Farah v Director General, Department of Finance and Services

NCAT Appeal Panel|2014-02-10

Introduction 1The question in this appeal is whether a money laundering offence, where the offender deals with money and is reckless as to the fact that the money is proceeds of crime, is an "offence involving dishonesty". If it is, Mr Farah, a former real estate agent, is disqualified from holding a real estate agent's licence unless excused because of the triviality of the offence or the time since conviction. In our view, the Tribunal's decision that Mr Farah is disqualified from holding a licence wrongly took into account his conduct and/or his actual state of mind when he committed the offence, rather than just the offence itself. Taking into account only the offence itself, that offence did not "involve dishonesty" and the Tribunal's decision should be set aside. 2If Mr Farah is not disqualified from holding a real estate agent's licence, the Director General says that he is, nevertheless, not a fit and proper person to hold a licence. The Tribunal at first instance did not decide that issue but said at [102] that it was 'inclined to agree with the Respondent's submission that, at this time, the Applicant is not a fit and proper person to hold a licence.' Given that statement, the matter should be remitted to a differently constituted Tribunal.

Appeal rights and applicable law 3On 1 January 2014 the Administrative Decisions Tribunal was abolished and its jurisdiction was taken over by the Civil and Administrative Tribunal (NCAT). This appeal was lodged on 31 October 2013 but not heard until 10 February 2014. In accordance with the Civil and Administrative Tribunal Act 2013, Sch 1, cll 6 and 8, this appeal is a "pending proceeding" and the provisions of the Administrative Decisions Tribunal Act 1997 (NSW) continue to apply. 4As a party to proceedings in which an 'appealable decision' was made, Mr Farah has the right to appeal on any question of law. He also asks for permission (or 'leave') to appeal against the merits of the Tribunal's decision: Administrative Decisions Tribunal Act, s 113(2).

Factual background 5Between 2007 and 2009 Mr Farah transferred six amounts totalling $42,500 to an associate, Mr Cleveland. Some transfers were by way of electronic funds transfer and others were by way of cheques drawn on a Macquarie Bank account. The money was transferred to pay private school fees for Mr Cleveland's step son and for his mortgage payments. Mr Farah said in an interview with the Australian Federal Police that he was paying these amounts as a favour to Mr Cleveland and expected to receive cash in return. 6Mr Cleveland was later convicted of drug offences. In September 2011 the Mr Farah pleaded guilty to a money laundering charge under the Criminal Code (Cth) s 400.6(2) and was convicted. The Criminal Code is a Schedule to the Criminal Code Act 1995 (Cth). 7The charge against Mr Farah was that: Between July 2007 and May 2009 at Sydney in the State of New South Wales did deal with money or other property which is the proceeds of crime and was reckless as to the fact that the money or property was the proceeds of crimes, and at the time of the dealing, the value of the money and other property was greater than $10,000, namely $46,500. 8Section 400.6(2) of the Criminal Code, which is in Chapter 10, Part 10.2 headed "Money laundering," provides that: (2) A person is guilty of an offence if: (a) the person deals with money or other property; and (b) either: (i) the money or property is proceeds of crime; or (ii) there is a risk that the money or property will become an instrument of crime; and (c) the person is reckless as to the fact that the money or property is proceeds of crime or the fact that there is a risk that it will become an instrument of crime (as the case requires); and (d) at the time of the dealing, the value of the money and other property is $10,000 or more. 9The term "deals with money or property" is defined by section 400.2 of the Criminal Code and includes a situation where a person "receives, possesses, conceals or disposes of money or property" or "engages in a banking transaction relating to money or other property". 10Mr Farah was sentenced in the District Court to a term of imprisonment of 1 year and 9 months. The sentence was suspended and he was placed on a good behaviour bond until 8 September 2013.

Disqualification 11Section 14(1)(d) of the Property Stock and Business Agents Act 2002 (NSW) provides that a person is eligible to hold a licence only if the Director-General is satisfied that the person "is not a disqualified person". Section 16(1)(a) contains the relevant definition of a disqualified person: (1) A person is a disqualified person for the purposes of this Act if the person: (a) has a conviction in New South Wales or elsewhere for an offence involving dishonesty that was recorded in the last 10 years, unless the Director-General has determined under subsection (2) that the offence should be ignored (Emphasis added.) 12The effect of these provisions is that if Mr Farah has been convicted of an offence "involving dishonesty" in the last 10 years, he is a disqualified person and is ineligible to hold a real estate agent's licence. 13The Director General may "ignore" such an offence either "because of the time that has passed since the offence was committed or because of the triviality of the acts or omissions giving rise to the offence": s 16(2)

Tribunal's decision 14The Tribunal acknowledged at [59] that for an offence to involve dishonesty it is not necessary for an act of dishonesty to be an element of the offence. The Tribunal did not expressly decide that s 400.6(2) is not, on its terms, an offence involving dishonesty but that conclusion can be implied. 15The Tribunal identified the issue at [58] as "whether there can be found to be dishonesty for the purposes of the Act in the conduct of the Applicant". (Emphasis added.) The Tribunal found that the Applicant acted recklessly in that he was aware of the substantial risk that the money was proceeds of crime and yet he passed that money "through the legitimate accounts of his business". The Tribunal also concluded from the sentencing remarks of the District Court and the Statement of Facts that the Applicant was anxious to avoid detection by the 'tax office'. 16As well as relying on the Statement of Facts, the Tribunal agreed with an opinion of the person who conducted the internal review of the decision to disqualify the Applicant. That opinion was that it was difficult to believe that the Applicant did not have any suspicions about the questionable nature of Mr Cleveland's financial dealings. The Tribunal added that the offence needs to be seen in its wider social context and that the Applicant should have reported his suspicions to police or ended his financial association with Mr Cleveland. 17The Tribunal concluded that the Applicant acted dishonestly when he failed to disclose his awareness of the substantial risk that the money was proceeds of crime, to the police.

Issues 18The issues on appeal, and the Appeal Panel's conclusion in relation to those issues, can be summarised as follows: (1)Did the Tribunal err in law in deciding that it was relevant to take into account Mr Farah's conduct and/or state of mind, other than that which was necessarily involved in the offence itself, in determining whether the offence was an offence involving dishonesty? (Yes) (2)Should the appeal extend to the merits of the Tribunal's decision? (Yes) (3)Is the offence in this case an offence involving dishonesty? (No)

Relevance of conduct or state of mind of the perpetrator 19In Barber v Law Society of NSW (No 2) [2001] NSWSC 361 at [32], Bell J held that to be a conviction for an "offence involving dishonesty" the offence "must be one which answers that description without further inquiry." The same conclusion was reached by the Supreme Court of South Australia in C v Johnson [1967] SASR 279 per Bray CJ at 291. His Honour's conclusion was that the relevant inquiry was whether the offence was "one which of its nature necessarily involves dishonesty". He concluded that it was not necessary to "make any inquiry into the particular conduct of the particular salesman in relation to the particular offence". 20A contrary view was expressed by Abadee J in Pollard v DPP (1992) 28 NSWLR 659. His Honour expressed the view, by way of dicta at 663, that if conduct or behaviour answering the description of fraud or dishonesty was involved in the commission of the offence, that is sufficient to make the offence one involving dishonesty. The Tribunal has followed that broad view in several cases including RTA v Sharp Towing Pty Ltd [2008] NSWADTAP 49. It is the view the Tribunal applied at first instance. Despite the broad view having been consistently applied by the Tribunal, we are now of the opinion that the better view is that expressed by Bell J in Barber v Law Society of NSW (No 2) [2001] NSWSC 361. To explain that conclusion we will examine the meaning of the phrase an "offence involving dishonesty".

Statutory interpretation 21There is no definition of "offence involving dishonesty" in the relevant legislation. It is a phrase that is sometimes seen in headings in statutes and in catchwords and judgments, but it has no fixed meaning that we were able to ascertain. Its meaning must be determined by the process of statutory construction. 22The "primary object of statutory construction" is to construe a provision so that "it is consistent with the language and purpose of all the provisions of the statute": Project Blue Sky v The Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69]. The long title of the Property Stock and Business Agents Act 2002 (NSW) makes it clear that its object is to regulate people working in that industry. That is achieved through a licencing scheme. A person is not eligible to hold a licence if they do not meet various criteria. 23The Act disqualifies a person from holding a licence as a real estate agent if that person has "a conviction in New South Wales or elsewhere for an offence involving dishonesty that was recorded in the last 10 years." Apart from the power given to the Director General to 'ignore' such a conviction in certain circumstances, s 16 is a mandatory disqualification provision. It is to be contrasted with the power of the Director General to cancel a person's licence because that person is not a 'fit and proper' person. That is a discretionary disqualification provision and the person is able to provide evidence as to their character and reputation. 24The effect of being a disqualified person is that a person is not eligible to hold a licence. Because of the significant implications of such a decision for the livelihood of the person concerned, the kinds of offences to which mandatory disqualification applies should not be construed broadly.

Meaning of "offence" 25The meaning of the word "offence" is uncontentious. An offence may be a statutory or a common law offence. There are numerous examples of statutory offences involving dishonesty under both State and Commonwealth law: Chung v R [2007] NSWCCA 231 at [21]. But there are no decisions that we were able to identify which address the question of whether a money laundering offence is an offence involving dishonesty.

Meaning of "dishonest" 26The Macquarie Dictionary online defines 'dishonesty' as: noun (plural dishonesties) 1. lack of honesty; a disposition to lie, cheat, or steal. 2. a dishonest act as a fraud or theft. 27The word "dishonest" has been interpreted by the High Court in the context of an exclusion clause in an insurance policy: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65. The clause excluded any liability "brought about by the dishonest or fraudulent act or omission of the assured." Guadron J distinguished between an act and an omission at [55] and [56] that: Dishonesty is an ordinary concept, not a term of art. It is, on that account, difficult to define in any comprehensive manner. However, dishonesty is a matter to be determined by reference to the mental state of the person whose conduct is in issue. It was pointed out in Peters v The Queen that "in most cases where honesty is in issue, the real question is whether an act was done with knowledge or belief of some specific thing or with some specific intent". Leaving aside the situation in which there is an honest claim of right, the question whether a failure to act is dishonest is usually answered by considering whether that failure was motivated by a desire to conceal the truth or to obtain an advantage to which the person concerned knew he or she was not entitled. (Footnotes deleted) 28Kirby P made the point out at [89], that dishonesty in the context of a criminal prosecution raises different questions from dishonesty in a contract of professional indemnity insurance. But in relation to the term "an offence involving dishonesty," we are of the view that the ordinary meaning, as outlined by Guadron J, is the starting point. Whether it has a broader meaning depends on the meaning attributed to the word "involving".

The word 'dishonest' in the offence provision 29If the offence provision contains the word "dishonest", that offence is an offence involving dishonesty. In many cases there is a definition of "dishonesty" in the relevant statute. For example, the Criminal Code defines "dishonest" in certain contexts to mean: (a) dishonest according to the standards of ordinary people; and (b) known by the defendant to be dishonest according to the standards of ordinary people. 30This test, known as the Ghosh test comes from the English decision R v Ghosh [1982] QB 1053; [1982] 2 All ER 689. It is not relevant when ascertaining the meaning of dishonesty in the phrase an "offence involving dishonesty" because it is intended to define the word "dishonest" in a particular statutory context.

The word dishonest is not in the offence provision 31To be an "offence involving dishonesty" the relevant statutory provision does not have to contain the word "dishonest" or "dishonesty". Examples of offences which come within the ordinary meaning of dishonesty offences are stealing, robbery and offences where property is gained through indirect means such as false pretences and conspiracy to defraud: Barber v Law Society of NSW (No 2) [2001] NSWSC 361at [32]. Perjury is another example. There is also clear authority that obtaining money by false or misleading statements is an offence involving dishonesty: Pollard v Commonwealth Director of Public Prosecutions (1992) 28 NSWLR 659 at 668-669; Doja v R [2009] NSWCCA 303 at [174]-[179]. 32In Kortman and Attorney-General's Department [2010] AATA 1074 (22 December 2010) the Administrative Appeals Tribunal decided that an offence of obtaining a financial advantage was an offence involving dishonesty.

Recklessness and dishonesty 33In Pollard v Commonwealth Director of Public Prosecutions (1992) 28 NSWLR 659 the plaintiff had been convicted of obtaining money by false or misleading statements: Crimes Act 1900 (Cth) s 178BB. The charge was that the person made a statement which was false in a material particular and which was made with reckless disregard as to whether it was true or false in a material particular with the intent to obtain certain moneys for a company. Abadee J held at 668 that a conviction for that offence "involved dishonesty" even though the words "fraudulently" or "dishonestly" are not in the provision and the offence required proof of recklessness, rather than intent.

Dishonesty in the commission of the offence 34Having come to that conclusion Abadee J did not need to address an alternative submission that if conduct or behaviour answering the description of fraud or dishonesty was involved in the commission of the offence, it would be an "offence involving dishonesty". Abadee J dealt with that alternative submission in the following way at 663: The offence under s 227(2)(b) is concerned with the conviction of the person charged, of an offence, 'involving fraud or dishonesty'. The inquiry is directed towards ascertaining whether fraud or dishonesty was 'involved' in the offence. The word used in the section is 'involving' and not 'of'. In my view 'involving' is a word that should be given its ordinary meaning. Were it necessary for me to finally determine Mr Farmer's alternative submission, I would be disposed to the view that if conduct or behaviour answering the description of fraud or dishonesty was involved in commission of the earlier offence, then, the offence under s 227(2)(b) would be established.' (Emphasis added) 35In RTA v Sharp Towing Pty Ltd [2008] NSWADTAP 49 the Appeal Panel applied the dicta in Pollard. The relevant provision in that case was s 58 of the Tow Truck Industry Act 1998 (NSW) which makes it an offence for a licensee to contravene a condition of the licence. The condition which had been contravened was that the licensee "must not charge a fee for the towing, salvage or storage of motor vehicle that exceeds any maximum fees determined by [the administrator]. . ." Any offence "involving fraud, dishonesty or stealing" was a prescribed offence under the statutory scheme: Tow Truck Industry Regulation 1999 (NSW), Reg 7. 36The Appeal Panel concluded at [51] that, "[W]hile there can be innocent explanations for excessive charging, sometimes the explanations will only be consistent with dishonesty on the part of the person engaging in excessive charging. It may be possible to form a view based on the court material that such is the case. . . The word 'involving' can, it seems to me, be interpreted as allowing reference to the circumstances of an offence, not merely the terms of the offence provisions." 37The Tribunal at first instance in this case followed the Appeal Panel's decision in RTA v Sharp Towing Pty Ltd [2008] NSWADTAP 49 and an earlier decision of the Tribunal in Joyce v Commissioner of Police, NSW Police Service [2000] NSWADT 17. In Joyce, the Tribunal decided at [18] that the offence of "goods in custody reasonably suspected of being stolen or otherwise unlawfully obtained" (Crimes Act 1900, s 527C) was an offence "involving dishonesty" because: A person would be acting dishonestly or deceitfully where that person fails to disclose to police that goods have come into his or her custody in circumstances where that person has reasonable grounds for suspecting that the goods have been stolen or otherwise unlawfully obtained. 38There are several reasons why we now prefer the narrower approach of confining the Tribunal's consideration to the offence itself. 39Firstly, as a matter of statutory interpretation, the provision refers to a conviction for an offence involving dishonesty. The provision does not permit an inquiry into the conduct or state of mind of the person concerned when committing the offence. The applicant's counsel gave an extreme example to illustrate the consequences of adopting that interpretation. If a person is convicted of murder but dishonestly lured the person to a remote location before killing that person, the offence would be one involving dishonesty. 40Secondly, if the broader interpretation is applied, there would be a practical onus on the person to prove that he had not acted in a dishonest manner or did not have a dishonest state of mind. In relation to the factual situation in Sharp Towing, the applicant would have to prove that he did not act dishonestly in charging a particular fee. That would require a separate factual inquiry and decision on the part of the decision maker. It is unlikely that the legislature intended that such an inquiry be carried out in circumstances where disqualification is mandatory upon conviction of a particular kind of offence. 41Thirdly, for the reasons we have given, the phrase should not be given a broad interpretation because the effect of disqualification is that a person will lose their livelihood. 42Our conclusion is that it is the offence itself that must 'involve dishonesty.' It is not permissible to look behind the conviction for that offence to consider the particular facts of the case. The agreed facts on which a guilty plea is based, the findings of the court in relation to a contested hearing and the sentencing remarks are not relevant. Those matters cannot be relied on to find that the person has engaged in dishonest conduct or behaviour or had a particular state of mind which was dishonest. In the words of Bell J, the offence must be one which involves dishonesty "without further inquiry". 43Having come to that view we extend the appeal to the merits of the Tribunal's decision to consider whether the offence in this case is an "offence involving dishonesty".

Is the offence of money laundering an offence involving dishonesty? 44Chapter 7 of the Criminal Code is headed "The Proper Administration of Government." That Chapter includes offences such as theft, receiving stolen property, robbery, burglary, stealing (taking), fraudulent conduct and obtaining property or financial advantage by deceit. While it is not necessary to determine the issue, our view is that these are all offences involving dishonesty. 45Chapter 10, headed "National Infra structure," contains, in Part 10.2, money laundering offences and offences of dealing in proceeds of crime. The word "dishonesty" does not appear in any of those provisions, nor do they necessarily involve dishonesty. Chapter 10 also contains postal services and telecommunications offences in Parts 10.5 and 10.6 respectively. Both those offences are offences involving dishonesty although the word "dishonesty" is defined differently from the way it is defined in other parts of the Criminal Code. 46The way the Criminal Code is structured provides some support, albeit weak, that the money laundering offences in Chapter 10 are not to be regarded as offences involving dishonesty. 47In certain policy contexts money laundering is not regarded as a dishonesty offence. For example, under the Australian Securities Exchange (ASX) Operating Rules Procedure, a person applying to be a Market Participant must complete a form disclosing whether they have "any charges or convictions for any offences relating to dishonesty, fraud, financial markets-related conduct or money laundering." 48If dishonesty must be involved in the offence itself, then it is the elements of the particular offence that must be examined. In this case, those elements are that: (1)the perpetrator made payments on behalf of another person; (2)payment was made in circumstances where there was a substantial risk that the money was the proceeds of crime; (3)the perpetrator was reckless as to that risk; and (4)the amount involved was more than $10,000. 49There is no act or omission involved in this offence which comes within the ordinary meaning of dishonesty or within the extended meaning including recklessness. Although it was an element of the offence that the perpetrator be reckless as to the risk that the money was proceeds of crime, that does not involve any dishonesty on his or her part. The Tribunal suggested that Mr Farah was concealing the truth from police by not reporting his suspicions to them. But even if we assume that Mr Farah understood that he was concealing something from police that is not a state of mind that is involved in the offence itself. 50For these reasons, the offence for which Mr Farah was convicted is not an offence involving dishonesty and he is not a 'disqualified person' by virtue of s 16(1)(a) of the Property, Stock and Business Agents Act.

Orders

The Tribunal's decision is set aside.
The issue of whether the Appellant is a fit and proper person to hold a licence is remitted to a differently constituted Tribunal to determine with or without the admission of further evidence, at the discretion of the Tribunal. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 May 2014

Administrative Decisions Tribunal Act 1997(NSW)

Property Stock and Business Agents Act 2002(NSW)

Tow Truck Industry Regulation 1999(NSW)

Crimes Act 1900(Cth)s 178BB.

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