Galleria SUV Pty Ltd v Commissioner for Fair Trading

Background

1. Galleria was issued with a motor dealer's licence in January 2018 which is due to expire in January 2022. Galleria operates as a used car dealership which purchases used cars and sells them to customers. Simon Wakim is the sole director and shareholder of Galleria. The company's principal place of business is in Marrickville.
2. The following information which led to the suspension of the licence is taken from the Notice of Suspension and Notice to Show Cause issued on 23 April 2021 and the NSW Police Facts Sheet annexed to the Notice to Show Cause.
3. In March 2020 Mr Wakim was issued with a loan for $2.058 million which was brokered by Allen Zhang through his company, Senworth Capital. Mr Zhang's associate, Jonathon Lee who worked for Solomon's Capital Pty Ltd, assisted Mr Zhang. Motor vehicles owned by Mr Wakim to the value of $3.093 million were secured against the loan and vehicles worth $2 million were moved to a secure location until the loan could be repaid. In May 2020 Mr Wakim was given a further three month period to repay the loan. No repayments were made.
4. At the end of the three month period Mr Wakim contacted Mr Zhang and Mr Lee to ask that security for the loan be swapped from one car to another to enable him to sell it. Mr Zhang and Mr Lee agreed to release a purple Lamborghini Aventador on the condition that Mr Wakim would sell it and use the money to purchase another vehicle to be supplied as a replacement for the loan security. Mr Wakim replaced the loan security with a black Lamborghini Aventador that did not belong to him.
5. On 22 December 2020 Mr Zhang and Mr Lee took action to place Galleria into liquidation as no repayments had been made on the loan. On 23 December 2020 liquidators attended the business premises of Galleria to repossess the vehicles. It is alleged that 30 people purportedly involved in the Comanchero Outlaw Motorcycle Gang prevented the removal of the vehicles. On the same day Mr Wakim contacted Mr Zhang and Mr Lee and threatened them and their families. Mr Zhang and Mr Lee did not proceed with the liquidation action.
6. In February 2021 Mr Wakim agreed to make certain repayments but failed to do so. On 25 February 2021 Mr Wakim contacted Mr Zhang and requested two vehicles have their financial security removed. This request was denied. Mr Zhang and Mr Lee continued to receive threatening communications from Mr Wakim.
7. On 16 March 2021 Mr Wakim was arrested by NSW Police and charged with 16 offences:

• one offence against s 192E(1)(b) of the Crimes Act 1900, as Mr Wakim is alleged to have obtained financial advantage and caused financial disadvantage by deception to Solomon's Capital Pty Ltd totalling $950,000;
• 7 offences under s 474.17(1) of the Criminal Code Act 1995 as Mr Wakim is alleged to have used a carriage service in such a way that a reasonable person would regard that use as being menacing, harassing or offensive;
• 7 offences against s 13(1) of the Crimes (Domestic and Personal Violence) Act 2007 as Mr Wakim is alleged to have stalked and intimidated Mr Zhang and Mr Lee with the intention of causing them physical harm; and
• one offence against s 249K(1)(a) of the Crimes Act 1900 as Mr Wakim is alleged to have demanded with menaces that vehicles be removed from the Personal Properties Security Register to the value of $950,000.

1. The charges are yet to be dealt with by the courts.
2. The Notice to Show Cause sets out the basis upon which the Commissioner believes disciplinary action may be taken against Galleria. In summary, the Commissioner is of the opinion that, if Galleria were not a licence holder, the company must be refused a licence on the basis that Mr Wakim, the sole director and secretary of Galleria, may not be a fit and proper person to hold a licence under the Act. It is not necessary here to set out the precise sections of the Act referred to by the Commissioner other than to note that s 25(3) provides: (3) The Secretary must not grant a licence to an applicant that is a body corporate if the Secretary is satisfied of any of the following - (a) a director or person involved in the management of the body corporate, or any other person who appears to the Secretary to have control or substantial control of the body corporate, would, if the director or person applied for the licence as an individual, be prohibited by this section from being granted the licence…
3. Section 25(2)(b) provides that a licence must not be granted to an individual if the Secretary is satisfied that the applicant is not a fit and proper person to hold a licence. Among other things, s 27 of the Act provides that in determining whether a person is a fit and proper person to hold a motor dealer's licence, the Secretary may have regard to whether proceedings for an offence involving fraud or dishonesty have been commenced against the applicant but have not been finally determined.
4. The decision made on 23 April 2021 to suspend Galleria's licence was made under s 42 of the Act on the basis that the Commissioner was satisfied that the grounds for disciplinary action specified in the Notice to Show Cause would, if established, justify the suspension or cancellation of the licence as, if Galleria were not a licence holder, the Secretary would be required to refuse an application by the company for the licence on the basis that Mr Wakim, the sole director and secretary of Galleria, may not be a fit and proper person to hold a licence under the Act. The Commissioner referred to the offences with which Mr Wakim has been charged and noted that he has allegedly engaged in dishonest and fraudulent conduct and has allegedly demonstrated a repeated pattern of intimidation within the context of carrying on his business as a motor dealer.

Legal principles

1. The general rule is that an application for administrative review of a decision does not prevent the decision from taking effect. The Tribunal has power, however, to make an order "staying or otherwise affecting the operation of the decision under review" (s 60 of the ADR Act).
2. In QLD Protection Security Pty Ltd v Commissioner of Police, NSW Police Force [2018] NSWCATAP 113, an Appeal Panel of this Tribunal led by Wright J, summarised the considerations which should be applied when considering a stay in matters such as this as including: 1. whether the order is appropriate to secure the effectiveness of the determination of the application for review: s 60(2), ADR Act; 2. whether the order is desirable taking into account: 1. the interests of any persons who may be affected by the determination of the application for review: s 60(3)(a), ADR Act, Loveday v Commissioner for Fair Trading [2018] NSWCATAD 80 (Loveday) at [10], Re Scott and Australian Securities and Investments Commission [2009] AATA 798 (Re Scott) at [4]; 2. any submission made by or on behalf of the administrator who made the decision to which the application relates: s 60(3)(b), ADR Act, Loveday at [10], Re Scott at [4]; 3. the public interest: s 60(3)(c), ADR Act, Loveday at [10], Re Scott at [4]; 1. the applicant's prospects of success on the application for review: AVS Group of Companies Pty Ltd v Commissioner of Police [2010] NSWCA 81 (AVS Group) at [129], Loveday at [10] and [11], Re Scott at [4].
3. The circumstances that are relevant in any particular case to the considerations identified above may well overlap or be interrelated.
4. In AVS Group of Companies Pty Ltd v Commissioner of Police [2010] NSWCA 81 at [129] the Court of Appeal held that securing the effectiveness of the determination of the application involves matters such as ensuring that the lapse of time before the determination is actually made does not deprive the review of practical point. The Court went on to say that it also involves considering the possibility that the result of the review might be that the decision is affirmed, with the consequence that, if stay is granted, the decision has not been implemented during the period of the stay.
5. In Loveday v Commissioner for Fair Trading [2018] NSWCATAD 80 at [14] the Tribunal referred with approval to the following passage from Re Pelling and Secretary, Department of Aviation [1984] AATA 179; (1984) 5 ALD 638 at 639: 6 If, after the facts have been ascertained at the hearing, the Tribunal considers that the applicant did deliberately flout the law and that his conduct warrants suspension of his licences in spite of the hardship which it will cause him and the company, the right or preferable decision may well be to affirm the decision under review. But, if its implementation before the facts have been established is likely to cause him or the company serious irreparable harm (irreparable in the sense that no recompense for it can be obtained if the application for review is successful) and so to affect adversely the effectiveness of the hearing and determination of the application under review, it may be appropriate to stay the implementation of the decision pending the hearing and decision of the application. However, in considering whether that is so, it is necessary that their interests be weighed against the interest of the public in the safe operation of aircraft. Only thus can the right or preferable decision regarding the stay be given.

Submissions

1. In support of the application for the stay, Galleria relies on an affidavit by its office manager, Anna Wakim, and its accountant, Scott McGill. Ms Wakim is Mr Wakim's wife. Galleria's primary submission is that the effectiveness of the Tribunal's decision on the merits will be futile if a stay is not granted because the applicant will have already suffered irreparable harm in relation to the finances and reputation of the business. Furthermore, if a stay is not granted, Galleria will likely be unable to continue to seek merits review of the decision by the Tribunal as it will be forced to go out of business.
2. Ms Wakim states that the income of Galleria is derived solely from the sale of motor vehicles to customers and, on occasion, other dealerships. She states that the company employs three people: herself as the office manager, Mr Wakim who is responsible for purchasing used cars and selling those cars to customers and John Tergaris who is the stock controller and picks up and drops off cars and organises registration. She states that she, Mr Wakim and Mr Tergaris will lose their jobs if the stay is not granted as the company will not be able to continue to trade. As a result, she and Mr Wakim, her husband, will lose their only source of income.
3. Mr McGill states that the financial data for the company shows losses and that Galleria is in shortfall. Mr McGill indicates that the company is presently the subject of a review/audit by the Australian Tax Office (ATO). He states that Mr and Ms Wakim have told him that is their expectation that the company would trade out of the current position if finance could be secured ongoing and the ATO review/audit was resolved.
4. In Mr McGill's professional opinion, if a stay is not granted, Mr Wakim would be obliged to immediately consider placing the company into administration or liquidation because it would be trading insolvent. He states that Mr Wakim would also be obliged to immediately advise the various financiers who would likely take immediate possession of the remaining stock and appoint a liquidator or receiver to deal with the matter. He states that the company would likely be in administration with 7 to 14 days if the stay application is unsuccessful and notice given to the financiers.
5. Ms Wakim said that Galleria currently holds five deposits on behalf of clients who are awaiting delivery of their vehicles and that Mr Wakim has put down deposits on five vehicles with suppliers. She states that if a stay is not granted, then Galleria will be in breach of its contractual obligations. This will cause reputational damage for the business.
6. Ms Wakim states that she and her husband had to enter into numerous funding arrangements with private investors because of the impact of COVID-19 upon the business. She says that the family home has been used as security for these arrangements and, if Galleria ceases to trade, it will not be able to meet its repayment obligations. It is likely that the investors will enforce their security against the family home and force a fire sale of all Galleria's stock. In any event, without an income, Mr and Mrs Wakim will not be able to meet the mortgage repayments for their home.
7. Galleria states that Mr Wakim intends to defend the charges brought against him and submits that the mere fact of charges being laid is insufficient to warrant suspension of the licence.
8. The Commissioner submits that it is not in the public interest for a stay to be granted and that the interests of lenders, customers and the public outweigh those of the business. This is particularly the case as the allegations involve potential fraud and threats of violence.
9. The Commissioner submits that the allegations made against Mr Wakim are serious and raise financial and public safety concerns which go to his fitness and propriety. The allegations also go to the objects of the Act which are, among other things, to establish appropriate standards of conduct for motor dealers. The Commissioner states that Mr Wakim has made no attempt to refute the allegations.
10. The Commissioner submits that there is no suggestion that the substantive application has good prospects of success and points to recordings of telephone calls and SMS messages which are detailed in the Police Facts Sheet. The Commissioner states that it will be difficult for Mr Wakim to overcome the evidence that he engaged in conduct that supports the charges.
11. The Commissioner submits that I could not be satisfied that a stay would secure the effectiveness of the review. The Commissioner points to the company's financial circumstances as set out in Mr McGill's affidavit and states that the financial state of the business is dire with the balance sheet showing it is not a going concern in any event. The Commissioner states that there is no evidence that the company could trade out of its current difficulties. The Commissioner points to the statements by Mr McGill that the company is presently being audited/reviewed by the ATO and that Mr and Ms Wakim have told him that it is their "expectation" that the company would trade out of the current position if finance could be secured ongoing and the ATO review/audit was resolved. The Commissioner states that no evidence has been provided about the ATO audit or its outcome and there is no evidence from Mr Wakim about the likelihood of being able to secure further funding for the business. The Commissioner states that it is unlikely further funding could be secured given the charges Mr Wakim is facing.
12. In relation to the impact on staff, the Commissioner points to the profit and loss statement provided by Mr McGill. This statement shows that for the 2021 financial year salaries and wages are $53,130 which does not indicate that the business supports three staff as claimed by Ms Wakim. The Commissioner notes that no employment contracts have been provided and submits that the evidence does not show that the business supports Mr and Mrs Wakim. Rather, the business is costing money as evidenced by the substantial loans Mr Wakim has made to it as shown in the balance sheet. Others have also made loans to the business and the Commissioner suggests that at least two of these people have known criminal associations. In that context, the Commissioner also refers to the allegation that 30 members of the Comanchero Outlaw Motorcycle Gang confronted liquidators on 23 December 2020. The Commissioner also states that no evidence about the mortgage on the family home has been provided to support Ms Wakim's statement that she and Mr Wakim will be unable to make repayments.
13. Galleria proposed that, if a stay is granted, it could be subject to an undertaking by Mr Wakim not to participate in any aspect of the business other than the buying and selling of vehicles. The Commissioner states that the undertaking proposed by Galleria that Mr Wakim not be involved in the business except to buy and sell vehicles is inadequate in the circumstances, particularly where Mr Wakim is the sole director and shareholder of the company. The Commissioner states that the proposed undertaking would not properly remove Mr Wakim's control over the business pending the review.

Consideration

1. Mr Wakim states that he intends to defend the charges laid against him. It is not open to me in considering the application for a stay to conduct a preliminary hearing on the merits of the substantive proceedings. When the matter comes before the Tribunal for hearing, it may receive fresh evidence in addition to that which was initially before the Commissioner. In that context, it is difficult to determine Mr Wakim's prospects of success on review. That being said, as the Commissioner notes, the evidence in support of the charges as set out in the Police Facts Sheet is considerable.
2. Galleria has contended that it will suffer irreparable harm if a stay is not granted as the company will likely go out of business and thus deprive three employees of a livelihood. In addition, it will not be able to fulfil its current contractual obligations. It is not possible to reach other than a preliminary view about the impact upon the business if a stay is not granted.
3. I agree with the Commissioner, however, that the evidence provided by Mr McGill indicates that the business is not in a sound financial position and would need an injection of capital to keep its head above water irrespective of the outcome of this application. Other than an "expectation" on the part of Mr and Ms Wakim that finance could be obtained, there is no evidence that steps have been taken in that regard or of the likelihood of funding being secured (particularly given the circumstances involving a lender which led to the current charges). At the present time there is also insufficient evidence that the company would be able to meet its current obligations in any event. In addition, there is a lack of evidence about the reasons behind the ATO audit and any likely outcome.
4. It can certainly be assumed, however, that would be some impact upon the business if a stay is not granted, or at least an acceleration of what seems to be an already unfavourable financial position. Whether that would mean that the effectiveness of the review could not be secured is not clear. This is particularly the case as the applicant could seek to expedite the review and may be able to later trade out of difficulties if successful.
5. The current wages expenditure as set out by Mr McGill does not support the contention that the business is supporting three employees or, at least, certainly not providing three full time salaries. There is also no evidence, other than an assertion, that Mr and Ms Wakim's family home is at risk if the company goes into administration.
6. As a motor dealer Galleria carries significant responsibilities. As noted above, one of the objects of the Act is the establishment and enforcement of appropriate standards of conduct for motor dealers. Another is to provide consumer protections and remedies for consumers who purchase motor vehicles from motor dealers. Motor dealers thus must act in accordance with certain ethical standards and consumers should be able to rely upon the integrity of those from whom they purchase motor vehicles.
7. In that respect, whilst acknowledging that Mr Wakim intends to defend the criminal charges against him, those charges are very serious and go to the heart of his role as a motor dealer. He has been accused of replacing a vehicle used for security with another that he did not own and demanding with menaces that secured vehicles be removed from the Personal Properties Security Register. He is also facing numerous charges relating to intimidatory and menacing behaviour. All the alleged offences have arisen during the course of Mr Wakim carrying out business as a motor dealer.
8. While not granting a stay may result in an adverse effect upon the business of the company and Mr Wakim and his family personally, which in turn may adversely affect the effectiveness of the review, these matters must be balanced against the interest of the public, customers and others in being able to safely deal with the company.
9. The number and seriousness of the charges brought against Mr Wakim and relevant concerns for public safety lead me to conclude that these matters outweigh the interests of Mr Wakim and others associated with the business. I have considered whether an undertaking or condition on the stay as proposed by Galleria may meet my concerns. Mr Wakim is the sole director of the company and would retain various duties in relation to it. The only business of the company is the buying and selling of cars and Mr Wakim would retain responsibility for buying and selling vehicles. In the circumstances I am not satisfied that the proposed undertaking is sufficient to grant a stay.
10. The application for an order staying the operation of the decision under review is therefore refused.

Orders 1. The request by Galleria SUV Pty Ltd to stay the decision made by the Commissioner for Fair Trading on 23 April 2021 to suspend the applicant's motor dealer's licence is refused.

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: 14 May 2021