Pillay v Department of Fair Trading

NCAT Occupational|2021-11-26

The Applicant's earlier evidence

The Applicant, in his capacity as the then sole director of the Company and licensee-in-charge, provided the Respondent with an affidavit sworn on 19 February 2019 and a supplementary affidavit dated 28 March 2019.
In his affidavit sworn on 19 February 2019, he made the following admissions: 1. On 9 August 2017, at the request of his father, he transferred $275,000 from the Trust Account to Arvideep Pty Ltd (Arvideep), a Company controlled by the father. He acted alone. His father repaid the sum of $275,000 on 5 September 2017. On 3 October 2017, again at the request of his father, he transferred $150,000 from the Trust Account to Arvideep and on 9 November 2017 Arvideep deposited $150,000 into the Trust Account. On 21 November 2017, at the request of his father, he transferred another $200,000 from the Trust Account to Arvideep. 2. On 8 December 2017, at the request of Viren, he transferred $100,000 from the Trust Account to Viren as a loan, which Viren promised to repay. On 11 December 2017, 18 January 2018 and 6 February 2018, again at the request of Viren, he transferred, respectively, another $60,000, $29,000 and $12,000 from the Trust Account to Viren. 3. By 20 February 2018 all the trust monies had been repaid.
In his affidavit sworn 28 March 2019, the Applicant made further admissions that on 9 August 2017 and on 16 January 2018, as licensee-in-charge, he authorised the deduction from the Trust Account of $80,000 and $14,720, respectively, in favour of his father as a loan. Both transactions were deposits to the account of a person, to whom his father owed money. These amounts were also repaid in full.

Evidence of the Applicant's father

In his oral evidence, the Applicant's father said that he is now semi-retired; he "runs" hotels - since May 2021, he has only 3. Previously, he worked 12-hour days 7 days a week, travelling each day between his various motels and other businesses, including his son's business premises. He said that he made all the business decisions for the Company. He said he had access to the Trust Account which he had opened in 2013 when he set up the business for his son. He said he knew the password and had an access token.
In his affidavit the Applicant's father wrote that in the period during which the monies were transferred he was running the Company and made all decisions and that he had access and full control of the Company's general and trust accounts.
He said at the time of the transfers from the Trust Account he had owed over $35 million to banks, in what he described as a "temporary cashflow shortage". He told his son that he owed a lot of money to banks and that he did not have enough cash to pay the interest. At the time he had debts which totalled approximately $1.5 million on 48 credit cards with various banks.
He said that he personally made all transfers from the Company's Trust Account "without involvement, knowledge or influence" of his son. He made transfers to his companies, totalling $719,755. He said his son told him not to do it "because we'll get into trouble". He said that it was his understanding that his son became aware of the transfers after about a month; there were not many transactions on the Trust Account. He did not know if his son was aware of the first transfer before the second one occurred.
He said he discussed many of his personal matters with Viren. In about early December 2017 Viren approached him and asked for financial assistance in building a house, and reminded him that he had already taken money from the Trust Account. A few days later he decided to lend money to Viren and on 8 and 11 December 2017 transferred a total of $160,000 from the Trust Account to him. In January 2018, Viren again approached him - and another $60,000 was paid. On 6 February 2018 another $12,000 was transferred to Viren's builder.
All the monies transferred from the Company's Trust account were paid back by 20 February 2018.
He wrote in his affidavit that his son is "innocent of all allegations" as he had not committed any crime or made any transfers from the Trust Account. He believed that his son took the blame to protect him; he said his son's lawyers had "told him to take the blame". His son didn't speak to him for a while. He said that on "many occasions" his son said that he did not know that he would be so severely punished for taking the blame, although in his oral evidence said his son had only said that after his licence was cancelled. He also said he also did not know about the consequences and said he would admit the wrongdoings as his son should not be punished for his deeds, and agreed in cross-examination that he first said that after the Applicant's licence was cancelled.

Conclusion as to the evidence on behalf of the Applicant

The Applicant's evidence before me squarely contradicted his sworn evidence in two earlier affidavits. In summary, he previously admitted that it was he who had made the unauthorised transfers from the Trust Account, whereas now his evidence is that it was his father, and not him, who made the transfers. It remains that he was convicted of 9 offences under s 211(2) of the Act: fraudulent conversion of trust monies, or alternatively, under s 218(2) of the Act as an accessory to the commission of corporate offences. It is clear that the offences involve dishonesty.
In his affidavit of 31 August 2021 and in his evidence before me, the Applicant asserted that he was advised by his then lawyers to ''admit all the wrongdoings done by [his] father". The Respondent submitted that it is inherently implausible that the Applicant would receive advice from a solicitor to accept responsibility for wrongdoing when he was not the responsible party. I do not canvass the advice the Applicant may have been given but I observe, that under the alternate charge under s 218 of the Act, the Applicant, as licensee-in-charge, had criminal responsibility for corporate offences by the Company. In Parisi v Commissioner of Police, NSW Police Force [2018] NSWCATAD 155, the applicant also claimed to have been poorly advised in criminal proceedings. see also Wilson v Commissioner of Police, NSW Police Force [2018] NSWCATAD 274. In Parisi, at [16], I discussed the absence of any reference to clear exculpatory evidence in criminal proceedings.
In Luk v Commissioner of Police, NSW Police [2019] NSWCATAP 23, at [34], in the context of a security licence the Appeal Panel considered one of the propositions arising from the decision of Farah v Director General, Department of Finance and Services [2014] NSWCATAP 23 to be that it is the offence itself that must involve dishonesty, and it is not permissible to look behind a conviction for that offence to consider the particular facts of the case. The agreed facts on which a guilty plea is based, the findings of the court in relation to a contested hearing and the sentencing remarks are not relevant, and those matters cannot be relied on to find that the person has engaged in dishonest conduct or behaviour or had a particular state of mind which was dishonest.
During the course of the criminal proceedings, the Applicant made admissions in the Agreed Facts detailing the conduct underlying his pleas of guilty and convictions. His present account is inconsistent with his guilty plea and the Agreed Facts.
Even if I were to accept that the Applicant decided to take the blame for his father in the criminal proceedings, it is more problematic, in my view, that he swore affidavits of 19 February and 28 March 2019 which he now says are not true. His change of position, it is clear, was precipitated not only by the penalty imposed by the Magistrate and by the District Court, but also by the disciplinary action taken by the Respondent. His present account is also inconsistent with the submissions made on his behalf in support of his application for internal review: he "did not know that the consequences [were] going to be so harsh and [he] made those admissions to protect his father". The submissions expressly relied upon the Applicant's two earlier affidavits in which he admitted making the transfers from the Trust Account himself.
The Applicant's evidence before me that at the time of the transfers he was "very depressed" was not supported by Dr Furst who prepared a psychiatric report for the purposes of the Applicant's sentencing in the Local Court which was that he is not suffering any psychiatric condition.
In these proceedings both the admitted conduct underlying the conviction and the convictions themselves are relied upon to establish disciplinary grounds, specifically contravention of the Act and conduct evidencing that the Applicant is not fit and proper to hold a licence; cf Sudath v Health Care Complaints Commission [2012] NSWCA 171.
Even if I were to accept that it was the Applicant's father who undertook all the transfers and not the Applicant, it remains that the Applicant failed to supervise the business by allowing his father to have access to the Trust Account, and failed to supervise the Company's Trust Accounts over a period of 6.5 months and identify unauthorised transactions on the Trust Accounts contrary to s 32 of the Act. Further, even on his present account, he became aware became aware of the transfers after the second or third transfer had been made, but still took no steps to intervene such as would have prevented the subsequent transfers.
I also consider that, because his position has so completely changed, it is inevitable that I conclude that the Applicant was prepared either to swear two false affidavits as to what occurred, endorse the Agreed Facts, enter pleas of guilty on the basis of that admitted conduct (including on appeal) and maintain that account through the Respondent's investigation, the NTSC process, and the internal review process, until fairly late in these (disciplinary) proceedings.
As was pointed out by the Respondent, the Applicant, having made full and voluntary admissions, expected a far more lenient outcome. Now, disappointed by the consequences of his admitted conduct, the Applicant seeks to undo the effect of his admissions by now relying on evidence which is materially inconsistent with his several sworn and signed admissions, and apparent instructions to successive legal representatives, including (at least initially), his present solicitor. In all the circumstances, it is difficult to accept the Applicant's evidence that it was not him but his father who was responsible for making each of the transfers. As a result, I consider that the Applicant cannot be relied upon to tell the truth where to do so might conflict with his own interests. Consequently, I have severe reservations, on the basis of the Applicant's evidence, as to his trustworthiness to hold a licence under the Act.

Are there grounds for disciplinary action?

Section 191 of the Act sets out the grounds for taking disciplinary action.

Has the Applicant contravened a provision of the Act or the Regulation?: s 191(1)(a)

The Applicant contravened ss 32(1) in that he failed to properly supervise the real estate business. He contravened s 37(2) in relation to rules of conduct, and s 86(1) in relation to his failure, as licensee, to properly hold and manage trust monies. Further, the Applicant has been convicted of offences under the Act: s 211(2) or s 218(2) of the Act. He breached Rules 2 and 6 by transferring, over the course of 6.5 months in multiple transfers, $920,755 in trust money to third parties.

Has the Applicant acted unlawfully, improperly, unfairly, or incompetently in the course of carrying on business or exercising functions under the licence?: s 191(1)(c)?

As discussed above, the Applicant clearly acted unlawfully. He also admitted to attempting to conceal the fraudulent conduct by falsifying the Company's accounts by using fictitious entries to falsely represent that the Trust Account balanced at the end of each month. In addition, he admitted to being unfamiliar with his Trust Account obligations, and relied on others to prepare the records. At best, this conduct demonstrates incompetence in relation to his obligations.

Is the Applicant a fit and proper person to hold a real estate agent's licence: s 191(1)(e)?

The expression "fit and proper person", on its own, carries no precise meaning and 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: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 (Bond), per Toohey and Gaudron JJ at 380.
In Sobey v Commercial Agents Board (1979) 22 SASR 70 at 76, Walters J said in relation to the licensing of commercial and private agents, that the expression means that an applicant must show that he or she "is possessed of sufficient moral integrity and rectitude of character as to permit him to be safely accredited to the public, without further inquiry, as a person to be entrusted with the sort of work which the licence entails." The statutory regime under the Act is protective, not punitive; the test, in this context, is directed towards maintaining appropriate standards by real estate agents. The licensed real estate agent role carries with it certain privileges. It also entails serious obligations, including in relation to the holding of trust money. The industry is regulated, not only to establish standards but to ensure that the public may be confident that licensed real estate agents will conduct themselves in accordance with the rules that have been established and behave honestly, competently and fairly. Such is the hallmark of a person who is fit and proper to hold a real estate agent licence.
In Maher v Department of Fair Trading [2019] NSWCATOD 21 at [124] Senior Member Montgomery observed: 124. 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.
In this matter, the Applicant either himself dishonestly transferred trust monies or he failed, as sole director and licensee-in-charge, to ensure that trust monies were held in the Trust Account and disbursed only in accordance with an authorised direction. At best, on the Applicant's current version of events, for a period of some months, he failed to supervise the Trust Account and in that time trust monies totalling $920,755 were made to third parties. As noted in Sobey I must be satisfied that the Applicant is possessed of a requisite knowledge of the duties and responsibilities devolving upon him as the holder of the licence. I am not satisfied that the Applicant has the knowledge of what is required of a licensee to ensure compliance with the legislative requirements; if he did have that knowledge, then he chose to ignore his responsibilities. I consider that that the dishonest use of trust funds or, on the Applicant's present account, his failure to prevent unauthorised use of the trust monies and to act when he discovered his father's access, is conduct which demonstrates that he is not fit and proper to hold a real estate agent licence.
One question that may also be considered is whether the general community will have confidence that the improper conduct will not occur again. The Applicant had described the unauthorised transfers as a "one off" but in my view this was a gross understatement of what occurred, because the activity occurred on multiple occasions over several months. The Applicant claims, on his current version, that his father did what he liked notwithstanding that he, the Applicant, had counselled him against using the trust monies for his own purposes. The Applicant's evidence was to the effect that he was so subjugated to his father's influence that he, either was persuaded to improperly access the Trust Account or to permit his father to have ongoing improper access to the Trust Account. The Applicant's father was, and remains, it would appear from the evidence of both the Applicant and his father, a significant presence, and more relevantly, influence, in the Applicant's life. In my view, the public would not have confidence that, that the Applicant's father may not again impose upon his son if faced with financial difficulties, notwithstanding his recent more modest business undertakings. More importantly, if those circumstances were to arise again, the public would not be confident that the Applicant would not, once more, succumb to his father's wishes.

What is the appropriate disciplinary action to take against the Applicant?

The submission on behalf of the Applicant, in summary, was that the disciplinary action taken against the Applicant was excessive. Both the Applicant and his father expressed concern was that the penalty imposed was "unfair", especially as the monies had been repaid.
In my view, what the Applicant did or was party to, was in fundamental disregard of the honesty and integrity required of those who hold a licence or a under the Act. That the Applicant thought the disciplinary action was unduly harsh also suggests that his knowledge of his obligations under the Act was significantly deficient: see Huynh v Commissioner for Fair Trading [2016] NSWCATOD 2.
Having regard to the standards imposed by the legislative regime, that the standards enhance consumer confidence, that there is an expectation in the general public that in matters of misconduct disciplinary action will be taken.
There are some mitigating factors against the imposition of a severe penalty. Firstly, the Applicant co-operated with the Respondent during its investigation, and had, very quickly, admitted the unlawful conduct. On the other hand, in 6.5 months nearly $1 million in trust funds were fraudulently converted, either by the Applicant himself, or while he was responsible for the business. His current evidence, at best, is that he was aware fairly soon after his father made the first one or two transfers that they were occurring, and yet he took no steps to curtail his father's access to the Trust Account.
I am satisfied that, even though restitution of the funds misappropriated from the Trust Account was made, the seriousness of the Applicant's actions, on either version of events, and his awareness that what he did was wrong (on either version) merits significant disciplinary action. His unauthorised use of trust account money (or permitting access to the trust money) on multiple occasions in the sum of nearly $1 million demonstrates a clear lack of honesty and integrity, and his licence warrants cancellation: s 192(1)(g).
Working in the real estate industry in any capacity requires the highest degree of integrity. I consider his conduct as sufficiently serious that a declaration that he is a disqualified person under s 192(1)(h) is warranted: see Gambino v Commissioner for NSW Fair Trading [2014] NSWCATOD 135 at [78]. It was submitted on the Applicant's behalf that he was immature at the time of the offences. Within a period of 10 years, it is hoped that he will have overcome his immaturity, and in that time, comes to grips with his father's influence, and be better aware of how to deal with possible blackmail.
For the same reasons I have reservations that, even if he were to work as a real estate agent other than a licencee-in-charge, he may still be subject to the influence of his father or others. Hence, it is appropriate that he not be involved in the direction, management or conduct of the business of a licencee for a period of 10 years: s 192(1)(i). I acknowledge that this would preclude him from working as a real estate salesperson in that period.
Having regard to the period during which the Applicant acted (or on his current version of events, failed to supervise the business), it is appropriate that the Applicant's licence is cancelled, that he is declared a disqualified person for a period of 10 years from 18 March 2021, and that he is disqualified from being involved in the direction, management or conduct of the business of a licensee for a period of 10 years from 18 March 2021 (ss 192(1)(g), (h) and (i) of the Act). The Applicant's conduct demonstrates a gross breach of trust and a failure to meet the standards expected of him by his clients and the public generally.

decision 1. The decision under review 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

Amendments 16 December 2022 - Unlinked legislation. 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: 16 December 2022

Tribunal's role

Section 63 of the Administrative Decisions Review Act 1997 (ADR Act) provides that in determining an application for review the Tribunal is to make the correct and preferable decision having regard to the material before it, and any applicable written or unwritten law. It is well established that the Tribunal is not restricted to a consideration of the material that was before the decision-maker, but may have regard to any relevant material before it at the time of the review: Shi v Migration Agents Registration Authority [2008] HCA 31. Under s 28(2) of the Civil and Administrative Tribunal Act 2013 (CAT Act) the Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice: s 38(2) of the CAT Act. The Tribunal makes its own decision in place of the Commissioner's, and there is no presumption that the decision of the Commissioner is correct: McDonald v Director General of Social Security (1984) 1FCR 353 at 357. The standard of proof that applies in these proceedings is the civil standard, that is, on the balance of probabilities. There is no onus of proof: Nakad v Commissioner of Police, New South Wales Police Force [2014] NSWCATAP 10 at [28]-[34].

At a glance

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Judgment (12 paragraphs)

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Cases Cited (13)

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