Taouk v Director General, NSW Fair Trading

Is the Applicant a fit and proper person to hold the licence?

1. The High Court dealt with the expression "fit and proper person" in Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 94 ALR 11; 64 ALJR 462; 21 ALD 1. In that matter the ABT was required to refuse a licence if it was not satisfied that the Applicant or the holder of a licence was a "fit and proper person". Toohey and Gaudron JJ stated (at 380) that: "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. "
2. In the same case, Mason CJ stated at [63] that: "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."
3. In Hughes & Vale Pty Ltd v State of New South Wales [1955] HCA 28; (1955) 93 CLR 127 at paragraph [9] the High Court defined the concept of fitness and propriety as having three components - "honesty, knowledge and ability."
4. In Director General Department of Finance & Services v Porter [2014] NSWCATAP 6, the Appeal Panel stated: 30. In the light of the High Court's comments in Hughes and Vale Pty Ltd v New South Wales No 2 [1955] HCA 28; (1955) 93 CLR 127 at 156 it can be accepted in determining this appeal that honesty, knowledge and ability are each considerations which the relevant decision maker was bound to take into account in reaching a conclusion as to whether the respondent was a fit and proper person in the context of the PSBA Act.
5. Those comments are equally applicable in the context of the Act.
6. In Sobey v Commercial and Private Agents Board [1979] 22 SASR 70 Walters J said of the term "fit and proper ": "In my opinion what is meant by that expression is that the Applicant must show not only that he is possessed of a requisite knowledge of the duties and responsibilities evolving upon him as the holder of a particular licence ... but also that he is possessed of sufficient moral integrity and rectitude of character as to permit him to be safely accredited to the public ... as a person to be entrusted with the sort of work which the licence entails."
7. The Applicant's fitness and propriety must be determined in the light of the role he is to undertake. The Tribunal must consider the evidence before it, taking into account and weighing up matters both contrary to and in favour of the Applicant.
8. Ms Campora has pointed to a number of issues which the respondent contends cast doubt on the Applicant's honesty and therefore his fitness and propriety to hold the licence that he is seeking. She referred to the discrepancies in the information provided that I have referred to above. She submitted that the irregularities suggest strongly that the paperwork submitted does not reflect the true state of the finances of the Applicant or Emka. She further submitted these irregularities also reflect an inexcusable pattern of illegal conduct that goes to the Applicant's fitness to hold an authority under the Act.
9. Ms Campora also referred to the fact that the Applicant had failed to declare that he had been a director of a company that had been wound up. The Applicant's evidence was that this failure was due to an error on his part. He stated that he incorrectly believed the question on the form related to his directorship of Emka rather than the other company - Kentlans Pty Limited ("Kentlans").
10. Ms Campora submitted that this explanation is dubious at best, given that the Applicant was applying for a licence under his own name. In that context he only provided the details of Emka as a former employer. Further, he had also been a director of Multidwell Pty Limited which had been ultimately deregistered but he did not confuse the question to relate to this company.
11. The Respondent submits that the Applicant failed to declare his directorship of Kentlans because he did not want to have his application refused on the basis of his directorship of a company that had been wound up.
12. Ms Campora also referred to comments by Justice White in his decision in Schmierer & Anor v Taouk [2004] NSWSC 345. In issue in that matter was the Applicant's conduct in withdrawing $164,718.61 from Kentlans' bank account, leaving it with a balance of only $100. In regard to the Applicant, Justice White stated: "48 I formed an adverse view of the defendant's credibility for a number of reasons. His answers in cross-examination were often unresponsive. His evidence of delivering an invoice to Mr Tony Taouk for work on the Black Garter premises to which I refer below was unimpressive. However there were two other matters of greater significance which reflected adversely on him. The first was his conduct in withdrawing $164,718.61 from the company's bank account on 17 September 1998, leaving it with a balance of only $100.00. … Even on his own evidence, … he did not have authority to deduct more from the company's accounts than that which he claimed to be owing to him in respect of work done on the Black Garter premises. The defendant has not claimed to be owed anything like the sum of $164,781.61 which he withdrew. I find below that this conduct was a serious breach of his duty as a director. 49 The second matter was more significant again. The defendant contended that he was entitled to the payments he received from Kentlans on the basis that he was owed money in respect of the Black Garter property. Accordingly he adduced evidence to show the amount he was owed in respect of that work. He produced a schedule he had prepared summarising a list of cheque butts which were claimed to show payments he had made in respect of the Denman Avenue project and the Black Garter property.[47] 50 The schedule was headed "Advance Bank Cheques paid from Louis Persanal (sic) Account". It included an item in the following terms "04-12-1998 Cement Render and Plastering $12,500.00 Cheque No. 000090". The cheque butt recorded "4/12/98 Ahmed RADWA (Renderer)" "For Tony". The amount was recorded as "$12,500-". In objecting to the tender of the cheque butt counsel for the plaintiff pointed out that the bank statement for the account showed that the relevant cheque was for an amount of $2,500.00, not $12,500.00.[48] In subsequent oral evidence the defendant said that he gave the renderer bits and pieces of money, $2,500.00 and $2,000.00 and a cash amount of $10,000.00. He said that he placed the figure "1" in front of the figure "2" in the figure $2,500.00 on the cheque butt to record that he had paid an additional $10,000.00 in cash to the renderer.[49] I do not accept that evidence. Plainly the cheque butt was intended to convey that the cheque to which it was a butt had been written in the amount of $12,500.00. When a call was made for the production of any documents which recorded the withdrawal of a sum of $10,000 from an account of the defendant being the $10,000 said to have been paid to Mr Ahmed Radwa, no document was produced.[50] I do not accept that the defendant paid $10,000.00 in cash to Mr Ahmed. However, even if he did, the cheque butt and the summary were prepared with what I can only regard as the intention of producing a false impression that the rendering work had been paid for, in part, by a cheque for $12,500.00. I do not accept Mr Tregenza's submission that the cheque butt was merely an indication of the defendant's very informal accounting system in respect of work done. The fact that the deception was readily picked up by the plaintiff's representatives owing to the application of an ink of a slightly different hue of blue on the cheque butt and by comparison with the bank statement, does not persuade me that the defendant did not attempt a deception. ... 84 The defendant's receipt of this sum was a misfeasance in the nature of a breach of trust whereby he acted wrongly by misapplying and retaining in his own hands moneys of the company ... 85 The defendant identified as one of the issues in the proceedings whether, if there were a breach of s 598, the defendant ought to be excused of liability under s 1318 of the Corporations Act. It is a pre-condition to relief under that section that it appear to the Court that the person liable has acted honestly and, having regard to all of the circumstances of the case, that he ought fairly to be excused for his negligence, default or breach. 86 In my view the defendant did not act honestly in applying the company's money to himself. He ought not fairly to be excused for his breach of his duty as a director."
13. The Applicant conceded that he was in error in regard to his failure to declare his directorship of Kentlans. His evidence was that at the time of filing out the application form he thought the question related to his Directorship at Emka. His evidence is that Kentlans was wound up voluntarily and did not involve any loss to the public. The surplus of company funds were returned to the Shareholders after the Liquidator received his fees and legal costs.
14. In regard to the Respondent's concerns about the decision in Schmierer and Anor v Taouk the Applicant conceded that he lacked a proper paper trail and contends that this was the main reason for his loss in that case and for Justice White's comments.
15. Mr Adams submitted that the Schmierer and Anor v Taouk case should not be taken into account or if it is taken into account the facts surrounding the winding up of Kentlans should discount any adverse consideration against the Applicant. In that regard the Applicant relies on the Affidavit of Mr Tony Taouk who was the other Director/Shareholder in Kentlans. His evidence is that Kentlans was a developer and not a builder; it was voluntarily wound up and not for insolvent reasons and surplus funds were paid to both shareholders. Mr Tony Taouk was not required for cross-examination.
16. In this regard Ms Campora submitted: During cross-examination, the Applicant was dismissive of the Court's findings on the basis that there was no loss to any consumer. The submissions of the Applicant focus on this, and that Mr Tony Taouk, the other director of the company the subject of the decision, was not cross-examined. However, the Respondent's concerns do not relate to consumer loss, nor what is Mr Tony Taouk's perception of the conduct of the Applicant. They focus on the Courts determination that the Applicant did not act honestly, a finding that the Applicant did not address in his evidence before the Tribunal nor in his submissions. The decision did not relate to the circumstances surrounding the winding up of the company, but to certain amounts of money taken by the Applicant to which the Court ultimately found he was not entitled. The Applicant's insistence that the Judge was wrong, but that an appeal was not lodged due to absence of a paper trail remains a concern. It cannot be said that reformation of character can occur until there is an acceptance that there has been some wrongdoing. In this case, the Respondent submits, there is no evidence of reformation of character.

Consideration

1. In the circumstances of this matter issues have been raised, either directly or indirectly, in regard to the Applicant's knowledge, honesty and ability.
2. The Applicant's experience is relevant to his ability. As I have indicated above, I am satisfied that he has probably met the requirement of two years relevant experience for the purposes of the instrument. In any event he has general experience in the building industry gained over a period of around twenty years. I am satisfied that the combination of his experience and qualifications removes any doubt in regard to his ability to undertake the construction work that would be authorised by the licence.
3. The Respondent has raised issues which are said to go to the Applicant's honesty. These are largely concerned with the discrepancies and irregularities in the information that he provided in support of his application. The material provided was conflicting and unreliable. The Respondent found that this was done in an attempt to deceive. The Respondent contends that the Applicant's failure to declare his directorship of Kentlans was done for a similar reason.
4. Given the circumstances of the dispute in regard to Kentlans it is improbable that the Applicant would not have been aware that he was a director of that company or that it had been wound up. However, there is not sufficient evidence to indicate that the failure to declare his directorship of Kentlans was done to deceive the Respondent. I accept that the decision in Schmierer and Anor v Taouk does the Applicant no credit, however, I also note that a significant period has passed since that decision and, with the exception of issues raised in relation to this application, there is no evidence of any other issues to raise concerns in regard to the Applicant's honesty.
5. Nevertheless, I am satisfied that the Applicant was at least careless in his response to the application form questions that related to previous business difficulties and in regard to the accuracy of the information that he provided to the Respondent.
6. In my view, the discrepancies and irregularities and the Applicant's failure to declare his directorship of Kentlans are consistent with the approach that he took in regard to his application. It is apparent from his evidence that he held the view that in order to obtain the licence he just needed to establish that he had two years' building experience and that any other considerations were secondary. When seen in that context, the discrepancies and irregularities are easily understood. They show a cavalier attitude to the regulatory regime.
7. In Maurice Neville Hinchcliffe v Building Services Corporation Commercial Tribunal No. 1115 of 1995 unreported, the Commercial Tribunal of NSW held that the intent of the Act was consumer protection and that the accreditation of a person as a building contractor or a qualified supervisor meant that such a person "can be held out to the public as being possessed of acceptable building expertise" and is a person of "integrity and honesty". The object of the Act is to protect consumers in relation to the quality of residential building.
8. The significance of the consumer protection aspect of the licensing regime established by the Act has been recognised in a number of cases before this Tribunal and the former Administrative Decisions Tribunal. To be regarded as a fit and proper person under the Act requires that that person fully understands the provisions of the Act and be prepared to observe its requirements. Regard must be given to the nature of the functions, obligations and duties which would arise under the licence: see my discussion in Bejjani v Commissioner for Fair Trading [2004] NSWADT 262.
9. Ms Campora has referred me to the decision of Boumelis v Building Services Corporation, Commercial Tribunal of New South Wales, 9 June 1995, unreported. I agree with the Respondent in regard to the importance of public confidence in builders and the view expressed by the Commercial Tribunal in Boumelis that: "Members of the public must have confidence in builders both from the perspective of standard of work and honesty. Consumers place their trust and their money in builders and often rely on their money in builders and often rely on their advice at times which are often stressful, that is, the renovating, extension or building or a home. Consumers must be sure that the confidence they place in builders is not abused. They should be able to assume that builders adhere to the proper standards of trust and honesty".
10. In my view, the present matter requires an assessment of whether the attitude to the regulatory requirements that the Applicant demonstrated in the past is likely to influence his actions in the future. The material before me suggests that he has a very poor understanding of the regulatory requirements and little knowledge of the licensing process. Alternatively, if he has that understanding and knowledge he has not demonstrated it.
11. In submissions, it has been argued that the errors and irregularities were the result of a lack of attention to detail and should not be held against him. It seems that his intention is that the Tribunal should draw the inference that he had learned from these mistakes and that his future conduct should not be viewed in the light of past mistakes.
12. However, my analysis of the Applicant's evidence gives me no confidence that he has any real understanding of the regulatory regime. I have no confidence that he now understands the importance of honesty and accuracy in his dealings with the regulator.
13. There is nothing in his evidence to suggest that he ever sought to gain an understanding of what the regulatory regime involves, or to adopt business practices that would allow him to meet his obligations under that regime.
14. Being fit and proper involves more than honesty and integrity, it involves knowledge and ability. At this point in time, I am not satisfied that the Applicant has the requisite knowledge to ensure that he can comply with applicable laws and other requirements of the regulatory regime. It is my view that the Applicant has not accepted responsibility for his carelessness and I am not confident that he would not repeat this approach in the future.
15. Having reached that conclusion it is my view that the licence should not be granted until such time as he is able to satisfy the Respondent that he has taken sufficient steps to address these issues. That being the case, the decision to refuse to grant the licence should be affirmed.

Orders 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 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 April 2016