Department of Consumer Affairs Victoria v McDonald (Review and Regulation) [2015] VCAT 1625

1. Under section 28A(1)(a) of the Estate Agents Act 1980 (Vic), the respondent, Mr Aaron McDonald is reprimanded.
2. Under section 28A(1)(f)(c) Mr Aaron McDonald's estate agent's licence number 72337L, is cancelled with effect from 20 October 2015 and he is disqualified from holding a licence for a period of three years.
3. In addition to any other conditions imposed by the Business Licensing Authority:
   • any licence held by Mr McDonald in the future shall be subject to a condition prohibiting him from being an officer in effective control of the estate agency business of a corporation; and
   • for a period of 5 years from the time any further licence is granted to Mr McDonald, any licence held by Mr McDonald shall be subject to a condition prohibiting him from receiving trust moneys or opening, operating or maintaining a trust account.

1. The Director of Consumer Affairs Victoria has applied to the Tribunal for an inquiry under section 25 of the Estate Agents Act 1980 (Vic) (the Act) into the conduct of a licensed estate agent, Mr Aaron McDonald.
2. Mr McDonald held an estate agent's licence from 13 November 2010 until 11 March 2014. Mr McDonald was also the director and Officer in Effective Control (OIEC) of Aaron McDonald Real Estate Pty Ltd (the company), which held a corporate licence until 11 March 2014. The company has been in liquidation since 30 April 2014. Its licence was automatically cancelled on liquidation.
3. On 11 March 2014, the Director suspended both licences, under section 120 of the Australian Consumer Law and Fair Trading Act 2012 after the company failed to submit trust account audit reports for the financial years ending 30 June 2011, 2012 and 2013.
4. Despite the suspension, which was effective 11 March 2014, Mr McDonald did not immediately close his estate agency business.
5. When inspectors attended on 20 March 2014, the business was still open. There were sale boards out the front, staff were making and receiving calls from clients and continuing to receive rental payments. On 24 March 2014, the business' website still showed properties for rental and sale, although it was closed down soon after.
6. Because Mr McDonald and the company were unlicensed for that trading period, their clients lost the protection of the Victorian Property Fund (the VPF). The VPF provides compensation for individuals and corporations when an estate agent, conveyancer or their respective representative has misused or misappropriated trust money or property in the course of their work
7. The Director makes three allegations, each of which Mr McDonald admits. The allegations and particulars are, in summary:
   • In breach of section 12 of the Act, Mr McDonald and the company continued to carry on an estate agency business after their respective licences were suspended on 11 March 2014.
     • The business was still operating and open to the public when Consumer Affairs Victoria Inspectors attended on 20 March 2014;
   • In breach of section 64 of the Act, in each of the financial years ending 30 June 2011, 2012 and 2013, Mr McDonald failed to ensure that the trust accounts of the business were audited within three months after 30 June.
     • Mr McDonald provided a qualified audit report for the financial year ending 30 June 2011 to Consumer Affairs Victoria on 21 March 2014. The reports for 2012 and 2013 have not been provided;
   • In breach of regulation 13 of the Estate Agents (Professional Conduct) Regulations 2008 (Vic), Mr McDonald engaged in conduct that is unprofessional or detrimental to the reputation or interests of the estate agency industry.
     • By continuing to trade past their respective suspensions, Mr McDonald and the company have put numerous consumers at risk: they are not eligible to rely on the protections of the Victorian Property Fund as Mr McDonald and the company remained unlicensed.
8. At the hearing on 21 July 2015, the parties provided a statement of agreed facts. On the basis of the statement, I found proven the alleged grounds for taking action set out in the Director's application.
9. The hearing then turned to the question of determinations under section 28A of the Act. Mr McDonald gave evidence and was cross-examined. The parties' legal representatives made some oral submissions and filed further written submissions after the hearing.
10. Section 28A of the Act sets out the determinations the Tribunal may make. They include:
    • Reprimand
    • Compliance with a specified requirement
    • Cancellation of the licence and disqualification from holding a licence either permanently or for a specified period
    • Suspension of the licence for a period up to one year
    • Conditions or limitations on the licence
    • Declaration of ineligibility to hold a licence or to be an agents' representative either permanently or temporarily
    • Requirement to provide an undertaking
    • Penalty of $5,000 or less.
11. The Director seeks orders that Mr McDonald be reprimanded, his licence cancelled and that he be permanently disqualified from holding a licence.
12. Mr McDonald seeks orders that will allow him to continue to work in the industry as an agent's representative. He is willing to undertake never to re-apply for an agent's licence but asks that the Tribunal not cancel his licence and disqualify him for any period because that will prevent him from working in the industry in any capacity for such a period.
13. The issue arises because, although section 28A appears to give the Tribunal the discretion to declare a person ineligible for a period of time to be either an estate agent or an agent's representative or both, section 44(1)(a) of the Act prohibits employment in any capacity of a person who is for the time being disqualified from holding a licence.
14. Before turning to the submissions regarding orders under section 28A, I set out the relevant agreed facts.

1. The following are paragraphs 4 to 18 of the parties' agreed statement of facts as set out in that document:[1]

[4] On 29 May 2013, following an inspection by Consumer Affairs Victoria ('CAV') inspectors, the company was issued with warning letter, care of its OIEC, McDonald requiring the completion out the outstanding trust account audits by 14 June 2013. During the inspection, Mr McDonald appeared surprised that the audits had not been undertaken and advised the CAV Inspector that he believed accountants were responsible.

[5] On 3 September 2013, CAV inspectors attended the premises to conduct an unannounced inspection of the premises. Mr McDonald, was again asked about the outstanding audits and in response to questioning advised that he had engaged his accountants Jag Accounting to complete the outstanding trust accounts.

[6] Following the inspection on 3 September 2013, CAV Inspector Hin Dan, subsequently contact Jag Accountants, the accounting firm nominated by Mr McDonald to determine the status of the audit reports. Inspector Dan was advised by Jag Accountants that they were not engaged by the company to undertake the audit and that they were unable to offer this service as they were not qualified auditors for the propose of the Act.

[7] On 13 January 2014, CAV again wrote to the company and Mr McDonald, both in his capacity as OIEC of the Estate Agent and as an individual licensee under the Act, advising that the Director of Consumer Affairs Victoria ("the Director") was considering suspending the licenses of the company and Mr McDonald, pursuant to section 120 of the ACLFRA, due to the continued non-compliance with the requirements of section 64 of the Act. The company and Mr McDonald were given until 29 January 2014 to make submissions as to why the Director should not exercise this discretion.

[8] On 29 January 2014, CAV received submissions from Mr McDonald, personally and on behalf of the company. Mr Mc Donald advised:

1. "our office has recently appointed a new book keeper by the name of John Goodsal in Jag Bookkeepers; they have since taken over our account and have appointed Zimsen partners as our new company accountants Dancy He who is looking after our file is currently working on getting the audit reports finalised (sic)."
2. "In summary I would like to reiterate that Zimsen partners are currently getting our audit reports up to date for the FYE 2011-2013. As they previous company didn't have the experience nor knowledge to complete them...I am pleading that should you allow me to hand in the 3 report you will be satisfied".

[9] On 6 February 2014, CAV officers once again spoke with Mr McDonald about the outstanding reports and stressed the need for these reports to be submitted urgently.

[10] On 12 February 2014, Mr McDonald left a message for CAV officers advising that the outstanding reports would be provided in a couple of weeks.

[11] On 17 February 2014, CAV received a further email from Mr McDonald, containing the details of Mr McDonald's accountant and auditor, Mr Rajesh Verma.

[12] On 19 February 2014, CAV contacted Mr Rajesh Verma, the auditor nominated by Mr McDonald who advised that despite speaking to Mr McDonald the week earlier and requesting information he had not received any of the paperwork or documentation required to complete the outstanding audits and therefore could not confirm a period for the completion of the audits.

[13] Following the advice from Mr Verma, CAV Inspectors had a further conversation with Mr McDonald on 19 February 2014, stressing the importance of the outstanding reports and apparent inconsistencies in the information provided to CAV to date.

[14] On 7 March 2014, CAV received an email from Mr McDonald advising that he had been away but was intending to catch up with the auditor.

[15] On 11 March 2014, Mr McDonald and the Company were served with a covering letter and a notice under section 120 of the ACLFTA. The notice advised that pursuant to section 120 of the ACLFTA, the licence issued to Aaron McDonald Real Estate Pty Ltd and Mr McDonald was suspended effective immediately upon service.

[16] On 20 March 2014, CAV received information alleging a deficiency in company's trust account in excess of $120,000. CAV attended the business premises the same day and observed the business operating despite the suspension of the Estate Agent and Mr McDonald some 9 days earlier. CAV seized a number of records and documents and advised Mr McDonald that these would be returned as soon as possible, however, should he require any documentation to complete his audits to contact CAV.

[17] On 21 March 2014, CAV received a completed audit report for the financial year ending 2011. To date the audit reports for the financial years ending 2012 and 2013 remain outstanding.

[18] On 30 April 2014 the company was placed in liquidation.

Making determinations: the guiding principles

1. In making determinations, the Tribunal directs its consideration to protecting the public, and the maintenance of public confidence in, and the professional standards of, the regulated industry.[2]
2. As observed by Murphy J in Mario Inglese v Estate Agents Board:[3]

If an estate agent is to be disqualified, the purpose which the Tribunal should have in mind is not the punishment of the individual (though it may appear to be a punishment to him) but the importance of protecting the public and the necessity to maintain standards in the conduct of an estate agent's business.

1. In the context of protecting the public and maintaining standards, the Tribunal assesses the need for specific deterrence (deterring the individual from repeating the conduct) and general deterrence (deterring others in the industry from offending in a similar way, by signalling that to do so will attract consequences).
2. General deterrence will increase in importance where there would be serious consequences if others in the industry engaged in the same conduct.
3. Specific deterrence will increase in importance where the individual has a history of contraventions, lacks insight or remorse or is otherwise liable to re-offend.
4. Necessarily, any sanctions will have a punitive effect. As observed by Maxwell P in Quinn v Law Institute of Victoria:[4]

The objectives of specific and general deterrence - which serve the protection of the public - depend upon the sanctions having punitive effect.

1. The Tribunal will take into account mitigating factors such as evidence of physical or psychological illness, family or other personal circumstances that may explain a lapse in otherwise high standards of conduct.
2. Where there is a choice of sanctions, however, the Tribunal will choose that sanction which maximises the protection of the public.[5]
3. While the Tribunal will have regard to other decisions involving similar conduct, every case is different.
4. Where conduct as an OIEC is involved, the Tribunal will be mindful of the important responsibilities placed on the OIEC. As Senior Member Proctor observed in Director of Consumer Affairs v Stewart[6]:

The role of OIEC is created in the Act as an essential element of the protection of the public. If the OIEC fails in that role, the public is at risk. That failure can take the form of a person not in fact being in effective control, even if the person acts honestly.

1. Mr McDonald gave evidence relevant to an assessment of the need for specific deterrence, which also provided some background to the particular failings in this case. The following is a summary of the evidence and some observations.

1. Mr McDonald is now in his 30s. His first job after finishing high school was in real estate. He worked as an agents' representative for nearly 9 years and then, in November 2010, obtained his estate agent's licence and set up his own business under the name 'Aaron McDonald Real Estate Pty Ltd'.
2. Mr McDonald said that at the time he started the business he had no experience managing the accounts or financial affairs of a real estate office, and that he was not aware of trust account auditing requirements.
3. In cross-examination, Mr McDonald agreed that he had undertaken the trust account unit in the estate agents' course. On the evidence, it is clear that he did not obtain or retain any understanding of the detail or the importance of trust account auditing requirements.
4. He assumed that his book-keeper would see to the audits. He did not realise that trust account audits may only be carried out by only approved auditors. He did not realise until May 2013 that his trust account audit reports were overdue.
5. Even after CAV sent him a warning letter in May 2013 and he engaged JAG Accountants, Mr McDonald believed, without confirming with them, that they would be able to perform the overdue trust account audits. He gave assurances to CAV that they would do so. They were not, in fact, able to do so because they were not qualified auditors. That only came to light when Inspector Dan contacted JAG Accountants in September 2013. JAG Accountants also told Inspector Dan that they had not been engaged to do the audit.
6. Zimsen Partners, who were qualified auditors, were not appointed until some time in early January 2014. They were able to complete a qualified audit report for the FYE 2011 by 21 March 2014. 2012 and 2013 remain outstanding. Mr McDonald has not had control over the company's records since liquidators were appointed on 30 April 2014.
7. During the period May 2013 to late 2013, Mr McDonald was giving assurances to CAV inspectors that were based on his assumptions and his ignorance of the requirements, rather than on direct enquiries that he had made with the accountants.
8. It was put to Mr McDonald in cross-examination that he had lied to inspectors over this period and had deliberately misled them. He denied that he had done so. It would clearly be a very serious matter if he had lied to inspectors. Even carelessness rather than dishonesty is serious enough.
9. On the evidence, I was not satisfied that Mr McDonald had deliberately misled CAV. In any event, the Director did not expressly make that allegation in the grounds for taking action. Nevertheless, Mr McDonald showed a high level of carelessness in his responses to the CAV inspectors in 2013 and a willingness to make promises without making sure that he could keep them. This is not to his credit.
10. Mr McDonald also showed a disturbing lack of understanding of what might be described as the basics of trust account auditing as set out clearly in section 64 of the Act:
    • That the person who carries on business as an estate agent has the obligation to ensure that the trust accounts are audited within 3 months after 30 June in each year.
    • That the person appointed as an auditor must be qualified under the Act to act as an auditor.
    • That the person who carries on the business must ensure that a copy of the audit report is lodged with CAV within 10 business days of receiving it.

1. Of even more concern is Mr McDonald's conduct in March 2014, when he continued to trade despite being suspended.
2. Mr McDonald's evidence about his reasons for doing so was unsatisfactory.
3. In evidence in chief, his counsel asked why he was still trading after he had been suspended. Mr McDonald said that he was juggling a lot. It was overwhelming. Mr McDonald accepted that his personal and professional life were a 'train wreck'. He was not trying to 'pass the buck' but he was trying to look after people and it was a stressful time. When asked what pressures were on him, he replied: "the pressure was running everything by myself and trying to find an OIEC to run the business."
4. I discuss the background pressures later. One of the concerns I had about this evidence was that Mr McDonald did not seem to understand that because the company's licence had also been suspended, finding a new OIEC would not solve the problem.
5. Mr McDonald also did not seem to understand at the time that the suspension was immediate. When inspectors attended on 20 March 2014, he told them that he was in the process of winding the business down. He said in evidence that he had thought he had some time to do that.
6. CAV served the suspension notice personally. According to Inspector Dan's statement, after having appeared to skim read the document, Mr McDonald said words to the effect of "what do I do now? Can I still work?" Inspector Dan replied that Mr McDonald should read the notice carefully as it explained what he needed to do.
7. The notice and the covering letter are clear, in my view. The covering letter states:

The enclosed notice under section 120 of the Act hereby suspends the licence issued to Aaron McDonald Real Estate Pty Ltd number 72338L, and your personal licence, number 72337L

1. The enclosed notice is clearly a notice of suspension and contains the following:

AND TAKE FURTHER NOTICE that the suspension of the licence takes effect

ii until further order is made by the Victorian Civil and Administrative Tribunal ("the Tribunal")[7] or the Court and

iii whether or not you have been afforded the opportunity to be heard on the matter.

1. Further, Mr McDonald had received an identical letter, described as a 'proposed notice' two months earlier, in January 2014. Whatever the stresses on him, he ought to have been in no doubt then that matters were serious and that CAV were proposing to suspend his licence. When he received the suspension notice in March 2014, he ought to have acted immediately. That he did not do so is inexcusable.
2. In cross-examination Mr McDonald agreed that there were risks of trading while unlicensed. He said that the risks included insurance issues, public liability issues and, when prompted by counsel for the Director, the loss of Victorian Property Fund protection for his client.
3. He did not accept, however, that it was easy to shut the door and said he had auctions scheduled and opens for inspection. He was not sure if he was taking commission, he might have been and there might have been property management fees. He accepted that trading while unlicensed indicated someone who had no understanding of the obligations of OIEC, but he did not accept that it indicated someone who had no understanding of fundamental obligations.
4. Mr McDonald did accept, and there is no doubt, that he was not fit to run an office.
5. General deterrence is highly important in this case. I say more about that below.

1. In his witness statement, Mr McDonald described a series of distressing personal events commencing in about December 2013. He says that while he was attempting to organise for auditing to be completed, his wife, who was pregnant, had a miscarriage. This caused significant emotional trauma and stress to both his wife and himself.
2. He says that at the time, his marriage was going through an extremely difficult period and he sought counselling in an attempt to manage the extreme stress and depression he was experiencing. Due to the exacerbation of these personal matters, he was distracted from the affairs of his business. Through early 2014 his marriage deteriorated, causing him to be further distracted from his business. He says that when he received notice of suspension of his estate agent's licence in March 2014 he was in an extremely stressed and depressed state and lacking proper judgment.
3. These matters are, in my view, relevant to an assessment of Mr McDonald's culpability during the period December 2013 through to March 2014 and I take them into account. They do not excuse, however, his failure to cease trading immediately he received the suspension notice. And they do not provide an explanation for why he did not act quickly and appropriately between May 2013 and September 2013, which would have averted the action CAV took in 2014.

1. Mr McDonald said that he had hoped to be able to sell the business but was unable to do so. The company was placed in liquidation on about 30 April 2014 and, he believes the ATO sold the business. He has found work as an agents' representative with Allans Real Estate and has been working in that role since June 2014. Mr McDonald's own assessment is that, despite his failure to manage his own business, he remains a capable agents' representative.
2. Grant Lynch, who is a director and auctioneer at Allans Real Estate provided a letter in support of Mr McDonald. In that letter, Mr Lynch said that he has always had the utmost respect for Mr McDonald as a real estate agent and as an individual and that he and his partner, Mr Harry Kyriakou, were very keen to purchase Mr McDonald's business, not so much for the business but more to have Mr McDonald as part of their team.
3. In his letter, Mr Lynch described Mr McDonald as having a wealth of knowledge, being a true leader to his peers, and always setting a good example. Mr Lynch spoke highly of Mr McDonald's ethical and professional standards and also notes that he is their highest performing agent, second only to Mr Lynch himself.
4. Mr McDonald described this work as a 'lifeline'. He said that, as a result of the failure of his business and the breakdown of his marriage he has no assets. He is currently renting. If he is not able to work as an agents' representative, he does not know what he will be able to do because the real estate industry is all he has known.

1. The solicitor for the Director submitted that protection of the public and the maintenance of industry standards requires cancelling Mr McDonald's licence and permanently disqualifying him from holding a licence.
2. The submissions emphasised the need for general deterrence, both in respect of trust account auditing contraventions and also trading while suspended. The solicitor for theDirector also submitted that Mr McDonald's conduct in misleading CAV inspectors was a 'deliberate and calculating act, designed to allow the company to continue to trade in deliberate and flagrant non-compliance with the requirements of the Act'.
3. Counsel for Mr McDonald submitted that the orders sought by the Director were out of proportion to the conduct involved, not supported by any case law and manifestly excessive. He submitted that orders short of suspension or cancellation were appropriate, proportionate and more than adequate to protect the public. Suitable orders, he submitted, included an undertaking to the Tribunal that Mr McDonald:
   • will not reapply for an estate agent's licence
   • for a period of ten years will notify the Director of any change in his employer within two weeks of that occurring
   • will undertake to perform the REIV-facilitated professional development course in "Managing Risk in Real Estate".
4. Counsel indicated that it was open to the Tribunal to impose a fine, although given his financial circumstances that should, it was submitted, be moderated, and that Mr McDonald would not argue with a reprimand.

1. In considering determination, I do so on the basis of the grounds of inquiry and the allegations made and proven. As counsel for Mr McDonald submitted, the grounds of inquiry did not allege that Mr McDonald had lied to investigators or engaged in deliberate and calculated deception of inspectors.
2. Despite a suggestion in Inspector Dan's statement and in the agreed statement of facts that Inspectors were concerned about a possible deficiency, the Director made no allegation in the grounds of inquiry or at the hearing that there was any deficiency in the trust account. This is important. As submitted by Counsel for Mr McDonald, it distinguishes his trust account failures from those in such cases such as Acting Director of Consumer Affairs v Moularis,[8] Consumer Affairs Victoria v Hoare (No 2)[9] and .Director of Consumer Affairs v Shaba.[10]
3. In Moularis, the respondent was an agents' representative who had stolen $14,753. The Tribunal declared Mr Moularis ineligible to be an agents' representative for seven years.
4. In Hoare, $13,000 of trust monies had been used to pay other expenses. The respondent's licence was cancelled for one year. There were mitigating circumstances in that case.
5. In Shaba, the trust account had a deficiency at one point of $50,000, although there was evidence that Mr Shaba had restored the deficiency. Mr Shaba had used trust funds to pay business expenses. Mr Shaba's licence was cancelled and he was declared ineligible for eight years.
6. Mr McDonald's conduct in respect of the trust account audits is closer to that of the licensee in Director of Consumer Affairs Victoria v Marshall, [11] where the licensee had failed to ensure that trust account audits reports were lodged for a five year period. Mr Marshall's licence was suspended for a year with an order that it be cancelled if he did not lodge the outstanding audit reports by a specified date. Mr McDonald has lodged a qualified audit report for the year ending 30 June 2011 but has not lodged the other two outstanding reports.[12]
7. As observed above, no two cases are the same. Here, Mr McDonald has not only failed in his obligations in relation to trust account audits and audit reports. He has also continued to trade while suspended. In his submissions, Counsel for Mr McDonald quite properly conceded that this is an aggravating factor. It would be a serious matter on its own.
8. The parties' legal representatives were not able to identify any cases involving an estate agent who had continued to trade while suspended.
9. Mr McDonald's licence has been suspended by operation of the Director's section 120 notice since March 2014 but he has been able to continue to work in the industry, unlike the estate agents in the cases above, whose licences were suspended by order of the Tribunal.
10. If I were considering only the trust account failures, then a period of further suspension would be appropriate in my view to serve the need for general deterrence.
11. As submitted by the solicitor for the Director, there is a high level of regulation of the estate agents' industry reflecting the fact that property transactions can involve very large sums of money for purchasers and vendors, and significant sums of money for tenants and landlords.
12. The trust account audit requirements are an essential part of the regulatory framework and are in place for the protection of those who entrust their money to real estate agents. It is paramount that the Director be able to rely on the timely filing of audit reports. Those reports act as an invaluable information source and can provide early warning of a range of problems including defalcations.
13. In the context of general deterrence, it is also important, in my view, that estate agents are deterred from assuming the obligations of an OIEC or maintaining a trust account unless they are fit for it, have the required understanding of their responsibilities, and are able to pay attention to those important responsibilities.
14. General deterrence is even more important in relation to trading while suspended. There are immediate and serious consequences for any consumers who have financial dealings with the estate agent concerned, in particular the loss of the protection of the Victorian Property Fund.
15. As Counsel for Mr McDonald submitted, no allegation is made that any funds have been lost in this case. It is nevertheless essential, if the public is to be protected, that other licensees understand that serious consequences will follow if a suspension notice given by the Director is ignored.
16. The Director's power is an important part of the regulatory framework that enables fast action to be taken to protect consumers.
17. Where an estate agent has continued to trade while suspended, cancellation and disqualification for a substantial period may well be required to protect the public, maintain professional standards and maintain confidence in those standards. Depending on the circumstances, permanent disqualification may be required.
18. Counsel for Mr McDonald submitted that the period of time in this case was short, about nine days. This does not assist Mr McDonald in circumstances where the trading only came to an end because CAV inspectors attended. When they attended, the estate agency was open for business, Mr McDonald did not have a clear plan to close down the business, and he had not taken any realistic steps of his own volition.
19. I considered carefully whether the proposed undertakings would sufficiently protect the public and maintain professional standards.
20. As submitted, Mr McDonald is offering to exclude himself for life from ever applying for a licence, whilst preserving by the effect of the undertaking, his ability to continue to work in the industry.
21. Counsel for Mr McDonald submitted that general deterrence will be served by the undertakings offered in combination with the public sanction of a reprimand. As submitted, a reprimand is a serious sanction and operates in aid of general and specific deterrence.[13] It is certainly appropriate, in my view, to reprimand in this case.
22. It is also the case, as submitted by Counsel for Mr McDonald, that the Tribunal ought to consider undertakings proffered by a contravener and consider whether such undertakings will meet the need to protect the public.[14]
23. Counsel for Mr McDonald referred to the case of Director of Consumer Affairs v Parsons, [15] where the Tribunal accepted a similar undertaking.
24. Parsons is a different case to this one. Ms Parson's personal circumstances were difficult and complicated but her failures, although serious, were failures of supervision of others, for which she as OIEC was responsible. They were also appropriately characterised as a short and sharp period in an otherwise unblemished career, out of character and explicable. In Mr Parson's case, the solicitor for Director indicated at the hearing that the undertaking addressed the Director's concerns and submitted that to the extent they were failures of supervision, accepting the undertaking addressed the need to protect the public.
25. In contrast Mr McDonald's failures were longstanding. They were not failures of supervision but were failures in relation to his own conduct and understanding of his obligations. They were not obviously out of character, in the sense that he did not at any time between opening a trust account in 2010 and late 2013 understand or comply with his trust accounting obligations. General deterrence is far more important in this case, particularly in relation to trading while suspended.
26. In my view, the proposed undertakings do not adequately address the need to protect the public and maintain professional standards.
27. I also have some concerns about whether Mr McDonald is currently fit to work as an agent's representative in the short to medium term. Although I did not find that he was dishonest or his actions were deliberate, his level of incompetence in relation to fundamental aspects of a licensee's obligations and his lack of understanding about the detail of the regulatory framework are of great concern.
28. He may well be regarded as a good salesperson, but even as an agent's representative it is important to have an understanding of, and respect for the regulatory framework in which one operates. In re-examination, his counsel asked him what were the technical obligations of an agents' representative. Other than saying that they are very different to an OIEC, and that he could fulfil the technical requirements, he was not able to articulate them.
29. While these are matters that could be addressed by further education, I am not satisfied that Mr McDonald currently has sufficient understanding of the detail, and acceptance of the importance of, the regulatory framework to be entrusted with the responsibilities of an agents' representative, even though they are less than that of a licensee and an OICE.
30. I accept that as an agents' representative he would be supervised, as he apparently is now, but the scale of his incompetence as a licensee was so large that it is not a simple matter of saying that so long as he doesn't run the business he will be alright.
31. In addition, orders that would allow Mr McDonald to move from a 'train wreck' of a business and breach of a suspension notice to uninterrupted employment in the real estate industry would, in my view, send an inappropriate message to the industry at large.
32. I have taken into account the mitigating factors of the personal events in December 2013 and following. They warrant, in my view, a reduction in the period of disqualification that would otherwise be ordered. I accept that they were difficult times for Mr McDonald personally. I also take into account his evidence that after his wife's miscarriage, he was depressed, although there was no expert opinion to that effect. I give credit to him for admitting the allegations.
33. I take into account the evidence that Mr McDonald has only every worked in the real estate industry, and there are likely to be financial consequences for him until he is able to find alternate employment. But as President Maxwell observed in Quinn, protection of the public is paramount and the objectives of specific and general deterrence depend on the sanctions having a punitive effect. The financial impact of a determination must always be secondary.
34. In my view, cancellation of Mr McDonald's licence is appropriate and necessary.
35. I regard a period of disqualification from holding a licence of three years as sufficient to meet the needs of general deterrence, taking into account the mitigating factors referred to above. If it were not for those mitigating factors, or if there had been any dishonesty or proven deficiency, a longer period of disqualification would have been warranted.
36. I consider it appropriate however to exclude Mr McDonald permanently from acting as an OIEC of an estate agency business, which can be achieved by a condition to that effect on any future licence.
37. I also consider it appropriate that for a period of 5 years from the time any further licence is granted, any licence held shall be subject to a condition prohibiting him from receiving trust money or opening, operating or maintaining a trust account. Such a condition is additional to any condition the regulator may impose.
38. By these orders, Mr McDonald will not be permanently excluded from holding a licence as an estate agent, as he would have been if I had accepted the undertakings offered. He will also not be permanently excluded from working in the industry, as he would have been if I had made the orders sought by the Director.
39. It is also appropriate that he be reprimanded as discussed above. In the circumstances, I will not impose a fine. There will be a short period before the order for cancellation takes effect.

[1] The document was prepared by the parties at short notice. Typographical and grammatical errors in the quotations are as they appeared in the document.

[2] Re Collins v Estate Agents Board [1994] 7 VAR 394, 400. See also Mario Inglese v Estate Agents' Board VSC (1989), 15 August 1989 per Murphy J

[4] [2007] VSCA 122 at [30]

[5] Quinn v Law Institute of Victoria [2007] VSCA 122 at [31].

[6] [2014] VCAT 446

[7] A licensee whose licence has been suspended by the Director may apply to the Tribunal for a stay of the suspension pending the hearing of a review of the decision. Mr McDonald did not apply for a stay.

[8] [2014] VCAT 474

[9] [2015] VCAT 1077

[10] [2014] VCAT 815

[11] [2013] VCAT 1316.

[12] It is important to note however that he has had no control over the books and records of the company since it went into liquidation.

[13] Consumer Affairs Victoria v Cohen (Review and Regulation) [2014] VCAT 220 [6 March 2014].

[14] Referring to Quinn v Law Institute of Victoria Limited [2007] VSCA 122 [at 31 - 33].

[15] Director of Consumer Affairs v Parsons (Review and Regulation_)_ [2014] VCAT 1231