offer had been made by a young couple". This is an allegation that Mr Lukauskas disputes. He admits to telling Ms Hamerston at one point that a young couple had indicated an interest; but according to him they never made, and he never put to the vendor, any offer from them. He says that he told Ms Hamerston that the offer to purchase at $160,000 was made by "somebody off my data base, he's known to me, he's a flight attendant and is looking for a first house".

9 In her evidence in chief before the Tribunal, Ms Hamerston said that the -

"... offer of $160,000 was conveyed to me as coming from a couple of naïve first home buyers, and it was explained to me in a way that, 'you got an offer of $150,000 from an astute investor from my database, but now we have some naïve first home buyers who don't know ... the property market very well, and are willing to offer you so much more, and that is why we have this fantastic offer of $160,000 ... I found out in January that the person was a flight attendant; and when the couple had turned into just one buyer, I assumed that only one half of the couple was therefore filling out the contract of sale'."

10 Even if one accepts the version put forward by Mr Lukauskas, neither Mrs Raw nor any representative of hers was initially told the full truth: that the purchaser, Mr Richard Hampton, was not only a flight attendant but also a close friend of Mr Lukauskas, who shared a flat with him. There had thus come into existence not a potential, but an actual, conflict of interest. Mr Lukauskas had an obligation as Mrs Raw's selling agent to obtain for her the best price he reasonably could in the circumstances. This was a task with particular responsibilities, given the vulnerability of Mrs Raw's position. The delicacy required to avoid the exploitation of his client, the vendor, is demonstrated by Ms Hamerston's evidence that she told Mr Luksauksas that a slightly lower price might be acceptable if it resulted in a quick sale. That was indeed, as she said, a fact she would not want a buyer to know.

11 The effect of the conflict as it might operate to the direct disadvantage of the vendor is to be seen in the words attributed by Ms Hamerston to Mr Lukauskas in telling her that "an astute investor" had offered $150,000, while he had a "fantastic" offer of $160,000 from "a couple of naïve first home buyers". No observation could be better calculated to result in prejudice to the vendor/client and in benefit to the flat-mate/friend. As I understand the evidence, Mr Lukauskas does not concede that this conversation occurred; and the Tribunal made no finding about it. My point in referring to it here is simply to illustrate the potential dangers to which conflicts of interest give rise, and that the regulations are intended to eliminate.

12 It was certainly in Mr Hampton's interest that Mrs Raw and her family be under the impression that, whereas an astute investor had offered no more than $150,000 for the unit, Mr Lukauskas had secured $160,000 for them from an ill-informed purchaser. And there is no denying that Mr Lukauskas also and at the same time had an interest in securing for Mr Hampton, his close friend and flat-mate, the purchase of the unit at the lowest price at which he could induce Mrs Raw to sell. In these circumstances, reg.11 of the Regulations, and good agency practice, obliged him to place his principal, the vendor, in a position from which she could freely make a fully informed decision about whether she wished to continue with the proposed transaction (with or without Mr Lukauskas as her agent). He did neither of these things. He continued to act, leaving his client in ignorance of the true nature of the connection between himself and the purchaser.

13 It follows that Mr Lukauskas did nothing to counter the position of vulnerability in which Mrs Raw was placed by reason of his conflict of interest. On the hearing of the appeal before me, Mr Lukauskas submitted, in effect, that this did not matter. He pointed to the fact that the truth was broached to the vendor's family before settlement; and yet Mrs Raw proceeded to settle.

14 The Tribunal did not share Mr Lukauskas' view of the evidence. It is true that there was evidence before the Tribunal that, on 10 February 2004, or perhaps on the following day, someone from Victorian Real Estate Conveyancing Pty Ltd told Ms Hamerston (as she put it in her statement of 21 April 2004) that "the buyer was suspected to be [Mr Lukauskas'] domestic partner." It is also true that Mrs Raw settled the transaction thereafter - on 19 February. But this is explicable. There was evidence that the family of the vendor, and the vendor herself, decided that the commitment to Delbridge Gardens, and therefore the need to realise the proceeds of the sale, was such that it was impossible to withdraw.

15 The Senior Member also accepted, contrary to the position put by Mr Lukauskas, that Mrs Gillian Hamerston "regarded the information [about the relationship] as significant."[2] This finding was attacked on appeal. I do not have to decide the point, however. This is because, during the time that a conflict of interest remains undisclosed, it operates to render the conduct of the agent contrary to good estate agency practice; and this is so whether or not the client would, had he or she known of it, have thought that the relevant information was material. The test is not a subjective one; it is objective. If it can be seen, as a matter of objective fact, that a conflict has arisen, the agent must take appropriate action without guessing at the reaction of the client. It cannot by any possibility be good estate agency practice for an agent to continue to act while a conflict of interest remains unresolved.

16 Mr Lukauskas failed to take the appropriate action. He was therefore guilty of a breach of reg.11(1); and so the first allegation is made out. At the same time, his conduct was also detrimental to the reputation or interests of the estate agents' profession. He was therefore also guilty of a breach of reg.11(3). It follows that the second allegation is proved. In addition, he engaged in a form of concealment. He was accordingly in breach of reg.16; and the fourth allegation is made good. Nor did he act in the best interests of his principal. He thus committed a breach of reg.7(2), a circumstance requiring me to hold that the fifth allegation has been established. Moreover, the concealment caught by reg.16 also resulted in his knowingly misleading or deceiving his client, contrary to regs.7(3) and 10 - and so allegations six and eight are made out. Finally, his failure to inform Mrs Raw of his connection to Mr Hampton was, if not dishonest, then at least unfair. It constituted, for this reason, a contravention of reg.6. The ninth allegation is accordingly also made out. Allegations three and seven are concerned with issue of timeliness and the like, not with the effects of such things as conflicts of interest. They are thus in a category of their own.

17 On the hearing of the application, the Tribunal found that the third allegation (failure to complete all work as soon as reasonably possible) had not been made good. It held that each of the other allegations had been proved. From these findings, Mr Lukauskas sought, and on 7 December 2005 obtained, leave to appeal pursuant to s. 148 of the Victorian Civil and Administrative Tribunal Act 1998. So far as is relevant, this section provides for an appeal to the Trial Division of this Court from a Senior Member of the Tribunal; but only on a question of law. The questions of law upon which the appeal is brought are set out in the notice of appeal. So too are the grounds of appeal. Although these purport to cover all allegations, there is in fact no reference - in either the questions of law or the grounds - to allegation seven. The questions of law as set out in the notice are as follows:

"1. What is the extent under the Estate Agents Act 1980 and regulations to which an agent's representative must make disclosure to his vendor and employer of the representative's knowledge of the purchaser and does it extend to the fact that:

(a) the purchaser is sharing rented accommodation with the agent's representative; and

(b) a friend of the agent's representative?

2. Whether the failure of an agent's representative to know the extent in equity of his fiduciary obligation to a vendor constitutes any breach of the Act or regulations?

3. Whether the Tribunal made findings which resulted in penalties, which findings were beyond the allegations made in the application issued by the respondent and thus made orders not based on the charges brought by the respondent?

4. In failing to direct itself properly to the issues in the inquiry, making findings when there was no evidence to support them and other findings not reasonably open, failing to make findings and in overlooking evidence favourable to the appellant and in failing to consider relevant matters, ... the Tribunal came to conclusions which are unsafe as a matter of law and ought to be set aside.

5. Whether the respondent was required to, and did afford the appellant natural justice before applying for an inquiry pursuant to s.28 of the Act, and whether, if not, the Notice of Application for the holding of an inquiry pursuant to s.28 of the Estate Agents Act 1980 dated 5 November 2004 and the proceedings before the Tribunal were void alternatively voidable.

6. Alternatively two paragraphs 1 to 5, whether the penalty was grossly excessive and not open based on the facts of the case."

18 These grounds do not expose the central issue that was argued on the appeal. This was whether all the charges (including the third but, it seems, excluding the seventh) should have been thrown out. The basis of the submissions put in this regard was not that the substantive charges were defective. It was that one of the particulars made an allegation that could not be sustained. The impugned particular was particular (q), which had been put forward as a particular of the first charge. It was then adopted and repeated - despite its irrelevance to the third and seventh charges - under each of the other eight. It alleged that, "[a]t the time the contract of sale was entered into by the purchaser, and at all times subsequent to the signing of the contract by the purchaser until settlement of the sale, the purchaser, Richard Hampton, co-habited with the agent's representative [Mr Lukauskas] at 2/18 Patterson Street, Middle Park."

19 According to Mr Lukauskas, this particular could not be sustained because, at the time Mr Hampton signed the contract, he and Mr Lukauskas co-habited only in the sense that they were flat-mates. They did not co-habit in the more generally understood meaning of that term - that is, as domestic partners. Some sexual activity had previously taken place between them; but it was not until after Mrs Raw's transaction had been settled that co-habitation in its true sense began. Given that, according to Mr Lukauskas in evidence accepted by the Tribunal, he and Mr Hampton were not co-habiting at the material time, and given that each charge included a particular alleging - to the contrary - that they were, all the charges were bad. The Tribunal should therefore have dismissed them all.

20 This account of the facts, and so much of the submission as concerned the definition of the word "co-habit", may be accepted. In my opinion, the point is nevertheless without substance. I begin with the uncontested fact that, while Mr Lukauskas was acting for Mrs Raw, he and Mr Hampton shared a flat and a close friendship. That circumstance was in itself enough to demonstrate an actual conflict of interest. By continuing to act without informing his clients of that interest, Mr Lukauskas was guilty of each of the relevant charges. The failure of the prosecution to establish one particular of those charges, in the fullest sense which could be given to that particular, makes no difference to their validity; and that is true even if it be accepted that "the fullest sense" of particular (q) accords with and embraces the generally understood sense of the expression "to co-habit" - that is, to live in a domestic (generally sexual) relationship. In this context it is to be noted that, in s. 4 of the Act, the expression "domestic partner" when used to describe a person means (so far as is presently relevant) an adult person to whom a person is not married but with whom the person is in a relationship as a couple where one or each of them provides personal or financial commitment and support of a domestic nature for the material benefit of the other, irrespective of their genders, and whether or not they are living under the same roof.

21 Reference was made, in the course of submissions, to s.55 of the Act. It provides, so far as is relevant, that neither an estate agent nor an employee of an estate agent shall, whether directly or indirectly, be in any way beneficially interested in the purchase of any real estate which he or she is commissioned to sell. For the purposes of the section, an estate agent or employee shall be deemed to be beneficially interested in the purchase of real estate if the purchase is made by or on behalf of the domestic partner of the estate agent or employee. Breach of this provision creates an offence for which, upon conviction, penalties may be imposed. By s.55(14), however, a person may make a purchase that would otherwise be prohibited if, before the contract of sale is signed, he or she applies to the Director for permission to make the purchase, and that permission is granted.

22 The submissions put on behalf of Mr Lukauskas were based upon the premise that, in truth, he had been charged with a breach of s.55. The premise is false. In opening the case before the Tribunal, counsel for the Director explicitly stated that the application did not rely on s.55. Nor could it, since none of the charges - as opposed to particular (q) - referred to that section, or alleged that at the relevant time Messrs Lukauskas and Hampton were living as domestic partners. Even particular (q) referred not to s.55 but to co-habitation. Likewise, in her written reasons for decision, the presiding Senior Member acknowledged that no allegation of a contravention of s.55 was made.

23 It was also argued for Mr Lukauskas that, if acting as the vendor's agent while being beneficially interested in the purchase of real estate is expressly forbidden by the Act, whereas being in some other kind of unresolved conflict of interest is not so forbidden, then it necessarily follows that he might properly remain in such other unresolved conflict. This argument, put in a somewhat different form, was taken into account by the Senior Member when she came to decide upon the penalty to be imposed upon Mr Lukauskas. In my opinion it lacks all merit.

24 The purchase price paid by Mr Hampton was, according to the Director, less than the market value of the unit. The difference was said to be between $25,000 and $35,000. This conclusion was supported by evidence called from two valuers, one of whom valued the property at $195,000; the other, at $185,000. Both, therefore, "expressed the view that the sale of the property at $160,000 was well below the market price."[3]

25 The Tribunal's acceptance of this evidence was attacked on appeal on the basis that it failed to take relevant considerations into account. In its judgment, however, the Tribunal refers to the issues raised by counsel with each valuer during the course of the evidence of each, and concludes that each nevertheless "maintained after all these issues were raised that [the] sale of the property at $160,000 was below the market value of the property."[4] Perusal of the transcript does not assist in assessing this conclusion, because it is so replete with the expression "(indistinct)" in relation to questions put by counsel for Mr Lukauskas that it is impossible to make sense of the responses. Even were this not so, in my opinion these submissions do not demonstrate any error of law on the part of the Tribunal.

26 An attack was also made, during the hearing of the appeal, on the Tribunal's finding "that Mr Lukauskas told [Ms Hamerston] the offer of $160,000 came from a 'naïve young couple'."[5] I have already set out the relevant portion of Ms Hamerston's evidence. The Tribunal's acceptance of it is impugned on the basis that Mr Lukauskas gave evidence to the contrary and, as Ms Hamerston admits, told her in early January, before the contracts were signed, that the purchaser was a flight attendant. It is also put that she acknowledged that her memory was fallible, and that the test in Briginshaw v Briginshaw[6] had been misapplied. It is for the Tribunal to assess the evidence. It is of course bound by Briginshaw, but it was aware of its obligations in that regard, as is demonstrated by its reference to that authority.[7]

27 In my opinion, no good point of law is raised by these submissions.

28 I turn briefly to the seventh allegation. The relevant facts are that, on 22 January 2004, Mrs Gillian Hamerston first received, as attorney for her mother, copies of the contract of sale and of the statement required by s.32 of the Sale of Land Act. Mr Hampton had already signed them as purchaser. The breach of s.32(1A) of that Act seems clear, indeed irrefutable. Accordingly, Mr Lukauskas was rightly found to be in breach of the section. He was therefore also in this respect in breach of reg.10 which, it will be remembered, provides that an agent, while engaged in the practice of the profession, must not contravene or fail to comply with any statute, rule or regulation in force in Victoria to the extent that it is relevant to proper professional conduct. It follows that the Tribunal rightly found that the seventh allegation had been made good. (It will also be remembered that a breach of reg.10 separately occurred in that Mr Lukauskas engaged in conduct that was misleading and deceptive contrary to s.9 of the Fair Trading Act. This was the subject of the eighth allegation.)

29 Mr Lukauskas claims that the Director failed to accord him natural justice before applying for the holding of an inquiry pursuant to s.28 of the Act. This claim, however, cannot be upheld. First, it is made not as against the Tribunal, but as against the Director. It is therefore not a claim that falls within s.148 of the Victorian Civil and Administrative Tribunal Act: it is not an appeal on a question of law from an order of the Tribunal. The issue may be stated in a slightly different, but equally pertinent, way. The claim raises a point that was not made before the Tribunal. And by its nature, it cannot be raised for the first time - or at all - on appeal. It simply does not arise from anything the Tribunal did. In any event, the Director is not, in deciding whether or not to apply to the Tribunal for an inquiry pursuant to s. 28 of the Estate Agents Act, bound to accord natural justice to a person in Mr Lukauskas' position.

30 Mr Lukauskas is of course entitled to natural justice before any orders against him are pronounced; but, in considering claims of the kind now made by him, it is necessary to look at the decision-making process in its entirety.[8] This brings in the Tribunal. It must accord natural justice to him. It did. The Director, however, is in a different position. He is empowered by s.28 simply to apply to the Tribunal for the holding of an inquiry. His powers and functions are purely investigative, and are therefore to be distinguished from the powers and functions of the NSW Legal Services Commissioner that were examined by the Supreme Court of New South Wales in Murray v Legal Services Commissioner.[9] There, the relevant legislation required the Commissioner to reach a state of "satisfaction" before making decisions that themselves might directly affect the interests of the solicitor the subject of the Commissioner's attention. His powers were more than merely investigative. He was, accordingly, himself bound by the rules of natural justice. But his position in that respect is different from the purely investigative position of the Director when the Director is simply deciding whether or not to apply to the Tribunal for an inquiry under s.28.

31 The final matter for my consideration concerns the question of penalty. Sitting on appeal from the Tribunal, I can interfere with the penalty it imposed only if it applied a wrong principle, or acted on a misapprehension of the facts, or took into account irrelevant material, or failed to take account of relevant material.[10]

32 In my opinion, the Tribunal was correct in directing its attention to the protection of the public. It was, however, wrong in holding that, for sentencing purposes, it should proceed on the basis that eight of the nine alleged breaches of the Regulations had been proved. In one - important - sense, they had. But the Tribunal found only three acts of wrongdoing (or, to be strictly correct, two wrongful acts and one wrongful omission) and one relevant consequence. It was those three acts which gave rise to the eight breaches; and it was to those three acts and one relevant consequence that, in determining upon an appropriate penalty, the Tribunal ought to have directed its exclusive attention. It was, accordingly, wrong for the Tribunal to state that "seven of the eight breaches of regulations were serious and three of them involved dishonesty."[11] The possibility is thus opened that, in coming to the decisions it made on penalty, the Tribunal was too harsh. In these circumstances I must, to the extent necessary, allow the appeal and either remit the matter to the Tribunal or exercise for myself the discretion involved in fixing upon an appropriate penalty.

33 The three wrongful acts/omissions (correctly) identified by the Tribunal were: (i) the failure to disclose the relationship between Mr Lukauskas and Mr Hampton; (ii) the assertion that the purchasers were a naïve young couple; and (iii) the procuring of Mr Hampton's signature to the s.32 statement before it had been signed by the vendor. The relevant consequence was, as the Tribunal said at [5] of its Reasons for Determination of 25 October 2005, that the sale of the unit was at "well below market value".

34 Two of the three wrongful acts involved dishonesty. The message is plain; but it has nevertheless not been received with the necessary clarity. By his dishonesty, Mr Lukauskas gained an advantage for his friend and flat-mate, Mr Hampton, at the expense of the client to whom he owed the duties of a fiduciary, Mrs Raw. I agree with the Tribunal that such conduct in someone acting in the estate agents' profession is a matter of great seriousness. I also agree that the protection of the public from conduct of this kind can best be achieved by ensuring that Mr Lukauskas does not work as an estate agent for a significant period. Given the seriousness of the conduct in question, and given the difficulty that some have in appreciating the moral, ethical and professional implications of it, I was inclined, were I to re-fix the penalties for myself, to think that - far from being too harsh - suspension for two years was not long enough. In the end, however, when taking into account all the relevant factors, I could not find sufficient justification for any change. Save for my difference with the Tribunal on the starting point of the exercise, I otherwise agree with the reasons for its determination of 25 October 2005, and with the orders which it then made.

[1] Statement of Felicity Jane Hamerston made 21 April 2004

[2] Reasons for Judgment, 26 July 2005, at [69].

[3] Reasons for Judgment, 26 July 2005, at [9].

[4] Ibid, at [11].

[5] Ibid, at [45].

[6] [1938] HCA 34; (1938) 60 CLR 336.

[7] Reasons for Judgment, 26 July 2005, at [5].

[8] Cornall v AB (a solicitor) [1995] VICSC 7; [1995] 1 VR 372 at 401.

[9] [1999] NSWCA 70.

[10] Visy Paper Pty Ltd v Australian Competition & Consumer Commission [2005] FCAFC 236 (unreported, 17 November 2005) at [26].

[11] Tribunal's Reasons for Determination, 25 October 2005, at [16].