Catchwords: OCCUPATIONAL DISCIPLINE - real estate agent - audit of trust accounts - failure of agent to provide audit of trust account - financial penalty - public reprimand - public reprimand as deterrent to other agents

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 65, 66

Agents Act 2003 ss 7, 41, 113, 115

Legislation cited: ACT Civil and Administrative Tribunal Regulation 2009 s 4

Agents Regulation 2003 s17

Cases cited: Bolam v Friern Hospital Management Committee [1957] 2 All ER 118

Imbree v McNeilly [2008] HCA 40

Law Society of the ACT & The Legal Practitioner [2011] ACAT 51

Rogers v Whitaker (1992) [1992] HCA 58; 175 CLR 479

SW Bar Association v Sahade (No 3) [2006] NSWADT 39

**1. Pursuant to section 66(2)(a) of the ACT Civil and Administrative Tribunal Act 2008 the respondent is publically reprimanded in the terms set out at Schedule 1.

2. Pursuant to section 66(2)(h) the respondent is to pay to the Territory the sum of $500.**

1. This is an application for an occupational discipline order against Ms Lita Giersch (respondent) for a contravention of section 115 of the Agents Act 2003 (Agents Act). The respondent admitted the contravention, so the only issue in this proceeding was the penalty to be imposed.

**2. The respondent is and was, at all relevant times, an agent licenced under part 3 of the Agents Act.

3. Section 115(1) of the Agents Act requires that agents submit their trust account for audit annually, and provides as follows:**

(1) A licensed agent must ensure that the records relating to any trust money held by the agent during an audit period of the agent are audited by a qualified auditor within 3 months after the end of the audit period or any longer period allowed by the commissioner for fair trading.

**4. Pursuant to section 113 of the Agents Act the 'audit period' for a licenced agent is each financial year or an alternative period as fixed by the Commissioner in writing. No alternative period was set for the respondent.

5. There is no dispute that the respondent breached her obligations under section 115 for the 2014/2015 financial year.

6. Section 41 of the Agents Act sets out the grounds upon which occupational discipline may be taken against a licenced agent. The applicant contended that by failing to comply with section 115 of the Agents Act, the respondent is liable for occupational discipline under:**

(a) section 41(1)(a), on the basis that she contravened or is contravening the fair trading legislation; and

(b) section 41(1)(b) on the basis that she contravened or is contravening a rule of conduct.

**7. For the purposes of section 41(1)(a) 'fair trading legislation' is defined in section 7 of the Agents Act and the Dictionary to the Fair Trading (Australian Consumer Law) Act 1992 to include the Agents Act.

8. The rules of conduct for agents are established pursuant to section 171(1) of the Agents Act and regulation 17(1) of the Agents Regulation 2003 (the Regulations) and are set out in schedule 8 of those Regulations. Relevantly, clause 8.5 of schedule 8 provides that an agent must "exercise reasonable skill, care and diligence."

9. Section 66 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) sets out the occupational discipline orders that the Tribunal may make.**

**10. The facts of this matter were not in dispute.

11. The respondent was initially required to file a trust account audit with the respondent for the 2014/2015 financial year by 30 September 2015. She did not do so.

12. Prior to this deadline, on 3 September 2015, the Commissioner sent a letter to all agents, including the respondent, reminding them of their obligations to complete an annual trust account audit by 30 September 2015. The respondent did not suggest that she did not receive this letter.

13. On 8 October 2015, the respondent sought an extension of time to provide her trust account audit report to the Commissioner. She was granted a further period until 30 October 2015 to comply (revised due date). There was no dispute between the parties that the respondent did not meet the latest due date either.

14. Ms Caroline Cogger, a senior investigator in the Commissioner's office, attempted to contact the respondent and obtain a copy of the trust audit report in January, February and May 2016. Most of her attempts at communication were unsuccessful, with the exception of a conversation on 10 February 2016 in which the respondent advised Ms Cogger that she would get back to her with an update. She did not do this.

15. On 15 September 2016 the Commissioner lodged this application seeking occupational discipline orders.

16. The application was listed for a directions hearing on 10 October 2016, a preliminary conference on 25 October 2016 and a final hearing on 22 November 2016. The respondent did not attend the directions hearing, but participated in the preliminary conference and attended the hearing on 22 November 2016.

17. The respondent's evidence was that, at least since the conference, she has made active efforts to have her trust account audited. Following the conference, she contacted an accountant. When that accountant did not get back to her by 28 October 2016, she made enquiries of a second accountant. It took some time to get an appointment with the second accountant, but she finally did so on 8 November 2016.

18. An audit for the 2014/2015 financial year was provided to the Commissioner on 18 November 2016. An outstanding audit report for the 2015/2016 financial year was also provided at the same time. Both reports confirmed that there were no irregularities with the respondent's accounts.

19. There is no suggestion that the respondent has mishandled any funds.

20. Accordingly, the only issue remaining for consideration at the final hearing on 22 November 2016 was the penalty to be imposed on the respondent for failing to file her audits reports in time.**

**21. I am satisfied that the respondent contravened section 115 of the Agents Act in failing to provide her 2014/2015 trust account audit report to the Commissioner by 30 October 2015. I am therefore satisfied that there is a ground for occupational discipline pursuant to section 41(1)(a) of the Agents Act.

22. The next issue is whether the respondent, by failing to submit her trust account audit report within the required time, failed to exercise "reasonable skill, care and diligence", such that there would be grounds for making an occupational discipline order pursuant to section 41(1)(b) of the Agents Act as well.

23. The word 'reasonable' in section 41(1)(b) of the Agents Act draws on the tortious standard for professional competence. This test does not require that the applicant demonstrate the highest levels of ability, but does require that she meet the standard expected of a reasonable professional real estate agent.[1]

24. In her submissions to the Tribunal, the respondent conceded that the provision of annual audit reports was an essential part of her role as an agent, and necessary for the protection of the public. Given the importance of the provision of an audit report, an ordinarily competent agent would ensure that the report was produced on time, every year, and would have processes in place to ensure this was done. The respondent did not. Accordingly, I am satisfied that by failing to finalise her trust account audit by 30 October 2016, the respondent failed to exercise the skill and care expected of a reasonable real estate agent.**

25. The Commissioner sought two occupational discipline orders:

(c) That the respondent pay a financial penalty of $500 to the Territory; and

(d) That the respondent be publically reprimanded.

26. The respondent did not oppose paying a penalty, but contended that her limited financial means meant that $300 was more appropriate. She opposed the making of an order that she be publically reprimanded.

**27. The majority of the respondent's submissions went to mitigation of the penalty sought by the Commissioner. She cited her personal circumstances, including illness and the death of her brother, as mitigating factors.

28. In her witness statement, the respondent states that her brother passed away in August 2015. She sat by his bed in hospital and watched him deteriorate. I accept that this must have been a difficult time for the respondent, during which she did not give her full attention to her professional affairs. However, this does not explain her failure to comply with her obligations at other times.

29. The respondent's witness statement also attaches a letter from the respondent's physiotherapist and several photographs. The statement from the physiotherapist confirms that the respondent was, at least as at October and November 2015, suffering from a medical condition. The respondent's evidence was that the condition had been ongoing for some time before that, and the photographs support that contention.

30. Given the public nature of this decision, I do not intend to set out the details of the respondent's medical condition, other than to note that the condition causes significant discomfort and undoubtedly compromised the respondent's mobility.

31. The one difficulty I have with the physiotherapist's report is that it does not set out the length of the respondent's infirmity, and nor does it set out how that infirmity affected her capacity to meet her obligations under the Agent Act. I have only the applicant's evidence as to how the condition has affected her. This is problematic because, while I fully accept the respondent's evidence that her condition compromised her capacity to undertake physical activity, such as inspections, I have little in the way of corroborative evidence to confirm that it compromised her capacity to attend to administrative duties.

32. Nonetheless, the Commissioner did not seek to dispute any evidence put by the respondent, and I have no doubt that the condition was a difficult one. Accordingly, I am satisfied that the respondent's medical condition likely had some impact on her capacity to arrange an audit of her trust account over the relevant period.

33. I also accept that her condition compromised her capacity to operate her business more broadly, and that she engaged in minimal commercial activity over the period of her incapacity.

34. Further to this, under questioning from the Tribunal, the respondent gave evidence that although she had some business activity early in the 2014/15 financial year, since suffering from her medical condition she has barely practiced as an agent. She said that she assisted a friend to sell a property, but otherwise she retained her licence mainly to act as an agent for her children's' investment properties. In such circumstances, she contended there was little risk to the public. I accept this as a partially mitigating factor.**

35. Section 65(3) of the ACAT Act sets out the matters the Tribunal must take into account when determining what occupational discipline orders to make under section 66 of that Act. Section 65(4) provides that the Tribunal may also consider any other relevant matter. Section 65(3) states:

In considering what occupational discipline to use against the subject person, the tribunal must consider the following:

(a) whether the person took reasonable steps to avoid the action (the contravention) that is the ground for occupational discipline;

(b) whether occupational discipline has previously been used against the person for a similar act;

(c) whether the person has taken steps to mitigate the effect of the contravention;

(d) the impact of the contravention on any other person;

(e) the likelihood that the person will act in a way that is a ground for occupational discipline in the future;

(f) whether the entity bringing the application has applied for particular occupational discipline to be used and, if so, the kind of occupational discipline applied for.

36. Taking each of those considerations in turn:

Whether the person took reasonable steps to avoid the action (the contravention) that is the ground for occupational discipline

37. The respondent offered no evidence of any steps taken to avoid a contravention of section 115 of the Agent Act. I am satisfied that the respondent did not take reasonable steps to avoid the contravention.

Whether occupational discipline has previously been used against the person for a similar act

38. No order for occupational discipline has previously been made against the respondent.

Whether the person has taken steps to mitigate the effect of the contravention

**39. The respondent took no steps to mitigate the effect of the contravention. That said, the audit report confirmed that there were no breaches of trust accounting requirements.

40. The 'effects' of the contravention in this case have been limited to additional regulatory burdens on the Commissioner, including the bringing of these proceedings. The respondent admitted the contravention once the process reached the tribunal, but it was unfortunate that matters had to go this far.**

The impact of the contravention on any other person

**41. The respondent's failure to submit her audit accounts on time has caused additional expense to the Commissioner in seeking to enforce the requirement.

42. Additionally, as the trust accounts audits are the only mechanism available to the Commissioner to ensure that agents are handling monies appropriately, the Commissioner's capacity to protect the public was compromised during the period that the report was due and not filed.

43. As the respondent's trust accounts were in order there was no impact on any other person.**

The likelihood that the person will act in a way that is a ground for occupational discipline in the future

44. I am satisfied that the respondent understands the seriousness of her contravention, and I am also satisfied that her business activities are now minimal. She has addressed the outstanding 2015/2016 audit as well. I am satisfied that she is unlikely to contravene her obligations again.

**45. The respondent is currently not trading. Although she provided no evidence of her income or expenditure, I have no reason to doubt her evidence that she has limited means to meet an order, particularly having regard to the evidence that her business is largely defunct. On this basis, she contended that a $300 penalty was more affordable, and therefore more reasonable, than the $500 penalty proposed by the Commissioner.

46. The respondent has also expressed a great concern about the consequences of these proceedings for her hitherto good reputation. She pointed to her fifteen years of experience in the industry without incident, and submitted that a public reprimand was, in such circumstances, oppressive.

47. The respondent agreed that some accountability was necessary. However, she contended that that purpose would be served by means of a published decision on the Tribunal website - in her submission, agents would be likely to be aware of the decision, and would learn from it, but she would not be subject to the kind of embarrassment that would arise from a public reprimand. She also argued that no educative function would be served by making the reprimand, as distinct from simply publishing a decision that reminded agents of their obligations.

48. The Commissioner's position in response was that a public reprimand was necessary to send a strong message to agents about the serious ramifications of failing to comply with their obligations. Agents, the Commissioner submitted, are required to act with competence, integrity and accountability, and the respondent should be held publically responsible for her failure to comply with the Act.**

**49. Having regard to the nature of the contravention, I am satisfied that a penalty of $500 is appropriate. This is half the maximum fine prescribed by legislation.[2] The fine is reflective of the fact that the respondent's moral culpability is on the lower end of the spectrum, but that her delay in submitting the audit report was lengthy, and the process was only completed after the commencement of legal proceedings. It is appropriate and necessary that the Territory recover some of the costs of the unfortunately necessary legal proceedings. It is also appropriate that a strong message be sent about the financial consequences of non-compliance.

50. I am also satisfied that a public reprimand is appropriate.

51. The sale and purchase of houses involves the handling by agents of very considerable sums of money. It entails a high degree of responsibility and diligence. The primary means by which the Commissioner can ensure agents are meeting their obligations is through the annual trust audit, and it is essential that agents comply with their obligations. Breaches must be treated seriously.

52. I acknowledge that the respondent likely presents no further risk to the community, and is unlikely to reoffend. However, a public reprimand serves a broader purpose than merely deterring the offender. It is a protective measure that reminds others of their obligations, and warns them of the consequences of similarly wrongful conduct.[3]

53. The risk that other agents may neglect or overlook their trust accounting obligations is a real one, and it is appropriate and necessary that steps be taken to prevent it. A public reprimand is an appropriate means of doing this, and is an appropriate penalty in this case.**

**54. Pursuant to section 66(2)(a) of the ACT Civil and Administrative Tribunal Act 2008 the respondent is publically reprimanded in the terms set out at Schedule 1.

55. Pursuant to section 66(2)(h) the respondent is to pay to the Territory the sum of $500.**

Schedule 1

Lita Giersch, the Tribunal has found that you have breached section 115 of the Agents Act 2003 (ACT) by failing to file a trust account audit for the 2014/1015 financial year within the required time. The report was finally filed a year after it was initially due.

As well as being a breach of your obligations under the Agents Act, your conduct amounts to failure to exercise reasonable skill, care and diligence.

The Tribunal acknowledges that once proceedings commenced in this Tribunal you accepted that the contravention occurred, expressed regret and took steps to remedy it.

The Tribunal further acknowledges that the contravention occurred during a period in your life in which you were experiencing personal difficulties. However, while this offers some explanation for your conduct, it is not an excuse.

It is significant that the trust report, once completed, revealed no errors or concerns.

Real estate agents hold significant sums of money on trust for other people. Agents have an obligation to exercise a high degree of responsibility and diligence in the management of their trust accounts, and a crucial part of this is the yearly audit. In the absence of an audit, neither the Commissioner nor the public can have confidence in the integrity of an agent's accounts. Your breach of this obligation must be treated seriously so as to ensure the protection of the public by deterring others from making a similar mistake.

Accordingly, the Tribunal has made orders that you be publically reprimanded, and that you pay $500 to the Australian Capital Territory.

[1] Eg. Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479 at 487 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ_); Imbree v McNeilly_ [2008] HCA 40 at [69] per Gummow, Hayne and Kiefel JJ

[2] ACT Civil and Administrative Tribunal Regulation 2009 reg. 4

[3] See SW Bar Association v Sahade (No 3) [2006] NSWADT 39 quoted with approval in Law Society of the ACT & The Legal Practitioner [2011] ACAT 51