Spano v Business Licensing Authority [2001] VSC 275

Supreme Court of Victoria|2001-08-13|Before: Gillard J

APPEAL FROM VCAT - Section 148 of VCAT Act 1998 - error of law - conditions attached to grant of permission to be agent's representative under Estate Agents Act 1980 - Section 31D of Act - discretionary exercise - discretion miscarried - irrelevant matters taken into account - appeal allowed.

The appellant, Mr Vito Spano ("Mr Spano"), is aged 53 years and, for a period of time, was the holder of an estate agent's licence. His licence was cancelled in November 1992.

The respondent, Business Licensing Authority ("the Authority"), is a body corporate established by the Business Licensing Authority Act 1998, whose functions include administering the licensing and registration provisions of the Estate Agents Act 1980 ("the Act"). See s.6 of the Business Licensing Authority Act 1998.

Any person who wishes to apply for an estate agent's licence applies to the Authority. See s.17(1) of the Act. By reason of s.21(1), the Authority is obliged to consider every application for a licence.

From about 1985 until 1992, Mr Spano held an estate agent's licence. This meant that he was considered by the licensing authority, at the time, to be a fit and proper person to hold an estate agent's licence. He operated a business known as Real Estate City. Mr Spano employed Mr Karahan, a Turkish speaking manager, at one of his branches. It appears that Mr Karahan conducted two transactions on behalf of Turkish speaking purchasers, and some $6,000 in cash was stolen by him.

Claims were made on the business and eventually, claims were made on the Estate Agents' Guarantee Fund, which were accepted by the Estate Agents Board. As a result, on 15 October 1992, Mr Spano's licence was automatically cancelled by reason of the operation of the Act. See s.22(2)(b).

On 25 November 1992, Mr Spano became bankrupt because certain property projects failed. By reason of the claim on the Fund and his bankruptcy, he became ineligible to hold an estate agent's licence pursuant to s.14(5)(c) and (d).

On 16 September 1994, Mr Spano applied for a sub-agent's licence, as it was then known, and the Board held that he was ineligible, under s.16(2).

On 3 May 1995, Mr Spano repaid to the Estate Agents' Guarantee Fund the sum of $6,820, being the full amount of the two claims that had been paid, together with interest. On 19 June 1995, he applied for permission to hold an estate agent's licence under ss.31A and B.

Section 31A is concerned with a situation where a person, who has been involved in a Guarantee Fund claim, may regain his licence if permission is granted by the Authority. Section 31B allows a bankrupt person a limited right to hold a licence, if the Authority gives permission.

On 24 April 1997, the then Authority refused his application.

He ceased to be bankrupt, by law, on 5 February 1998.

On 10 November 1999, Mr Spano lodged an application for permission, under s.31A of the Act, to be employed as an agent's representative. The application was considered by the Authority and on 31 March 2000, it refused the application.

Section 4 of the Act defines "agent's representative" as meaning any person who is not a licensed estate agent but, is employed by a licensed estate agent or is a director of a corporation that is a licensed estate agent, and who performs, for that estate agent, any of the functions of an estate agent.

There is no licensing obligation which an agent's representative must satisfy, but s.16 sets out certain requirements for eligibility for employment as an agent's representative. One of the eligibility criteria is that the person has not had a claim allowed against the Estate Agents' Guarantee Fund. See s.16(1)(f).

It follows that because a claim had been made against Mr Spano, he was not eligible for employment as an agent's representative.

Section 31A empowered the Authority to give permission to a person, who would otherwise be ineligible, to be employed as an agent's representative.

On 31 March 2000, the Authority refused the application because it was not satisfied that the matters set out in s.31A(3)(b), (c) and (d) had been established.

On 1 May 2000, Mr Spano made application to VCAT seeking a review of the decision.

The hearing took place over three days in August before a three member tribunal, comprising Deputy President Michael Levine, and Members Suzanne Russell and Dan Reilly.

On 28 November 2000, the Tribunal made an order that the decision of the Authority be set aside, and that Mr Spano be granted permission to be an agent's representative. However, the permission was made subject to a number of conditions. The Tribunal published reasons.

Mr Spano was dissatisfied with the conditions and made application to this Court for leave to appeal the conditions, pursuant to s.148 of the VCAT Act. The application came on before a Master of the Court, who refused leave, but on 27 March 2001, Beach J allowed an appeal from the Master and granted leave to appeal to Mr Spano.

Mr Spano, a person who was ineligible to be an agent's representative, applied, pursuant to s.31A of the Act, for permission to be employed as an agent's representative. The Authority refused the application and Mr Spano exercised his right to have the decision reviewed.

Section 31A(3) provides -

"(3) The Authority may give its permission if it satisfied -

(a) that the person has refunded all amounts paid out of the fund or the corresponding fund in respect to the claims; and

(b) that there were exceptional circumstances which gave rise to the claim against the person; and

(c) that having regard to the conduct of the person before and after the claim, there is no reasonable expectation that the person will not comply with this Act and the regulations in future; and

(d) that the giving of permission is not contrary to the public interest."

The Tribunal, on the review, was satisfied that, in the circumstances, each of the matters set out in sub-s.(3) had been established.

First, Mr Spano had refunded all moneys paid out of the Fund.

Secondly, there were exceptional circumstances which gave rise to the claim. In particular, it was noted that the defalcation by the employee was deliberate and that there was no possibility of discovery by Mr Spano, even with reasonable supervisory measures being adopted. It was also found that Mr Spano would have had difficulty in discovering the fraud or preventing it, even if he had closely supervised the employee's activities. The criticism of Mr Spano was that he did not properly supervise the conduct of the employee.

The Tribunal then turned to the question of future compliance with the Act and regulations, and the question of public interest.

There were a number of matters which were alleged against Mr Spano, which reflected upon his honesty. The material that was placed before the Tribunal comprised s.49 statements prepared by the Authority, together with reasons by various bodies refusing applications made by Mr Spano, and also judgments in two court proceedings.

The first proceeding occurred in 1987, involving a Mrs Trimbole. It appears that in about 1980, Mr Spano purchased a property from Mrs Trimbole which, it was suggested, was under valued. At the time, he was acting as an estate agent. However, in his favour, the evidence revealed that Mrs Trimbole was fully aware that he was the purchaser and further, that a relative of Mrs Trimbole, who was familiar with conveyancing, advised her with respect to the transaction. The matter came on before Justice Brooking, in a proceeding brought by Mr Spano, seeking specific performance of the contract some seven years after the event. His Honour held that Mr Spano owed fiduciary duties to the vendor, that he had breached the duties and that the claim for specific performance failed. However, Mr Spano was successful in recovering his deposit with interest.

The Tribunal stated that, in their opinion, the finding made in that case did not indicate that Mr Spano would pursue a similar course again, if his application was granted. The Tribunal noted -

"Whilst we note the findings of the judge we think that matter too far removed in time to be of adverse effect."

However, the other matter before a court was far more serious. Some time prior to going bankrupt, Mr Spano took steps to transfer assets to relatives, to conceal his assets from his creditors. Ryan J, in the Federal Court, held that Mr Spano was the architect of the scheme. Mr Spano accepted that what he did was wrong, but he was anxious to keep a roof over the head of his wife and himself. The Tribunal accepted that such conduct was unlikely to occur again.

There are two features about the bankruptcy which are of concern. First, the deliberate dishonest conduct in concealing assets, and secondly, the fact that Mr Spano was able to influence his relatives to participate in the scheme. The latter observation is relevant to the conditions which were imposed on the review.

This brings me to the matters which were of some concern to the Tribunal. It appears that Mr Spano has been unemployed for a number of years, and has no income. He relies upon payments made to him by his children. At or about the time of his bankruptcy, the name of the business was sold for a small sum, and it was ultimately acquired by his nephew. His nephew and son now own Vic Spano Group Pty Ltd, trading as Real Estate City. There are three branches. Other members of the family are involved in the business. Mr Spano frankly admitted that he was, from time to time, assisting his son and nephew in the conduct of the business, and giving them the benefit of his advice. He also frankly admitted that he referred work to them, if anybody approached him. Although there was some suggestion, at the hearing before VCAT, that Mr Spano was in fact involved in the business, the Tribunal found, as a fact, that there was no evidence before the Tribunal which would lead to that conclusion. The Tribunal found -

"It ought to be possible for the respondent (the Authority) to have obtained such evidence if indeed the applicant was engaging in matters which give rise to prohibited practices for a non-licensed agent or non-agent's representative. That the respondent has not done so, leaves us with no option but to not find those matters adverse to the applicant."

The Tribunal ultimately came to the following conclusion -

"On balance, having regard to the fact that eight years or more have passed since the theft by an employee that has given rise to a series of events that have disqualified the applicant from being an agent's representative, we can find no reason to extend the complete prohibition any longer."

Hence, the Tribunal was of the view that there had been compliance with s.31A(3).

The Tribunal then considered whether conditions should be imposed. In the end, the Tribunal did impose conditions. Mr Spano complains about those conditions.

The Tribunal ordered that Mr Spano be granted permission to be an agent's representative, but on the following conditions -

"(a) That he not be employed, refer work, or attend at any business premises at which any of his relatives carry on or transact any matters arising out of their being a licensed estate agent or an agent's representative;

(b) that he not advertise or promote in any manner the business of any of his relatives arising out of their being a licensed estate agent or an agent's representative;

(c) that he not have any interest share or investment in, be a beneficiary of any trust deriving income from or receive directly or indirectly any benefit or income or payment in any manner from any business of any of his relatives arising out of their being a licensed estate agent or an agent's representative."

It can be seen from those conditions that Mr Spano was precluded, as an agent's representative, from being in any way involved in the business run by his nephew and son, even though the conditions went wider than that restriction. Further, he was not permitted to have any interest share or investment in any estate agent's business of any of his relatives.

The latter condition places a greater restriction on Mr Spano than the Act itself. Section 15(1A) allows a corporation to hold an estate agent's licence, even though an employed agent's representative holds shares not exceeding 10% of the total number of shares.

In my opinion, the Act makes adequate and appropriate provision for problems that may arise where an agent's representative has an interest in the estate agent's business. But, on any view, an interest is permitted. The reasons of the Tribunal do not refer to the provisions of the Act and, in my opinion, the Tribunal erred in the exercise of its discretion by failing to take into account a relevant matter, namely, the provisions of the Act, when considering condition (c). The discretion miscarried and the condition should be set aside.

The reasoning of the Tribunal concerning the imposition of the other conditions is set out in a number of paragraphs. I must confess I have some difficulty with some of the reasoning. The reasons were -

40. The applicant argued that the respondent has licensed all the family of the applicant and the family is not on trial and there is no reason that members of the family could not supervise the applicant. The applicant points out that he has made this application and queries what if he had not? Indeed the answer is simple - nothing would have changed and confusion would remain in the mind of the public as to the applicant's ownership of the business of his relatives.

41. But the fact is that the applicant has made the application and because of our disquiet as to the continuing involvement of the applicant in the business of his relatives on the evidence and finding of others and the evidence he has given to us we have come to the view that more is to be achieved in the public interest by having the applicant as an agent's representative with conditions than leaving the matter as it currently stands. Nothing the applicant has said in evidence shows any contrition or even concern that there may be confusion in the mind of the public as to his role in the business of his relatives.

42. Further the possibility of restrictions was mentioned to the applicant in his examination before us and he accepted the possibility of restrictions in employment with his relatives. By doing so he may, as his counsel suggested, be unable to work with former customers and re-build his contacts. However we believe that appropriate conditions would help to ensure that any perceived proprietorial involvement in any of his relative's estate agency businesses is strongly countered. Conditions will ensure that other licensed agents are fully aware of what they may do if they are approached or have clients referred by, or they employ the applicant."

It will be necessary to closely analyse the reasons hereafter. For present purposes, it would appear that the main focus by the Tribunal is on the concern that Mr Spano operated the business prior to losing his licence and going bankrupt, and that since that date, he has, from time to time, provided advice and referrals to the business operated by his son, who is 20 years of age, and his nephew, who is 26 years of age. It is said, and the evidence supports the conclusion, that some persons may think that he is involved in the business at present, and that if he is granted permission to be employed as an agent's representative, the public may think that he has some proprietary interest in the business. I interpolate to note that both men are licensed estate agents. Are these concerns, matters which the public must be guarded against?

Section 31D empowers the Authority and, on review, the Tribunal, to impose conditions. Section 31D(1) provides -

"(1) In giving its permission under s.31A, 31B or 31C, the Authority may impose any conditions it considers appropriate to ensure the ongoing protection of the public interest."

It is an offence not to comply with the conditions, the Authority has power to revoke the permission granted, and the Authority may, at any time, vary the conditions - see s.31D(2), (3) and (4).

It is important to note that the conditions are imposed to ensure the ongoing protection of the public interest. That is, protection of the public interest during the period when the person is employed as an agent's representative.

In my opinion, in considering and determining what conditions, if any, should be imposed, the first step is to determine what risk or threat there is, of harm to members of the public, if Mr Spano is given permission to be employed as an agent's representative? In considering that question, what an agent's representative may or may not do, by reason of the provisions of the Act, must not be overlooked. An agent's representative is not a licensed estate agent. The latter is permitted to do certain things. By implication, the agent's representative is not permitted to do things which only a licensed estate agent may do. It follows that although an agent's representative may perform, for an estate agent, any functions of an estate agent, he cannot perform any function which is expressly imposed on a licensed estate agent by the Act. For example, only a licensed estate agent may manage and supervise the business and office - see ss.29B and 30.

The Act ensures a degree of control over the activities of an agent's representative.

Given what he is permitted to do by reason of the provisions of the Act, together with the control, management and supervision of an employer, who is a licensed estate agent, and the control imposed by the Act, what risk of harm is there to the public if Mr Spano is permitted to be employed as an agent's representative?

In answering that question, Mr Spano's past must be investigated and determined, and, insofar as it bears on the work and activities of an agent's representative, must be taken into account. In addition, one must not overlook the circumstances which have occurred subsequent to any past indiscretions. Conditions should be imposed, to avoid or minimise the risk of harm to the public, if there is a risk that a person given permission to be an agent's representative, may be a threat to the public. But there must be a relevant link between the risk and protection of the public. Given the apparent risk to the public, what measures should be put in place to avoid or minimise it?

My reasoning is supported by what Buchanan JA said in Cichello v Estate Agents' Licensing Authority (1998) 4 VR 477 at 483.

In that case, an applicant for a licence had become ineligible, by reason of the fact that he had been convicted of an offence involving violence, punishable by imprisonment for three months. He made application, under s.31C of the Act, for permission to hold a licence. The Estate Agents' Licensing Authority could grant a licence if satisfied that it was not contrary to the public interest.

The Court of Appeal held that the Tribunal had erred in law, because it overlooked the true nature of the particular offence.

"In determining whether it was satisfied that it was not contrary to the public interest to give permission under s.31C(3) the Tribunal, in my opinion, was required to take into account the circumstances of the offence. Those circumstances bore directly upon the question of the risks and detriment to which members of the public were exposed by the appellant conducting the business of a real estate agent. Other factors may also affect the nature and degree of risk of harm to members of the public posed by a violent offender acting as an estate agent, but the starting point must be the circumstances constituting the offence of violence upon which s.14(5)(e) of the Act operates."

Under s.148 of the VCAT Act, a party may only appeal "on a question of law". There is no appeal on matters of fact.

The Authority and the Tribunal, on review, had authority to impose conditions under s.31D(1). In imposing conditions, the Tribunal was exercising a discretion given to it by law.

Ms E.A. Strong of Counsel, who appeared for the Authority, emphasised the heavy burden which rested upon a party alleging that the discretion had miscarried. She referred to the well-known statement of principle by Kitto J in Australian Coal and Shale Employees' Federation v The Commonwealth [1953] HCA 25; (1956) 94 CLR 621. At p.627, His Honour summarised the principles as follows -

"I shall not repeat the references I made in Lovell v Lovell to cases of the highest authority which appear to me to establish that the true principle limiting the manner in which appellate jurisdiction is exercised in respect of decisions involving discretionary judgment is that there is a strong presumption in favour of the correctness of the decision appealed from, and that that decision should therefore be affirmed unless the Court of Appeal is satisfied that it is clearly wrong. A degree of satisfaction sufficient to overcome the strength of the presumption may exist where there has been an error which consists in acting upon a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts. Again, the nature of the error may not be discoverable, but even so it is sufficient that the result is so unreasonable or plainly unjust that the appellate court may infer that there has been a failure properly to exercise the discretion which the law reposes in the court at first instance." (Emphases added).

If an error in the exercise of the discretion occurs, this is an error of law. Ms Strong emphasised that the Tribunal heard evidence over a number of days, considered a wealth of material, none of which was really contested, and had the opportunity of observing Mr Spano in the witness box. Most of these advantages are denied this Court. That may be so, but the question is, did the discretion miscarry?

What were the possible risks and detriment to members of the public if Mr Spano was permitted to be employed as an agent's representative?

If one goes back into Mr Spano's past, there were a number of instances of dishonest conduct. The first relating to the purchase of the property. I agree entirely with the Tribunal that it was a matter which had occurred many years ago, and the degree of moral turpitude was at the lower end of the scale. The incident involving the manager was also found by the Tribunal not to involve any dishonesty or moral turpitude on the part of Mr Spano. The transferring of assets to defeat creditors is a matter of some concern but, in the end, I agree with the Tribunal that it was a matter that was in the past, was a response to the exigencies of the moment and would not occur in the future. One could therefore feel a degree of confidence that Mr Spano, who is now aged 53, and who has no doubt benefited from his experience of ineligibility to hold a licence, would ensure that, in the future, he did not transgress and did not put in jeopardy his right to employment in the real estate industry. The Act ensures that he does not transgress, and power is given to the Authority to impose conditions, at any time, in respect of the permission. See s.31D(2).

The Tribunal, on the hearing of the review, came to the conclusion that the giving of permission was not contrary to the public interest - see s.31A(d).

It follows that the Tribunal was prepared to accept, given the past conduct of Mr Spano, that it was not contrary to the public interest that he should be given permission to be employed as an agent's representative.

What other risks are there? The Tribunal adverted to two possible areas. First, that it was likely that Mr Spano would be employed by the company operated and controlled by his nephew and son, and questions arose as to the degree of control and supervision by the employer over Mr Spano, as an agent's representative. Although this was adverted to in the course of the Tribunal's reasons, it is clear, in my opinion, that the issue was not a matter which the Tribunal considered was a matter for conditions. This conclusion is supported not only by a consideration of the reasons, but the matter appears to have been adverted to in the first sentence of the reasons and put to one side.

The reasons given for the imposition of conditions did not discuss this question. Ms Strong submitted that the Tribunal must have had the concern in mind, and referred to a number of references, in the reasons, which raised queries as to the degree of control or supervision to be employed by Mr Spano's relatives. But the fact was that when one closely analyses the reasons given for the conditions, it was a matter that the Tribunal did not take into account. I accept the submission of Mr Slonim of Counsel, for Mr Spano, that this Court must consider the reasons given for the conditions, in determining this appeal.

Those reasons show that the Tribunal was concerned about the confusion in the mind of the public, that Mr Spano may have an interest in the businesses conducted by his relatives, and further, that there may be confusion in the mind of the public as to his role in the business operated by the relatives, if employed by them.

There is no doubt, as Ms Strong submitted, that there was ample evidence to show that the business, Real Estate City, was owned by a corporation owned and controlled by a nephew, aged 26, and his son, aged 20; that Mr Spano's daughter worked in the business, as did a son-in-law; and that Mr Spano visited the agency a number of times per week. The business had four licensed estate agents, who were the nephew, the son, a son-in-law, and a daughter. In addition, another daughter was three-quarters of the way through a course.

Given that there appears to be a close association between Mr Spano and his family's business, and that there may be a perception out in the public that he has an interest in the business, and confusion as to his true role if he was employed there, the question arises as to what would be the nature and degree of risk of harm, to members of the public, posed by Mr Spano being employed there?

The mere fact that members of the public may think that he has a proprietorial interest in the business, which is not prohibited by the Act, or that he is a licensed estate agent, does not, in my opinion, pose any threat or risk of harm to members of the public. The mere fact that members of the public may be uncertain as to his role in the business or that he may be a licensed estate agent, does not represent any threat to the public. If any member is concerned to find out the correct position , an enquiry of A.S.I.C. or the licensing authority would soon reveal the true position. Indeed, in most cases, why would a member of the public wish to know what Mr Spano's position was? Members of the public know that estate agents must be licensed, and that their activities are subject to statutory provisions and rules. They are comforted by those facts.

If Mr Spano is thought by some to have an interest in the business, which is permitted by law, or is thought to be the holder of a licence, the public does not need to be protected from these perceptions. The fact is that they do not represent a threat or risk of harm to members of the public. Insofar as the Tribunal thought they did, it was wrong, misdirected itself in respect of the application of s.31D(1) and took into account irrelevant matters.

Under s.31D(1), the conditions to be imposed are those "appropriate to ensure the ongoing protection of the public interest". There is no interest to be protected. What does it matter if some members of the public think that Mr Spano does have such an interest, or that he is a licensed estate agent?

In my opinion, the Tribunal erred, in that it gave weight to extraneous or irrelevant matters, namely, the perception by members of the public, including other agents, that Mr Spano may have a proprietorial interest in the business or that he had a licence, and that these posed a degree of risk of harm to members of the public, which should be protected by prohibiting him being employed in a relative's business.

The discretion miscarried, and this is an error of law.

It follows that the appeal should be allowed.

I am satisfied that the Tribunal was guilty of an error of law, in exercising its discretion with respect to the imposition of conditions, which would have prohibited Mr Spano from being employed in his family's business.

This Court is empowered, by s.148(7) of the VCAT Act, to make an order on the appeal which the Tribunal could have made in the proceeding.

In my opinion, the conditions should be set aside and the permission given to Mr Spano should be unconditional.

Subject to the submissions by Counsel, I propose to make the following orders -

(i) That the appeal by Vito Spano from the order made by the Victorian Civil and Administrative Tribunal on 28 November 2000 be allowed.

(ii) That the conditions attached to the permission granted to Mr Spano to be employed as an agent's representative be set aside, otherwise the order made by the Tribunal be affirmed.

(iii) That the respondent, the Business Licensing Authority, pay the costs, including reserved costs, of the appellant, Vito Spano.

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