Maher v Department of Fair Trading

Background

1. The Applicant was issued a real estate agent and stock and station agent licence in 1974.
2. The Applicant and Elizabeth Maher were directors of a licensed corporation - 115 Investment Company Pty Ltd ("the Company"). The Company operated a real estate business in Blayney ("the agency" or "the business"). The major source of income for the business was rent roll commissions, commissions on sales of properties and dealing in livestock. The Applicant was the sole shareholder of the Company and licensee-in-charge of the business from March 2012 to April 2017.
3. The Company was licensed under the Act from 2010. That licence expired on 21 April 2017.
4. The Applicant was also a director of Morable Pty Ltd ("Morable") and 117 Investment Company Pty Ltd ("117 Investment Company") and he was one of two partners in JD & EA Maher Partnership ("the Partnership"). The Applicant's wife is the other partner in the Partnership.
5. WJ Hamilton & Co. ("the Liquidator") was appointed as provisional liquidator on 23 December 2016 and as Official liquidator on 3 February 2017. In its report of 24 February 2017 the Liquidator identified: 1. as at 28 December 2016 the Company's trust account for the rental properties had a deficiency of $15,420.90; 2. books and records were not written up for the period 1 July 2016 to 23 December 2016; and 3. monies were transferred between the Company and Morable, 117 Investment Company and the Partnership. The Liquidator's report identified: 1. significant sums of money transferred from the Company to Morable to reduce the Company debt owed to Morable; 2. a reallocation of $86,915.40 in commission from the Company to Morable; 3. as at December 2016, 117 Investment Company owed the Company $24,743.00 and the Partnership owed the Company $334,699.38; 4. a total deficiency to unsecured creditors of $2,366,631.07; and 5. a lease agreement dated 1 January 2017 that the Applicant entered into with Ms Klindokput leased the business of the Company. The consideration for the lease was monthly rental of $2,500.00 plus GST for five years and an equal split 50/50 of the commissions on residential sales. On 7 February 2017 the Liquidator obtained a Federal Court order declaring that rent-roll was the property of the Company. This permitted the sale of the rent-roll to Unipro Pty Ltd, for $81,000.00.
6. The Liquidator reported to the Respondent that the Company's trust account for the rental properties ("the rent trust account") had a deficiency and the Respondent commenced an investigation. The principal investigator was Mr John Saminaden. The Liquidator reported that the Company's books and records had not been properly kept - accounts had not been updated for 6 months, there was no general ledger, cash book recording the day to day transactions as required by the Corporations Act.
7. The Company had three trust accounts. The rent trust account was with ANZ Banking Group Limited. The sales trust account was with the Commonwealth Bank and the stock and station trust account was with the National Australia Bank.
8. The Company used accounting systems software called REST for the management of its trust accounts. The REST software creates a creditor trust ledger and also identifies entitlements such as management and agency fees. The Applicant conceded that deficiencies in the trust account for the rental properties became apparent in December 2015 - about a year before Mr Saminaden's involvement and he stated that he took steps to ascertain the source of the deficiencies and to ensure that all payments were made as required. He said that he was actively trying to locate the missing money.
9. Mr Saminaden undertook an inspection of the Company's books and records. The inspections identified a number of issues. The Respondent has summarized these as follows: 1. there were deficiencies in the trust account for rental properties managed by the Company; 2. from March 2015 to December 2016 trust payments were not banked as soon as practicable; 3. trust money was used to pay commissions or fee entitlements; 4. the Company paid a share of the commission to Morable and to Ms Kunchaya Klindokput. Neither Morable nor Ms Klindokput held a licence under the Act; 5. significant sums of money were transferred from the Company to Morable and to the Partnership at times when the Company was arguably insolvent. At the time of liquidation the Partnership owed over $334,699.38 to the Company.
10. On 5 October 2017 a Notice to Show Cause was issued to the Company and the Applicant. The Notice to Show Cause related to the following grounds under the Act: 1. section 191(a) of the Act - the Company or the Applicant may have contravened a provision of this Act or the Property, Stock and Business Regulations 2014 ("the Regulation"). 2. section 191(c) of the Act - the Company or the Applicant may have acted unlawfully, improperly, unfairly or incompetently. 3. section 191(d) of the Act - the Company or the Applicant may be a disqualified person or otherwise not eligible to hold a licence or certificate. 4. section 191(e) of the Act - the Company or the Applicant may not be a fit and proper person to be involved in the direction, management or conduct of the business of a licensee.

The Respondent's Allegations

1. The Respondent alleged that the Company contravened provisions of the Act and provisions of the Regulation. It also contends that the Applicant was the director of the Company and he aided, abetted or was knowingly concerned in the breaches. In particular it identified the following breaches: 1. Section 86(1) for failing to retain monies in a trust account and hold them exclusively for the purpose for which they were paid; 2. Clause 18 of the Regulations for failing to bank trust funds into the trust account within a day or as soon as practicable; 3. Section 88 for using trust money to pay the debts of the licensee company; 4. Section 104 for failing to keep proper books and records; 5. Section 111 for failing to lodge an audit report; and 6. Section 33 for entering into arrangements whereby an unlicensed person was entitled to a share of the commission of the licensed corporation.
2. The Respondent also alleged that the Applicant has individual liability for other breaches: 1. Section 32(2) for failing to supervise a business as the licensee-in-charge; and 2. Section 37 for failing to comply with the prescribed rules of conduct;
3. The Respondent also alleged that the Applicant: 1. acted unlawfully, unfairly or incompetently in that he failed to ensure the licensee company complied with provisions of the Corporations Act (Cth) and arguably did not act in the best interest of the Company in his capacity as director; 2. is a disqualified person because he was the director of two companies that went into involuntary liquidation; and 3. is not "fit and proper" to hold a licence.
4. The Applicant conceded that he had health issues during 2015 and 2016 that meant that he was unable to attend the office for significant periods of time from October 2015 to December 2016. However, he denies any liability for breaches of the applicable legislation.

Role of the tribunal

1. 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: section 63 of the Administrative Decisions Review Act 1997.
2. The hearing is a hearing "de novo" - meaning that the Tribunal may consider the matter from the start including taking into account fresh evidence brought before the Tribunal. The Tribunal is not restricted to the consideration of the material that was before the Respondent, but may have regard to any relevant material before it at the time of the review: Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 46 FLR 409.
3. 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.

Applicable Legislation

1. It is not in dispute that the Act provides for the licensing, regulation and discipline of persons or companies carrying on a business in the real estate industry. It provides a measure of protection to consumers in their dealings with the industry. It aims to ensure that those engaged in the business of real estate have the appropriate knowledge and skill to carry on the business in a competent, honest and professional manner. Licensees and registered persons have an obligation to act in the best interests of their clients unless it would be unlawful to do so.
2. The Act places an emphasis on licensees being fit and proper for the role. Licensees and registered persons must be fit and proper to hold a licence or a certificate of registration under the Act. Section 14 of the Act provides: 14 ELIGIBILITY FOR LICENCE OR CERTIFICATE OF REGISTRATION (1) A natural person is eligible to hold a licence only if the Secretary is satisfied that the person: (a) is at least 18 years of age, and (b) is a fit and proper person to hold a licence and each person with whom the person is in partnership in connection with the business concerned is a fit and proper person to hold a licence, and (c) has the qualifications required for the issue of the licence, and (d) is not a disqualified person, and (e) has paid such part of any contribution or levy payable under Part 10 (Compensation Fund) as is due and payable on the granting of the licence. (2) A corporation is eligible to hold a corporation licence only if the Secretary is satisfied that: (a) the corporation is a fit and proper person to hold a licence, and (b) each director of the corporation is a fit and proper person to hold a licence, and (c) the corporation, and each officer (within the meaning of the Corporations Act) of the corporation, is not a disqualified person, and (d) at least one of the directors of the corporation holds a licence that a natural person is required to hold to carry on the business that the corporation carries on or proposes to carry on, and (e) the corporation has paid such part of any contribution or levy payable under Part 10 (Compensation Fund) as is due and payable on the granting of the licence. (3) A person is eligible to hold a certificate of registration only if the Secretary is satisfied that the person: (a) is an individual who is at least 16 years of age, and (b) is a fit and proper person to hold a certificate of registration, and (c) has the qualifications required for the issue of a certificate of registration of the type concerned, and (d) is not a disqualified person. Note : The grounds of disqualification in section 16 (1A) do not disqualify a person from eligibility to hold a certificate of registration. (4) The requirement that at least one of the directors of a corporation holds a licence that a natural person is required to hold to carry on the business that the corporation carries on or proposes to carry on does not require a director to be accredited as an auctioneer under section 21 merely because the corporation carries on or proposes to carry on the business of an auctioneer.
3. Section 16(1A)(c) of the Act provides: 16 DISQUALIFIED PERSONS … (1A) A person is also a disqualified person for the purposes of this Act (except for the purposes of eligibility to hold a certificate of registration) if the person: … (c) 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, or …
4. Section 32 of the Act imposes a duty on a licensee and a person in charge of a business carried on by the licensee to supervise the business properly. It provides: 32 DUTY OF LICENSEE AND PERSON IN CHARGE TO PROPERLY SUPERVISE BUSINESS (1) A licensee must properly supervise the business carried on by the licensee. (2) A licensee employed by another licensee ("the principal licensee") as the person in charge of business at a place of business of the principal licensee must properly supervise the business of the principal licensee carried on at that place. (3) The requirement to properly supervise the conduct of business includes the following requirements: (a) a requirement to properly supervise persons engaged in the business, (b) a requirement to establish procedures designed to ensure that the provisions of this Act and any other laws relevant to the conduct of that business are complied with, (c) a requirement to monitor the conduct of business in a manner that will ensure as far as practicable that those procedures are complied with. (4) The Secretary may from time to time issue and notify to licensees guidelines as to what constitutes the proper supervision of the business of a licensee. A failure to comply with the requirements of any such guidelines in connection with the supervision of a business constitutes a failure to properly supervise the business. (5) A reference in this section to a person who is engaged in a business carried on by a licensee is a reference to a person: (a) who is engaged in the business as an employee of the licensee, or (b) who is engaged by the licensee, other than as an employee of the licensee, to provide services in the course of the business, or (c) whose services are provided to the licensee in the course of the business, other than as an employee of the licensee, under an arrangement entered into by the licensee with another person. Maximum penalty: (a) 200 penalty units in the case of a corporation, or (b) 100 penalty units in any other case.
5. Section 86 of the Act requires that trust money received in connection with the licensee's business is to be paid into a trust account. The section 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 Secretary for the purposes of this Part. (2) If the licence is held by a corporation, the trust account is to be in the name of the corporation and in any other case is to be in the name of the licensee or of the firm of licensees of which the licensee is a member. (3) The name of a trust account and the description of the trust account in the books and records of the licensee and also on all cheques drawn on the trust account: (a) must include the name of the licensee corporation, licensee or firm of licensees in whose name the trust account is kept, and (b) must include the words "Trust Account", and (c) may include, at the end of the account's name, a name or other matter to identify the person on whose behalf money in the account is held. (4) When opening a trust account at an authorised deposit-taking institution for the purpose of complying with this section, the licensee concerned must ensure that the authorised deposit-taking institution is notified in writing that the account is a trust account required by this Act. The notification must be in a form approved by the Secretary and the licensee must serve a copy of the notification on the Secretary within 14 days after the trust account is opened. (5) A licensee must, within 14 days after closing a trust account, notify the Secretary in writing of the closure. The notification must be in a form approved by the Secretary. (6) Subsections (4) and (5) do not apply in respect of: (a) a separate trust account kept on the instructions of a client of a licensee or firm of licensees for the exclusive benefit of the client, or (b) a separate trust account opened by a licensee for the exclusive benefit of both the vendor and the purchaser of land. Maximum penalty: 100 penalty units.
6. Clause 18 of the Property, Stock and Business Regulations 2014 ("the Regulation") deals with the banking of that trust money. It provides: 18 BANKING OF TRUST MONEY A licensee who receives trust money must pay it into the licensee's trust account: (a) before the end of the next banking day after the day of its receipt, if that is practicable, or (b) if that is not practicable, as soon as practicable after that day. Maximum penalty: (a) 40 penalty units in the case of a corporation, or (b) 20 penalty units in any other case.
7. Clause 26 of the Regulation requires that records be kept of trust account transactions. It provides: 26 RECORD OF TRUST ACCOUNT TRANSACTIONS (1) A licensee must keep a record of daily receipts and payments of money into and out of the licensee's trust account. (2) The record must be in the nature of a cash book in which the pages are consecutively numbered and on the respective pages of which are shown: (a) the consecutive numbers of receipts issued or cancelled, and (b) the consecutive numbers of cheques drawn or cancelled, and (c) in the case of money received or disbursed by means of electronic funds transfer, the consecutive reference numbers or other means of identification of the transfers. (3) When money required to be paid into the trust account is received, the licensee must enter into the record the particulars required by clause 23 (3) (a), (b) and (d)-(g) to be entered in a receipt for the money, together with the date of the deposit of the money to the trust account and the amount of the deposit. (4) When money is paid out of the trust account, the licensee must enter into the record the particulars required by clause 24 (3) to be recorded for a cheque or required by clause 24 (5) to be recorded for an electronic funds transfer. (5) At the end of each named month, the licensee must balance the cash book or other record and either: (a) carry forward the balance to the commencement of the next month, or (b) carry forward the balance to a ledger account provided for the purpose. (6) The licensee must, at the end of each named month, prepare a statement reconciling the balance of the licensee's trust account with the balance of the related cash book or other record. Maximum penalty: (a) 40 penalty units in the case of a corporation, or (b) 20 penalty units in any other case..
8. Section 111 of the Act provides for the regular auditing of the trust accounts. It provides: 111 REQUIREMENT FOR AUDIT (1) A person who is a licensee, a former licensee or the personal representative of a licensee must, within 3 months after the end of the audit period applicable to the person: (a) cause the records and documents relating to any money held during that period in a trust account kept by the person in accordance with this Act to be audited by a person qualified to act as an auditor for the purposes of this Division, and (b) if the auditor's report on the audit is a qualified report, lodge the report with the Secretary. (1A) An auditor's report is a "qualified report" if it sets out any discovery by the auditor that any breach of this Act or the regulations has been committed, that there is any discrepancy relating to the trust account to which the audit relates or that the records or documents concerned are not kept in such a manner as to enable them to be properly audited. (2) The Secretary may in a particular case or class of cases by order in writing extend the period of 3 months under subsection (1). (3) An auditor's report under this section must be kept for at least 3 years: (a) by the licensee at the licensee's registered office (while the licensee remains a licensee), or (b) if the licensee ceases to be a licensee, by the former licensee in his or her possession, custody or control unless the former licensee authorises some other person to have possession, custody or control of the report, or (c) by any other person who obtains possession, custody or control of the report whether as a result of being the personal representative of a licensee or by transfer of the business of the licensee or otherwise. (4) The auditor's report is to be in a form approved by the Secretary and is to be signed by the auditor. Maximum penalty: (a) 100 penalty units in the case of a corporation, or (b) 50 penalty units in any other case.
9. Section 191 of the Act sets out certain grounds upon which disciplinary action can be taken against a person or a corporation. It 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 (including any provision of the Australian Consumer Law (NSW) ), 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, (a1) the person has, in respect of the person's conduct of business or exercise of functions under the licence or certificate of registration, contravened the Competition and Consumer Act 2010 of the Commonwealth, (b) the person has contravened a condition of the licence or certificate of registration, (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, (f) the person has failed to pay any part of a contribution or levy that is due and payable under Part 10 (Compensation Fund), (g) the person has breached an undertaking given by the person to the Secretary under this Act or the Fair Trading Act 1987 , in respect of the person's conduct of business or exercise of functions under the licence or certificate of registration, (h) the person has failed to comply with a direction given to the person by the Secretary pursuant to the taking of disciplinary action under this Part, (i) the person has failed to pay a monetary penalty imposed on the person by the Secretary pursuant to the taking of disciplinary action under this Part, (j) the issue of the person's licence or certificate of registration was obtained by fraud or mistake, (k) grounds specified in the regulations as grounds for the taking of disciplinary action against a person under this Act.
10. Section 192 of the Act sets out the types of disciplinary action that can be taken against a person under the Act: 192 DISCIPLINARY ACTION (1) Each of the following actions is disciplinary action that the Secretary 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 Secretary 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. (3) When a licence or certificate of registration is suspended, it is taken not to be in force except for such provisions of this Act or the regulations as the regulations may prescribe as provisions that remain applicable to a suspended licence or certificate of registration.
11. Under section 195 of the Act, where the delegate is of the opinion that there is reasonable cause to believe there are grounds for taking disciplinary action against a person or a corporation, a notice may be served requiring that person or corporation to show cause why disciplinary action should not be taken against them.
12. An individual licensee who is a director or licensing in charge of a corporation can be liable for breaches of the legislation by the corporation pursuant to the accessorial provisions contained in section 218 of the Act. The individual licensee can be dealt with under their own licence on the same basis as the corporation. Section 218 of the Act provides: 218 LIABILITY OF DIRECTORS ETC FOR OFFENCES BY CORPORATION - ACCESSORY TO THE COMMISSION OF THE OFFENCES (1) For the purposes of this section, a "corporate offence" is an offence against this Act or the regulations that is capable of being committed by a corporation. (2) A person commits an offence against this section if: (a) a corporation commits a corporate offence, and (b) the person is: (i) a director of the corporation, or (ii) an individual who is involved in the management of the corporation and who is in a position to influence the conduct of the corporation in relation to the commission of the corporate offence, and (c) the person: (i) aids, abets, counsels or procures the commission of the corporate offence, or (ii) induces, whether by threats or promises or otherwise, the commission of the corporate offence, or (iii) conspires with others to effect the commission of the corporate offence, or (iv) is in any other way, whether by act or omission, knowingly concerned in, or party to, the commission of the corporate offence. Maximum penalty: The maximum penalty for the corporate offence if committed by an individual. (3) The prosecution bears the legal burden of proving the elements of the offence against this section. (4) The offence against this section can only be prosecuted by a person who can bring a prosecution for the corporate offence. (5) This section does not affect the liability of the corporation for the corporate offence, and applies whether or not the corporation is prosecuted for, or convicted of, the corporate offence. (6) This section does not affect the application of any other law relating to the criminal liability of any persons (whether or not directors or other managers of the corporation) who are concerned in, or party to, the commission of the corporate offence.

The Evidence

1. The Respondent relies on the evidence of Mr Saminaden who also provided financial statements and related documentation and the liquidator's report. Evidence was also provided by Ms Lauren Newstead; Ms Rebecca Hayes; Mr Neil Pascua (compliance officer of the Commonwealth Bank of Australia); Mr John Kennard and Mr Edwin Smith. Ms Newstead and Mr Kennard attended by telephone and were cross-examined.
2. The Applicant relies on his own evidence and that of his accountant Mr John Sloane.

Mr Saminaden

1. Mr Kennard provided affidavits and also appeared at the hearing and was cross-examined by the Applicant and by Mr Sloane.
2. Mr Saminaden is an investigator with the Respondent and he was the principal investigator in this matter. He took on that role after the liquidator brought issues to the Respondent's attention.
3. As part of his role as investigator Mr Saminaden dealt with the Applicant. The Applicant advised him that the Company had three trust accounts. Each related to a separate part of the Company's business and was held with a different bank to the other trust accounts. Mr Saminaden attended the Company's premises and examined those financial records of the Company that the Applicant was able to provide to him. In his affidavits and his oral evidence before the Tribunal he provided the following summary of his conclusions about those records: 1. the rental trust records indicated an apparent deficiency of $20,625.99 as at 28 December 2016; 2. the end of month reconciliation for the month ending 26 February 2016 indicated an apparent deficiency of $17,808.80; 3. the Applicant, as licensee in charge, had not signed off on reconciliations from February to May 2016. The Applicant's signature would have indicated that he was satisfied that the reconciliation was correct 4. the end of month reconciliation for the month ending 30 June 2016 indicated an apparent deficiency of $17,457.85; 5. the end of month reconciliation for the month ending 29 July 2016 indicated an apparent deficiency of $19,161.73; 6. the end of month reconciliation for the month ending 30 August 2016 indicated an apparent deficiency of $22,617.07; 7. the end of month reconciliation for the month ending 29 September 2016 indicated an apparent deficiency of $14,043.77; 8. the end of month reconciliation for the month ending 28 October 2016 indicated an apparent deficiency of $19,038.03; 9. the end of month reconciliation for the month ending 29 November 2016 indicated an apparent deficiency of $21,345.44;
4. Mr Saminaden provided copies of the Company's records relating to those end of month reconciliations. He said that he had asked for all end of month reconciliation records but the Applicant had not provided the bank reconciliations for the end of months of December 2015, January 2016, March 2016, April 2016 and May 2016.
5. Mr Saminaden stated the without proper records it is not possible to identify all transactions and to carry out a proper reconciliation.
6. In his affidavit dated 2 July 2018 Mr Saminaden stated that for the period 1 March 2015 to 31 December 2016: 1. the Company failed to bank all trust money. It receipted a total amount of $431,210.33 and banked $368,609.95. 2. the Company's property management trust account books and records showed that it failed to bank trust money in accordance with the Regulation on 144 occasions to the value of $282,951.41.
7. Mr Saminaden also referred to the Company's records relating to fee entitlements. In particular he referred to the withdrawal on 29 May 2015 of an amount of $11,000 from the Company's property management trust account. A cheque for that amount was made payable to Morable and was deposited in an NAB account under the name of Morable Pty Ltd Farm Management Account. Mr Saminaden noted that 1. the cheque was signed by a signature appearing to be the Applicant's signature. 2. the funds appeared to be used by the Company for its own purpose. 3. the funds were not returned to the Company prior to December 2016. 4. Morable is not a licensed corporation under the Act. 5. his analysis of the Company's fee entitlements indicated that the Company was not owed any money at the time of the drawing of the cheque for $11,000 thus it was not entitled to draw the $11,000 from the trust account for its own purpose. 6. his analysis of the fee entitlements for the period March 2015 to December 2016 showed a total amount of $108,294.25 owing to the Company for the period. The Company received a total amount of $91,854.77 for the period indicating a variance of $16,439.48.
8. Mr Saminaden formed the opinion that the Company may have withheld some of its commission payments in the trust account to accumulate enough funds to cover the end of month payments to its landlords at month end - to compensate for the failure to bank trust money.
9. Mr Saminaden also noted that the trail of the Company's fee entitlement payments showed money from the trust account being deposited into: 1. an NAB Cash Manager account under the name of James & Elizabeth Maher, 2. a Farm Management account, under the name of Morable Pty Ltd; and 3. a credit card account under the Company's name.
10. Mr Saminaden also noted: 1. the Company failed to lodge an audit report for the period ending 30 June 2016 and 30 June 2017 in accordance with section 111 of the Act; 2. end of month reconciliations had not been conducted for the sales trust account in the period of at least December 2014 to December 2016. 3. end of month reconciliations had not been conducted for the stock and station trust account in the period of at least January 2016 to December 2016. 4. the Applicant, as licensee in charge, failed to have in place guidelines for the proper supervision of the business, in particular the banking practices of trust money and the conduct of a monthly review of the Company's trust accounts. Procedures are to be supervised by the licensee in charge to ensure compliance. Guidelines provided by the Applicant had not been updated since 2012; 5. the Respondent approved five claims regarding the Company's business that were made against the Property Services Compensation Fund. The claims totalled $4,834.

Mr Kennard

1. Mr Kennard provided an affidavit and also appeared by telephone at the hearing and was cross-examined by the Applicant.
2. Mr Kennard's evidence is that he was employed by the Applicant on a contract basis from October 2014 until May 2015 when he began full time employment with the Company. He said that he was employed as a sales person and bookkeeper assisting with the Company's day to day operations. His role with the Company was predominantly assisting with the books and records of the general accounts. He said that from July 2015 he also operated as a registered real estate agent under the licence of the Applicant.
3. He said that he had limited access to the Company's trust accounts and that the trust account was predominantly looked after by Lauren Newstead.
4. He said that he was being paid less than the agreed salary as the Company was trading at a loss. As a result, between January 2015 and May 2015, the Applicant allowed him to use the Applicant's credit card to pay certain bills. He said that this arrangement continued until the bank cancelled the credit card.
5. Mr Kennard's evidence is that trust money was banked by whoever was going to the bank at the time. It was never reconciled to the REST System by anyone and it was done on an adhoc basis with whatever money was in the cash draw.
6. Mr Kennard referred to an incident that he considered to be irregular. In or around early December 2015 the Applicant had taken $1600 rent money that had been paid in cash but he had not placed it in the cash draw and it had apparently not been banked.
7. Mr Kennard also stated that the Applicant was out of the office from time to time showing properties and doing livestock buying and selling. On occasions, he would be away for a couple of days at a time and he would leave pre-signed cheques to pay monthly creditors including his commission.
8. Mr Kennard referred to an incident in about May 2015 in which the Applicant had asked him to write out a cheque from the rental trust account made out to him or Morable for $11,000. When he queried the reason for the cheque the Applicant had told him that it was for outstanding commission. He said that he informed the Applicant that no commission was outstanding but the Applicant instructed him to "put it through as outstanding commission".
9. Mr Kennard stated that the Applicant did not pay him or Ms Newstead wages for some weeks from late October 2015 and considerable money was owed. When he raised the issue with the Applicant he was told to take what he needed out of the cash draw and to leave a note in there and that the Applicant would put a cheque in there to replace it.
10. Mr Kennard stated that he followed those instructions as he had bills to pay. He said that he was uneasy about this and he never saw a cheque from the Applicant to compensate what he had taken out.
11. Mr Kennard stated that he ceased working for the Company in December 2015 due to the fact that he had not been paid for many months. By the time he resigned he had taken a total of about $4000 from the cash draw and had left IOU notes stating the amount of money taken, the date it was taken and that it was taken because he had not been paid a wage.
12. After he resigned he received a phone call from the Applicant's accountant who requested that he put the money back into the trust account. He said that he paid the money into the rental trust account as requested.
13. The Applicant disputes much of Mr Kennard's evidence but he was not challenged under cross-examination in regard to the disputed evidence. Under cross-examination Mr Kennard agreed that he had taken money from the cash draw and that he had repaid it.

Ms Newstead

1. Ms Newstead provided an affidavit and also appeared by telephone at the hearing and was cross-examined by the Applicant.
2. Ms Newstead's evidence is that she was employed by the Applicant, part-time, 2 days a week, from about April 2015 to May 2016. She was employed as a receptionist, mainly answering the phones but she also did general administration which included filing, receipting trust money into the REST system. She said that she would pay water bills when required. The REST system would generate the amount that needed to be paid and she would print out the payment invoice for the cheque to be drawn. The Applicant would give her a signed cheque for payment and she would take it to the Water Board which was located in Blayney.
3. She stated that the most of the trust money was received by EFT. Cash and cheques were receipted then put into a metal box, kept in a drawer at the front of the office. The drawer and the metal box were not locked. She was not aware of any procedures guidelines being in place, nor did she sight anything to that effect. She said that the Applicant would pay her in cash but not on a regular basis. However, she said that the Applicant did not owe her any money.
4. She recalled that the banking was prepared by John Kennard to be banked by the Applicant. She said that she did not do the banking as the bank was located in another town, either Orange or Bathurst. The Applicant usually only came into the office for a few hours on one of the days she worked but at times he did come in for the two days.
5. Mr Kennard prepared the End of Month reconciliations and provided them to the Applicant to sight and sign. Ms Newstead said that she would then file the reconciliations in a filing cabinet.
6. She recalled that the Applicant was in hospital for approximately a week, but does not recall when that occurred. She believes that Mr Kennard managed the office in that time and that his role included the banking of trust monies.
7. She said that there was a trust account cheque book located in the drawer. She was not aware of any pre-signed trust account cheques. She recalls a safe in the office, but she did not have access to it.
8. She recalled that at some point she heard the Applicant and Mr Kennard talking about an $11,000 cheque. She heard the Applicant say words to the effect of "it's money left in the trust account for the end of financial year". But she didn't understand what it was about. She does not recall a conversation with the Applicant about the Company's commission or a conversation about tenants in arrears entering into a payment plan that she had prepared.
9. She stated that she is not aware of any money missing from the trust account nor was she involved in taking any money from the trust account for her own use.
10. Under cross-examination she agreed that in March of 2016 there was a transfer of an amount of $3,655.50 from her Commonwealth Bank account to the rent trust account. She said that this was because she presented the money at the Commonwealth Bank and the rent trust account was with the ANZ bank. It was not held with the Commonwealth Bank and there was no mechanism to allow for a bank to bank transfer from the Commonwealth Bank to the rent trust account at the ANZ. The bank suggested that the transfer be done via her personal account that she held at the Commonwealth Bank but the money was never actually in her account.
11. Under cross-examination Ms Newstead was asked about her evidence that she believes that Mr Kennard managed the office in the time that the Applicant was in hospital. The Applicant put to her that his period in hospital was in March of 2016 and that Mr Kennard had left the office in December of 2015. In response she stated that as far as she was aware Mr Kennard was still there whenever it was that the Applicant went into hospital.
12. The Applicant disputes much of Ms Newstead's other evidence but she was not challenged under cross-examination in regard to the disputed evidence.

Mr Smith

1. Mr Smith provided an affidavit but was not cross-examined.
2. In about March 2016 Mr Smith had discussed the possibility of purchasing the Company's rent roll. In about April 2016 he met with the Applicant's accountant Mr Sloane to go through the Company's rent records. After inspecting the records he informed the Applicant that the trust records showed that tenants were in arrears by $97,000. Further to this, he identified a number of other issues relating to the rent roll.
3. Following that conversation, the Applicant engaged Mr Smith to address those rent roll issues and to assist with the agency.
4. Mr Smith stated that he made the Applicant aware that he could not be a licensee in charge as he only had a certificate of Registration. He had previously held a licence and reapplied for a full licence a few months later. He stated that there were never any agreements made for him to manage the agency. For the six-month period that he was assisting the Applicant he never signed any cheques and he never had any authority to do so.
5. After further examination of the trust records, he informed the Applicant that the rental trust account was deficient by $25,000. The Applicant requested that he audit the records and he agreed to do so.
6. Mr Smith's evidence is that he spent 8 weeks going through and auditing the trust records. He stated that it was clear that when cash came into the office it was not banked. He also stated that while he was at the office, landlords phoned regularly about failure to account for rent received on their behalf.
7. After reconciling the landlord's ledgers, the Applicant got Ms Newstead to pay the landlords what was owed to them.
8. Mr Smith recalled finding a pile of cheques attached with bond lodgement forms lying around in the office totalling $18,000. The cheques represented tenant's bond owed to the Rental Bond Board and were all signed by the Applicant. Mr Smith stated that he posted them all and they were dishonoured.
9. Mr Smith stated that he advised the Applicant that he did not want anything to do with him and his business but he agreed to stay while the Applicant addressed his health issues. He does not dispute that he subsequently reached an agreement with the Applicant in regard to taking over the business.
10. Mr Smith stated that while the Applicant was in hospital he advised the Applicant's wife of issues relating to unpaid staff and debt collectors calling and turning up at the office.
11. The Applicant disputes much of Mr Smith's other evidence but he was not challenged under cross-examination and the Applicant has not provided any documentary evidence to refute what Mr Smith stated in regard to issues such as the deficient rental trust account, unpaid wages, dishonoured rental bond cheques and landlords seeking payment for rent received on their behalf.

The Applicant

1. The Applicant provided an affidavit and also provided written responses to the Respondent's evidence and allegations. He attended the hearing, gave evidence and was cross-examined.
2. In essence, the Applicant blames Mr Kennard, Ms Newstead and Mr Smith for the issues with the rent trust account and other accounting issues of the Company.
3. The Agency operated separate trust accounts for each of the property sales, rental properties and livestock sales. The Applicant said that he was the only person who dealt with the property sales trust account and the livestock sales trust account. However, the rent trust account was conducted electronically by office staff. He noted that the issues that the Respondent has identified only relate to the rent trust account. Contrary to Mr Saminaden's assertions tot eh contrary, the Applicant said that there were no breaches of the trust accounts which were operated solely by him.
4. He concedes that he became unwell in June 2015 and underwent a series of medical tests over the following months. He became seriously ill in October 2015 and that impacted on his ability to attend to the agency business. This situation continued until its closure in December 2016, apart from intermittent returns to the office between April 2016 and December 2016.
5. The Applicant said that between October 2015 and December 2015 he entrusted compliance with the rent trust account requirements to the office staff and to be overseen by his accountant. A procedures guideline was kept in a folder in the front office for the office staff to refer to as needed.
6. The Applicant's evidence is that in April 2016 his health issues were such that he decided to appoint Mr Smith as manager of the agency. He stated that he gave specific instructions regarding the trust banking requirements. He further stated that Mr Smith held himself out as familiar with trust account requirements and undertook to comply with those requirements. He understood that Mr Smith held a licence under the Act and that he was able to take on the role of the licensee in charge of the agency.
7. The Applicant contends that the majority of the issues that the Respondent has identified took place during the period of his absence from the agency while undergoing medical treatment.
8. In summary, the Applicant's case is that he: 1. challenged some of the Mr Saminaden's figures in regard to the extent of the rent trust account deficiency. He does not dispute that a deficiency existed and in fact stated that he was aware of it about a year before Mr Saminaden's involvement. Nevertheless, he submitted that there must not have been a deficiency because landlords were paid their rent money and other liabilities such as water and contractors had been paid. 2. submitted that the Company never ran at a loss. 3. blames Mr Kennard, Ms Newstead and Mr Smith for the issues with the rent trust account and other accounting issues of the Company. 4. states that Mr Kennard stole the $11,000 from the rent trust account and paid that amount to Morable on 29 May 2015. He rejects any suggestion that he had any knowledge or participation in the act. He submits that Mr Kennard's motive was to discredit him and the business due to previous work disagreement over invoicing transport payable invoices. 5. states that Ms Newstead was a party to Mr Kennard's act as she gave Mr Kennard the pre-signed cheque from the safe. 6. submits that Mr Kennard frequently used Company money for his personal use and took cash from the cash drawer without his permission; and 7. submits Mr Kennard used the Company credit card to pay for personal purchases which neither he nor the Company had authorised. 8. suggests that Ms Newstead also was responsible for the banking of trust money. 9. submits that when asked about the deficiencies in commissions and the rent trust account Ms Newstead had told him that some of the tenants were behind in their rental payment and that the landlords had agreed to payment plans which she had in place. The Applicant contends that Ms Newstead's advice was obviously a lie as she and Mr Kennard had not been banking the trust money. 10. contends that when Mr Kennard left in December 2015 he took trust money that should have been banked along with the bank card that he used for personal items. He denies that he authorised Mr Kennard's conduct. 11. submits that Mr Smith was responsible for the audit reports for 2017; that it was Mr Smith's job to find the missing money and that he never did. 12. contends that the failure to bank trust money seemed to occur between August 2015 and December 2015. 13. submitted that any failure to keep proper books and written records between January and April 2016 was due to ill-health. 14. accepts that as the licensee in charge of the agency he has responsibility for ensuring that the Company meets its obligations. He does not accept that he failed to oversee the employees' conduct of the business and he does not accept that he failed to supervise the rental trust account properly. He does not accept any responsibility for deficiencies in the rent trust account while he was licensee in charge of the Company. He accepts that it happened while he was licensee in charge but says that he didn't know that the business was being defrauded. 15. does not dispute that he entered into an agreement to lease the business of the Company. He stated that an agreement was reached with Mr Smith in October 2016 for this to take place at the end of December 2016. He believed that he was entitled to enter into that agreement. 16. accepts that commission money that was owing to the Company was transferred directly from the rent trust account to the Morable account and other accounts without payment to the Company. However, he regarded this as merely a technicality as the money was ultimately owed to him. He said that he had acted on advice from an accountant in adopting this practice.
9. In regard to Mr Kennard's evidence the Applicant asserts that Mr Kennard should not be regarded as a credible witness. He stated that Mr Kennard was only ever engaged as a contractor. He was never offered employment as a full time employee. He said that Mr Kennard was there for two hours in the afternoon just to hold the phone and keep the door open. He was permitted to use the office computers and phone for his own work so he could be on hand to keep the office open if the front desk staff were called out.
10. The Applicant referred to a series of issues related to the settlement of a claim by Mr Kennard in regard to unpaid salary. These issues are raised apparently to show that Mr Kennard is dishonest. In the absence of any evidence to support the Applicant's allegations in regard to those issues they should not be given any weight.
11. In regard to the issue of the $11,000 payment to Morable the Applicant asserts that in May 2015 Mr Kennard conveyed the message that there was $11,000 in unclaimed commissions. He said that Mr Kennard wrote two cheques - one in early May which the Applicant told him to destroy and the second one on 29 May 2015 which was banked.
12. The Applicant stated that signed unused cheques were locked in the fire proof safe in his office for use when end of month payments were required to be made by cheque. He believes that Mr Kennard stole one of the signed cheques that were in the safe, wrote it out for $11,000 on the same day and banked it at the National Australia Bank. His motivation for doing this was to discredit the Applicant and the business due to a previous work disagreement.
13. The Applicant alleged that Mr Kennard stole approximately $7,000 through the use of the Company's credit card. He said that many staff had used the cards over 10 years but that Mr Kennard is the only one who used the cards to pay for personal purchases. The Applicant also alleged that Mr Kennard stole approximately $4,500 from the office cash draw.
14. As noted, Mr Kennard conceded that he had taken money from the cash draw but stated that the Applicant had authorised him to do so. The Applicant denies that he told Mr Kennard to take money from the cash draw and to leave an IOU. He also denied that he authorised Mr Kennard's use of the Company's credit card. The Applicant concedes that he took cash home a few times as it is not good practice to leave cash on vacant premises. However, he stated that the cash was always returned to the office to be banked. He said that the $1,600 rent payment that Mr Kennard had referred to was returned for banking.
15. The Applicant disputed much of Mr Kennard's evidence but he did not challenge that evidence when given the opportunity to do so by cross-examination.
16. The Applicant believes that Mr Kennard would have had assistance from Ms Newstead as at times they were in the office together. He said that Mr Kennard must have used Ms Newstead's access codes to gain access to the trust account. He disputes Ms Newstead's evidence regarding her role in the agency. However, he did not challenge the majority of her evidence when he had the opportunity to cross-examine her.
17. The Applicant also relies on the evidence of Mr Sloane. Mr Sloane challenged some of Mr Saminaden's figures as inaccurate. He stated that he had identified numerous deposits that Mr Saminaden had omitted from his calculations. I note that Mr Saminaden reviewed his evidence in light of that challenge and adjusted his figures to reflect issues that Mr Sloane raised.
18. Mr Sloane observed that "The bulk of the money not banked seemed to occur between August 2015 and December 2015". I note that the Respondent's schedules identify the non-payment of trust money within the prescribed time over a significantly wider period than Mr Sloane alleges. I also note that these failures are not limited to the rent trust account.

Discussion

1. At all relevant times the Applicant was a director of the Company and the licensee in charge for the Company's business. As a director of the Company he had an obligation to act in the best interests of the Company. One of the obligations of acting in the best interests of the Company was to ensure that the Company didn't breach the Act. He had the responsibility for reconciling the rent trust account and he bears the responsibility for ensuring trust money is banked in accordance with the legislation.
2. The Applicant does not accept that he was responsible for the rent trust account deficiencies. He places the blame for the deficiencies on Mr Kennard, Ms Newstead and Mr Smith.
3. It is possible that the Applicant is correct in his assertions regarding the rent trust account deficiencies and fraudulent conduct. However, there is no independent evidence to corroborate those assertions. In contrast the Respondent has presented considerable amount of evidence that for the most part has not been challenged.
4. The evidence before me suggests that the agency's business had financial problems from at least March 2015. The rent trust account deficiencies were not limited to the narrow period between August 2015 and December 2015 as the Applicant contends. Mr Saminaden identified failures to bank trust money in accordance with the legislation for the period 1 March 2015 to 31 December 2016. While the Applicant has either disputed or explained these alleged failures, he simply relies on his own evidence and assertions. He has not produced independent evidence that might have supported his position. For example, he contends that the REST software program could not function if the rental funds were missing and he accepted that the REST software program would have back-up copies of all relevant transactions, he did not produce that material to support his contentions.
5. I note the Applicant's evidence that the Company never ran at a loss. However, the fact of the Company's liquidation and Mr Kennard's and Mr Smith's uncontested evidence suggest that this was not the case. Mr Kennard gave evidence that he explained the Company's financial circumstances to the Applicant's wife while the Applicant was in hospital. This included the issues of unpaid staff and unpaid debts. The Applicant did not question Mr Kennard about this evidence nor did he produce any evidence from his wife to contradict it or explain why she was unable to give that evidence.
6. Mr Smith stated that while he was at the office, landlords phoned regularly about failure to account for rent received on their behalf. The Applicant did not question Mr Smith about this evidence nor did he produce any evidence to contradict it.
7. There is no dispute that a payment of $11,000 was made to Morable in May 2016 in circumstances where the payment was not justified. No commission was owed to the Company at that time and it is clear from the Applicant's evidence that he was aware that it was not owed. It is also clear that the Company and Morable benefited from the payment. If the Applicant's evidence in regard to this payment is accepted, Mr Kennard made the deposit to discredit the Applicant. However the Applicant has not explained why Morable did not repay the money.
8. I note the Applicant's assertion that the direct transfer of money from the rent trust account to accounts other than the Company is merely a technical point. I do not agree with that view. While I accept that he may have been acting on advice in regard to these transactions, I accept Mr Saminaden's view that it is not sufficient to simply have book entries showing payments to and from the Company's account in circumstances where the relevant cheque for the transfer is made out to a different entity.
9. It is apparent that the Applicant did not have a good understanding of the Company as a separate legal entity. He referred to the Company and Morable as "just conduits for business to be conducted". It seems that this misunderstanding has resulted in the Applicant's belief that no distinction is to be made between the Company's entitlements and his own. This inevitably leads to a conflict where the interests of the Company and the Applicant's interests differ.
10. Accurate transaction records are necessary if tracing is to be possible. The lack of transparent records has been a significant factor in the failure of the Applicant's attempts to ascertain the reason for the rent trust account deficiencies.
11. The failure to bank trust money within the prescribed period is also a significant factor. I accept that timely banking is difficult in isolated rural communities. However, options were available that would have allowed this to occur. For example, the Company's sales trust account is operated with the Commonwealth Bank in Blayney. It was a commercial decision to use banks that were not based in Blayney, albeit one taken on advice given by an investigator from the Respondent, and this decision affected the ability of the staff to undertake timely banking of trust money.
12. Despite the Applicant's denial that he failed to oversee the conduct of the business or that he failed to supervise the rental trust account properly, the uncontradicted evidence suggests otherwise.
13. Mr Kennard's evidence is that trust money was banked by whoever was going to the bank at the time. Mr Kennard was not cross-examined on that evidence. It is consistent with the evidence of Mr Smith that it was clear that when cash came into the office it was not banked. The Applicant did not question Mr Smith about this evidence nor did he produce any evidence to contradict it.
14. Mr Kennard also gave evidence that reconciliation to the REST System was done on an adhoc basis with whatever money was in the cash draw. Mr Kennard was not cross-examined on that evidence.
15. It is apparent that the procedures guideline was not kept up to date and it is clear from Ms Newstead's evidence that she was not aware of those guidelines. Ms Newstead was not cross-examined on that evidence. The Applicant conceded that he entrusted compliance with the rent trust account requirements to the office staff between October 2015 and December 2015. It is unclear how this is consistent with his denial that he failed to oversee the conduct of the business at least during that period.
16. Similarly, if the rental trust account had been properly supervised, the banking would have been done regularly and any deficiencies in the account would have been apparent much earlier. If the Applicant is correct in his assertions regarding defrauding of the business, this fact would have become apparent much earlier and action could have been taken to address it.
17. In the absence of evidence to the contrary, I must accept that the Applicant failed to oversee the conduct of the business and that he failed to supervise the rental trust account properly. I agree with the Respondent's submission that the Company was not being adequately supervised by the Applicant who was the licensee in charge, that books or records were not properly kept, and that trust money was being inappropriately mixed with fee entitlements and commissions. The Applicant's poor health may provide an explanation for these failures. However, his responsibilities as a director of the Company and as licensee in charge of the agency required that he take steps to ensure that proper oversight was in place in spite of his poor health.
18. It is apparent that the Applicant intended that Mr Smith would take a greater role in that regard. He does not accept Mr Smith's evidence that he had made it clear that he only had a certificate of Registration and could not be a licensee in charge or that there were never any agreement that Mr Smith manage the agency. However, the Applicant has not produced any independent evidence to show that Mr Smith ever took on the duties associated with that role.
19. In the circumstances I agree with the Respondent in regard to the allegation that the Company has committed the identified offences. As director and a licensee in charge the Applicant must accept responsibility for those offences. However, to the extent that while he was ill he apparently took a hands-off approach to the conduct of the business, I have difficulty in finding that the Applicant was knowingly concerned in the conduct. I accept that he aided the offences by his lack of attention to the business.
20. At best, the Applicant's attention to the business was sporadic. Nevertheless, he knew of the fact of trust account deficiencies. Once he became aware of the rent trust account deficiencies his efforts to address the issues were inept. He seems to have been unaware of the Company's true financial circumstances and considered that the trust account deficiencies merely reflected theft from the account rather than a greater issue relating to the conduct of the business. He appears to still not accept those circumstances.
21. As noted, the Company's rent trust account had a deficiency of $15,420.90 as at 28 December 2016. The liquidator's report identified a total deficiency to unsecured creditors of $2,366,631.07.
22. The primary responsibility for misconduct lies with those who manage and control the licensed entity - the directors and licensee in charge. I am not satisfied that the Applicant has acted dishonestly however there is no doubt that he acted unfairly and incompetently.

Fit and proper person

1. One of the issues for determination is whether the Applicant is a fit and proper person to hold a licence under the Act.
2. A person's fitness and propriety are to be determined by reference to the activities in issue and consideration of the nature and purpose of the activities that the person will undertake. In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 380 Toohey and Gaudron JJ said: The expression "fit and proper person", standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of "fit and proper" cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, 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. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
3. They went on to say at 388: 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.
4. In Sobey v Commercial and Private Agents Board (1979) 22 SASR 70 Walters J said: 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 devolving 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.
5. In Hughes and Vale Pty Ltd v New South Wales (No. 2) [1955] HCA 28; [1955] HCA 28; (1955) 93 CLR 127 the High Court discussed the meaning of the term 'fit and proper' (at 156-7): "The expression fit and proper' is of course familiar enough as traditional words when used with reference to offices and perhaps vocation. But their very purpose is to give the widest scope for judgment and indeed for rejection. Fit' (or `idoneus') with respect to an office is said to involve three things, honesty, knowledge and ability ... When the question was whether a man was a fit and proper person to hold a licence for the sale of liquor it was considered that it ought not to be confined to an inquiry into his character and that it would be unwise to attempt any definition of the matters which may legitimately be inquired into; each case must depend upon its own circumstances."
6. A licensed real estate agent carries privileges and obligations. Agents are entrusted to hold deposits on sales of properties and to receive rent on behalf of landlords. The industry is regulated to provide the public with a measure of confidence that agents follow rules in respect of trust money and conduct themselves competently, honestly and fairly. Poor or dishonest use of trust funds or poor supervision of a corporation that manages the trust funds is behaviour that fails to meet those standards. If a licensee is unable to discharge his responsibilities, he is not a fit and proper person to remain licensed.
7. I am not concerned about the Applicant's honesty. Nor is his knowledge of the industry in which he has operated in question. However, his ability to act in the role he has taken on as a licensee in charge is in serious doubt. As noted in Sobey I must be satisfied that he is possessed of a requisite knowledge of the duties and responsibilities devolving upon him as the holder of the particular licence. In light of all the evidence presented in this matter I am not satisfied that he has the knowledge of what is required of a licensee to ensure compliance with the legislative requirements. He has demonstrated a lack of ability to supervise staff in such a way as to ensure that those requirements are met. He has also demonstrated a lack of ability to supervise the rental trust account properly. Further, his lack of understanding of the Company as a separate legal entity has implications for his ability to act in the best interests of the Company.
8. Of equal concern is the Applicant's failure to accept responsibility for these issues. He has attempted to place the blame for all the issues of concern on the staff engaged in the agency. Even if he is correct in regard to fraudulent conduct, his failures to supervise the business properly created an environment in which fraudulent conduct could occur.
9. In the circumstances I agree with the Respondent that the Applicant's poor management of the rent trust account, his lack of supervision of the Company and his failure to act in the best interests of the Company evidence that he is not fit and proper to hold a licence.
10. The Applicant will need to address these issues if he wishes to apply for a licence in the future.
11. I note that the Applicant is a disqualified person pursuant to section 16(1A)(c) of the Act because he was the director of companies that went into involuntary liquidation within the last three years. The grounds of disqualification in section 16 (1A) do not disqualify a person from eligibility to hold a certificate of registration.

Conclusion

1. The Tribunal is to decide what the correct and preferable decision is having regard to the relevant factual material and applicable law.
2. The Respondent's determination was to cancel the Applicant's licence, to declare him to be disqualified under the Act for a year and to declare him to be disqualified from the direction, management and control of a business of a licensee for three years.
3. I agree with the determination to cancel the Applicant's licence. I am also satisfied that he should not be permitted to play any role in the direction, management and control of a business of a licensee for three years.
4. However, given that I am not concerned about the Applicant's honesty I am not satisfied that he should be disqualified from taking on any role in the industry in a capacity that requires supervision. In my view, the decision should be varied to allow this possibility.

Order 1. The decision under review is varied. 2. The Respondent's determination to declare the Applicant to be a disqualified person under the Property, Stock and Business Agents Act 2002 for one year is set aside. 3. The Respondent's determination to cancel the Applicant's real estate agent licence is affirmed. 4. The Respondent's determination to disqualify the Applicant from being involved in the direction, management or conduct of the business of a licensee under the under the Property, Stock and Business Agents Act 2002 for three years is affirmed.

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: 11 February 2019