Huynh v Commissioner for Fair Trading

NCAT Occupational|2015-09-16

Introduction

Mr Huynh seeks review of a decision made by the respondent on 10 June 2015. This decision affirmed decisions made on 17 October 2014 to:

Cancel Mr Huynh's real estate licence number 929342 in accordance with s 192(1)(g) of the Property Stock and Business Agents Act 2002 (the Act);
Declare that Mr Huynh is a disqualified person for the purposes of the Act for a period of six years in accordance with s 192(1)(h) of the Act and
Declare that Mr Huynh is disqualified from being involved in the direction, management or conduct of the business of a licensee under the Act for a period of six years in accordance with s 192(1)(i) of the Act.

In his application for review, Mr Huynh stated that he seeks review of the decision so that he could work as a real estate salesman. He did not seek an order overturning the decision cancelling his real estate agent's license or the decision disqualifying him from being involved in the direction, management or conduct of the business of a licensee. Mr Huynh is currently working as a real estate salesman in the employ of a licensee.
However, during the hearing, it was brought to Mr Huynh's solicitor's attention that as a disqualified person, Mr Huynh was not eligible for a certificate of registration and could therefore not work as a real estate salesman. Mr Huynh sought and was granted leave to amend the application for review to seek a review of the declaration that he is a disqualified person for the purposes of the Act and a finding that Mr Huynh is a fit and proper person to hold a certificate of registration.
The parties were given an opportunity to make written submissions on the amended application.
For the reasons set out below I have decided to affirm the decisions to cancel Mr Huynh's license and to disqualify him from being involved in the direction, management or conduct of the business of a licensee under the Act. I have varied the decision to declare that Mr Huynh is a disqualified person for the purposes of the Act by reducing the period of disqualification. I have also found that Mr Huynh is not a fit and proper person to be issued with a certificate of registration.

Background

Mr Huynh was the director of Goldstar Partner (NSW) Limited ACN 112 962 777 (the corporation), which is now under external administration.
The corporation held a license issued under the Act and carried on business under the trading name Goldstar Partner Real Estate from premises in Fairfield New South Wales.
Mr Huynh was the holder of a real estate license issued under the Act on 24 January 2000. He was formerly the licensee in charge of the corporation's business in Fairfield.
In the 2012 audit of the corporation's business, the auditor noted that that on 9 September 2011, there had been an unauthorised withdrawal of $20,000 from the corporation's sales trust account, which had not been reversed until a deposit of $20,000 was make into the account on 30 June 2012.
On 21 January 2014 a routine inspection of the corporation's business premises confirmed the 2012 withdrawal and revealed further unauthorised debits from and deposits to the sales trust account in the order of $58,324.
On 23 January 2014 investigators met with Mr Huynh and his solicitor. Mr Huynh did not dispute the transactions, which he explained arose from a need to service his personal investments and loans from the Vietnamese community. Mr Huynh undertook to deposit the necessary funds to reconcile the sales trust account. The trust account was reconciled by 28 January 2014.
On 6 February 2014 the respondent appointed Mr Brett Schofield of PPB Advisory as manager of the corporation to take control of the corporation's business and to prepare a detailed report into the corporation's previous three years of trading pending sale of the business.
On 28 February 2014 PPB Advisory issued an interim report identifying unauthorised sales trust account debits of $126,648. On 20 May 2014 a final report revised the amount of unauthorised sales trust debits to $146,648. On 19 September 2014 PPB Advisory issued a final report which confirmed this amount of unauthorised sales trust account debits.
On 28 January 2015 Smith Hancock Accountants were appointed liquidator to the corporation by order of the Federal Court. This was on the petition of the Australian Tax Office (ATO) as the corporation had unpaid tax debts.
On 5 March 2015 a show cause notice was issued to the corporation and to Mr Huynh under section 195 of the Act. The notice was issued because the respondent's delegate formed the opinion that grounds existed under section 190(1)(d) of the Act for taking disciplinary action against the corporation and Mr Huynh.
Following the granting of an extension of time to respond to the Notice to Show Cause, Mr Huynh's solicitor provided written submissions on 26 March 2015.
In summary, Mr Huynh's solicitor submitted that:

In respect to steps taken to avoid the corporation being placed into external administration, the ATO had served a garnishee notice on the corporation on 10 June 2014 demanding payment of $171,331.47. The corporation was only able to pay $100,478.11 to the ATO on 13 June 2014. The corporation also had to pay fees to the appointed managers totalling $228,150, which left insufficient funds for the corporation to pay the remaining amount to the ATO after the sale of the business. Despite negotiations between Mr Huynh's lawyers and the ATO to reach a settlement, the ATO filed for the liquidation of the company on 28 January 2015.
Mr Huynh has suffered financial losses arising out of the liquidation of the corporation and business costs associated with the appointed manager's fees.
Mr Huynh fully cooperated with investigators during the investigation and assisted the managers up until conclusion of the sale of the business.
Mr Huynh is 57 years of age, is not in good health and is extremely depressed at the loss of his business.
Mr Huynh is very contrite and deeply regrets his acts and omissions.
As a character reference, Mr Huynh submitted a certificate of appreciation presented by the president of the Vietnamese Community of Australia in recognition of his support during the Philippines Appeal in 2013.
Mr Huynh has been working on the real estate industry for the past 20 years.
If he is disqualified he will suffer great financial difficulty in meeting his debts, as he has no training or qualifications to work in any other industry.
In determining an appropriate penalty, proper consideration should be given to imposing conditions on Mr Huynh's license, requiring annual mandatory education; not to act as a sole trader; not to accept appointment as a partner of any business; to work under supervision of a licensed real estate agent; not to accept appointment as a director or manager of any corporate licensee; not to purchase in any corporate licensee; not to accept appointment as a signatory on any licensee's trust account.

Determination

A determination was made on 4 April 2015. The respondent's delegate found that grounds for taking disciplinary action against Mr Huynh were established in accordance with ss 191(a), 191(c), 191(d) and (191)(e) of the Act in that Mr Huynh:

Had contravened sections 86(1), 221 and 37 of the Act and Rules 2, 3, 6 and 9 of the Rules of Conduct set out in Schedule 1 of the Property Stock and Business Agents Regulation 2003 (the Regulation);
Had acted unlawfully, improperly, unfairly or incompetently;
Was not a fit and proper person to hold a licence or a certificate of registration (ss 14(1)(b) and 14(3)(b));
Did not warrant an exemption from being a disqualified person under s 16(2B) of the Act in that the liquidation of the corporation occurred due to Mr Huynh failing to pay taxes to the ATO.

The delegate further found that Mr Huynh's conduct in misappropriating trust money for his own use demonstrated a lack of honesty and a lack of willingness to at all times comply with legislative requirements. The delegate noted that misappropriations of money from the sales trust account occurred on several occasions over a period of four months and only ceased when the conduct was detected by NSW Fair Trading during a routine inspection.
As noted above, the delegate:

Cancelled Mr Huynh's real estate licence;
Declared Mr Huynh to be a disqualified person for the purposes of the Act for a period of six years and
Disqualified Mr Huynh from being involved in the direction, management or conduct of the business of a licensee under the Act for a period of six years.

Decision under review

On 29 April 2015, Mr Huynh sought review of the Determination. No further submissions were provided and the internal review was conducted following a consideration of the submissions made by Mr Huynh in respect of the show cause notice.
The delegate affirmed the Determination on 10 June 2015.
In making that decision, the reviewer found, amongst other things, that:

The conduct of the corporation and of Mr Huynh was at the high end of the scale of seriousness and warranted the imposition of a disqualification under the Act.
The proposed disciplinary action was justified as it provides a deterrent to other similar conduct and provides a level of protection to consumers.

Application for review

The application for review was filed on 8 July 2015.
It was listed for directions on 14 July 2015. On that date, an order staying the decision under review was made. The stay order permitted Mr Huynh to work as a real estate salesperson subject to a number of conditions.

Hearing

Mr Huynh gave oral evidence at the hearing on 16 September 2015. He was represented by his solicitor, Mr Quy. Ms Bourke, a solicitor in the employ of the respondent, appeared for the respondent.

Evidence and submissions

In making a decision I have taken into account the documents filed with the Tribunal pursuant to s 58 of the Administrative Decisions Review Act 1997, the documents filed by Mr Huynh on 10 September 2015, the oral evidence Mr Huynh gave at the hearing and the oral and written submissions made by Mr Quy and Ms Bourke. This includes the written submissions made after the hearing in respect of the exemption from disqualification issue and the issue of whether Mr Huynh is a fit and proper person.
On 14 December 2015, Ms Bourke wrote to the Tribunal seeking the relisting of the matter in order to consider the respondent's application to revoke the stay order made on 14 July 2015. The basis for this application was that on 4 December 2015, Mr Huynh was convicted and sentenced to a 12 month good behaviour bond. Material provided to the Tribunal demonstrates that Mr Huynh pleaded guilty to the offence of "licensee / registered person fraudulently convert money". Mr Huynh has appealed against the severity of the sentence. The appeal has been listed for hearing in the District Court on 5 February 2016.
The respondent's application was listed for hearing. However, the hearing will be vacated upon publication of these reasons for decision. Mr Huynh's conviction has not been considered in determining the application for review.

Relevant Legislation

A number of provisions of the Act are relevant to the issues in this application.
As noted above, Mr Huynh does not seek to be licensed. Rather, he wants to be able to continue in employment as a real estate salesperson. Mr Huynh cannot be a real estate salesperson unless he holds a certificate of registration: s 10(1)(a) of the Act
In accordance with s 14(3) of the Act, a person is eligible to hold a certificate of registration only if the Director-General is satisfied that the person: 1. is an individual who is at least 16 years of age, and 2. is a fit and proper person to hold a certificate of registration, and 3. has the qualifications required for the issue of a certificate of registration of the type concerned, and 4. is not a disqualified person.
A person is a disqualified person for the purposes of holding a certificate of registration if s 16(1) applies to the person. Relevantly to Mr Huynh's situation, this subsection provides that a person is a disqualified person for the purposes of this Act if the person is "for the time being declared to be a disqualified person under Part 12 (Complaints and disciplinary action)": s 16(1)(j) of the Act. Part 12 of the Act contains ss 191-203.
Section 191 of the Act sets out the circumstances in which disciplinary action can be taken against a licensee of a holder of certificate of registration. The section relevantly provides: 191 Grounds for disciplinary action Disciplinary action under this Part can be taken against a person who is or was the holder of a licence or certificate of registration on any one or more of the following grounds: (a) the person has contravened a provision of this Act or any other Act administered by the Minister, or the regulations under any such Act, whether or not the person has been prosecuted or convicted of an offence in respect of the contravention, … (c) the person has, in the course of carrying on business or exercising functions under the licence or certificate of registration, acted unlawfully, improperly, unfairly or incompetently, (d) the person is a disqualified person or is otherwise not eligible under section 14 to hold a licence or certificate of registration, (e) the person is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee, … (k) grounds specified in the regulations as grounds for the taking of disciplinary action against a person under this Act.
Section 195 of the Act provides: 195 Show cause notice (1) The Director-General may serve a show cause notice on a person if the Director-General is of the opinion that there is reasonable cause to believe that there are grounds for taking disciplinary action against the person. (2) A show cause notice is a notice requiring a person to show cause why disciplinary action should not be taken against the person under this Act on the grounds specified in the notice. (3) A show cause notice is to be in writing and is to specify a period of not less than 14 days after service of the notice as the period that the person to whom the notice is directed has to show cause as required by the notice. (4) The person on whom a show cause notice is served may within the period allowed by the notice make oral or written submissions to the Director-General in respect of the matters to which the notice relates. In the case of a corporation, submissions may be made by a director or officer of the corporation.
Section 192 of the Act specifies the disciplinary action that can be taken where a ground or grounds to take such action exist under s 191. This section relevantly provides: 192 Disciplinary action (1) Each of the following actions is disciplinary action that the Director-General can take against a person under this Act: (a) caution or reprimand the person, (b) give a direction to the person requiring the person to give a specified undertaking to the Director-General as to the manner in which the person will conduct business or exercise functions under a licence or certificate of registration held by the person, (c) give a direction to the person requiring the person to take specified action within a specified time in connection with the conduct of business or the exercise of functions under a licence or certificate of registration, (d) impose a monetary penalty on the person of an amount not exceeding 100 penalty units in the case of an individual or 200 penalty units in the case of a corporation, (e) impose a condition on the person's licence or certificate of registration, (f) suspend the person's licence or certificate of registration for a period that does not exceed the unexpired term of the licence or certificate of registration, (g) cancel the person's licence or certificate of registration, (h) declare the person to be a disqualified person for the purposes of this Act, either permanently or for a specified period, (i) disqualify the person from being involved in the direction, management or conduct of the business of a licensee. (2) A power conferred by this Act to take disciplinary action against a person is a power to take any one or more of the actions that constitute disciplinary action. …
The disciplinary action taken against Mr Huynh is set out in [1] above.
As noted above, Mr Huynh specifically seeks a review of the declaration made under s 192(1)(h) of the Act declaring him to be a disqualified person for a period of six years. Mr Huynh is not eligible for a certificate of registration while this declaration is in force: s 16(1)(j) of the Act. Mr Huynh also seeks a finding that he is a fit and proper person for the purposes of eligibility for a certificate of registration.
It appears that the declaration made under s 192(1)(h) of the Act that Mr Huynh was a disqualified person was made at least partly because, in accordance with s 16(1A)(c) of the Act, he was considered to be a person who is or was at any time in the last 3 years, concerned in the management of, or a director of, an externally-administered body corporate (within the meaning of the Corporations Act) except in a case of the voluntary winding up of the body corporate.
A person may be exempted from the operation of s 16(1A)(c) if the Director-General (or the Tribunal standing in the shoes of the Director-General) is satisfied that the person "took all reasonable steps (while concerned in the management of, or a director of, the body corporate) to avoid the body corporate becoming an externally-administered body corporate": s 16(2B)(c) of the Act. In determining what reasonable steps could have been taken by a person to avoid this outcome, regard is to be "to the steps that could have been taken by the person from the time that the financial difficulties that gave rise to the outcome first arose": s 16(2D) of the Act.

Role of the tribunal

The Tribunal's role is to decide whether, having regard to the underlying facts in the matter and the applicable law, the decision is the correct and preferable one: s 63 of the Administrative Decisions Tribunal Act 1997.
The Tribunal must review the merits of the original decision and consider the evidence available at that time, together with any other or later material. The Tribunal may affirm the original decision, vary it or set it aside: Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60.
The Tribunal must make its own decision. There is no presumption that the decision under review is correct: McDonald v Director-General of Social Security [1984] FCA 57; (1984) 1 FCR 354, 357.

Issues

In determining whether the decision under review is the correct and preferable decision, determination of the following issues is relevant:

Is Mr Huynh a fit and proper person to hold a certificate of registration?
Do grounds exist to take disciplinary action against Mr Huynh?
Was a show cause notice given to Mr Huynh in accordance with the Act?
If grounds to take disciplinary action are established and a show cause notice was properly given, what disciplinary action, if any, is it appropriate to take against Mr Huynh?
Does the exemption from the operation of s 16(1A)(c) of the Act apply to Mr Huynh?
If Mr Huynh should be declared to be a disqualified person for the purposes of the Act, how long should the period of disqualification last?

Is Mr Huynh a fit and proper person to hold a certificate of registration?

As Mr Huynh only seeks to remain eligible for a certificate of registration, I have first considered whether he is a fit and proper person to hold such a certificate in accordance with s 14(3)(b) of the Act.
The concepts of fitness and propriety have been defined by the High Court of Australia as having three components: "honesty, knowledge and ability." Hughes & Vale Pty Ltd v State of New South Wales [1955] HCA 28; (1955) 93 CLR 127 at [9].
In Sobey v Commercial and Private Agents Board [1979] 22 SASR 70 Walters J said of the term "fit and proper": In my opinion what is meant by that expression is that the applicant must show not only that he is possessed of a requisite knowledge of the duties and responsibilities evolving upon him as the holder of a particular licence ... but also that he is possessed of sufficient moral integrity and rectitude of character as to permit him to be safely accredited to the public ... as a person to be entrusted with the sort of work which the licence entails."
The term "fit and proper person" was also discussed by Mason CJ in Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 at [63]. The Chief Justice stated: The question whether a person is fit and proper is one of value judgment. In that process the seriousness or otherwise of particular conduct is a matter for evaluation by the decision maker. So too is the weight, if any, to be given to matters favouring the person whose fitness and propriety are under consideration.
In McBride v Walton (NSW Court of Appeal, unreported, 15 July 1994), the Court said that where there is evidence of misconduct, there should be consideration of any explanation for that misconduct, its seriousness to the particular activity, the motivation of the person, whether the misconduct is an isolated incident, the person's underlying qualities of character, and the person's conduct since the incident and whether this demonstrates recognition of the misconduct and subsequent reform. The question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur.
Mr Huynh's conduct in misappropriating money from the corporation's trust account constitutes a fundamental breach of several provisions of the Act. (In relation to this, see [58] - [60] below). Furthermore, it was a breach of the Act that involved dishonesty which was systematic and calculated. It was not an isolated incident and the motivation was to avoid personal financial loss. According to his oral evidence during the hearing, Mr Huynh knew that the behaviour was wrong. However, he repeated the behaviour on a number of occasions. It is reasonable to assume that the behaviour would have continued had it not been detected by an audit. References provided by Mr Huynh indicate that he is viewed within the community as being honest, reliable, a person of good character and high moral integrity. However, his conduct in misappropriating funds from the corporation's sales trust account belies that view and demonstrates a lack of honesty. While I accept that Mr Huynh is contrite, I consider that it is too early to be confident that he is now reformed and that he will not commit acts of dishonesty in the future.
Furthermore, at the hearing, Mr Huynh, while expressing remorse for his actions, did not demonstrate an understanding of the legislative provisions that prohibited the misappropriation of money from the trust account. When asked during cross-examination which provisions of the Act prohibited the unauthorised withdrawal of funds from the trust account, Mr Huynh nominated s 192 of the Act. This response suggests that Mr Huynh lacks the ability and knowledge that are required to be considered a fit and proper person.
Although Mr Huynh only seeks a certificate of registration and not a license, the rules of conduct set out in Schedule 1 of the Regulation set out the expectations of both licensees and registered persons. Section 37 of the Act makes it clear that the rules of conduct apply to those exercising functions under both a licence and a certificate of registration. There is nothing in the Act or the Regulation to suggest that a lower standard of conduct applies to a certificate of registration holder as opposed to a licence holder. Knowledge of the legislation and honesty are requirements under the rules of conduct. They are not requirements that I can be comfortably satisfied that Mr Huynh currently meets.
I accept that Mr Huynh has worked in the real estate industry for a long time and that he will face financial difficulty if he is unable to keep working in the industry. However, the hardship Mr Huynh may suffer is not a relevant factor to consider in making a determination of whether he is a fit and proper person.
Overall, taking into account all of the evidence before me and the submissions made by both parties, while this may change in the future, I am not satisfied that Mr Huynh is currently a fit and proper person for the purposes of being issued with a certificate of registration.

Do grounds exist to take disciplinary action against Mr Huynh?

I have considered whether there were grounds to take disciplinary action against Mr Huynh.
Mr Huynh does not dispute that he misappropriated funds from the corporation's sales trust account for his own use. According to the evidence Mr Huynh gave at the hearing, he used funds withdrawn from the trust account to re-pay personal loans and other personal expenses, including employees' salaries. At the hearing, Mr Huynh stated that he used money that should have been paid in taxes to pay personal expenses.
Mr Huynh also stated that both he and the corporation were fined in 2005 because he withdrew money from the corporation's sales trust account without authority to do so. Mr Huynh stated that this was his "first mistake". He agreed that that he had made further withdrawals from the trust account on several occasions between September 2013 and January 2014. He stated that he knew that it was wrong to do so, but he thought that the worst thing that would happen to him would be a fine.
On the basis of Mr Huynh's evidence, I am satisfied that Mr Huynh contravened s 86(1) of the Act, which provides: 86 Trust money to be paid into trust account (1) Money received for or on behalf of any person by a licensee in connection with the licensee's business as a licensee: (a) is to be held by the licensee or (if the licensee is employed by a corporation) by the corporation, exclusively for that person, and (b) is to be paid to the person or disbursed as the person directs, and (c) until so paid or disbursed is to be paid into and retained in a trust account (whether general or separate) at an authorised deposit-taking institution in New South Wales and approved by the Director-General for the purposes of this Part.
I am also satisfied that Mr Huynh breached rules of conduct for licensees and holders of certificates of registration which are set out in Schedule 1 of the Regulation. I am satisfied that in misappropriating trust account funds and putting the funds to his own use, Mr Huynh breached rules 2, 3, 4, 6 and 9. These rules provide: 2 Fiduciary obligations An agent must comply with the fiduciary obligations arising as an agent. 3. Honesty, fairness and professionalism (1) An agent must act honestly, fairly and professionally with all parties in a transaction. … 3. Skill, care and diligence An agent must exercise reasonable skill, care and diligence. 6. To act in client's best interests An agent must act in the client's best interests at all times unless it would be contrary to the Act or regulations under the Act or otherwise unlawful to do so. 9. To act in accordance with client's instructions An agent must act in accordance with a client's instructions unless it would be contrary to the Act or regulations under the Act or otherwise unlawful to do so.
Given that Mr Huynh misappropriated trust account funds, I am satisfied that he also breached s 211 of the Act, which relevantly provides: 211 Fraudulent conversion and false accounts of money received by licensee or registered person (1) This section applies to: (a) any money received by a licensee or registered person on behalf of any person in respect of any transaction in the licensee's or registered person's capacity as a licensee or registered person, or any part of any such money, and (b) any money so received that is held by the licensee or registered person as a stakeholder or in trust pending the completion of any transaction. (2) If the licensee or registered person fraudulently converts the money or any part of that money to his or her own use or to the use of any other person, the licensee or registered person is guilty of an indictable offence and liable to imprisonment for a term of not more than 10 years. ….
I am satisfied that Mr Huynh's contraventions of the Act establish a ground for disciplinary action under s 191(a). They also constitute unlawful and improper behaviour in the course of carrying on the business of a licensee, which means that the ground for disciplinary action under s 191(c) is also established.
The corporation went into external administration while Mr Huynh was its director. This means that Mr Huynh was a disqualified person within the meaning of s 16(1A)(c) of the Act. This means that the grounds for disciplinary action set out in s 191(1)(d) of the Act is established.
The ground for disciplinary action set out in s 191(1)(e) of the Act is also established. Mr Huynh's misuse of trust account money is not only a breach of a number of provisions of the Act, it also supports a conclusion that he was not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee.
Overall, it is clear from the evidence that a number of grounds for taking disciplinary action against Mr Huynh are established.

Was a show cause notice given to Mr Huynh in accordance with the Act?

As noted above, a show cause notice dated 5 March 2015 was given to Mr Huynh. I am satisfied that the notice complied with the requirements of s 195 of the Act.

What disciplinary action, if any, is it appropriate to take against Mr Huynh?

The disciplinary action that can be taken against a licensee or the holder of a certificate of registration is set out in s 192 of the Act.
Disciplinary proceedings are both protective and punitive in nature: Rich v ASIC (2004) 220 CLR 129. While the protection of consumers is a purpose of the Act, the effect of the disciplinary provisions in the Act is to penalise the person against whom action is taken.
The disciplinary action taken against Mr Huynh was:

The cancellation of his real estate licence under s 192(1)(g) of the Act;
A declaration under s 192(1)(h) of the Act that he was a disqualified person for the purposes of the Act for a period of six years and
A declaration under s 192(1)(i) of the Act that he was disqualified from being involved in the direction, management, or conduct of the business of a licensee under the Act for a period of six years.

I note that s 192(1)(i) of the Act allows the Director-General to "disqualify the person from being involved in the direction, management or conduct of the business of a licensee". It does not specify that this penalty can be imposed for a particular period of time, unlike the penalty which can be imposed under s 192(1)(h) which allows the Director-General to declare a person to be a disqualified person for the purposes of the Act, "either permanently or for a specified period".
In any event, Mr Huynh does not dispute the cancellation of his license or the disqualification from being involved in the direction, management or conduct of the business of a licensee. He only disputes the declaration under s 192(1)(h).
Given that the Tribunal stands in the shoes of the Director-General in making a decision on the application for review, I have nevertheless considered the appropriateness of all of the penalties imposed on Mr Huynh and whether they represent the correct and preferable decision.

Cancellation of license under s 191(1)(g) and disqualification under s 191(1)(i)

In my view, the seriousness of Mr Huynh's conduct merits the imposition of a serious penalty. Mr Huynh's unauthorised use of trust account money on a number of occasions demonstrates a lack of honesty and integrity in Mr Huynh's conduct as a licensee. As noted above, Mr Huynh's evidence at the hearing was that he was aware that his conduct was wrong. However, he repeated the conduct on a number of occasions and stated that he thought that the most serious penalty he would face was a fine. That Mr Huynh thought this was the case also suggests that his knowledge of his obligations under the Act was significantly deficient.
I note the personal and professional references provided by Mr Huynh, which are included in the documents filed by Mr Huynh on 10 September 2015. I accept that Mr Huynh is highly regarded in his community. I also accept that full restitution was made in respect of the money he withdrew from the sales trust account. However, I remain of the view that Mr Huynh's behaviour in misappropriating trust account money for his own use represents a fundamental breach of the honesty and integrity required of those who hold a license or a certificate of registration under the Act. In these circumstances, I am satisfied that the penalties imposed under s 192(1)(g) and s 192(1)(i) of the Act are appropriate.

Declaration that Mr Huynh is a disqualified person under s 192(1)(h) of the Act

The penalties imposed under s 192(1)(g) and s 192(1)(i) would not prevent Mr Huynh from holding a certificate of registration under s 14(3) of the Act. As I have found that Mr Huynh is not a fit and proper person to hold a certificate of registration, he is not eligible to hold a certificate of registration: s 14(3)(b) of the Act. However, fitness and propriety are factors that can change over time. The fact that Mr Huynh is not currently a fit and proper person to hold a certificate of registration does not mean that he will not become fit and proper in the future.
The other factor arising from the decision under review that results in Mr Huynh not being eligible to hold a certificate of registration is the declaration under s 192(1)(h) of the Act that he is a disqualified person for the purposes of the Act. It is this declaration that Mr Huynh specifically seeks to have set aside.
The tension between ss 16(1) and 192(1)(h) of the Act was noted in Gambino v Commissioner for NSW Fair Trading [2014] NSWCATOD 135 at [78]. I am satisfied that s 16 does not limit the power to declare a person to be a disqualified person under s 192(1)(h). Rather, it provides for the circumstances in which a person is automatically disqualified. This means that it was open to the Director-General to make a declaration that Mr Huynh is a disqualified person under s 192(1)(h) even if he would not be automatically disqualified under s 16(1) or s 16(1A) of the Act. A declaration under s 192(1)(h) applies to both licensees and holders of registration certificates: Director General, Department of Finance and Services v Carr (GD) [2011] NSWADTAP 64
Working in the real estate industry requires the highest degree of integrity. Notwithstanding the positive references provided by Mr Huynh, his actions demonstrate that he does not have the degree of integrity his referees attest to. Having once been fined for making unauthorised withdrawals from the corporation's sales trust account, he nevertheless took the same action again on several occasions. Furthermore, given that the action was repeated on a number of occasions, it is safe to conclude that it only ceased because it was detected during an audit.
I am comfortably satisfied that, even though restitution of the funds misappropriated from the sales trust account was made, the seriousness of Mr Huynh's actions, his awareness that what he did was wrong and the fact that he had previously been fined for the same breach of his statutory obligations merits disciplinary action as serious as a declaration that he is a disqualified person for the purposes of the Act under s 192(1)(h). I am satisfied that this is so, notwithstanding Mr Huynh's contrition, the evidence that he has provided of his good standing within the community and the personal hardship that arises from a declaration that he is a disqualified person, including the fact that he would be precluded from working as a real estate salesperson.
Nevertheless, if the exemption under s 16(2B)(c) of the Act applies in Mr Huynh's case, this could justify setting aside the declaration that Mr Huynh is a disqualified person for the purposes of the Act. I note that in making the decision under review, the reviewer considered whether the exemption applied. If the declaration under s 191(1)(h) is set aside and no period of disqualification is imposed, Mr Huynh would not be a disqualified person under s 16(1)(j) of the Act, and could (subject to meeting the other relevant criteria, including fitness and propriety) be eligible for a certificate of registration under s 14(3) of the Act.

Does the exemption from the operation of s 16(1A)(c) of the Act apply to Mr Huynh?

Section 16(2B)(c) of the Act provides that a person may be exempted from the operation of s 16(1A)(c) if the Director-General is satisfied that "the person took all reasonable steps (while concerned in the management of, or a director of, the body corporate) to avoid the body corporate becoming an externally-administered body corporate". Section 16(2D) of the Act provides that in determining what reasonable steps could have been taken by a person to avoid the body corporate becoming an externally-administered body corporate, the Director-General is to have regard to "the steps that could have been taken by the person from the time that the financial difficulties that gave rise to the outcome first arose".
As noted above, the corporation went into external administration on 25 January 2015 on the petition of the ATO, because it had unpaid tax debts. In essence, Mr Huynh submits that he took all reasonable steps to avoid the corporation going into external administration because there were no steps he could have taken to avoid the appointment of a liquidator. He further submits that the financial difficulties that led to the external administration are largely referrable to decisions made by the managers appointed by NSW Fair Trading.
The central issue for the Tribunal to determine is what steps Mr Huynh could have taken from the time the corporation's financial difficulties first arose.
Mr Huynh's submission dated 25 September 2015, which was made specifically in relation to this issue, suggests that the corporation's financial difficulties first arose when the ATO demanded payment of $177,331.47 in respect of the corporation's unpaid taxes and that he could do nothing to avoid the company going into external administration.
I do not accept this submission. I note that in oral evidence during the hearing, Mr Huynh stated that he was using money that was supposed to be paid in tax for other purposes, including the servicing of loans and the payment of employees. Overall, Mr Huynh's evidence indicates that the corporation's financial difficulties existed from a date prior to 2014.
That Mr Huynh's business was in financial difficulty prior to 2014 is supported by other material before the Tribunal. This material includes a psychological report dated 3 September 2015 prepared by Flora Truong, which is included in the documents filed by Mr Huynh on 10 September 2015.
Ms Truong reports that Mr Huynh had told her about his high expenses and said that he could generally meet loan repayments and other expenses but "struggled at times when his business income fluctuated". Ms Truong further states that Mr Huynh told her that his stress "increased every quarter when his company tax obligations, employee tax payments and superannuation contributions were due". Mr Huynh estimated paying $18,000 per quarter for these expenses and said that "when he struggled to meet these payments, he would try to borrow more money".
According to Ms Truong's report, Mr Huynh also told her that difficulty in meeting his monthly payments in 2012 was a major trigger for withdrawing money from the corporation's sales trust account. Ms Truong reports that Mr Huynh said that: [H]e exhausted his options of borrowing including being refused for commercial loans from several banks, non-approval for refinancing his business and his friends also refused to loan him more money. He stated that he thought he would be 'alright' if he were to return the funds into the account the next month, and believed that he would only receive a fine.
I conclude that the corporation's financial difficulties prior to 2014 contributed to its failure to pay tax when it fell due and ultimately to the placement of the company under external administration. In these circumstances, I am not satisfied that Mr Huynh has established that he took all reasonable steps to avoid the corporation going into external administration because, although given an opportunity to do so after the hearing, he has not provided evidence in relation to what steps could have been taken to avoid that outcome from the time the corporation's financial difficulties first arose; that is, at a date prior to 2014.
It follows that I am not satisfied that the exemption to s 16(1A)(c) of the Act set out in s 16(2B)(c) applies in Mr Huynh's case. In these circumstances, I am not satisfied that the declaration that Mr Huynh is a disqualified person for the purposes of the Act should be set aside. However, even if s 16(2B)(c) did apply to Mr Huynh, I am satisfied that a declaration under s 192(1)(h) is an appropriate penalty, given the seriousness of Mr Huynh's behaviour and the fact that it was repeated even after he had previously been fined.

If Mr Huynh should be declared to be a disqualified person for the purposes of the Act, how long should the period of disqualification last?

As noted above, a declaration under s 192(1)(h) of the Act that a person is a disqualified person for the purposes of the Act can be made either permanently or for a specified period. In this case, a period of six years has been specified.
I consider that this period is excessive. In reaching this conclusion, I have taken into account the following factors.
First, while Mr Huynh's conduct amounts to a serious breach of his statutory obligations which is not excused by the fact that he made restitution of the funds misappropriated from the corporation's sales trust account, the fact that restitution was made is a relevant factor to consider when determining the penalty to be imposed. The material before the Tribunal indicates that Mr Huynh did not dispute the transactions when they were put to him and fully cooperated with Fair Trading and with the appointed manager until the business was sold.
Second, while a period of total exclusion from the industry is justified given the seriousness of Mr Huynh's behaviour, particularly given that he had previously been fined for the same behaviour, a lengthy period of disqualification from being the holder of a certificate of registration is not justified. In relation to this, I place weight on the fact that full restitution of the misappropriated funds was made and Mr Huynh's customers did not suffer financially. I also place weight on Mr Huynh's remorse.
Overall, I am satisfied that a Mr Huynh should be declared to be a disqualified person for the purposes of the Act for a period no longer than the s 16(1A)(c) statutory disqualification period of three years which is applicable to licensees. The period should operate from 14 April 2015, being the date on which the primary decision was made. However, I note that if Mr Huynh is not successful in his appeal on sentence to the District Court he faces a statutory disqualification period of 10 years under s 16(1)(a) of the Act, subject to a decision being made under s 16(2) that the offence should be ignored.

Conclusion

Mr Huynh does not dispute the decision to cancel his license or the decision to disqualify him from being involved in the direction, management or conduct of the business of a licensee under the Act. I have affirmed those decisions.
I am not satisfied that Mr Huynh is currently a fit and proper person for the purpose of eligibility for a certificate of registration.
I have determined that Mr Huynh should be declared to be a disqualified person for the purposes of the Act. However, I am satisfied that the period of disqualification should be reduced to three years.

Orders

The following orders are made accordingly: 1. The declaration that Mr Huynh is a disqualified person for the purposes of the Property, Stock and Business Agents Act 2002 for a period of six years is set aside. 2. Pursuant to s 192(1)(h) of the Property, Stock and Business Agents Act 2002 Mr Huynh is declared to be a disqualified person for the purposes of the Act until 14 April 2018. 3. The decision under review is otherwise affirmed. 4. The stay order made on 14 July 2015 is lifted. 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. 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: 08 January 2016

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