HSL Group Pty Ltd v Department of Finance, Services & Innovation

Mr Ibrahim's explanation for making false statements

First Junction Road insurance application

1. On 19 May 2018, HSL's insurance broker since 2014, Action Insurance Brokers Pty Ltd (Action Insurance), made an application for home warranty insurance (HWI) on behalf of HSL for the Junction Road site. On 9 July 2018, Action Brokers emailed HSL an invoice for the premium payable for that application, $12,737. The following day, Mr Ibrahim emailed that invoice to HSL's office manager, Anna Katrib. Mr Ibrahim claims that ordinarily when he requests Ms Katrib to pay an invoice, she does so within a couple of days.
2. Mr Ibrahim claims he first discovered that the insurance premium for Junction Road had not been paid on 5 June 2019 when the solicitor acting for the developer, 63 Junction Pty Ltd, requested a copy of the certificate of insurance for the properties. Mr Ibrahim claims after searching in HSL's electronic files without success, he asked Ms Katrib to conduct a search. She reported that her searches revealed that HSL had not paid the insurance premium.
3. According to Mr Ibrahim, he assumed that because a construction certificate was issued for Junction Road on 11 July 2018 that "everything was in order". He stated that it was his understanding that ordinarily a certifier will not issue a construction certificate without sighting evidence of a complying certificate of insurance.

Second Junction Road insurance application

1. On the day he discovered that iCare had not issued a complying certificate of insurance, 5 June 2019, Mr Ibrahim completed a second insurance application for Junction Road. In that application he stated that the commencement and completion dates of the work were 7 June 2019 and 7 December 2019 respectively and that the contract for that work was signed on 5 June 2019.
2. In a statement prepared for these proceedings dated 21 February 2020, Mr Ibrahim stated that it "was not clear to me why I did [that]". He stated he was "surprised" by his decision to make a fresh application for Junction Rd rather than "chasing Action Brokers about the original one issued in July 2018". Mr Ibrahim stated that the "only thing that makes sense to me at the moment" is that when searching for the insurance certificate on 5 June 2019, he came across the October 2018 notice issued by iCare cancelling the insurance and realised that a new application had to be made. Mr Ibrahim claims that prior to seeing the show cause notice issued by the Secretary on 3 October 2019, which attached a copy of the October 2018 cancellation notice , he had no recollection of seeing that notice.
3. Mr Ibrahim admits that the statements he made about the commencement and completion dates of the work and the date on which the contract for that work was signed were false and he knew that to be so when he completed the second insurance application. He stated he did "not think [he] was actually being dishonest", reasoning: Although those details were false, in my mind I wasn't doing anything wrong because all I was doing was getting the same insurance that I had applied for in May 2018 and had been approved and issued to HSL Group on 4 June 2018. I was just fixing the mistake about payment. The building work for which the 5 June 2019 Insurance Application was made was exactly the same building work that would have been insured if the 4 June 2018 invoice had been paid on time.
4. Mr Ibrahim claims that at the time he completed the second Junction Road insurance application he was unaware that it was possible to make a retrospective application for HWI.

Mr Ibrahim makes statutory declarations in support of application to cancel Junction Road insurance

1. On 13 June 2019, iCare issued a certificate of insurance for Junction Road. According to Mr Ibrahim on reviewing that certificate he noticed that the property had been incorrectly described as a "triplex". In his view the correct description was "3 townhouses".
2. On discovering that error, Mr Ibrahim requested Action Brokers to apply to cancel 13 June 2019 certificate of insurance. He claims that it was his understanding that this was the only way the error in the certificate could be corrected. Mr Ibrahim stated that this was the first occasion he had cause to correct a certificate of insurance and it "never occurred" to him to ask Action Brokers whether the certificate could be corrected rather than cancelled.
3. In a statutory declaration made on behalf of HSL on 5 July 2019 and submitted to iCare, Mr Ibrahim declared : 1. no "building work" had been commenced under the contract between himself and HSL for the construction works at Junction Road. 2. that contract was cancelled as "I decided not to undertake the project with HSL".
4. Mr Ibrahim made a statutory declaration in identical terms on behalf of the developer, 63 Junction Pty Ltd.
5. While conceding that the above statements were misleading, Mr Ibrahim stated that they were "strictly speaking true", because no work had been undertaken under the second Junction Rd insurance application because when that application was made the work had been completed. He said he thought he was just correcting an error, a "second stuff up". He stated he was not "conscious of the dishonesty … If anything, I thought I was doing the right thing correcting an error".
6. The pro forma certificate of insurance issued by iCare on 13 June 2019 in respect of Junction Rd contained the following statement: This certificate can only be cancelled within two years of the policy date and only where no work has been commenced and no money paid under the building contract. (Emphasis added)

Third Junction Road insurance application

1. After being notified of iCare's decision to cancel the 13 June 2019 certificate of insurance, Mr Ibrahim prepared a third application for insurance. That application repeated the false information contained in the second application about the estimated start and completion dates of the work and the date on which the contract for that work was signed. Mr Ibrahim acknowledges that information was "obviously false". He stated that he included it for the same reasons he included it in the second application.

Bangalla Avenue

1. According to Mr Ibrahim, he originally intended to start work on Bangalla Avenue around mid-2019 but brought forward the commencement date when the tenant unexpectedly vacated the premises in February 2019.
2. Mr Ibrahim claims that he thought he had applied for insurance in 2018 and for that reason on 2 February 2019 requested Advance Brokers to send him the invoice and to "activate the insurance". Advance Brokers replied that it "did not have the job on file". Mr Ibrahim then prepared an application for insurance in which he wrote: Estimated Start Date: 10/3/19 Estimated Completion Date: 10/11/19 Date Contract Signed (Actual/Proposed): 10/01/19.
3. Construction commenced shortly after a construction certificate was issued for Bangalla Avenue on 4 March 2019. Mr Ibrahim stated that he mistakenly assumed that a certificate of insurance had been issued because it was his understanding that a construction certificate could only be issued if a certificate of insurance was in place.
4. On 27 March 2019, Advance Brokers emailed Mr Ibrahim an invoice for insurance premiums for Bangalla Avenue. Mr Ibrahim stated that he was sure he forwarded that email to Ms Katrib for payment but was unable to find that email. He claimed that sometimes he did verbally instructed Ms Katrib to pay invoices.
5. According to Mr Ibrahim, it was not until he received an email from Advance Brokers on 25 June 2019 that he became aware that iCare had not issued a certificate of insurance for Bangalla Avenue. In that email Advance Brokers requested Mr Ibrahim to provide additional information: Can you please advise what estimated start date and estimated completion date to use so that I can re-process the form again? On application form had 10/3/19 for start and 10/11/19 for completion. Joe asked me to confirm with you.
6. Mr Ibrahim replied immediately: "Commencement next week. Completion February 2020."
7. On 27 June 2019, Advance Brokers submitted an application for insurance to iCare on behalf of HSL for Bangalla Avenue. That application stated: Estimated Start Date: 1/7/19 Estimated Completion Date: 28/2/20 The proposed Date Contract Signed (Actual/Proposed): 10/01/19
8. On 1 July 2019, Action Brokers sent HSL an invoice for the insurance premium of $13,879. Mr Ibrahim claims that he forwarded that invoice to Ms Katrib on the same day. The invoice was paid on 23 July 2019, after HSL received a reminder notice from Action Brokers.
9. On 24 July 2019, iCare issued certificates of insurance for Bangalla Avenue. According to Mr Ibrahim, by then the work was about 60 per cent complete.

Alfred Road

1. On 16 June 2019, Mr Ibrahim sent Advance Brokers an application for HWI in respect of Alfred Road. In that application he stated: Estimated Start Date 30/06/19 Estimated Completion Date 10/02/20 Date Contract Signed (Actual/Proposed) 10/06/19
2. On 17 June 2019, Action Brokers requested Mr Ibrahim to provide further details about the Alfred Road project together with a copy of the building contract. On the same day Mr Ibrahim gave Advance Brokers those details, and a week later, the building contract.
3. Mr Ibrahim claims that when the construction certificate for Alfred Road was issued on 28 June 2019 he assumed "we were good to go". Construction commenced in early July 2019.
4. On 15 July 2019, Action Brokers emailed HSL advising that HBCF requested "proof of funding" for the Alfred Avenue project and "proof of ownership" of the land. Mr Ibrahim claims he does not recall seeing that email and at the time was receiving over 100 emails a day and reading them when time allowed, mostly at night.
5. On 24 July 2019, Action Brokers notified Mr Ibrahim that iCare had stopped issuing insurance policies to HSL. According to Mr Ibrahim, after receiving that notice HSL undertook no further work at Alfred Road. HSL later engaged an external builder to complete the project.

iCare declines to issue insurance to HSL and a "no residential building work" condition is imposed on HSL's authority

1. According to Mr Ibrahim on learning of iCare's decision to stop issuing insurance policies to HSL he was shocked not only because of the effect on HSL's business but because "stupid as it now seems … I was [not] conscious of doing anything bad".
2. Mr Ibrahim claims that he first became aware of the availability of retrospective HWI when he rang Fair Trading on 24 July 2019 to try to sort out the insurance on Alfred Road. In an email sent to Fair Trading on the same day, Mr Ibrahim outlined the history to the applications for HWI for Junction Road and Bangalla Avenue and the error in the certificate of insurance issued in relation to Junction Road. He wrote that the "above errors are honest and unintended" and that the allegations made by officers of iCare that HSL attempted to falsify its records are "completely without merit". Mr Ibrahim made no reference in that email to the series of false statements he made in the applications for insurance for Junction Road and Bangalla Avenue or the statement made in the statutory declarations provided in support of the application to cancel the certificate of insurance issued for Junction Rd that no "building work" had been commenced under the contract between himself and HSL.
3. In an email sent to Fair Trading on 25 July 2019, Mr Ibrahim admitted that HSL work had commenced work at Bangalla Avenue before paying the insurance premiums for that project. He stated that he understood that because he was both the home-owner and builder, that a complying certificate of insurance was not required before work was commenced.
4. On 31 July 2019, Mr Ibrahim complied with Advance Brokers' request for further information to progress his request for retrospective insurance.
5. On 1 August 2019, Advance Brokers informed Mr Ibrahim of iCare's decision to "permanently halt" HSL's applications for retrospective cover for Bangalla Avenue and Junction Road and not to issue a certificate of insurance for Alfred Road.
6. On 5 August 2019, iCare suspended HSL's eligibility to apply for HWI.
7. On 30 August 2019, the Commissioner imposed a condition on HSL's authority prohibiting it from undertaking residential building work requiring HWI (the August 2019 licence condition). The Commissioner did not inform HSL of its right to seek review of that decision.
8. On 18 September 2019, Fair Trading notified Mr Ibrahim and HSL of its decision to investigate them.
9. On 9 October 2019, iCare declined to grant HSL's new certificate of eligibility of insurance for residential building work requiring HWI, giving these reasons for that decision: "Licencing authority sanctions (including advice by NSW Fair Trading of disciplinary action or intended disciplinary action)… Not meeting business financial measures, namely not having sufficient working capital …"

HSL's staff

1. Between January 2018 and 30 June 2019, in addition to the subject sites, HSL constructed approximately 35 dwellings at 15 sites.
2. Throughout that period, HSL employed on a full-time basis, Mr Ibrahim, Ms Katrib and four foremen onsite. In addition, HSL employed an accounts clerk, for 20 hours per week. Until September 2018, Mr Ibrahim's wife, Ms Amanda Abou-Melham, provided to HSL about 10 hours "overflow" administrative assistance per week.
3. According to Mr Ibrahim, between January 2018 and 30 June 2019 he spent most of the day moving between building sites, meeting with clients, suppliers and sub-contractors and attending to administrative matters after hours.

Mr Ibrahim's personal circumstances

1. In September 2017, Ms Abou-Melham suffered a miscarriage. Following a second miscarriage in May 2018 she became unwell and did not fully recover until shortly before the birth of the couple's second child in September 2019.
2. In July 2018, the couple's (then) only child sustained a serious injury, was hospitalised and underwent surgery.
3. According to Mr Ibrahim, between mid-2018 and September 2019 he was often required to be away from work to provide care and support to his wife and son, sometimes at short notice. He claimed this added significantly to Ms Katrib's workload.
4. Mr Ibrahim claims that the insurance problems outlined above were "not usually how I did business". He states that he now realises that those problems were the result of him being distracted by his distressing personal circumstances and being unable to cope with the workload.

Retrospective HWI

1. Subject to conditions, iCare may issue HWI where residential building work has commenced. If the work is complete, iCare may issue HWI on provision of a "defects report" prepared by a suitably qualified person.
2. Since 2014, the Home Building Compensation Fund (HBCF) has published on its website an 'Eligibility Manual' setting out the process for obtaining HWI, including retrospective cover. The Manual states that where a builder makes an application for retrospective insurance, they must notify HBCF and NSW Fair Trading. On receipt of such notification the HBCF: 1. may conduct a "Special Eligibility Review"; 2. apply an "Adverse History Margin" loading to the premiums payable by the builder in respect of HWI, which could add an additional 25% to the premiums payable by the builder; 3. add special approval conditions to the builder's eligibility.
3. Mr Ibrahim stated that before becoming aware of the availability of retrospective insurance on 24 July 2019, he thought that the "correct process" to obtain a valid contract of insurance where work had already commenced was to backdate the dates given in the application for insurance for the commencement and completion of the subject project.
4. In cross-examination, Mr Ibrahim stated that it had not occurred to him to seek advice from iCare, his lawyers or Advance Brokers when he realised that HSL did not hold contracts of insurance for the subject sites,.

Did Mr Ibrahim make false statements "in connection with an application for insurance"?

1. It is agreed that in the second and third applications for insurance for Junction Road and in the application for insurance for Bangalla Avenue, Mr Ibrahim made false statements in relation to the commencement and completion dates of the subject works and the date on which the contract for that work was signed; he knew those statements to be false; and those statements were material.
2. In addition, the parties agree that HSL and Mr Ibrahim contravened s 103EA of the Act, and, as a consequence, each is guilty of improper conduct.
3. With respect to the statutory declarations submitted to iCare in support of the application to cancel the certificate of insurance issued for Junction Road on 13 June 2019, the Commissioner asserts they are false and misleading and made "in connection with an application for insurance under [Part 6 of the Act]" and caught by s 103EA of the Act. Mr Ibrahim contends the statements were not, strictly speaking, false but concedes they were misleading.
4. For current purposes I will assume but not decide that the statements while misleading, were not made "in connection with an application for insurance" and therefore do not amount to a contravention of s 103EA of the Act.
5. Mr Ibrahim's actions in making those statements are nonetheless relevant to the question of whether he is a fit and proper person to hold an authority, which I address below.

Did HSL contravene s 92 of the Act by doing residential building work without a complying certificate of insurance?

1. HSL undertook residential building work at each subject site without a complying certificate of insurance. In the case of Junction Road, iCare did not issue a complying certificate of insurance until after the work was complete. In the case of Bangalla Avenue, the work was at least 60 per cent complete when iCare issued a complying certificate of insurance. In the case of Alfred Road, work had been underway for about three weeks when HSL ceased work on that site.
2. The Commissioner contends that s 92 creates an offence of strict liability. HSL disagrees. In any event, it contends that it can rely on the defence of reasonable and honest mistake.
3. The parties agree that because it is conceded that HSL and Mr Ibrahim contravened s 103EA thereby enlivening the power to make orders under s 62, it is not necessary to decide whether s 92 creates an offence of strict liability.
4. In my view the textual and contextual indicators suggest that s 92 creates an offence of strict liability. In contrast to s 103E, s 92 does not state that knowledge is an element of the offence - "knowing that, or being reckless as to whether …". In addition, as the NSW Court of Criminal Appeal said in R v Wampfler (1987) 11 NSWLR 541 at 546-548 following the decision of the High Court of Australia in He Kaw Teh v The Queen [1985] HCA 43; (1985) 157 CLR 523 there is a: [D]iscernible trend in modern authorities away from construing statutes as creating absolute liability and towards recognising statutory offences" as falling within the middle or second category - that is to say the category in which the prosecution must negative the honest and reasonable belief in innocence if there is sufficient basis advanced to be capable of raising a reasonable doubt of such belief.
5. For the following reasons, I am not satisfied that the defence of honest and reasonable mistake is available to HSL: 1. Mr Ibrahim did not sight or attempt to sight, evidence that iCare had issued a complying certificate of insurance before work commenced at the subject sites; 2. As Mr Ibrahim concedes, throughout the relevant period HSL did not have an adequate system in place to alert it if a complying certificate of insurance had not been issued before work commenced; 3. Mr Ibrahim was not informed by Advance Broker, Ms Katrib or any other person that a complying certificate of insurance was in place before work commenced. Nor did he make any enquiries to determine whether insurance was in place. 4. Mr Ibrahim made no enquiries to check the correctness of his stated understanding that "ordinarily" a certifier will not issue a construction certificate without evidence of the existence of a complying certificate of insurance. Notably, by 5 June 2019 when he became aware that iCare had not issued a certificate of insurance for Junction Road, for which a construction certificate had been issued, he was squarely on notice that that understanding was incorrect but nonetheless continued work on Bangalla Avenue, and commenced work on Alfred Road.
6. By failing to obtain complying certificates of insurance before undertaking work at each subject site, HSL contravened s 92 of the Act.

Is HSL/ Mr Ibrahim a fit and proper person to hold an authority?

1. The power to take disciplinary action against an authority holder can be exercised, if, among other things, the authority holder "is not a fit and proper person to hold the [authority]": ss 56(b), 57(b). Because of my findings that Mr Ibrahim and HSL contravened s 103EA, and, as a consequence are guilty of improper conduct, it is not necessary to determine whether, in addition, they are not fit and proper persons to hold their respective authorities before exercising the power to take disciplinary action under s 62 of the Act. Nonetheless that question is relevant to whether disciplinary action should be taken and, if so, what form it should take and is addressed below.

Submissions on disciplinary action

1. The Commissioner urges the Tribunal to affirm the Review Decisions, contending that they are measured and proportionate. Mr Ibrahim and HSL disagree. They contend that the decisions to cancel their respective authorities and to impose a 24-month disqualification period are unduly harsh and punitive.

Commissioner's submissions on disciplinary action

1. The Commissioner contends that the Review Decisions are consistent with the objects of the Act, which include consumer protection and promoting consumer confidence in the Act's system of accreditation, citing in support Hutchings Electrical Pty Limited & Anor v Director General, Department of Fair Trading [2004] NSWADT 23 in which the Tribunal at [118] approved the following passage from Bournelis v Building Services Corporation, Commercial Tribunal of New South Wales, (9 June 1995, unreported) at [5]: Members of the public must have confidence in builders both from the perspective of standard of work and honesty. Consumers place their trust and their money in builders and often rely on their advice at times which are often stressful, that is, the renovating, extension or building of a home. Consumers must be sure that the confidence they place in builders is not abused. They should be able to assume that builders adhere to the proper standards of trust and honesty.
2. While accepting that HSL has taken some steps to prevent a recurrence of work being commenced without a complying certificate of insurance, the Commissioner contends that there is insufficient evidence of remorse or rehabilitation. The highpoint of Mr Ibrahim's evidence of rehabilitation, contends the Commissioner, is Mr Ibrahim's stated intention to engage a business coach. It is concerning, contends the Commissioner, that Mr Ibrahim continues to harbour the belief that his actions in making false statements were not dishonest and that no one was "harmed" by his failure to obtain HWI.
3. The Commissioner asserts that Mr Ibrahim is not a fit and proper person to hold an authority for the following reasons: 1. Mr Ibrahim's ignorance of the availability of retrospective insurance; 2. Mr Ibrahim's reliance on the existence of a construction certificate as evidence that HWI had been secured; 3. Mr Ibrahim's actions in making a series of false and misleading statements to iCare and Fair Trading in order to obtain HWI; 4. Mr Ibrahim's failure to seek advice from his broker or lawyer to determine whether a legitimate solution was available when he became aware that HSL had failed to obtain HWI for the subject sites.
4. While not going so far as to submit that Mr Ibrahim made a deliberate decision to delay paying HWI premiums because of HSL's alleged financial difficulties, the Commissioner contends that HSL's financial position, nonetheless is a relevant contextual factor. The Commissioner asserts that throughout 2018/2019 HSL was experiencing financial difficulties, as evidenced by, among other things, the arrangement it entered into with the Australian Taxation Office for the payment of a significant debt and the "current utilisation" restriction imposed in May 2019 on its eligibility to obtain HWI, following its alleged failure to respond to an HCBF eligibility assessment.
5. The Commissioner accepts that Mr Ibrahim's "truly dreadful" personal circumstances go some way to explaining HSL's failure to obtain HWI. He asserts they do not explain why Mr Ibrahim made a series of false statements to iCare and, at least initially, to the regulator.

HSL's submissions on disciplinary action

1. HSL and Mr Ibrahim contend that the correct and preferable decision is the issue of a reprimand for the following reasons:
2. First, their respective "enviable compliance records". Since the issue of their respective authorities in March 2014 neither HSL nor Mr Ibrahim have been issued public warnings or been the subject of insurance claims, including statutory claims. They contend that HSL is a "good builder" with a history of rectifying defects brought to its attention and complying with any rectification orders in a timely fashion.
3. Second, referring to the Commissioner's submissions about the need to protect consumers, Mr Ibrahim asserts that his actions did not result in any loss or damage to consumers. Rather they were designed to protect the interests of future homeowners by securing HWI. His actions did not cause HSL to avoid paying insurance premiums or to cause iCare to suffer loss or damage.
4. Third, while conceding that it was foolish and ignorant to have made false statements, Mr Ibrahim asserts that he is not a stupid man and nor is HSL a stupid company. Until August 2019, when the Secretary imposed a condition on HSL's authority, barring it from undertaking residential building work and iCare suspended its eligibility to apply for HWI, HSL had been a successful building company with a significant turnover. Mr Ibrahim's actions in making false statements were the result of his lack of knowledge of the availability of retrospective insurance and his failure to put in place an adequate system to alert it if a complying certificate of insurance was not issued before work commenced. While accepting that he ought to have known about the availability of retrospective insurance, Mr Ibrahim contends that it was an "unknown unknown".
5. Fourth, Mr Ibrahim's family circumstances, while not excusing his actions, go some way to explaining them. As the Commissioner acknowledges, between May 2018 and September 2019, Mr Ibrahim's family circumstances were "truly dreadful". Mr Ibrahim and his family were under significant emotional distress. Mr Ibrahim was required to shoulder additional family responsibilities, resulting in him having less time to devote to HSL. This, in turn, placed a heavier workload on Ms Katrib, resulting in the series of errors which saw HSL commence three projects without first securing complying certificates of insurance.
6. Fifth, Mr Ibrahim's actions in making false statements, while serious, fall at the lower end of the scale, because: 1. The short period over which those were made. The first statement was made on 5 June 2019 (the second Junction Road insurance application); the last on 8 July 2019 (the second Junction Road insurance application). 2. Only two false statements were made: those relating to the commencement and completion dates of Bangalla Avenue and Junction Road. In repeating those statements Mr Ibrahim was simply replicating his original error caused by his mistaken belief that in circumstances where insurance had not been obtained before building work had commenced, the only option was to make a fresh application for insurance and backdate the commencement and completion dates of the subject work. 3. In making those statements, Mr Ibrahim was not motivated to advance his or HSL's interests at the expense of iCare or consumers. Mr Ibrahim points out that had he not been able to obtain insurance, it would have been open to him to rent rather than sell the properties. The false statements resulted in iCare insuring the same work at the same value. They did not impact on the premiums payable by HSL.
7. Sixth, of the 90 or so building projects undertaken by HSL since 2014 which required HWI, the subject sites are the only instances of HSL failing to obtain HWI before work commenced.
8. Seventh, the Tribunal can be confident that HSL's failure to obtain HWI will not be repeated because of the remedial measures now in place. These include: undertaking and arranging for Ms Katrib and HSL's bookkeeper to undertake refresher training on contracts and HWI; requiring Ms Katrib to provide regular updates about HWI compliance; engaging the services of a quality assurance consultant to, among other things, prepare a quality assurance manual; developing and using checklists to ensure that all requirements have been met before work commences, and increasing the hours worked by HSL's bookkeeper from 20 to 40.
9. Eighth, Mr Ibrahim acknowledges his wrongdoings and is contrite as demonstrated by his candour and "full admissions" when interviewed by officers of Fair Trading in September 2019 and his full cooperation with authorities since that interview.
10. Ninth, while acknowledging the seriousness of the impugned conduct, Mr Ibrahim contends that a reprimand is, nonetheless, appropriate, given the significant economic loss suffered by HSL as a result of the Commissioner's decision to impose a condition on its authority and iCare's decision to suspend and later to cancel its HWI eligibility. As conceded by the Commissioner, iCare failed to notify HSL of its right to challenge that decision and has failed to provide a satisfactory explanation for that decision. Pointing to the reasons given by iCare for its decision to decline to grant HSL's certificate of eligibility of insurance for residential building work requiring HBCF insurance - "Licencing authority sanctions (including advice by NSW Fair Trading of disciplinary action or intended disciplinary action)" - Mr Ibrahim contends that the Commissioner is at least partially responsible for iCare's decision.

What disciplinary action should be taken?

1. Being satisfied that HSL and Mr Ibrahim are guilty of improper conduct and, as discussed below, are not fit and proper persons to hold an authority, the power to take disciplinary action under s 62 of the Act can be exercised. Under that provision a range of disciplinary action can be taken including to take no action against the authority holder, to caution or reprimand the authority holder, to issue a fine up to $11,000 (to an individual), or $50,000 (to a corporation), and to suspend or cancel the authority.
2. The Review Decisions came into effect on 2 June 2020. The operation of those decisions has been stayed by order of the Tribunal. Nonetheless, because of the Commissioner's decision to impose a condition on HSL's registration, together with iCare's decision to withdraw its eligibility for HWI, since August 2019 HSL has been unable to accept new contracts to undertake residential building work.
3. The purpose of taking disciplinary action under s 62 is protective not punitive. Any order made under s 62 must be measured and proportionate.
4. The Act gives no express guidance about the considerations to be taken into account in deciding whether the discretion to make an order under s 62 should be exercised and, if so, the form of orders that should be made. The parties agree, and I concur, that the following considerations listed by one of NCAT's predecessors, the NSW Fair Trading Tribunal, in Director General, Department of Fair Trading v Cohen [2000] NSWFTT 3 (per O'Connor J), cited with approval in Qiu v Building Professionals Board [2013] NSWADT 289 at [98]), provide useful guidance. (a) the nature, width and extent of the contraventions (b) the loss or damage and prejudice in consequence of the contraventions (c) the circumstances in which the contraventions took place (d) whether the licensee has been seen to have engaged in any similar conduct (e) the presence of fraudulent or dishonest intent and deliberation on the part of the licensee (f) the extent of carelessness or wilfulness of the conduct (g) the efforts made to correct the situation and what measures have been taken by the licensee (h) what consciousness the licensee had and displayed of its obligations under the relevant statute and to the owners (i) the effect upon the licensee (j) antecedents (k) attitude, building history and future compliance (l) the penalty range.

Nature, width and extent of the contraventions

1. The subject contraventions, namely the failure to obtain complying certificates of insurance and the making of false statements, occurred over a relatively short period. The former involved three projects and occurred over a period of 13 months. The latter involved two projects and occurred over a period of less than a month.
2. Mr Ibrahim's actions in failing to obtain complying certificates of insurance for the subject sites were serious, albeit that they related to only three of the 90 residential building projects undertaken by HSL since 2014. As Mr Ibrahim properly concedes, the procedures employed by HSL in 2018/2019 to monitor its compliance with insurance obligations were inadequate.
3. I accept that when Mr Ibrahim made the false statements, he was unaware of the availability of retrospective HWI. However, I reject the argument that this diminishes the serious nature of that conduct. While Mr Ibrahim may have been unaware of the exact consequences of the failure to obtain insurance, he was aware that HSL was required by law to obtain insurance before commencing work and that without insurance the property could not be sold. While concern for the prospective homeowners may have been a reason, it was not, and nor is it suggested to be, the sole reason for Mr Ibrahim's actions. I find that a significant contributing factor for Mr Ibrahim's actions was to avoid any adverse consequences for HSL or himself as a result of the failure to obtain complying certificates of insurance.
4. While the short period over which the impugned statements were made supports the contention that the conduct falls towards the low end of the scale in terms of seriousness, the fact that those statements were repeated tends against that characterisation. I reject the argument that because the "same two lies" were repeated, their seriousness is diminished. On eight occasions, Mr Ibrahim made statements that he knew to be false or at least misleading. With respect to Junction Rd, Mr Ibrahim made false statements in applications for insurance on 5 June 2019 and 8 July 2019; and in two statutory declarations prepared in support of the application to cancel the original certificate of insurance issued on 13 June 2019. With respect to Bangalla Avenue, Mr Ibrahim made false statements in an application for insurance on 27 June 2019. Two days earlier, knowing that work had commenced in March 2019, in response to a question from Advance Brokers about the estimated start date of the project, he replied "next week". When matters began to unravel towards the end of July 2019, Mr Ibrahim made a series of misleading statements to Fair Trading.
5. The failure to obtain complying certificates of insurance was conduct of a serious nature. Because it was intentional and repeated, the making of false statements, in my opinion, was objectively more serious.

Loss or damage and prejudice in consequence of the contraventions

1. There is no evidence of any individual suffering loss, damage or prejudice as a consequence of the false statements made by Mr Ibrahim or HSL's failure to obtain insurance before undertaking work at the subject sites. Nonetheless, I reject the submission that this was in effect a "victimless crime". The making of false statements to iCare and failing to obtain HWI has the potential to undermine the integrity of the insurance scheme established by the Act and to prejudice homeowners.

Whether the licensee has been seen to have engaged in any similar conduct

1. There is no evidence of HSL or Mr Ibrahim engaging in similar conduct, either before or after the impugned conduct.

Presence of fraudulent or dishonest intent and deliberation on the part of the licensee

1. The available material is insufficient to support the Commissioner's hypothesis that Mr Ibrahim made a deliberate and calculated decision to delay obtaining insurance because of HSL's alleged financial problems. The more likely explanation for HSL's failure to obtain insurance is carelessness and poor administrative practices, compounded by Mr Ibrahim's difficult personal circumstances.
2. With respect to the making of false statements, I find that on each occasion Mr Ibrahim made those statements he did so with the intention of misleading iCare that work had not been commenced. I have difficulty reconciling Mr Ibrahim's acknowledgement that when he made those statements, he knew they were false and iCare would rely upon them but, in his opinion, his actions were not dishonest. Whether, as suggested by Counsel for Mr Ibrahim, this is an example of "psychological dissonance", is not to the point.

Extent of carelessness or wilfulness of the conduct

1. HSL's failure to obtain complying certificates of insurance was careless.
2. In contrast, Mr Ibrahim's actions in making false statement were wilful and deliberate.

Efforts made to correct the situation and what measures have been taken by the licensee

1. I am reasonably satisfied that Mr Ibrahim has taken genuine steps to ensure that the failures within HSL, which resulted in work being commenced at the subject sites without a complying certificate of insurance, will not be repeated. The Review Decisions, together with iCare's decision to withdraw HSL's eligibility for insurance, are likely to have a deterrent effect and encourage it to maintain those systems.
2. With respect to the making of false statements I accept that Mr Ibrahim has demonstrated a degree of remorse. The more difficult question, which I consider below, is whether there is risk that conduct will be repeated.

Consciousness the licensee had and displayed of its obligations under the relevant statute and to the owners

1. I accept that Mr Ibrahim is now acutely aware of the need to comply with the obligations imposed by the Act.

Effect upon the licensee

1. Cancellation of the authorities held by HSL and Mr Ibrahim will have a devastating effect on HSL, its employees and their families, Mr Ibrahim and his family.

Antecedents

1. There is no evidence of HSL or Mr Ibrahim engaging in improper conduct apart from the conduct that is the subject of the Review Decisions.

Attitude, building history and future compliance

1. There are no reported issues of concern relating to HSL or Mr Ibrahim's building history.

Penalty range

1. The decisions made by the Commissioner to cancel the authorities held by Mr Ibrahim and HSL, and to disqualify each from holding an authority for a period of two years, are at the high end of the scale. The issue of a reprimand as proposed by HSL falls at the opposite end of the scale.

Fit and proper person?

1. The expression "fit and proper person" is not defined by the Act. Sections 20(1A) and 25(1A) provide guidance as to its meaning, stating that in determining whether a person is not a fit and proper person to hold a contractor licence/supervisor certificate, the Secretary is to consider whether "the applicant is of good repute, having regard to character, honesty and integrity". The Commissioner must refuse an application for a contractor licence/supervisor certificate if s/he is not satisfied that the applicant is a fit and proper person to hold a contractor licence/supervisor certificate: ss 20(1)(a), 25(1)(a).
2. The concepts of "good repute" and "fit and proper" are not identical. The latter is broader in scope and encompasses character, honesty and integrity and in addition, competence and technical skills.
3. The expression "fit and proper person" takes its meaning from the activities in which the person is or will be engaged and the ends to be served by those activities: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 (Bond) at 380 per Toohey and Gaudron JJ; Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93 [30], [31]. Whether an authority holder is a fit and proper person is not to be evaluated by simply considering whether they are competent and possess the necessary technical skills to undertake the class of work permitted by their authority. It also requires consideration of the holder's conduct measured against the responsibilities, functions and duties imposed by the relevant statutory scheme, here, the scheme established to regulate the residential building industry and to accredit persons authorised to work in that industry.
4. In deciding whether Mr Ibrahim is a fit and proper person the question of whether the community would have confidence that any improper conduct will not reoccur is a relevant factor (Bond at 380 per Toohey and Gaudron JJ).
5. A person found not to be a fit and proper person may redeem him or herself: Grenfell v Director General Department of Finance and Services [2013] NSWADT 57 at [13]; In re Davis [1947] HCA 53; (1947) 75 CLR 409 at 416.

Consideration

1. The issue to be determined is whether Mr Ibrahim and HSL are currently not fit and proper persons to hold an authority.
2. Dealing first with the question of whether Mr Ibrahim is a fit and proper person, in the sense of possessing the necessary knowledge and technical skills to discharge the obligations imposed on authority holders, I accept, as contended by the Commissioner, that in 2018/2019 Mr Ibrahim demonstrated ignorance of several key statutory obligations imposed on authority holders and an inability to comply with those obligations. As Mr Ibrahim concedes, throughout that period, HSL did not have in place a reliable system to monitor its compliance with its obligation under s 92 of the Act. While Mr Ibrahim was aware of that obligation, as he properly concedes, he was ignorant of various matters relevant to compliance. These include his misapprehension that the issue of a construction certificate was evidence of the issue of a complying certificate of insurance and his ignorance of the availability of retrospective HWI.
3. I find that throughout the period HSL undertook work without a complying certificate of insurance, Mr Ibrahim was not a proper person to hold an authority in the sense that he lacked the necessary knowledge and skills to discharge the obligation imposed by s 92. Given the evidence of the remedial measures taken by Mr Ibrahim together with his demonstrated resolve to ensure that conduct of that type is not repeated, I am satisfied that he has addressed those deficiencies.
4. The more difficult question is whether Mr Ibrahim is now fit to hold an authority, in the sense that in his future dealings with iCare and the regulator he can be expected to act scrupulously and honestly.
5. Several factors favour a finding that Mr Ibrahim is now fit to hold an authority, including: 1. Mr Ibrahim's frank admissions made during the interview with Fair Trading in September 2019 and his candour in his subsequent dealings with Fair Trading, iCare and the Tribunal. 2. the fact that the impugned statements were made over a relatively short period. 3. the likelihood that when he made those statements, Mr Ibrahim was emotionally distressed. 4. the absence of any evidence to suggest that Mr Ibrahim had previously engaged in conduct of that type. 5. Mr Ibrahim's expression of remorse for his actions.
6. Despite these favourable considerations, I remain troubled by Mr Ibrahim's actions in repeatedly making false statements to iCare and Fair Trading. Parliament has decided that the regulation of the home building sector is necessary to protect consumers. The statutory scheme is dependent upon authority holders being honest and candid in their dealings with the regulator and iCare.
7. Human behaviour is complex. How a particular individual will react to future events is notoriously difficult to predict. While possible, as Mr Ibrahim contends, his conduct is an aberration and will not be repeated, on the available material I am not confident that if Mr Ibrahim were again confronted with a situation where a mistake was made or a problem arises, which had adverse consequences for himself and/or HSL, that he will act with complete candour in his dealings with iCare and Fair Trading, especially if under stress. I find that at this point in time he poses an unacceptable risk of reoffending.
8. I find Mr Ibrahim is not a fit and proper person to hold an authority.

Decision

1. Section 62 does not mandate that the discretion to cancel an authority must be exercised where the authority holder is found not to be a fit and person to hold an authority. Nonetheless, given the seriousness of the matters found proven, together with my finding that Mr Ibrahim is not a fit and proper person to hold an authority, I have decided that the correct and preferable decision is to cancel the authorities held by HSL and Mr Ibrahim.
2. However, I have decided to reduce the disqualification period from 24 months to six months because of: (i) the passage of time since the Review Decisions were made, (ii) my view that, if after the expiration of that period, Mr Ibrahim is able to demonstrate reform, he should not be deprived of the opportunity to reapply for an authority.
3. In addition, reflecting the Review Decisions, I have decided that throughout that disqualification period Mr Ibrahim should be disqualified from: 1. holding any authority under the Act; 2. being a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority under the Act; and 3. being an officer of a corporation that is the holder of an authority under the Act.

Orders 1. The decision made by the Commissioner for Fair Trading on 19 May 2019 under s 62 of the Home Building Act 1989 (NSW) in respect of HSL Group Pty Ltd, is varied by reducing the period HSL is disqualified from holding an authority under the Home Building Act from 24 months to 6 months. The decision is otherwise affirmed. 2. The decision made by the Commissioner for Fair Trading on 19 May 2019 under s 62 of the Home Building Act 1989 (NSW) in respect of Hanna Ibrahim, is varied by reducing the period Hanna Ibrahim is disqualified from holding an authority under the Home Building Act; being a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority under the Home Building Act; and being an officer of a corporation that is the holder of an authority under the Home Building Act, is reduced from 24 months to 6 months. The decision is otherwise affirmed. 3. Pursuant to s 66 of the Administrative Decisions Review Act 1997 (NSW) orders 1 and 2 above come into effect in 14 days from this decision.

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: 30 October 2020