Director of Consumer Affairs Victoria v Melbourne South Eastern Real Estate Pty Ltd

MORTIMER J: 1 The applicant, the Director of Consumer Affairs Victoria, commenced these proceedings in May 2017 alleging the respondent, a real estate agency trading as Barry Plant Mount Waverley, had contravened provisions of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) and the Australian Consumer Law (Victoria) (the Australian Consumer Law as it applies in Victoria pursuant to s 8 of the Australian Consumer Law and Fair Trading Act 2012 (Vic). He alleged between certain dates in 2014 and 2015, the respondent had engaged in misleading and deceptive conduct, and had made false or misleading representations concerning the likely selling price for 20 properties at various addresses in South-East Melbourne, which the respondent advertised for sale on the website realestate.com.au. 2 The respondent, which I will identify as MSE in these reasons, has admitted to the contraventions alleged by the Director and the underlying conduct. The parties have filed both an agreed statement of facts, and the proposed orders, on a consensual basis, so as to give effect to a settlement reached between them. The parties recognised the Court must nevertheless be satisfied there is a sufficient basis to make the necessary findings, and that the orders sought (including the quantum of penalties sought) are appropriate. 3 The agreed statement of facts was admitted pursuant to s 191 of the Evidence Act 1995 (Cth), and sets out the conduct constituting the alleged contraventions of the ACL and ACL (Vic). With the Director's consent, MSE also read an affidavit of Mr Robert Nabil Namour, a director of MSE, concerning a proposed variation by MSE to the timing and rate of instalment payments of any penalties imposed by the Court, due to the financial situation of MSE. Counsel confirmed to the Court that he was instructed the altered financial position of MSE would not affect MSE's capacity to pay costs, nor to implement the compliance program it had agreed to. 4 Initially, there were also a number of affidavits "annexed" to the agreed statement of facts, upon which the Director sought to rely. The contents of these affidavits traversed much of the contents of the agreed statement of facts, and also went far beyond it. Counsel for MSE submitted that the content of those affidavits was clearly not agreed, and pointed out that the Director himself would not agree with all their content because, for example, there were affidavits from some witnesses MSE had proposed to call if the matter had not resolved by agreement. Counsel for MSE further submitted, and it was clear from even a cursory examination of the documents, that their content would not be admissible taking into account the terms and purpose of s 191(2)(b) of the Evidence Act. Counsel for the Director ultimately accepted the annexures to the agreed statement of facts should not be adduced in evidence given the settlement of the proceedings, but submitted some of them would assist the Court in understanding what was in the agreed statement of facts. 5 However, counsel accepted the Director could, and should, restrict the Director's submissions to the contents of the agreed statement of facts. That is how the case proceeded. Accordingly I have had no regard to any of the affidavit material (and documents) initially attached to the agreed statement of facts, but rather only to the agreed statement of facts itself, Mr Namour's affidavit about instalment payments, and the parties' submissions, insofar as they refer to the agreed statement of facts for factual propositions. 6 The Director's written submissions frequently went well beyond the agreed statement of facts, relying on parts of the affidavit material or documents created during the investigation process. Given the eventual agreed position of the parties at the hearing, and noting that the agreed statement of facts, and the way the proceeding was to be conducted, flowed from the parties' agreement to resolve the Director's claims in a particular way, self-evidently it is not appropriate for the Court to have regard to those parts of the Director's submissions which rely on material that ultimately was not adduced in evidence. 7 MSE consents to orders which would provide for a pecuniary penalty totalling $720,000, declarations, an adverse publicity order, a compliance program, and the payment of a contribution to the Director's costs, in a fixed lump sum amount. 8 For the reasons set out below I am broadly satisfied that the orders proposed by the parties should be made, with one specific exception to which I refer at [58]-[59]. I have proposed to make substantial changes to the content of the public notice initially proposed by the parties because in my opinion in the form proposed it did not clearly explain the findings made by the Court, in a way the public was likely to understand. I also consider that certain changes should be made to the agreed form of declarations, although none of those changes substantively affect the basis on which MSE admitted its conduct, or admitted the contraventions. The parties will be given a further opportunity to make further submissions on the proposed form of the Court's orders.

Legislative framework 9 In carrying out its real estate business, MSE is subject to the Australian Consumer Law (Vic) being the Australian Consumer Law as it applies in Victoria and the Estate Agents Act 1980 (Vic). Although this proceeding does not, in terms, concern contraventions of the Estate Agents Act, some of the obligations of a licensed agent (or an agent's representatives) under that legislation should be noted. The obligations imposed by the scheme are in my opinion relevant to at least two aspects of the proceeding: first, as forming part of the factual knowledge that can be attributed to individual agents such as Mr Namour, to other agents employed at the Barry Plant Mount Waverley office at the relevant time and to MSE, by way of a reasonable belief in the truth of statements made in advertising about selling prices of the properties; and second, as to penalty. 10 Section 47A of the Estate Agents Act relevantly provides: 47A Seller must be given estimated selling price (1) Before obtaining a person's signature to an engagement or appointment to sell residential property on behalf of the person, an estate agent or an agent's representative employed by the agent must ensure that the engagement or appointment contains an estimate of the selling price of the residential property that - (a) is expressed as - (i) a single amount; or (ii) a price range where the difference between the upper and lower limits of the range does not exceed 10 per cent of the amount of the lower limit of the range; and (b) is set out in a form approved by the Director. Penalty: 200 penalty units. (2) Nothing in this section requires the estimate of a selling price and the seller's reserve price to be the same amount. 11 Section 47B provides: 47B False representation to seller or prospective seller An estate agent or agent's representative must not make a false representation to a seller or prospective seller of residential property as to the agent's or representative's estimate of the selling price of the residential property. Penalty: 200 penalty units. 12 Section 47C provides: 47C False representation to prospective purchaser (1) This section applies to an estate agent who holds a written engagement or appointment to sell residential property, and to any agent's representative employed by the agent. (2) In making any statement while marketing the residential property, the agent or representative must not state as a selling price or likely selling price of the residential property a price that is - (a) less than the estimated selling price contained in the engagement or appointment; or (b) if the estimated selling price contained in the engagement or appointment is expressed as a price range - less than the lower limit of that range. Penalty: 200 penalty units. 13 The terms of s 18 of the ACL and the ACL (Vic) should also be set out: 18 Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3‑1 (which is about unfair practices) limits by implication subsection (1). Note: For rules relating to representations as to the country of origin of goods, see Part 5‑3. 14 Section 30(1)(c) of the ACL and the ACL (Vic) contains a specific prohibition in relation to representations made in connection with the sale of land: 30 False or misleading representations about sale etc. of land (1) A person must not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land: … (c) make a false or misleading representation concerning the price payable for the land; or

Factual findings 15 MSE is a company licensed under the Estate Agents Act. It carries on three franchise real estate agent businesses, including a franchise trading under the name of "Barry Plant (Mount Waverley)". The allegations in this proceeding relate to the Mount Waverley franchise of the business. I shall call that Barry Plant Mount Waverley in these reasons. This franchise was, during the relevant period, managed by Mr Robert Namour, a licenced agent under the Estate Agents Act. Mr Namour is the deponent to the affidavit to which I refer above. 16 Mr Namour was at all material times in "effective control" of Barry Plant Mount Waverley for the purposes of s 29B of the Estate Agents Act. He has been a licensed real estate agent for a long time, having obtained his licence in 2001, although he first worked in the real estate industry in 1988. He has been working in the real estate industry in the Waverley district since 1991. At Barry Plant Mount Waverley, Mr Namour was assisted by Ms Frankie Jayne, who had worked for Barry Plant Mount Waverley for seven years. 17 The allegations made by the Director concern the sale of 20 properties between April 2014 and August 2015, with advertising having commenced sometime between February and April 2014 for the first property sold. The properties were located in the suburbs of Ashwood, Burwood, Burwood East, Chadstone and Mount Waverley. These properties are listed in "Annexure A" in the orders to be made, and I refer to them in these reasons as "the properties". 18 As the Estate Agents Act requires, as part of obtaining a person's signature to an engagement or appointment to sell any real estate, an agent must ensure that the authority given by the vendor sets out the agent's estimate of the selling price of the property. Mr Namour, and MSE, accept that the estimated selling price given to the vendor by the agent, and which is on the authority given by the vendor to the agent, should relate to the "blind price" which is entered into the realestate.com.au search engine because otherwise, the "blind price" could lead to underquoting on a property. 19 In relation to each of the properties, before an authority was given by the vendor, agents from MSE (sometimes Mr Namour, who was sometimes assisted by Ms Jayne), but sometimes one of the other agents employed by MSE at the time, gave the relevant vendor an appraisal of the likely selling price for the property. The appraisal was listed on an appraisal form, and in most cases, included recent sales of other, comparable properties in the area to, I infer, substantiate the accuracy of the agent's particular appraisal of the property concerned. 20 At various times between late February 2014 and 15 August 2015, MSE published, or caused to be published, advertisements on the website realestate.com.au about the properties. The first date of publication is unknown on the evidence, but for the property at 23 Wave Avenue, Mount Waverley, the appraisal was completed on 26 February 2014 and the property was sold on 5 April 2014, so the advertisement on realestate.com.au which is alleged to constitute the contravention must have occurred sometime shortly after 26 February 2014. Those advertisements sometimes contained what is called a "display price", being an explicit statement in the advertisement about what the estimated selling price for the property was. Sometimes, there was no display price. There is no obligation to include a display price. 21 For some properties, the only way a consumer could discover the potential selling price for a property was through the way the consumer used the search engine on realestate.com.au. Where this was the case, when the consumer enters a price range into the search engine of realestate.com.au, properties within that search range will appear. Whether a property appears or not depends on what the real estate agent (in this case MSE and its agents) have identified as what is called "the blind price". The identification by a real estate agent of the "blind price" is what will determine whether a property appears in searches performed by consumers who give a particular range of selling prices in which they are interested in purchasing properties. 22 MSE did not dispute in this proceeding that the blind price was an important indicator for consumers of the likely selling price of a property, and was used as such. 23 MSE also accepted that the advertisements it placed on realestate.com.au for the 20 properties, with the display price or the blind price, or both, represented to potential purchasers not only the likely selling price, but also the market value of the properties, and a price for which the vendors of the properties were prepared to sell the properties. 24 The evidence shows that the estimated selling prices listed on the authority for some of the properties were sometimes revised down to reflect the price for which the property was then advertised, that sometimes vendors' "expectations" about price were recorded by MSE agents, and that on one occasion MSE agents advised the vendor to drop the advertised price and the estimated selling price on the authority to attract more interest, notwithstanding what the price was dropped to was significantly below the selling price the vendors had indicated they were prepared to take. On several occasions, the display price and blind price of the property were also amended in the period during which the property was advertised, to a substantially lower price. 25 The evidence shows, and I am satisfied, that over all 20 properties, the differences between the appraisal price on the one hand and the display price and blind price on the other, were significant, and in relation to these 20 properties the two latter prices were significantly lower. 26 The evidence also shows, and I am satisfied, that each of the 20 properties ended up selling for approximately the same as, or in excess of, the appraisal price and well in excess of advertised prices (ie display and blind prices). Thus, the "underquoting" occurred in the way the property was represented to the public through advertising and marketing on realestate.com.au, and to potential purchasers. 27 The agreed facts set out the details of each of the relevant steps in the listing of each property, with the facts concerning the appraisal prices, the estimated selling prices, the display and/or blind prices (some properties did not have display prices but all properties had blind prices as part of their searchable terms) and the prices for which the properties ultimately sold at auction, or privately. The agreed facts also establish which agents within MSE were responsible for the pricing of each property. 28 I propose to simply give some examples, to demonstrate the nature of the contravening conduct, the range of underquoting, and to indicate its seriousness because of the significant differences in the prices in relation to many of the 20 properties. However, it is also important to emphasise that the price differences for some of the properties were not as extreme as others.

The Renown Street property 29 Mr Stuart Davies from MSE was responsible for the appraisal of this property. It was recorded in late January 2015 in the appraisal as having a selling price range of $2,200,000 to $2,500,000. The three comparable properties listed in the appraisal had sale prices ranging from $1,000,000 to $1,640,000. The estimated selling price on the vendor's authority, dated 12 February 2015, was $1,750,000 to $1,925,000. At some stage, a vendor's reserve of $2,250,000 was noted on the authority. 30 No display price was advertised on the realestate.com.au website for this property. That is, consumers were given no indication of the likely selling price. The blind price was $1,750,000. 31 Yet the Renown Street property was sold for $2,360,000 on 28 March 2015, well above even the vendor's identified reserve price, but well within the estimated selling price given during the appraisal. The price the property was sold for was more than $550,000 above the blind price.

The Illuka Crescent property 32 Mr Namour and Ms Jayne undertook an appraisal of this property in February 2015, and the appraisal is recorded as "$800 +/-". The three comparable properties on the appraisal all had previous sale prices between $780,000 and $882,000. 33 The estimated selling price set out in the vendor's authority was $650,000 to $715,000. 34 This property had both a display price and a blind price on the realestate.com.au website. Its display price began at "$650,000 plus", which was at the lowest end of the estimated selling price. 35 Its initial blind price was $700,000, but this was lowered the next day to $600,000. 36 Conformably with the appraisal, the Illuka Crescent property was sold at auction for $860,000 on 21 March 2015.

The Cassinia Avenue property 37 Mr Davies was again the agent who appraised this property, and recorded an appraisal in January of $850,000 to $900,000. The three comparable properties on the appraisal all had previous sale prices between $930,000 and $940,000. There was an entry for "client expectation" on the appraisal form, and the sale price expectation recorded there was a price range of $850,000 to "low $900,000". When the vendor's authority was completed in early February 2015, the estimated selling price for this property was said to be $700,000 to $770,000, significantly lower than both the appraisal and the "client expectation". 38 Yet, MSE's records show that MSE's commission was first calculated using a sale price of $955,800, which was subsequently changed to $975,800. The vendor's authority also recorded that additional commission was payable for a sale price above $970,000. A further vendor's authority of the same date maintained the same estimated selling price, yet calculated the commission on a sale price of $971,000. 39 This property did not have a display price on the realestate.com.au website, so consumers had no information about the proposed selling price. Its blind price was $700,000. Although this correlated with the estimated selling price on the authority, it was materially inconsistent with the prices being used to calculate MSE's commission, and with what had been recorded as the vendor's expectations. I am prepared to infer the estimated selling price on the authority in this document was set at lower than the price MSE and its agents, in particular Mr Davies, knew it was likely to sell for. 40 Contrary to the estimated selling price as it was recorded in the authority, but very consistently with the appraisal and with the vendor's expectations as recorded, this property sold at auction on 12 April 2015 for $975,800, more than $250,000 over the blind price.

The Gordon Road property 41 I have included this property as an example because it provided some additional evidence of the deliberateness of the strategies employed by MSE and its agents. 42 The evidence shows Ms Jayne gave the vendors an appraisal of the property on her own, set at $1,100,000 although she told them that $1,200,000 would be "a good result which could be achievable". However, she recorded the appraisal as $1,200,000 to $1,300,000. 43 Before they gave MSE authority, the vendors of this property told an MSE agent that they would not accept an offer of less than $1,200,000 for the property. Despite this, MSE's agent attempted to persuade them to reduce the advertising price to between $900,000 and $950,000 to attract more interest in the property. The vendors did not consider this to be a "sound marketing strategy" - as it turned out, presciently so - and refused. Accordingly, they gave MSE an authority to sell the property for an estimated selling price between $1,200,000 and $1,320,000. 44 This was not the end of MSE's persuasive strategy. At a later meeting, in early February 2015, the vendors were advised by MSE's agent (whose identity is not disclosed in the evidence) to drop the estimated selling price down to between $910,000 and $1,001,000 "in order to attract more interest in the property". At this point, the vendors agreed, reluctantly. 45 This property did not have a display price. Its blind price was set in accordance with the revised downward estimate, at $950,000. It is to be recalled that the vendors had instructed MSE and its agents they would not sell the property for below $1,200,000. 46 Again, in accordance with a price closer to the appraisal, and to the vendor's firm intentions, this property was sold at auction for $1,333,000 on 28 March 2015, not far off $400,000 above the blind price.

A less extreme example: the Huntingdale Road, Ashwood property 47 The appraisal by MSE for this property recorded a selling price in the appraisal in the range of $420,000 to $462,000. The three comparable former sale properties in the area all had a sale price of $505,000. Ms Carolyn Barton, the then branch manager, was the agent responsible for the appraisal. 48 The vendors authorised the sale in early August 2014 with an estimated selling price of between $420,000 and $462,000. At a date not revealed in the evidence, the estimated selling price was reduced to $395,000-$434,000. Yet, the reserve for the property was noted on the vendor's authority as $480,000. 49 This property was advertised with both a display price and a blind price. The display price changed over time. It started (in late August 2014) at "$450,000 plus". That, I note, is more or less in the middle of the range of the estimated selling price in the authority, and there is nothing untoward about it being struck at that level. However, on 12 September 2014, for just one day, the display price was dropped to "$390,000 plus", some $30,000 below the lower end of the estimated selling price. The next day, the display price was increased to "$450,000 plus", but only for two days and then it was dropped, again, to "$390,000 plus". It was increased slightly after one day, on 16 September 2014 to "$395,000 plus", where it remained until the end of September 2014, when it sold at auction. Thus, the display price when it sold at auction was "$395,000 plus". 50 During the period of this last display price, in a document dated 19 September 2014, the vendor's authority to sell nominated the vendor's nominated reserve price as $480,000, well above the price level the property was being advertised for. 51 The blind price on the realestate.com.au website for this property for a few days in mid-September was $420,000, but for the last half of September and, importantly, for the period immediately prior to the auction, the blind price was set at $350,000, that is $130,000 below the vendor's reserve price. 52 The Huntingdale Road, Ashwood property sold at auction on 30 September 2014, for the sum of $452,500.

The 302 High Street Road property 53 This property is sought to be the subject of particular mention in the declaratory relief, because additional representations were made about the likely selling price to a potential purchaser. Mr Namour and Ms Jayne were responsible for the appraisal of the likely selling price for this property, which they nominated as being in the range of $650,000 to $700,000. The three comparable property sales in the area had identified sale prices ranging from $585,000 to $651,000. The client's expectation had been recorded as "$650+/-". 54 The vendors gave authority to Barry Plant Mount Waverley to sell the property, with an estimated selling price of $550,000 to $605,000. However, the agents' commission was expressed to be calculated on a sale price of $650,000, which is a figure consistent with the appraisal. 55 This property was advertised with a display price on the realestate.com.au website. It was set at "$550,000 plus". It was given a blind price of $650,000, but the same day this was changed to $550,000. Perhaps someone realised there was a correlation between the appraisal and the blind price (which would have been accurate and not misleading) and decided to change it: there is no evidence one way or the other so I make no finding on that matter. 56 Not long after it had been advertised, Mr Charnchai Trangadisaikul telephoned Ms Jayne to inquire about this property. Ms Jayne told Mr Trangadisaikul it would sell well over the advertised price of $550,000. Some three to four weeks before the auction Mr Trangadisaikul spoke to Ms Jayne again. She told him that there was a lot of interest in the property and that he should expect to pay more at the auction than the price advertised. 57 Ms Jayne's belief turned out to be quite correct. Mr Trangadisaikul was the successful bidder for the property at the auction on 21 March 2015, but the selling price was $702,500. This price was not a great deal more, in house price terms, than the appraisal price, or the price at which commission was calculated. It was, however, considerably more than the display price and the blind price. 58 The Director sought, as I have noted, a specific reference in the declaratory relief to a buyer interested in this property (through Mr Trangadisaikul). The Director submitted (in submissions filed with leave after judgment was reserved) that the agreed statement of facts demonstrated that MSE "had received a lot of interest in the property and expected that [the] selling price of the 302 High Street Property would be more than its advertised price". As noted above, there were references to two telephone conversations between Ms Jayne and Mr Trangadisaikul in the agreed statement of facts and there were agreed facts that Ms Jayne made statements there was a lot of interest in the property, that the property would sell well over the advertised price, and that he should expect to pay more at auction than the price advertised. I am not satisfied that this evidence provides a sufficient foundation to grant any further declaratory relief about MSE's "expectation". In my opinion, MSE's belief, and its relationship to the misleading or deceptive character of the advertised prices is properly established through the admissions about the appraisal prices. 59 I decline to include any specific reference to the 302 High Street property in the declaratory relief.

Other relevant factual matters 60 The financial year that ended on 30 June 2015, the financial year in which many of these sales were made, was a particularly good one for the Mount Waverley franchise of MSE. It earned a pre-tax profit of $1,405,917 for that financial year, compared to $505,880 for the preceding financial year, and $178,951 and $131,561 respectively for the next two financial years. 61 The total gross commission for Barry Plant Mount Waverley for the sales of the properties was $490,923.67 (excluding GST). After deducting expenses, including wages and other payments to staff, out of pocket advertising costs, and other expenses, the net margin generated by the sale of the relevant properties was $228,218.53. 62 During this period, Mr Namour, as the manager of this branch, well understood his obligations about the need for the estimated selling price to reflect the price that would be used in promoting and marketing the property to consumers. In an email to a prospective vendor, sent 10 March 2015, Namour explained: Agent's estimate of selling price: The two figures are marketing range (not necessarily your selling price range). In Victoria it is a requirement that we put a 10% range on the Authority to Act, this is the range that we will use in marketing.

Contraventions 63 There was of course no debate that all of the impugned conduct occurred in the course of trade and commerce. Little time in submissions or oral argument was spent on the form of declarations, or the precise nature of the representations, probably because the parties had agreed them. That in turn created some difficulties which needed to be addressed in correspondence to the parties after judgment was reserved. 64 However it is necessary for me to set out the representations I find were made, based on the facts as agreed. 65 I find that MSE, through its agents employed at Barry Plant Mount Waverley at the relevant time and who were involved in fixing the display price and/or the blind price for one or more of the 20 properties, made the following representations to the potential purchasers of the properties who used the realestate.com.au website: (a) The agents, on behalf of MSE trading as Barry Plant Mount Waverley, believed and held the opinion that each of the properties would be sold at, or for not substantially more than the display price, where such a price was stated in the advertisement; (b) The agents, on behalf of MSE trading as Barry Plant Mount Waverley, believed and held the opinion that each of the properties would be sold at, or for not substantially more than the price, or price range, which was generated in search results to those purchasers by reason of the blind price attributed to each property by agents employed by MSE. 66 I further find that MSE, through its agents employed at Barry Plant Mount Waverley at the relevant time and who were involved in fixing the display price and/or the blind price for one or more of the 20 properties, made the following representations to the potential purchasers of the properties who used the realestate.com.au website: (a) The likely selling price, or market value, of each of the properties was the display price or not substantially more than the display price, where such a price was stated in the advertisement; (b) The likely selling price, or market value, of the each of the properties was the price, or price range, which was generated in search results to those purchasers by reason of the blind price attributed to each property by agents employed by MSE. 67 I am satisfied that each of these representations was misleading or deceptive, because MSE, through its agents at Barry Plant Mount Waverley had provided an appraisal to the vendors of the properties that was substantially more than the display price and/or blind price. On several occasions, MSE, through its agents at Barry Plant Mount Waverley had also accepted an authority to act as agent on the basis of an estimated selling price that was substantially more than the display price and/or blind price. 68 I am separately satisfied on the evidence that in relation to 8 Paynes Road, Mount Waverley and 17 Gordon Road, Mount Waverley, MSE, through its agents employed at Barry Plant Mount Waverley at the relevant time and who were involved in fixing the display price and/or the blind price for those properties, represented to the potential purchasers of the properties who used the realestate.com.au website that the vendors of those two properties were prepared to sell the properties at, or for a price not substantially more than the display price, or for the price range, which was generated in search results to those purchasers by reason of the blind price attributed to each property by agents employed by MSE. 69 I am satisfied that each of these representations was misleading or deceptive, because MSE, through its agents at Barry Plant Mount Waverley had instructions from each of the vendors of those properties not to sell them below a certain price, which was a price that was more, or substantially more than either the display price or the blind price. 70 Insofar as any or all of these representations were representations as to future matters (which it seems to me they were, although the parties did not address this matter), I am satisfied that MSE, through its agents at Barry Plant Mount Waverley, had no reasonable grounds to make such representations as they had earlier given advice through appraisals and the fixing of estimated selling prices which varied considerably from the display price and the blind price. 71 In summary, I am satisfied the conduct set out in [65] to [70] above contravenes both s 18 of the ACL and ACL (Vic) and s 30 of the ACL and ACL (Vic).

Appropriate orders 72 I accept the Director's submission, by reference to the decision of French J (as his Honour then was) in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18; 161 ALR 79, that in regulatory matters, where the parties have reached an agreed settlement of a proceeding, involving a range of remedies, the Court's role is a restrained one in terms of considering whether different remedies should be imposed. His Honour said (at [20]): A general principle of judicial restraint in the scrutiny of proposed settlements was enunciated early in the history of the Trade Practices Act. It is not the function of the court to impede settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to a settlement nor to refuse to give effect to terms of settlement by refusing to make orders or accept undertakings where they are within the court's jurisdiction and otherwise unobjectionable. 73 The Court must be satisfied the remedies are just and appropriate, but whether they are "just" will be substantially informed by the fact that they have been agreed, after a negotiation between legally represented parties, bearing in mind the regulator (here the Director) acts in the public interest. That is an approach which is common in civil proceedings, including regulatory proceedings of the current kind which are plainly civil proceedings. In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 the plurality said (at [57]): In contrast, in civil proceedings there is generally very considerable scope for the parties to agree on the facts and upon consequences. There is also very considerable scope for them to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy. Accordingly, settlements of civil proceedings are commonplace and orders by consent for the payment of damages and other relief are unremarkable. So are court-approved compromises of proceedings on behalf of infants and persons otherwise lacking capacity, court-approved custody and property settlements, court approved compromises in group proceedings and court-approved schemes of arrangement. More generally, it is entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate. 74 Thus, where a full settlement has been reached, contraventions admitted, and a suite of orders proposed to reflect that settlement, whether the remedies proposed by the parties is "appropriate" is the task for the consideration of the Court. 75 Further, when considering whether the remedies proposed are appropriate, the Court must focus on the protective purpose of the ACL and of the imposition of remedies such as civil penalties, and assess what is proffered against that standard. The plurality made this clear in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate at [55]: No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance: "Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act." (citations omitted) 76 The applicable principles, framed in the context of conduct by real estate agents have been set out by other judges of this Court in Director of Consumer Affairs Victoria v Hocking Stuart (Richmond) Pty Ltd [2016] FCA 1184 (Middleton J); Director of Consumer Affairs Victoria v Manningham Property Group Pty Ltd [2017] FCA 1448 (Murphy J); and Director of Consumer Affairs Victoria v Fletcher & Parker (Balwyn) Pty Ltd [2017] FCA 1521 (Murphy J). I respectfully agree with the statements of principle and approach set out by their Honours in those decisions, and need not repeat them here. 77 MSE accepted in its written submissions that the facts in this proceeding were "closely analogous" to the facts in those proceedings. 78 Nevertheless, there were some particular aspects of the conduct by MSE to which it has admitted in these proceedings which do call for some analysis and specific application of principle. 79 Advertising and marketing for the sale of properties involving underquoting misleads and deceives consumers, who are in the property market, in a fundamental way. Purchasers are driven by a number of variables, but price is key amongst them. Like any other category of information about a product, or piece of real or personal property they are intending to purchase, consumers are entitled to accurate and complete information to assist them in making reasonable and responsible decisions about the way they choose to spend their money. In relation to real estate properties, they are entitled not to be misled about the likely selling price of a property. The likely selling price will include not only market value, but what the vendors are prepared to accept as a purchase price. That is why an advertised selling price that incorporates a range may be a fair and reasonable practice: where a property is to be sold by auction or tender and not in a fixed price sale, identifying the likely final selling price is not an exact science, is market dependent, and sale outcomes will always involve some level of variation. So much can be accepted. 80 Where conduct crosses the line into being misleading or deceptive is where the selling prices put forward to the purchasing public differ substantially from the real estate agent's true opinion, and differ substantially from the vendor's true state of mind in terms of what the vendor will accept. By "substantially", I mean (as the evidence in this proceeding shows) differences often in the tens or hundreds of thousands of dollars. The true situation is being concealed from the purchasing public in those circumstances. 81 As the parties submitted, the totality of the remedies imposed is a factor to be considered in deciding whether the orders are, as a whole appropriate. The pecuniary penalties should not be seen in isolation: they form part of a larger burden proposed to be imposed on MSE by the Court's orders, including adverse publicity orders and a compliance program.

Characterisation of MSE's conduct 82 This was the one issue about which there was some dispute between the parties. The dispute seemed to stem from MSE's concern to avoid findings, or observations, in the Court's reasons for judgment which reflected on the individual agents involved, in the sense of attributing to them a consciousness of what they were doing. Having noted that intention was not an element of the prohibition in s 18 or s 30 of the ACL, MSE submitted: MSERE does not accept the CAV submissions to the effect that its contravening conduct was done in knowing disregard of the law, that it had any positive intention to conceal its conduct from CAV or that it deliberately intended to contravene the ACL or ACL (Vic). MSERE submits that the evidence does not prove any such positive intention to disregard or contravene the ACL or ACL (Vic) and notes that intention is not a necessary element of the admitted contraventions. MSERE does, however, acknowledges the seriousness of the contraventions the subject of this proceeding and is committed to ensuring they are not repeated. It accepts that the contravening conduct was misleading, wrongful and repeated. MSERE has significantly increased its corporate compliance measures and is committed to ensuring that the contraventions are not repeated. 83 Counsel for MSE accepted in oral submissions that there was in fact no submission from the Director about MSE or its employee agents acting in "knowing disregard" of the ACL, and did not press this aspect of the argument. However, he did press an argument that seemed to suggest there should be no finding by the Court that MSE, through its employee real estate agents, intended to engage in conduct that was misleading or deceptive (accepting as is the case that intention is not an element of the prohibitions). 84 It is true that the Director submitted that a higher pecuniary penalty for the blind price advertisements is warranted: I deal with this below. Since MSE has agreed to the differential penalties, the Court should have been able to proceed on the basis it also agreed with the Director's proposition that the conduct involving blind pricing is deserving of a higher penalty. 85 Counsel for MSE was somewhat coy about this in oral submissions. However, after some exchanges, MSE's counsel accepted that the use of blind pricing as a practice or method was capable of being more misleading, because it was a practice entirely hidden from consumers. Ultimately, he did accept the court could infer that the reason for MSE's conduct, and that of its agents, in engaging in underquoting properties through the fixing of a blind price, well below the actual estimated selling price the agent had reached, was to conceal the underquoting, including from the regulator. 86 That concession was properly made. I consider the evidence does permit that inference to be drawn. The evidence shows that MSE's agents at Barry Plant Mount Waverley consistently advised vendors in their appraisals of a selling price that was at, or above, the estimated selling price put on the vendor's authority. The appraisal is the expression of the agent's honest, experienced opinion of the likely selling price of a property in the current market at the time the property is to be listed for sale. It is not a figure to be plucked from the air, or to be artificially arrived at. That is the point of the exercise of evaluating the property in question with previous sale prices of three comparable properties. A fair and reasonable estimate, with some basis in the facts of recent, comparable sales in the market, is to be given. 87 Yet the evidence also consistently showed no translation of the agents' actual opinions and advice into the display price and the blind price. The evidence showed a pattern of not including any display price at all: the effect of that, intentionally is not to give consumers any "up front" indication of what the likely selling price might be. Only five out of 20 properties had a display price. The effect of depressing the blind price is to draw in categories of consumers who would not be interested at all in the property if the agent's true opinion about the likely selling price was disclosed. The concealment, through a depressed blind price, is necessary for this drawing in to occur. 88 The concealment is not, as I have said, only or even principally from the regulator. Just as importantly, it is from consumers, potential purchasers. Those consumers enter prices into a range on the search engine on realestate.com.au, and expect that what is returned in those searches are properties which are genuinely and accurately estimated to sell for a price within the range they have entered. They are entitled to expect that. The practice of underquoting through blind pricing conceals the underquoting from consumers in a way that underquoting through display pricing does not. Real estate agents, such as those employed by MSE at the time of the contravening conduct, can be taken to understand the effect of entering a price range by way of a blind price. 89 I note that the practice of blind pricing did not feature in any of the previous cases to which I have referred. It is a practice which deserves the scrutiny in this proceeding that the Director has given it. It is to be hoped that all real estate agents take note of the consequences for MSE that have resulted from engaging in conduct that involves underquoting through the mechanism of blind pricing.

Declarations 90 I am satisfied declaratory relief is appropriate in this proceeding. 91 The form of the declarations proposed by the parties had a number of difficulties. The parties were informed of some of those difficulties and provided amended proposed declarations. I still considered the form to be unsatisfactory, so I have proposed further amendments. The Court is satisfied with the form now to be proposed to the parties. It is part of the Court's function to be satisfied not only that declarations should be made, but about the form in which they should be made: see generally BMI Ltd v Federated Clerks Union of Australia [1983] FCA 403; 51 ALR 401 at 412-413 (Keely and Beaumont JJ). 92 In terms of the substance of the declarations, I considered there were two problems. First, as I have explained above, the declarations sought a specific declaratory order about the 302 High Street Road property which I considered was not supported by the agreed statement of facts. I have declined to include any specific reference to that property. Second, the period of time proposed by the parties as the period of time over which the contravening conduct occurred did not reflect the evidence in the agreed statement of facts. Therefore I will make declarations about the period of the contravening conduct which I consider reflects the evidence before the Court.

Pecuniary penalty 93 The parties agreed, and I accept, that it is appropriate to see MSE's conduct in relation to each property as a separate contravention, for which a penalty should be imposed. The Court then should consider the principle of totality to ensure the total penalty is proportionate and appropriate to the contravening conduct. 94 Section 224(1) of the ACL (Vic) provides that pecuniary penalties can be imposed for a breach of certain provisions of that Act, including s 30(1)(c). Section 18 is not a provision identified in s 224(1) as a pecuniary penalty provision. Thus although the admitted conduct contravenes both provisions, pecuniary penalties are only imposed in respect of the admitted contraventions of s 30. 95 Pursuant to s 224(3) item 2 of the ACL (Vic), the statutory maximum for each contravention of s 30(1)(c) was, at the time the conduct occurred, $1.1 million. 96 I have taken into account the applicable principles on the imposition of penalties which, as I have stated above, are set out in the three decisions to which I have referred at [76]. 97 I have also taken into account the matters set out in s 224(2) of the ACL (Vic). 98 MSE's contravening conduct occurred over approximately 17 months, spread over 20 properties sold during that period and was in that sense quite extensive. This was not one isolated contravention. As I have explained I find the conduct to have been part of a conscious strategy to draw in a wider, and larger range of consumers as potential purchasers for the properties than would have been the case if MSE's agents had been honest and accurate about their opinions and estimates of the likely selling price for the properties, and if more display pricing had been used instead of only blind pricing. 99 The elements of impulsiveness and overreaching, which can be seen in real estate purchases, are likely to be at their most damaging where consumers whose price range is below the likely selling price of a property, are lured into engaging with real estate agents about a property, seeing it as within their reach when in reality it is not. 100 It should be borne in mind that the potential purchasers of properties, such as these 20 properties, will include people who are experienced in real estate purchases and those who are not; it will include people who are somewhat naive and trusting, and those who are not; it will include those who may quickly form emotional attachments to properties and have their judgment clouded by those attachments, and those who will not. It is to be expected that some consumers seeing the advertisements for these 20 properties, and using the search engine of realestate.com.au relied on results coming up from their searches as being true indications of properties they were going to be able to afford to negotiate to buy, when that was not the case. 101 There is no evidence of actual loss or damage, but the potential for it is clear in this kind of conduct. I accept that it is possible that some consumers, who saw themselves as potential purchasers of these properties and were drawn into negotiations and to attending the auctions, having prepared to bid (including, for example, arranging finances), may have been inconvenienced, frustrated and disappointed when the property went for several hundred thousand dollars above the advertised price, or the price that appeared on their searches. However, given there is no evidence of the position of any individual potential purchaser of any of these 20 properties (aside from Mr Trangadisaikul), this is not a matter upon which much weight can be placed. As I have explained above, the circumstances of the purchase of one of the 20 properties by Mr Trangadisaikul does not in my opinion mark what occurred in respect of this property out as any different to the other properties. 102 As I explain elsewhere, I consider the conduct of the MSE agents at Barry Plant Mount Waverley was part of a conscious strategy, and was not accidental or some kind of coincidence. I find the agents knew they were advertising these properties well below the appraisals and advice they had given vendors about the likely, realistic selling price for these properties. Fixing display prices and blind prices to be advertised on realestate.com.au involves deliberate, conscious conduct, and conduct which occurred after having given quite different advice to vendors about what the market value, and likely selling price, of the properties were. I also take into account, as a matter justifying the imposition of a significant penalty that Mr Namour, as the officer in charge of Barry Plant Mount Waverley was himself involved in these contraventions. This was no frolic by junior employees, without the knowledge of those with management responsibilities. 103 I have set out the financial position of the Barry Plant Mount Waverley office of MSE in the relevant period at [60] above, and have already made an observation about the much higher profits in 2015. However, I accept MSE's submissions that this is not, comparatively, a large business, although it is also not aptly described as small. It is a business of modest size, and the strategy which led to the contravening conduct appears to have been pervasive during the 17 months across most MSE agents at Barry Plant Mount Waverley. There was some debate between the parties in submissions about the relevance of the size of the business to the appropriateness of the penalties to be imposed. 104 Any correlation between the size of a business and the size of penalties cannot be asserted in a general way. A large business may have a rogue employee, whose conduct results in contraventions of the ACL by the business, but the fact that the business is large has no causal or other connection to the contraventions. In contrast a large business may, at senior and junior levels, engage in a planned and sophisticated course of contravening conduct that its size and financial position enables. In that circumstance, the size of the business may be highly relevant to the size of the penalties that should be imposed. In the present case, I see the size of MSE's Barry Plant Mount Waverley office as of some importance, but of more importance is that the contravening conduct spread across most agents in the office. That fact contributes to a higher penalty, to emphasise the wider need for deterrence. 105 There is no evidence MSE, or the agents involved, have any history of prior contraventions, and MSE has co-operated with the Director, in admitting the conduct and agreeing to proposed orders. 106 In Hocking Stuart at [84], Middleton J stated that the amount of pecuniary penalties imposed in that case took account of the profit made from the contravening conduct, and then added an additional sum, to make it clear that payment of penalties was not simply the "cost of doing business". The parties have taken that approach to the sums proposed by way of pecuniary penalty in this case and I accept that is appropriate. 107 MSE submitted: In the circumstances, it is submitted that the pecuniary penalty of $720,000 in total agreed in this case is appropriate in the circumstances. It is a substantial sum having regard to the size of the MSERE business. It is more than half the pre-tax profit made by the Mount Waverley office of MSERE (which is the office responsible for relevant contraventions) in 2015 and more than four times the pre-tax profit made by that office in 2016 and 2017. It reflects a degree of parity with the penalty per contravention imposed in Hocking Stuart Richmond and Fletcher & Parker Balwyn, and is substantially more than was imposed per contravention in Hocking Stuart Doncaster. The amount of the agreed pecuniary penalty is more than triple the profit of $228,218 earned by MSERE on the 22 relevant properties. It will act as a deterrent both to MSERE and any potential contraveners. 108 I accept that submission. Whether or not the much higher profit in the 2015 financial year bore any relationship to the Barry Plant Mount Waverley office's practice of underquoting is not established by the evidence, and was not the subject of submissions. However on any view, taking a broader perspective on the income of the Barry Plant Mount Waverley office for MSE over the financial years from 2014 to 2017, the amount payable is substantial. 109 Different penalties are sought in respect of properties which were advertised with both a display price and a blind price, and those which were advertised only with a blind price. A penalty for each contravention in the former category (five properties) is proposed at $30,000. A penalty for each convention in the latter category (15 properties) is proposed at $38,000. The justification for this put forward by the Director is that a higher pecuniary penalty for the blind price advertisements is warranted because the use of an underquoted blind price, being hidden, demonstrates MSE intended to conceal its practice of underquoting properties from the Director. 110 While MSE has accepted the appropriateness of imposing higher pecuniary penalties for its blind pricing conduct, it submitted the Court should not make a finding that MSE intended to conceal its underquoting practice from the Director by using blind pricing. This submission formed part of its overall submissions about what the Court should find about the deliberateness of, or reason for, its conduct. 111 I refer to the findings I have made at [82]-[89] above. In my opinion the plain inference is that MSE intended to underquote these properties. It intended to encourage consumer purchasers who were in fact looking at a lower price bracket of property than the price bracket MSE and its agents believed these properties fell into. It was a strategy to increase inquiries, increase exposure and increase the likelihood that purchasers might be encouraged to make offers above their existing price range. The gaps in pricing are so significant and the pattern of conduct so repeated, that no other explanation is available. I refute the suggestion, if that is what MSE was submitting, it was some kind of coincidence or accident. 112 I have considered Mr Namour's affidavit in relation to the proposed changes to the dates for instalment payments. I accept his evidence, and consider given his evidence of the "substantial financial strain" that MSE is experiencing, it is appropriate to allow it further time before the instalment payments commence. It is not in anyone's interests that liability for these penalties places MSE at risk of insolvency. The other relief will still occur before the instalment payments, including the corrective notices. Mr Namour also gave evidence that MSE will consent to an additional order which will make the entire penalty due and payable if MSE defaults on its instalments. That default order should be made to encourage prompt payment.

Adverse publicity order 113 The proposed corrective notice is to be published by MSE: (a) at the Barry Plant Mount Waverley office; (b) on realestate.com.au; and (c) on the homepage of MSE's website. 114 Those locations are appropriate, and I am satisfied publication in those places is likely to have the requisite effect of alerting consumers to MSE's misleading and deceptive conduct in underquoting on realestate.com.au, and to educating consumers about the way in which underquoting can occur, especially through the practice of blind pricing. I am also satisfied that publication of a notice can assist in preventing further contraventions, in particular if the sum of the pecuniary penalties imposed is included, as is proposed. I consider some amendments should be made to the notice, so as to explain how the respondent's pricing has led to misleading or deceptive representations about the likely selling price of the properties.

Compliance program 115 The Director submitted, and I accept, that at the time that the contraventions occurred, almost all of the staff employed in MSE's Mount Waverley office were involved in the contraventions, including Mr Namour, who was the officer in effective control of the office for the purposes of the Estate Agents Act. There was a culture of non-compliance with the ACL (Vic), and a disregard for the obligations of MSE and its agents not to engage in underquoting because it involves misleading or deceptive conduct. 116 For those reasons, I am satisfied the proposed compliance program is appropriate. It will also ensure that all agents employed by MSE at Barry Plant Mount Waverley, whether directly involved in these contraventions or not, are better educated about their legal obligations.

Costs 117 The Director has sought, and MSE has agreed to, the payment of a contribution towards the costs of bringing this proceeding. I accept it is appropriate that MSE pay such a contribution and that the sum of $30,000 as agreed between the parties, is an appropriate sum. The agreed date the costs were payable is 30 January 2019.

Conclusion 118 There will be orders broadly in the terms sought by the parties, but with some modifications to the form of the declarations, and to the public notice. The parties will be provided with the Court's proposed form of all orders and given an opportunity to be heard in relation to them before they are made. I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mortimer.