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 7, 44, 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: Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172

Commissioner for Fair Trading v Rumbles Realty Pty Ltd [2011] ACAT 47

Commissioner for Fair Trading v Rumble; Commissioner for Fair Trading v Lamaro [2016] ACAT 159

**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) of the ACT Civil and Administrative Tribunal Act 2008 the respondent is to pay to the Territory the sum of $1000.**

1. By this application the Commission for Fair Trading (Commissioner) seeks occupational discipline orders against Ms Karen Lamaro (respondent) for a contravention of section 115 of the Agents Act 2003 (Agents Act).

**2. The respondent is and was, at all relevant times, an agent licenced under part 3 of the Agents Act. She trades under the name Rumbles Real Estate.

3. Section 115(1) of the Agents Act 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 fixed for the respondent.

5. The respondent did not file her audit report for the 2014/2015 financial year until 4 April 2016.

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

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

(b) section 41(1)(b) on the basis that she contravened 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. For the purposes of section 41(1)(b), 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 if satisfied that there are grounds to do so.**

**10. This matter was first listed for a directions hearing on 10 October 2016 before Presidential Member Daniel. On that occasion the Commissioner was represented by Mr Mangeruca and the respondent failed to appear. Presidential Member Daniel attempted to telephone the respondent, but was unable to contact her. She then made directions to bring the matter on for hearing on 30 November 2016.

11. At the hearing on 30 November 2016 the Commissioner was again represented by Mr Mangeruca and the respondent again failed to appear.

12. When the respondent failed to appear I telephoned her mobile phone number. She answered her phone, and I introduced myself, advised that the hearing was in progress and enquired as to whether she would be attending. Her response, which I need not repeat here, made it clear that she did not intend to participate in the proceedings, and indeed considered them to be a waste of resources.

13. Following the telephone call, Mr Mangeruca provided a copy of an email from the respondent to Ms Cogger, an investigator with Access Canberra, and a witness in these proceedings, dated 19 September 2016. The email reads, in part:**

Ms Cogger, please explain as to why you are wasting tax payers money on so called disciplinary action for a late lodgement of our audit?

It is straight up clear cut case of a late lodgement which you personally had knowledge of, why do you not issue a fine for late lodgement and why have you wasted almost a year to send out paperwork.

An actual hearing at the Tribunal is a waste of time and taxpayers money when there is no dispute. Please explain who is disputing this, there should only ever be a hearing if we are disputing something.

Once again, this shows harassment and bullying from OFT that we have had to put up with for years...

**14. I note, for completeness, that one of the respondent's concerns, expressed in both the email and during the brief telephone call with the Tribunal, was that these proceedings were not necessary. I take this to mean that she thought that action was excessive or punitive, having regard to the fact she had admitted the contravention. I do not accept this argument. The Commissioner does not have the power to simply "issue a fine for late lodgement" for a breach of section 115 of the Agents Act. To impose a penalty, the Commissioner must pursue an order for disciplinary action through the Tribunal. Accordingly, there is nothing inappropriate about the Commissioner commencing these proceedings.

15. In any case, in light of this email, and the respondent's comments when I telephoned her, I was satisfied that the respondent was aware of these proceedings and that she did not intend to participate in them. This is unfortunate, because even if she did not intend to dispute the alleged facts, it was open to her to put forward submissions as to the appropriate penalty, including any matters relevant to mitigation.

16. The respondent's decision not to appear also left the Tribunal in a difficult position in terms of proceeding.

17. Section 7 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) requires that the Tribunal, in exercising its functions, observe the rules of natural justice and procedural fairness. This requires, amongst other things, that a respondent be given an opportunity to present their case to the Tribunal before a decision is made.

18. However, section 44 of the ACAT Act expressly provides that if a party fails to appear either personally or by a representative, the tribunal may proceed to hear the matter in that party's absence. This reflects the practical reality that proceedings should not be indefinitely postponed or delayed because a respondent fails to attend.

19. The discretion to proceed to hear a matter ex parte in accordance with section 44 must be balanced against the Tribunal's obligation to afford all parties procedural fairness pursuant to section 7. Procedural fairness requires only that a party be provided with an opportunity to present their case - it does not require that the party actually take up that offer.[1] The respondent did not suggest any reason why she could not participate in the hearing. Accordingly, I am satisfied that she was given an opportunity to participate in the proceedings, but that she chose not to do so. I also took into account the respondent's comments, in the email, that she did not contest the proceedings. Having regard to these matters, I decided to proceed with the hearing on an ex parte basis, in her absence.

20. At the end of the hearing, I made findings of fact but I did not make any orders for disciplinary action. I instead provided the respondent with a further opportunity to file written submissions as to penalty, or to request that the matter be relisted for oral submissions. She did not avail herself of either opportunity. I therefore proceeded to determine the matter.**

**21. Having regard to the evidence filed with the Tribunal by the Commissioner, I am satisfied of the following facts.

22. 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 (audit report) for the 2014/2015 financial year by 30 September 2015.

23. The respondent did not file an audit report by 30 September 2015.

24. On 21 October 2015 an investigator engaged with Access Canberra, Mr John Turnbull, telephoned the respondent and enquired as to why she had not filed an audit report. According to Mr Turnbull, the respondent advised him that she had spoken to other agents, who had in turn advised her that she did not have to file a trust audit report with Access Canberra. Mr Turnbull told her that was incorrect. The respondent then said that she would file a report by the end of the day.

25. Immediately following that conversation, Mr Turnbull send an email to the respondent's agency email address outlining her obligations, and a copy of the Commissioner's letter of 3 September 2015.

26. Mr Turnbull sent a further email to the respondent on 20 November 2015, this time requesting that the audit report be provided by 24 November 2015, and advising her that the Commissioner would be advised if she did not comply.

27. On 25 November 2015 the respondent sent an email to Mr Turnbull, advising that the audit had been completed, but that there were some issues with the accountant and she would need to find someone else to sign off on the audit. She said that she expected to do this in the 'next few days'.

28. The respondent did not file the audit report within a few days. Mr Turnbull sent further emails asking where the process was up to on 30 November 2015 and again on 8 December 2015. He did not receive a reply to either email.

29. On 16 February 2016 Ms Coggar sent an email to Ms Lamaro advising that her trust report audit needed to be submitted by 29 February 2016, and that further action would be taken if she did not comply. Again, Ms Lamaro did not respond to this email.

30. On 4 April 2016, Ms Coggar received an email from Mr John Beard, an accountant, attaching an audit report for Rumbles Real Estate. The report confirmed that there were no breaches in the audit report, other than that the report was late.

31. On 6 April 2016, Ms Coggar emailed Mr Beard and enquired as to when he was engaged by the respondent to conduct the audit. Mr Beard did not respond for some months, but confirmed on 6 June 2016 that he has been engaged to conduct the audit on 5 January 2016 and completed the process on 16 March 2016. He explained the delay as being due to him being away on business, and because of internet connection issues.

32. This application for disciplinary action was lodged on 16 September 2016.**

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

34. 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.

35. I am also satisfied that by failing to ensure that the trust account audit was finalised by 30 September 2016, and by failing to seek any extension of time when it became apparent that the report would not be finalised on time, the respondent failed to exercise the skill and care expected of a reasonable real estate agent. I am therefore also satisfied that there are grounds for making an occupational discipline order under section 41(1)(b) of the Agents Act.**

36. The Commissioner sought two occupational discipline orders:

(a) that the respondent pay a financial penalty of $1000 to the Territory; and

(b) that the respondent be publically reprimanded.

37. The respondent has provided no submissions in opposition to the proposed penalty, and appeared, on the basis of the email of 19 September 2016, to accept that some penalty is appropriate. Nonetheless, the role of the Tribunal is not to simply accept the penalty proposed, but to scrutinise the submissions and make its own decision about whether the proposed orders or penalties are within power and are appropriate.[2]

38. 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(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.

39. 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

40. The respondent offered no evidence of any actions taken to avoid a contravention of section 115 of the Agent Act. In the absence of any evidence, I cannot be satisfied that the respondent took reasonable steps to avoid the contravention.

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

**41. The respondent has previously been subject to an occupational discipline order - albeit the order was not imposed until after the conclusion of these proceedings, being matter OR 15/30.[3]

42. Additionally, the respondent was the agent in charge of Rumble's Real Estate Pty Ltd's business during a period when the business was subject to disciplinary orders on three occasions, as identified in Part B of the application in matter OR 15/29.[4]

43. The prior complaints are quite different in terms of the detail but raise issues of record keeping, compliance and broader management of the business. This case raises the same issues. I am satisfied that they are sufficiently similar to be given some weight in the consideration process.**

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

44. There is no evidence before the Tribunal the respondent took any steps to mitigate the effect of the contravention, other than the belated appointment of Mr Beard in January 2016. The lack of communication between the respondent and the Commissioner, and the respondent's misleading information about timeframes, exacerbated the situation and the Commissioner incurred additional and unnecessary compliance costs as a result. There were no effects on the broader public that required mitigation.

The impact of the contravention on any other person

**45. The respondent's failure to submit her audit accounts on time has caused additional expense to the Commissioner in seeking to enforce the requirement, as set out in paragraph 44 above.

46. 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.

47. 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

**48. As the respondent has failed to participate in these proceedings, I cannot make an assessment as to whether she is likely to act this way again in the future.

49. Previous disciplinary proceedings against the respondent, being Commissioner for Fair Trading v Rumble; Commissioner for Fair Trading v Lamaro [2016] ACAT 159, proceeded by way of an application for consent orders, and consequently in that case, also, the Tribunal was not able to question the respondent about this issue. In her decision in that matter, President Crebbin observed that:**

It is not possible in my view to draw any reliable conclusion about the likelihood that either respondent will act in a way that is a ground for occupational discipline in the future, save to note that the facts strongly suggest a level of disorganisation and a neglect of communication that does not augur well for the future.

50. That same level of disorganisation may have been a cause of the failure to complete the audit requirements in this case, and accordingly I share the President's concerns. Further, I have no evidence that the respondent feels any contrition, nor any evidence of any systems in place to ensure no further breaches occur. It is most unfortunate that the respondent neither attended the hearing, nor filed any submissions, addressing these issues. By her failure to attend, she may well have done herself something of a disservice.

51. The respondent has not raised any issues in mitigation.

**52. Having regard to the nature of the contravention, I am satisfied that a penalty of $1000 is appropriate. This is the maximum fine prescribed by legislation.[5] I have also ordered that the respondent be publically reprimanded. These orders reflect several considerations.

53. First, the magnitude of the penalty reflects that the Commissioner has had to expend resources in enforcing compliance with what should be a routine annual obligation. It is appropriate that the Commissioner recover some of these unnecessary costs from the respondent. The maximum fine of $1000 likely represents only a small portion of those costs.

54. Secondly, the penalty reflects the fact that this is the second time occupational discipline orders have made against the respondent, and the fourth involving an entity associated with the Rumbles Real Estate trading name. Although the facts of each previous disciplinary matter are different, all raise issues of management and record keeping. While disciplinary orders are not intended to be punitive, they are intended to have both a specific and general deterrence effect, and it is appropriate for both purposes that multiple, similar breaches of similar professional obligations are treated more seriously than singular incidences. This justifies both the fine and the public reprimand.

55. Thirdly, the breach is a significant one. It is a breach of an obligation that goes to the protection of the public. This is not a matter that should be dealt with by a private fine. 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. One such step is a public record of the Commissioner taking steps to address non-compliance. A public reprimand and a not insignificant fine are appropriate means of ensuring that all agents are aware of their obligations, and of the consequences of not meeting them.

56. Finally, the respondent has offered no submissions in mitigation, and therefore I have not been able to consider whether there are any matters, particular to her, that may explain some or all of the delays, the poor communication, or the misleading information provided to Access Canberra about timeframes. I have given some consideration to the fact that the respondent did file her report prior to the commencement of these proceedings, and that is to her credit. However, it was still very late, and no reason has been given as to why. I have also been unable to take into account the respondent's financial position. In the absence of such information, remain satisfied that a fine of $1000 should be imposed.**

**57. 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.

58. Pursuant to section 66(2)(h) the respondent is to pay to the Territory the sum of $1000.**

Ms Karen Lamaro, 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 2014/2015 financial year within the required time. The report was finally filed on 4 April 2016, over six months after it was due.

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

The Tribunal acknowledges that you complied with your obligations by filing the audit report prior to the commencement of these proceedings. It is also significant that the trust report, once completed, revealed no errors or concerns.

Unfortunately, however, you have offered no explanation for your conduct, and consequently the Tribunal has been unable to consider any other matters in mitigation.

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 $1000 to the Australian Capital Territory.

[1] Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172 at [38]- [40]

[2] Commissioner for Fair Trading v Rumble; Commissioner for Fair Trading v Lamaro [2016] ACAT 159 at [11]

[3] Commissioner for Fair Trading v Rumble; Commissioner for Fair Trading v Lamaro [2016] ACAT 159 at [11]

[4] See also Commissioner for Fair Trading v Rumbles Realty Pty Ltd [2011] ACAT 47

[5] ACT Civil and Administrative Tribunal Regulation 2009 reg 4