Travel Action Pty Ltd; Sascha Frugtniet; Suzanne Frugtniet and Brian Frugtniet v Commissioner for Fair Trading

BEFORE: Hennessy N - Magistrate (Acting President) APPLICATION: Travel Agent - cancellation of licence - Travel Agent - disqualification from conducting business - Travel Agent - disqualification from holding a licence - Travel Agents Act - Travel Agent - cancellation of licence - Travel Agents Act - Travel Agent - disqualification from holding a licence - Travel Agents Act - Travel Agent -disqualifiction from conducting a business MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 Listening Devices Act 1984 LEGISLATION CITED : Migration Act 1958 Travel Agents Act 1986 Travel Agents Regulation 2001 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Briginshaw v Briginshaw (1938) 60 CLR 336 Ex Parte Tziniolis (1966) 67 SR (NSW) 448 Hughes and Vale v The State of New South Wales (1955) 93 CLR 127 McBride v Walton, (Supreme Court of NSW, Court of Appeal, 15 July 1994, unreported) Manilla Marketing Pty Limited v The Travel Compensation Fund (Commercial Tribunal, unreported No 1116 of 1993) Nationwide News Pty Ltd v Wills (1992) 44 IR 282 CASES CITED: R v Frugtniet and Frugtniet [1999] VSCA 58 Re Greenham and Minister for Capital Territory (1979) 2 ALD 137 Re Ladybird Children's Wear Pty Ltd and Department of Business and Consumer Affairs (1976) 1 ALD 1 Roncarelli v Duplessis (1959) 16 DLR (2d) 689 Rumbolt v Schmidt (1882) 8 QBD 603 Sabag v Health Care Complaints Commission [2001] NSWCA 411 Sakellis v Officer in Charge of Police, Paddington (1968) 88 WN (NSW) Pt 1 541 Sobey v Commercial Private Agents Board (1979) 22 SASR 70 Sydney Municipal Council v Campbell [1925] AC 388 APPLICANTS REPRESENTATION: R Frugtniet, agent RESPONDENT G Elliott, counsel ORDERS: 1. The Commissioner's decision to permanently disqualify Suzanne Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Travel Agents Act 1986, is affirmed.; 2. The Commissioner's decision to permanently disqualify Brain Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Travel Agents Act 1986, is affirmed.; 3. The Commissioner's decision to disqualify Sascha Frugtniet for a period of ten years from 27 September 2002 from holding a licence issued under the Travel Agents Act 1986 and further to disqualify him for ten years from being involved in the direction, management or the conduct of business as travel agent is set aside. ; 4. The Commissioner's decision to cancel licence No 2TA001406 and to disqualify Travel Action Pty Ltd for a period of 10 years from 27 September 2002 from holding a licence issued under the Travel Agents Act 1986 is set aside. In substitution for that decision a decision is made to reprimand Travel Action Pty Ltd for failing to comply with the Travel Agents Act 1986.; 5. If either party wishes to apply for costs, then that application should be made within 28 days of receiving these reasons.

INTRODUCTION Outline of proceedings 1 These proceedings concern four decisions made by the Director-General, Department of Fair Trading, now the Commissioner for Fair Trading, ("the Commissioner") pursuant to s 21 of the Travel Agents Act 1986 (the Act). The decisions relate to Travel Action Pty Ltd, a licensed travel agency, Sascha Frugtniet, the sole director of Travel Action Pty Ltd, and to Sascha Frugtniet's parents, Suzanne and Brian Frugtniet. Although the Commissioner made separate decisions in relation to each legal entity, the decisions were reviewed during the course of a single proceeding. 2 On 9 October 2002, the Tribunal granted a stay of the decisions pursuant to s 60 of the Administrative Decisions Tribunal Act 1997 (ADT Act) pending the final determination of the matter. Pursuant to s 71(1)(b) of the ADT Act the applicants were represented by an agent, Mr Rudy Frugtniet. The Commissioner was legally represented by Mr Grant Elliot. The decisions under review, and the grounds for those decisions are summarised below. DECISION 1: SUZANNE FRUGTNIET To permanently disqualify Suzanne Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Travel Agents Act. 3 The basis for this decision were findings pursuant to s 20(1)(i) of the Act that Suzanne Frugtniet, being a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates, is not a fit and proper person to be so involved. The Commissioner put forward four reasons as to why Suzanne Frugtniet is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. These were: her convictions for criminal offences in New South Wales and Victoria; the fact that part of that record was not disclosed to the Commissioner, representing to Susan Javor that she was Renuka Ranasinghe and her previous involvement with other travel agencies. DECISION 2: BRIAN FRUGTNIET To permanently disqualify Brian Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Travel Agents Act . 4 The basis for this decision were findings pursuant to s 20(1)(i) of the Act that Brian Frugtniet, being a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates, is not a fit and proper person to be so involved. The Commissioner put forward several reasons as to why Brian Frugtniet is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. These were: his criminal convictions, his alleged failure to reveal his Victorian conviction to the Commissioner, his false representation that he was a managing director of Travel Action Pty Ltd and a migration agent, his alleged requests to Ms Collins to misrepresent her experience as a travel agent and his previous involvement with travel agencies. DECISION 3: SASCHA FRUGTNIET To disqualify Sascha Frugtniet for a period of ten years from 27 September 2002 from holding a licence issued under the Travel Agents Act and further to disqualify him for ten years from being involved in the direction, management or the conduct of business as travel agent. 5 The basis for this decision were findings pursuant to s 20(1)(i) of the Act that Sascha Frugtniet, being a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates, is not a fit and proper person to be so involved. There were several reasons put forward by the Commissioner as to why Sascha Frugtniet is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. These were that: · He makes scurrilous allegations of bad faith against investigators; · He misrepresented the extent of Suzanne Frugtniet's criminal record; · He failed to comply with a provision of the Act by operating the agency for certain periods without an approved manager; · He represented that Siobhan Collins was the day-to-day manager of the business without her knowledge or consent; · He attempted to obtain a false statement from Ms Collins; · He obstructed Mr Whittaker and Mr Grahame in their investigation including holding them against their will; · He does not pay creditors in timely and business like fashion; and · The business is not financially viable. DECISION 4: TRAVEL ACTION PTY LTD To cancel licence No 2TA001406 and that the corporate licensee be disqualified for a period of 10 years from 27 September 2002 from holding a licence issued under the Act. 6 The basis for this decision was that pursuant to s 20(1)(c), Travel Action Pty Ltd had failed to comply with the Act; that pursuant to s 20(1)(e), Travel Action Pty Ltd does not have, or is not likely to continue to have, sufficient financial resources to enable it to continue to carry on business as a travel agent; and s 20(1)(i) that Suzanne Frugtniet and Brian Frugtniet, being persons (other than the corporate licensee) involved in the direction, management or conduct of a business to which the licence relates are not fit and proper persons to be so involved. Jurisdiction, powers and onus of proof 7 Under s 22 of the Act and s 38 of the ADT Act, the Tribunal has jurisdiction to review each of the four decisions. The Tribunal must decide what the correct and preferable decision is having regard to the material before it, including any relevant factual material and any applicable written or unwritten law (s 63(1) of the ADT Act). 8 Contrary to the applicants' submission there is no statutory or common law onus on either party to establish that the decisions are, or are not, the "correct and preferable" decisions. (Re Ladybird Children's Wear Pty Ltd and Department of Business and Consumer Affairs (1976) 1 ALD 1 at 5; Re Greenham and Minister for Capital Territory (1979) 2 ALD 137.) The standard of proof is the civil standard, "on the balance of probabilities" applying the principles in Briginshaw v Briginshaw (1938) 60 CLR 336. Depending on the factual and legal material before it, and its view of the correctness or preferability of the decision, the Tribunal may affirm, vary or set aside the Commissioner's decisions. LEGISLATIVE PROVISIONS AND LEGAL PRINCIPLES Legislative scheme 9 Under s 6 of the Act a person must have a licence in order to carry on business as a travel agent. In this case the licensee is Travel Action Pty Ltd. Section 20 states that the Director-General may issue a person with a Notice to Show Cause as to why the person should not be disqualified from holding a licence or engaging in other specified conduct. As far as is relevant to these proceedings, s 20 states that: (1) Where, at any time, the Director-General is of the opinion that there are reasonable grounds for believing that: . . . (c) a licensee has failed to comply with this Act, a condition or restriction to which the licence is subject, a requirement under section 21 (1) (b) or an order of the Tribunal applicable to the licensee, . . . (e) a licensee does not have, or is not likely to continue to have, sufficient financial resources to enable the licensee to continue to carry on business as a travel agent, . . . (i) a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates is not a fit and proper person to be so involved, . . . the Director-General may, by notice in writing served on the licensee, call upon the licensee to show cause, within such period, being not less than 14 days, as is specified in the notice, why the licensee should not, for such of the reasons referred to in paragraphs (a)-(l) as are specified in the notice, be dealt with in accordance with section 21(1). . . . (4) A licensee on whom a notice under subsection (1) has been served, a person with whom the licensee carries on, in partnership, the business to which the licence relates or, where the licensee is a body corporate, a director or officer of the body corporate may, within the period specified in the notice, make submissions, orally or in writing, with respect to the matters to which the notice relates. (5) A person on whom a notice under subsection (2) (b) has been served may, within the period specified in the notice, make submissions, orally or in writing, with respect to the matters to which the notice relates. (6) In order to determine: (a) whether or not to serve a notice under subsection (1), or (b) whether or not to take action under section 21, the Director-General may make such investigations as the Director-General thinks fit. Notices to Show Cause 10 On 10 June 2002, the Director-General served Notices to Show Cause on the applicants. Each applicant responded on 24 June 2002. In accordance with s 21, following consideration of the responses, the Commissioner made the decisions set out above. Section 21 states that: (1) If, after compliance with section 20, the Director-General is satisfied that any matter referred to in section 20 (1) has been established in relation to a licence, a licensee or the business carried on pursuant to a licence, the Director-General may do any one or more of the following: (a) reprimand the licensee, (b) require the licensee to comply within a specified time with a requirement specified by the Director-General, (c) suspend the licence for a period not exceeding 12 months, (d) impose a condition or restriction to which the licence shall be subject, (e) disqualify the licensee (or, if the licence has been surrendered, the former licensee) in accordance with subsection (2), (f) where a notice was served on a person under section 20 (2) (b) - disqualify the person in accordance with subsection (2), (g) except where the Director-General acts in accordance with paragraph (a), (b), (c) or (d) - cancel the licence. (2) A person is disqualified in accordance with this subsection if either or both of the following disqualifications is or are imposed: (a) a disqualification from holding a licence, (b) a disqualification from being involved in the direction, management or conduct of business as a travel agent, either permanently or for such period as is specified by the Director-General when imposing the disqualification. (3) Where, under subsection (1) (b), the Director-General requires a licensee to comply with a requirement specified by the Director-General, the licensee shall comply with the requirement within the time specified by the Director-General under that paragraph. Penalty: 10 penalty units. (4) Where the Director-General disqualifies a licensee in accordance with subsection (2), the Director-General shall cancel the licence. (5) Where the Director-General suspends or cancels a licence under this section, the suspension or cancellation shall take effect on and from such day as is determined by the Director-General and notified by notice in writing served on the licensee. (6) Where the Director-General: (a) suspends a licence - the licensee, or (b) cancels a licence - the former licensee, shall return the licence to the Director-General within a period specified by the Director-General in the notice served under subsection (5). Penalty: 10 penalty units. (7) A person disqualified in accordance with subsection (2) shall not, while disqualified, act in contravention of the disqualification. Penalty - subsection (7): 50 penalty units. Meaning of fit and proper 11 The meaning of a "fit and proper" person was discussed by the High Court in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321. Toohey and Gaudron JJ stated at p 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. 12 The activities performed by a person carrying on the business of a travel agent are set out in s 4 of the Act. They include selling tickets to members of the public for travel and accommodation within or outside New South Wales. This involves receiving money for bookings from members of the public and holding that money on trust. The ends to be served by the regulation of travel agents include the "protection of the travelling public." (Hansard, Legislative Assembly, 13 March 1986, Premier Carr at p 946.) 13 Further, at p 388, their Honours state 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. 14 In Hughes and Vale v The State of New South Wales (1955) 93 CLR 127 at 156 the High Court established that the three characteristics of "fit and proper" are honesty, knowledge and ability. In Sobey v Commercial Private Agents Board (1979) 22 SASR 70 Walters J considered at p 75 that a person's record of previous offences is most germane to the question whether a person is a fit and proper person. "Any previous breaches of the law, and any propensity towards offending against the law must .... be regarded as of crucial importance." However, the fact that a person has been convicted of a crime does not mean that he or she will never be a fit and proper person to hold a licence. (See Sakellis v Officer in Charge of Police, Paddington (1968) 88 WN (NSW) Pt 1 541 at p 548; Sobey at p 75 and Hughes and Vale at p 156-157). 15 In relation to the period of time which has passed since a person has been engaged in any criminal conduct, Walsh JA said in Ex Parte Tziniolis (1966) 67 SR (NSW) 448 at 461: Reformations of character and of behaviour can doubtless occur but their occurrence is not the usual but the exceptional thing. One cannot assume that a change has occurred merely because some years have gone by and it is not proved that anything of a discreditable kind has occurred. If a man has exhibited serious deficiencies in his standards of conduct and his attitudes it must require clear proof to show that some years later he has established himself as a different man. Travel Agents Compensation Fund 16 Under s 11(2)(a) of the Act, it is a condition of a licence that the licensee shall be a participant in the compensation scheme, known as the Travel Compensation Fund (TCF). The Travel Agents Regulation 2001 (the Regulation) prescribes a compensation scheme regulated in accordance with a Trust Deed set out in a schedule to the Regulation. 17 The TCF regulates the financial obligations of travel agents, provides compensation to consumers who are out of pocket because of conduct attributable to the licensee, and seeks to ensure that travel agents have and will continue to have sufficient financial resources. The TCF is administered by industry under the direction of a Board of Trustees consisting of government, industry and consumer representatives. It is a separate legal entity from the Commissioner. While the Commissioner regulates the licensing of travel agents, the Board of Trustees manages the compensation fund available to consumers. Nevertheless, the two organisations work together in some cases where financial viability and other licensing issues overlap. VALIDITY OF THE DECISION Summary of submissions 18 I have interpreted the applicants' submissions as challenging the validity of each of the four decisions on three grounds namely: bad faith, improper purpose and denial of procedural fairness. A decision may be beyond power, or ultra vires in the broad sense, if the decision maker engages in an abuse of power such as "bad faith" or exercises the power for an improper purpose. Similarly a decision which is made without affording the subject person procedural fairness may be invalid. Jurisdiction in relation to invalid decisions 19 The Tribunal has jurisdiction to review the merits of a decision, even if the decision was beyond the power of the decision-maker to make it. (See s 6(3) of the ADT Act.) If the Tribunal finds that the decisions were made in bad faith, for an improper purpose or in breach of procedural fairness, then the decisions may be set aside. Bad faith 20 Bad faith involves corruption, dishonesty, fraud, malevolence or spite. (See, for example, Roncarelli v Duplessis (1959) 16 DLR (2d) 689.) Historically it has been exceedingly difficult to establish that a decision has been made in bad faith. Aronson and Dyer, in Judicial Review of Administrative Action, LBC Information Services 1996, say, at p 324, that "it is impossible to find cases where the allegation has been upheld." 21 A great deal of evidence and cross-examination on the part of the applicants was directed to the allegation that the investigation had not been carried out in good faith. Mr Elliott, representing the Commissioner, said that these allegations were made without any sufficient evidentiary basis. Rudy Frugtniet, the applicants' agent, maintained his entitlement to make the allegations and confirmed that they were being made on the instructions of his principals. 22 Since the allegation of bad faith must relate to the decision making process, any allegations relating to Mr Whittaker, the manager of special investigations at the TCF, are of marginal, if any relevance because he was not the decision maker, or a delegate of the Commissioner. Mr Mignacca, a senior investigator with the Commissioner, is an officer of the Commissioner. I will not repeat all the allegations that the applicants made against him, but they included allegations that he intimidated an employee of Travel Action Pty Ltd, Radojka Pantich, that he illegally obtaining documents from the St George Bank and that he maliciously represented that Suzanne Frugtniet was "disqualified from holding a licence" when she was not. 23 Having examined all the evidence in relation to these and other allegations, I find that neither Mr Mignacca, nor anyone else involved in the decision making process, was acting in bad faith when making the decisions under review. There was no evidence sufficient to conclude that anyone acted corruptly, dishonestly, fraudulently, malevolently or spitefully. Consequently, the decision cannot be vitiated on that basis. Improper purpose 24 The agent for the applicants submitted that the decisions made by the Commissioner were made for an "improper purpose" because "proper objectives or purposes to be administered under the Travel Agents Act 1986 were not being undertaken." In their final submission of 2 June 2003, the agent particularised this allegation by saying that failure on the Commissioner's part "to disclose that it was acting at the behest of ASIC (Australian Securities and Investments Commission) who were using the services of the agency representatives, reflects an investigation for an improper purpose . . ." (Words in brackets added.) In support of this contention, the applicants said that "a number of witnesses including Mr Mignacca, Mr Whittaker and others were instructed to obtain information in respect of the management of Travel Action Pty Ltd, however, in Mr Mignacca's and Mr Whittaker's position, using the Travel Agents licensing legislation to do so far exceeded the powers so conferred, the resulting information that the director based its decision on, ought to be disregarded by this Tribunal." 25 The issue is whether the decisions under review were made for a purpose not allowed by the legislation (Sydney Municipal Council v Campbell [1925] AC 388.) Under s 20(6) of the Act, "the Director-General may make such investigations as the Director-General thinks fit" in order to determine whether or not to serve a Show Cause Notice or take action under s 21. A decision is not made for an improper purpose if evidence collected during the course of an investigation is used for another purpose or evidence collected during the course of a separate investigation is used for the purpose of making a decision under the Act. It is manifestly apparent that investigations were conducted and the decisions under review were made for a purpose allowed by the legislation. 26 The applicants also regarded the conduct of Mr Mignacca and Mr Whittaker during the investigation as reflecting adversely on their credit. This submission will be considered when making factual findings which depend on the credit of either of these witnesses. Mr Elliot asserted that the making of allegations of bad faith against the investigators is one of the reasons that Sascha Frugtniet is not a fit and proper person to hold a licence. Similarly, that allegation will be dealt with further below. Procedural fairness 27 The applicants submitted that since they were never told that they had to address issues that went beyond what was particularised in the Notices to Show Cause, the Commissioner breached the rules of procedural fairness. In particular, the Commissioner sought to rely on matters which were raised in cross-examination as being relevant to the question of whether the applicants were fit and proper persons to be involved in the conduct of a travel agency. Those matters included an assertion that Suzanne, Brian and Sascha Frugtniet should have disclosed criminal convictions in their responses to the Notices to Show Cause. 28 The applicants did not allege that the Commissioner denied them procedural fairness prior to the decisions under review being made. Consequently the question of whether it is permissible to raise new matters by way of cross examination, goes not to the validity of the Commissioner's decision, but to the legality of the Tribunal relying on those matters. 29 In disciplinary proceedings involving professionals such as lawyers and medical practitioners, there are some restrictions on the extent to which a court or Tribunal can rely on matters which were not particularised prior to the initial decision having been made. (Sabag v Health Care Complaints Commission [2001] NSWCA 411.) However, in McBride v Walton, (Supreme Court of NSW, Court of Appeal, 15 July 1994, unreported) Powell JA said at [236], that: I am unable to accept the view . . . that is it never open to a disciplinary tribunal to have regard to matters going to the conduct and character of the subject person unless those matters have been particularised in the relevant complaint. 30 These proceedings are not disciplinary proceedings in the strict sense of that term. Nevertheless, the Tribunal must afford the parties procedural fairness. Under s 73(4) of the ADT Act the Tribunal is to take such measures as are reasonably practicable to give parties "the fullest opportunity practicable to be heard or otherwise have their submissions considered." The applicants were given every opportunity at the hearing to respond to the allegations which were not detailed in the Notices to Show Cause. In fact the applicants admitted that they comprehensively addressed those issues. Consequently there has been no denial of procedural fairness in this case and any finding made on the basis of this material is relevant to be taken into account when determining the fitness and propriety of the applicants. FACTUAL BACKGROUND Involvement with other agencies 31 Suzanne and Brian Frugtniet have been involved in the travel agency business since at least 1986. They first came to the attention of the predecessor to the TCF when they were the directors and shareholders of Travel Trend International P/L (Travel Trend). According to Mr Whittaker, the manager of special investigations at the TCF, over the past 16 years, Brian Frugtniet and Suzanne Frugtniet have been involved in a repetitive pattern of misconduct in respect of the following agencies: Travel Trend International Pty Ltd (Travel Trend); Denhall Pty Ltd, t/as Travel Trend International Sydney (Denhall); Tarson Pty Ltd t/as Travel Trend International Victoria (Tarson); Manila Marketing Pty Ltd (Manila Marketing); ITN Pty Ltd t/as International Travel Network (ITN); International Air Travel Agents Pty Ltd (IATA Pty Ltd); and H Chand t/as Getaway Travel Fund (Getaway). 32 In particular, Mr Whittaker singled out Travel Trend and Denhall as two bodies in which Brian Frugtniet and Suzanne Frugtniet were effectively "shadow directors" controlling the company. Mr Whittaker's essential allegation was that Brian and Suzanne Frugtniet routinely create the appearance of having no involvement with the agencies other than as friends who provide general guidance in the establishment of each travel agency business. It is Mr Whittaker's view that by informally controlling the businesses, they avoid recovery action by the TCF when the agencies fail. 33 The agent for the applicants objected to the evidence of Mr Whittaker being admitted because much of it was hearsay and was extremely prejudicial to both Suzanne and Brian Frugtniet. The Commissioner's representative acknowledged that much of Mr Whittaker's evidence was based on hearsay, but submitted that the Tribunal is not bound by the rules of evidence and that there has been no breach of procedural fairness. The Tribunal did admit the evidence as well as that of several other witnesses but has not given that evidence weight unless satisfied that it was relevant and reliable. 34 Ultimately, Mr Elliot submitted that it was not necessary for the Tribunal to delve into the evidence of Mr Whittaker about previous travel agencies with which Suzanne and Brian Frugtniet have been involved. In his view, the nature and extent of their criminal convictions as well as the other matters relied on, are sufficient to show that they are not fit to be involved in the conduct of a travel agency. In my view the evidence of previous involvement is capable of supporting certain findings of fact, which I set out below. Investigation of Travel Action Pty Ltd 35 In January 2001 Suzanne Frugtniet negotiated the purchase of Travel Action Pty Ltd on behalf of Renuka Ranasinghe, Barbara Johnson and Joseph Stanislav (the former directors). Ms Susan Javor, who had owned the business for the previous 27 years, continued to work for Travel Action Pty Ltd on a commission basis following the purchase. She agreed to be the "manager" of the agency, a position required under s 36 of the Act. 36 Mr Whittaker visited the offices of Travel Action Pty Ltd on 18, 19 and 22 February 2002. On or about 18 February 2002 Sascha Frugtniet took over as the sole director. On 18 March 2002, Mr Mignacca, senior investigator with the Commissioner, Mr Anderson, a Departmental investigator and Mr Whittacker, inspected Travel Action Pty Ltd's records at their offices in Bondi Junction. Mr Mignacca concluded that Travel Action Pty Ltd did not have a qualified manager as required by s 36 of the Act. Consequently the Commissioner placed a condition on Travel Action Pty Ltd's licence that it not be involved in making arrangements for any form of travel outside Australia or air travel within Australia. That restriction remained in place until 19 April 2002. 37 On 20 May 2002, Mr Mignacca and Mr Anderson again visited the premises of Travel Action Pty Ltd and asked Sascha Frugtniet to produce the company's records so that they could inspect them. Mr Mignacca made inquiries as to the whereabouts of Ms Siobhan Collins, who was recorded as the current manager. Following those inquiries, Mr Mignacca arranged to have a further condition imposed on Travel Action Pty Ltd's licence because of the absence of an approved manager. 38 On 28 November 2002, Mr Whittaker and Mr Grahame, director of the Chartered Accounting firm Masselos Grahame Masselos Pty Ltd, visited the offices of Travel Action Pty Ltd. They were unable to examine the financial records on that day and made arrangements to return on 12 December 2002. On that day, Sascha and Suzanne Frugtniet and Ms Horvathova were present when Mr Whittaker and Mr Grahame arrived. In summary, Sascha and Suzanne Frugtniet challenged Mr Grahame's authority to be present at the inspection. Ms Horvathova called the police. Mr Whittaker and Mr Grahame allege that they were prevented from leaving the premises but that eventually Suzanne Frugtniet let them go. 39 The main issue raised by this incident is whether the conduct of Sascha or Brian Frugtniet at this "meeting" affects their fitness to be involved in the direction management or conduct of a travel agency. DECISION 1: SUZANNE FRUGTNIET Summary of issues 40 Three issues arise from the decision to permanently disqualify Suzanne Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Act. The first is whether she is a person involved in the direction, management or conduct of a business to which the licence relates. The second is whether or not she is a fit and proper person to be so involved. The final question is whether permanent disqualification is the appropriate response. Each of these issues is considered in turn below. Suzanne Frugtniet's involvement 41 During previous proceedings before the Tribunal relating to the Commissioner's decision to suspend Travel Action Pty Ltd's licence, Sascha Frugtniet agreed that Suzanne and Brian were both involved in the conduct of the agency. It was again conceded by the applicants' agent in these proceedings that while neither Suzanne nor Brian Frugtniet is a director or shareholder of Travel Action Pty Ltd, both were and are involved in the conduct of the business. 42 Although that is all that is required for the purposes of s 21 of the Act, I will briefly summarise my findings in relation to the nature and extent of Suzanne Frugtniet's involvement in the business. Her involvement included: · negotiating the purchase of the business on behalf of the three former directors; · participating in the negotiation of the lease for the premises at Bondi Junction; · negotiating with the landlord about overdue rent; · referring clients on a commission basis in relation to which there was an agreement that she be paid 50% of the value of that business; · assisting Sascha Frugtniet with clients who had complex itineraries or fare structures; · representing in the TravelTrade Year Book for January to June 2003 that she is a consultant to Travel Action Pty Ltd; · allowing her mobile phone number to be printed on Travel Action Pty Ltd's letter head; and · participating in informal meetings of the former directors and offering advice about issues that arose. Fit and proper person 43 Introduction. The Commissioner put forward four reasons as to why Suzanne Frugtniet is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. These were: her convictions for criminal offences in New South Wales and Victoria; the fact that part of that record was not disclosed to the Commissioner, representing to Susan Javor that she was Renuka Ranasinghe and her previous involvement with other travel agencies. 44 NSW convictions. On 11 June 1997 Suzanne Frugtniet was convicted in the NSW Local Court of two counts of "obtain benefit by deception" and two counts of "attempt to obtain benefit by deception". The circumstances of the offences were that on 4 January 1996, Ms Frugtniet obtained airline tickets for two passengers by deception. She did this by telephoning Ansett Australia Ltd and quoting a fraudulent miscellaneous charge order number indicating that payment for the ticket was guaranteed. Ms Frugtniet was also charged with attempting to obtain a financial advantage for two passengers by deception, by fraudulently altering a Qantas Airway Limited ticket so that the ticket purported to allow the clients to fly on a particular flight. 45 The Magistrate placed Ms Frugtniet on a three year good behaviour bond and ordered her to pay compensation of $1,096.00. That amount has not been paid. On 27 August 1999, following an appeal, the convictions were affirmed. 46 Ms Frugtniet admitted that she was correctly convicted of these offences and that the first transaction involved a loss to Ansett. However she maintained that there was no impact on the public because she was assisting a friend and she did not stand to gain anything financially. 47 Victorian convictions. On 24 June 1998, the County Court of Victoria convicted Suzanne Frugtniet of "conspiring to make false documents" and "using false documents". The offences related to activities occurring during the period from October to December 1991. The Court sentenced her to imprisonment for two years, with a minimum term of 12 months. (Brian Frugtniet was also convicted in NSW and Victoria in relation to these matters). The Victorian Court of Appeal dismissed appeals against the custodial sentences that the County Court had imposed. The background to the convictions is conveniently summarised by the Court of Appeal (Brooking, Phillips and Buchanan JA) in R v Frugtniet and Frugtniet [1999] VSCA 58 (19 May 1999) at [1]: On 5 December 1991, as part of the culmination of police investigations into the production of counterfeit American Express travellers' cheques with a face value of over US$2.8m., Brian Frugtniet, a travel agent, was arrested at the Hilton Hotel in Melbourne. Six and a half years later, on 19 June 1998, he and his wife, Suzanne Frugtniet, who had also been a travel agent, were convicted in the County Court at Melbourne of two offences against the Crimes Act 1958 , conspiracy to make false documents and conspiracy to use them. In the meantime - on 12 December 1994 - Brian Frugtniet had been convicted in the District Court of New South Wales on ten counts, five of making and five of using a false instrument, namely, a counterfeit bank cheque. The Victorian convictions resulted in his being sentenced to a total effective five years six months' imprisonment with a non-parole period of three years six months and to Suzanne Frugtniet's being sentenced to a total effective two years' imprisonment with a non-parole period of 12 months. Each of them seeks leave to appeal against conviction. Each of them also applied for leave to appeal against sentence, but Suzanne Frugtniet has abandoned that application. 48 The Court of Appeal concluded at [87] that: In the present case we are of the opinion that the sentence imposed upon Frugtniet was proportionate to the sentences imposed on the other participants in the conspiracies. He was indisputably the creator and master of the undertaking. Peris and Suriarachi only supplied skilled labour and they co-operated with the authorities. Suzanne Frugtniet was her husband's aide-de-camp. 49 In relation to Suzanne Frugtniet, the Court of Appeal noted at [96], that the evidence at the trial "disclosed a motive on her part to participate in the conspiracies to make and use false travellers' cheques." She served 12 months in prison and was released in mid July 1999. 50 Non-disclosure of Victorian convictions. The Commissioner alleged that Ms Frugtniet's failure to disclose her Victorian convictions in her response to the Notice to Show Cause adversely reflects on her fitness to be involved in the conduct of a travel agency. The Notice did not mention the Victorian conviction and Ms Frugtniet's response to the NSW conviction was as follows: Duplicitous. Abuse of process - I adopt the affidavits and submissions filed in the ADT proceedings 023100. This is a matter of record. The circumstances occurred in January 1995, some 7 years ago and the matter is stale. I have since been gainfully employed in the most reputable law firm in this country and I have undertaken several charitable activities and assisted persons less fortunate than myself. 51 Section 21 of the Act gives a person on whom a Notice to Show Cause has been served, the option of making oral or written submissions with respect to the matters to which the notice relates. Ms Frugtniet said that she did not acknowledge the Victorian conviction because it was not mentioned in the Notice to Show Cause and the conduct for which she was in prison in Victoria occurred in 1991. She submitted that because the response only needed to be made "with respect to the matters to which the notice relates" there was no obligation on her to disclose other matters. 52 The Commissioner submitted that Ms Frugtniet's response was misleading because it did not disclose that she had been in prison in Victoria during the seven years since her conviction in NSW. According to the Commissioner, the omission reflects adversely on Suzanne Frugtniet's fitness to be involved in the conduct of a travel agency. 53 Findings re non-disclosure of conviction. While Suzanne Frugtniet was not obliged to disclose adverse information to the Commissioner in her response to the Notice to Show Cause, the way in which she worded her response was misleading. To say that she has "since been gainfully employed" suggests that she has been gainfully employed since her NSW convictions. That is not the full story. Suzanne Frugtniet has also been in gaol since those convictions. Her response indicates that she in not prepared to be fully frank in her dealings with the Commissioner. 54 Represented that she was Renuka Ranasinghe. Ms Susan Javor was a former director of Travel Action Pty Ltd who continued on as manager after the sale of the business in March 2001. She gave evidence that a woman who identified herself as Renuka Ranasinghe rang to inquire about the sale of the business. They arranged an appointment and a woman, who Ms Javor now knows to be Suzanne Frugtniet, came to see her. All through the negotiations and sale of the business, Ms Javor said she thought she was dealing with Renuka Ranasinghe. She introduced Suzanne Frugtniet to her lawyer as Renuka Ranasinghe. She said that Suzanne Frugtniet did not correct her. After about a month, Barbara Johnson, one of the former directors, told Ms Javor that the person she had thought was Renuka Ranasinghe was actually Suzanne Frugtniet. 55 Renuka Ranasinghe gave evidence that at one stage she rang Travel Action Pty Ltd and Susan Javor answered. Ms Ranasinghe asked to speak to Suzanne. Ms Ranasinghe said that Ms Javor seemed puzzled and asked who was calling. Ms Ranasinghe said "Renuka". Ms Javor said "Renuka is here." Suzanne Frugtniet then spoke to Renuka Ranasinghe and told her that Susan knows her as "Renuka". 56 Suzanne Frugtniet denied that she had ever represented herself as being Renuka Ranasinghe. In her view Susan Javor merely assumed that she was Renuka Ranasinghe. 57 Findings in relation to representation. Susan Javor gave credible evidence about Suzanne Frugtniet representing that she was Renuka Ranasinghe. Renuka Ranasinghe corroborated that evidence. Suzanne Frugtniet's denial was unconvincing. I find that she told Susan Javor on the phone that she was Renuka Ranasinghe. Subsequently, although she knew that Susan Javor thought she was Renuka Ranasinghe she did nothing to disabuse her of that assumption. 58 The inference suggested by the Commissioner can readily be drawn that her motive for seeking to pass herself off as Ms Ranasinghe was to distance herself from Travel Action Pty Ltd. Given her previous history with travel agencies, any involvement was likely to attract the interest of the authorities. 59 Previous involvement with travel agencies. One of the reasons for the decision to disqualify Suzanne Frugtniet was her previous association with other travel agencies. In 1990 the TCF carried out an investigation of Travel Trend because of complaints about difficulties in obtaining tickets and late delivery of tickets. Mr and Mrs Frugtniet were both directors of this company. The business was sold while it was under investigation. The Commercial Tribunal (as it then was) discussed the involvement of Suzanne and Brian Frugtniet in Travel Trend in the matter of Manilla Marketing Pty Limited v The Travel Compensation Fund (unreported No 1116 of 1993). They were both witnesses in the proceedings. The Commercial Tribunal was hearing an appeal against the TCF's decision that Manilla Marketing was not eligible to be a participant in the Travel Agent's Compensation Scheme. One issue for consideration was the involvement of Brian and Suzanne Frugtniet in the management of Travel Trend. The following passage from the Tribunal decision at p 12 is relevant: Mr and Mrs Frugtniet carried on the travel agency business of Travel Trend International Pty Limited in Sydney and Melbourne. They were the Directors of that company. It is common ground that on 5 October 1990 the Trustees told them that in their view the financial records of the company were inadequate and unsatisfactory. It is also common ground that they mixed personal funds and travel agency funds in the company's general account and declined to produce company financial records to the Trustees. The Trustees appointed Ross Gatwood an accountant to assist them in investigating the financial viability of the company. That accountant provided a Report to the Trustees dated 26 October 1990. The Report stated that on the evidence provided by the company the amount of the company's available cash reserves required to meet the Scheme's financial criteria were totally insufficient. Mr Gatwood was not cross-examined. His conclusion is accepted. 60 The Sydney business of Travel Trend was sold to Denhall at the end of 1990. The Melbourne business was sold to Tarson. Suzanne Frugtniet gave evidence that she continued on as a consultant to Denhall and Tarson after the sale because the good will of the Travel Trend business depended on continuity of service being maintained. She was paid commission for the bookings she brought in. 61 After receiving reports of Denhall's financial situation, the TCF commenced an investigation into its financial status in December 1991. On 12 December 1991, eight days before Denhall advised the TCF that it was unable to carry on trading, Manilla Marketing lodged an application to become a participant in the TCF. The financial collapse of Denhall resulted in claims against the TCF amounting to $64,167. Denhall failed to pay various airlines a total of $261,771. 62 Mr Whittaker concluded that Suzanne Frugtniet was the ultimate controller of Denhall based on "the fact that she took command and made all management decisions and the manner in which other company staff deferred to her." On the basis of Mr and Mrs Frugtniet's evidence, the Commercial Tribunal concluded in Manilla Marketing Pty Limited v The Travel Compensation Fund (unreported No 1116 of 1993) that: "At least Mrs Frugtniet did travel agency work for the new business" and "at least Mr Frugtniet worked in those ways for the new business venture." While these findings are consistent with the evidence given to this Tribunal, they fall short of Mr Whittaker's assertion that Suzanne Frugtniet was the "ultimate controller" of Denhall. 63 In the case before the Commercial Tribunal, the TCF submitted that Brian and Suzanne Frugtniet had acted dishonestly in relation to Travel Trend, Tarson and Denhall and that because they would also be involved in Manilla Marketing that company was not eligible to participate in the TCF. The Commercial Tribunal concluded at p 15 that Manilla Marketing's application for participation in the TCF "was made at the instigation of and to benefit Mr and Mrs Frugtniet." The appeal was dismissed. 64 While the applicants' agent appeared to accept the Commercial Tribunal's findings, he submitted that it made no adverse findings in relation to Brian or Suzanne Frugtniet. That is not entirely correct. The Commercial Tribunal found, contrary to their evidence, that they were behind Manilla Marketing's application for participation in the TCF and that in relation to Travel Trend, they mixed personal funds and travel agency funds in the company's general account. 65 Mr Whittaker also expressed concern about Suzanne Frugtniet's involvement with Getaway Travel. In June 1996, Mr Whittaker, on behalf of the TCF, conducted an investigation because of suspicions that Suzanne Frugtniet was involved in the operations of Getaway Travel. The audit was completed and lodged on 30 August 1996. Mr Chand gave evidence that he had purchased a training computer from Suzanne Frugtniet to assist him to train people who had been referred to him from various agencies for retraining. Suzanne Frugtniet also referred clients to him but did not do any of the bookings or other arrangements. Later Mr Chand said that Brian Frugtniet and Suzanne Frugtniet were referring clients to him on a commission basis. 66 Mr Whittaker concluded that the agency was a front for Suzanne Frugtniet to carry on a travel agency business. The TCF imposed several conditions on the agency but they were not complied with and the agency's membership of the TCF was terminated in August 1997. While it is apparent from the evidence that Suzanne Frugtniet was "involved" with Getaway, there is insufficient evidence to conclude that Getaway was "a front" for her to carry on a travel business. 67 According to Mr Whittaker, Brian Frugtniet and Suzanne Frugtniet's modus operandi has been to offer discounted tickets and to advise consumers to pay in full at the time of booking in order to avoid any fare increases. Tickets are only available for collection one week prior to departure. Consequently the agency collects the full fare from the consumer months in advance of departure and accumulates large volumes of client's deposits. According to Mr Whittaker, at first when an agency commences trading, consumers receive their tickets. However, after a period of time when sales volumes have increased and the agency has collected substantial sums as deposits, the money "disappears" and the agency suffers a financial collapse resulting in heavy claims on the TCF and losses to airlines. 68 There was no reliable evidence of this alleged modus operandi in relation to Travel Action Pty Ltd. Ms Barbara Johnson gave evidence that it was her daughter Deborah Johnson, and Deborah's partner Nick Martin, who developed the web site on which ticket information and payment plans were advertised. While the website mentions "layby" arrangements and "planning and paying off your vacation before you go" there was no evidence that consumers had being paying in full for their travel arrangements long before they were due to travel. Nor was there any evidence that Travel Action Pty Ltd offered consumers discounts if payment was received well in advance. The current manager, Ms Horvathova, gave evidence that Travel Action Pty Ltd has a policy of obtaining payment as early as possible. She said that she orders and issues tickets as soon as payment is received. I am not satisfied that the modus operandi alleged by Mr Whittaker took place either within Travel Action Pty Ltd or any other agencies with which Suzanne Frugtniet was involved. Findings as to fit and proper 69 The Tribunal's consideration of Ms Frugtniet's fitness spans the period from 1991 to the present. In 1991, while the proprietor of a travel agency, Suzanne Frugtniet engaged in conduct which ultimately resulted in a conviction for conspiring to make false documents and using false documents. The conspiracy involved the production of counterfeit American Express travellers' cheques. Her husband and one of her husband's brothers were also involved in the conspiracy. The fact that Ms Frugtniet was sentenced to two years' imprisonment with a non-parole period of 12 months reflects the extremely serious nature of these offences. 70 In 1995, before Ms Frugtniet was ultimately convicted of the offences relating to counterfeit traveller's cheques, she engaged in deceptive conduct relating to airline tickets, for which she was convicted. These offences are less serious than the conspiracy offences, but nevertheless reveal deceptive practices on the part of Ms Frugtniet in the course of conducting business as a travel agent. 71 Ms Frugtniet and her agent attempted to downplay the significance of her convictions by saying they were "really ultimately of only incidental relevance". That is not the case. Previous convictions, especially convictions for offences of dishonesty while conducting a travel agency business are of crucial importance in determining Ms Frugtniet's fitness. 72 These offences occurred during a period when Suzanne Frugtniet was either directly or indirectly involved in various failed travel agencies. Travel Trend was the subject of complaints about the late delivery of tickets. The business was sold while it was under investigation. The Commercial Tribunal found that the Frugtniet's mixed personal funds and travel agency funds in the company's general account and declined to produce company financial records to the Trustees. The amount of the company's available cash reserves required to meet the TCF's financial criteria was insufficient. 73 Suzanne Frugtniet was a consultant to Denhall and Tarson. When those companies collapsed resulting in significant claims against the TCF, she instigated an application for Manilla Marketing to become a participant in the TCF for her own benefit. The TCF imposed several conditions on Getaway, another agency with which Ms Frugtniet was involved. When those conditions were not complied with its membership of the TCF was terminated. 74 In 2001, when Ms Frugtniet negotiated the purchase of Travel Action Pty Ltd on behalf of three directors she held herself out to be Renuka Ranasinghe. That conduct was deceptive and took place in the context of negotiating the purchase of a travel agency. While there was no suggestion that this conduct amounts to a criminal offence it demonstrates that despite having been imprisoned for conspiracy offences and having been convicted for deceptive conduct in the past, Ms Frugtniet had no compunction about deceiving Ms Javor in relation to her identity. 75 Suzanne Frugtniet's agent also attempted to focus on the consequences of Ms Frugtniet's conduct submitting, for example, that no consumers had been disadvantaged because of the NSW offences. The Commissioner submitted that the fact that potential losses may have initially been borne by other corporations does not mean that the criminal conduct has no impact on consumers. The agent also pointed out that even if Suzanne Frugtniet did say that she was Renuka Ranasinghe, no consumer was misled and there had been no fraud or other misconduct. 76 The consequences of any criminal or other dishonest behaviour are relevant when determining the seriousness of that conduct and indirectly when determining the fitness of a person to be involved in the conduct of a travel agency. However, it cannot be said that conduct which happens to have little or no impact on consumers is necessarily less significant when determining fitness and propriety than conduct which does have such an impact. 77 A person involved in a travel agency must exhibit a high degree of honesty because of their position of trust with client's money and the opportunity to defraud clients and service providers. Ms Frugtniet's knowledge and ability are not in question. The focus is on her honesty. She has been involved, either directly or indirectly, with several failed travel agencies. She was also involved in high level criminal activity in the early 1990s. She did not learn from that experience. She behaved dishonestly again in 1995 and was convicted. Ms Frugtniet has not repaid the money she was ordered to repay to Ansett. While accepting those convictions, she proceeded to deceive Ms Javor in 2001 by pretending she was someone else in order to avoid alerting the authorities to her involvement. The final matter concerning her failure to disclose her Victorian conviction to the Commissioner is relatively minor but it provides an example of her lack of candour. Ms Frugtniet's involvement in charitable activities, while commendable, does not tip the scales in her favour. While any one of the matters summarised above may not justify a conclusion that Ms Frugtniet is not a fit and proper person to be involved in the conduct of a travel agency, those matters, in combination, do justify such a conclusion. I find that she is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. Appropriateness of outcome 78 The final question in relation to Suzanne Frugtniet is whether permanent disqualification from being involved in the direction, management or the conduct of business as a travel agent or holding a licence issued under the Act is the appropriate outcome. Despite submissions from the applicants' agent to the effect that neither Suzanne nor Brian Frugtniet were applying to be a licensee or director of a travel agency, the provisions in s 20 apply to "a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates." Disqualification from holding a licence and disqualification from being involved in the direction, management or conduct of business as a travel agent are both available forms of disciplinary measures pursuant to s 21(2) because the Commissioner has complied with s 20(2)(b) by serving a Show Cause Notice on Suzanne Frugtniet personally. 79 The Commissioner has the power under s 21(2) to disqualify a person from holding a licence or from being involved with a travel agency either permanently or for a specified period of time. Suzanne Frugtniet's agent submitted that if any outcome is appropriate then it should be that Suzanne Frugtniet not be involved in the management or direction of the company until at least five years have lapsed from the date of her release from prison. Since she was released in mid July 1999, any such disqualification would have approximately 10 months to run. 80 The disqualification of a person under the Act is not a measure designed to punish the person concerned, but rather to protect the travelling public and to discourage others from engaging in similar conduct. Had Ms Frugtniet's conduct involved a one-off incident of dishonesty after which she had demonstrated that a reformation of her character had taken place, there would be a strong argument in favour of no period of disqualification or disqualification for a limited period. In this case Ms Frugtniet's dishonest and misleading behaviour has continued for over a decade. While that behaviour varies considerably in its seriousness, she has not demonstrated that she has established herself as a different person. 81 In those circumstances, the Commissioner's decision to permanently disqualify Suzanne Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Travel Agents Act, is affirmed. DECISION 2: BRIAN FRUGTNIET Summary of issues 82 Three issues arise from the decision to permanently disqualify Brian Frugtniet from being involved in the direction, management or conduct of business as travel agent or holding a licence issued under the Act. The first is whether he is a person involved in the direction, management or conduct of a business to which the licence relates. The second is whether or not he is a fit and proper person to be so involved. The final question is whether permanent disqualification is the appropriate response. Each of these issues is considered in turn below. Brian Frugtniet's involvement 83 During previous proceedings before the Tribunal relating to the Commissioner's decision to suspend Travel Action Pty Ltd's licence, Sascha Frugtniet agreed that Suzanne and Brian were both involved in the conduct of the agency. It was again conceded by the applicants' agent in these proceedings that while neither Suzanne nor Brian Frugtniet is a director or shareholder of Travel Action Pty Ltd, both were and are involved in the conduct of the business. Brian Frugtniet said in evidence "Yes I'm involved in the conduct of the business but I'm not a manager or a director." 84 Although these admissions are all that is required for the purposes of s 21 of the Act, I will briefly summarise my findings in relation to the nature and extent of Brian Frugtniet's involvement in the conduct of the business. His involvement included: · delivering a ticket to the airport on one occasion; · arranging for business cards to be printed for the former directors and himself; · promoting Travel Action Pty Ltd by means including handing out business cards; · discussing business with the three former directors on at least two occasions at the Rose Bay RSL Club. During those discussions he provided advice about promoting the business and relocating to the City. He also prepared a submission in relation to leasing premises in the City; and · assisting on a voluntary basis with matters such as removal of furniture to the City office, transporting maintaining and updating brochures, designing and organising stationery and signs, putting up shelves and other handyman type chores. He continues to undertake this work, unpaid, for up to 8 hours a week. Fit and proper person 85 Introduction. The Commissioner put forward several reasons as to why Brian Frugtniet is not a fit and proper person to be involved in a travel agency business. These are: his criminal convictions, his alleged failure to reveal his Victorian conviction to the Commissioner, his representation that he was a managing director of Travel Action Pty Ltd and a migration agent, his alleged requests to Ms Collins to misrepresent her experience as a travel agent and his previous involvement with other travel agencies. 86 NSW convictions. On 27 January 1995, the District Court of NSW convicted Brian Frugtniet of five counts of "make false instrument" and five counts of "use false instrument." The circumstances of the offences involved the use of forged bank cheques to purchase travellers' cheques from travel agents. He was sentenced to a minimum term of imprisonment of 18 months commencing on 12 December 1994, with an additional term of six months. He says that he was released in March 1995 after spending 3 months in prison. 87 Victorian conviction. Brian Frugtniet was also convicted in the Victoria County Court on 28 June 1998 of one count of "conspiring to make false documents" and one count of "conspiring to use false documents." Details of these offences are set out above in that part of the decision concerning Suzanne Frugtniet. The NSW and Victorian convictions apparently arose from the same series of events in 1991. Mr Frugtniet was sentenced to a minimum period of imprisonment of 3 years and 6 months. He served this period and was released from goal on 5 October 2001. He appealed unsuccessfully to the Supreme Court of Victoria (R v Frugtniet and Frugtniet [1999] VSCA 58) on several grounds including that the trial judge should have excluded the record of interview. 88 A further appeal to the Court of Criminal Appeal was dismissed notwithstanding the fact that a Crown witness had subsequently changed his evidence and was now asserting that Brian Frugtniet was not involved in the scheme at all. The Court did not accept this new evidence. The matter came before the Court of Criminal Appeal again on 29 May 1998. On that occasion Brian Frugtniet sought an order that the first decision of the Court of Criminal Appeal be set aside on the basis that the Court was invalidly constituted. That appeal was dismissed. The matter came before the Court of Criminal Appeal for a third time on 25 June 1998 on the basis that a judge who issued warrants under the Listening Devices Act 1984 was disqualified from sitting on the appeal against conviction because of apprehended bias. That appeal was also dismissed. 89 Mr Frugtniet also appealed to the High Court. That matter was adjourned with leave to reinstate on 14 days notice. He intends to pursue the matter but at present there are no proceedings on foot in relation to his convictions. He maintains his innocence in relation to the matters for which he was convicted. 90 Failure to disclose his Victorian conviction. In his response to the Notice to Show Cause which mentioned his NSW convictions, Brian Frugtniet stated that: In any event, the matters I was convicted for relate to a period of time from 1 October 1991 to 5 December 1991, some 11 years ago. I was of prior good character and since that matter I have never ever been involved in any other issues of any kind anywhere. 91 It was put to Brian Frugtniet that this response failed to reveal the fact that he had been convicted of offences in Victoria since 1991. His response was that the period of time provided in his response covered both convictions. I find that although his response is technically correct, Brian Frugtniet failed to fully disclose the extent of his criminal convictions to the Commissioner. While not obliged to do so, that failure demonstrates a lack of candour on his part. 92 Mr Frugtniet's agent submitted that while he maintains his innocence "he very much acknowledges the regret, (sic) errors at the time and inappropriateness and fully understands that so long as the conviction stands what he has done will be regarded as wrong and does not seek to excuse or justify his actions, rather his regret appears genuine and sincere." That is not what Mr Frugtniet said in evidence. He did not express remorse. On the contrary, his evidence left me with the strong impression that he maintained that he had done nothing wrong and that he would do everything within his power to have the convictions overturned. 93 Misrepresentations on business card. During the course of discussions with a real estate agent by the name of Mr O'Dwyer, in November 2001, Brian Frugtniet gave him a copy of a business card. That card is headed "Travel Action P/L" and names Brian Frugtniet as "Managing Director". The card also lists, in very small print, "GST Global Services Trust Corporation, Law Referral Services and Migration agents, fast car imports and Blue Fontaine night club - Sydney Hilton." 94 Mr O'Dwyer gave evidence that although Brian Frugtniet did not tell him that he was the Managing Director of Travel Action Pty Ltd, he formed that impression from reading the card. Mr Frugtniet said that he only gave the card to Mr O'Dwyer because he had forgotten his mobile phone number and the card had the number on it. 95 Grant MacDonnell, the director of GSM Printing Pty Ltd, gave evidence that in late October 2001 Brian Frugtniet requested that he provide a quote for the printing of business cards for Travel Action Pty Ltd. Mr MacDonnell prepared a quote on 24 October 2001. The quote was for 500 cards for 8 people, totalling 4,000 cards. Attached to Mr Frugtniet's affidavit of 28 January 2003 is the first page of a letter from Travel Action Pty Ltd to Mr MacDonnell stating that they wanted to go ahead with the quote. There was no evidence as to where the rest of the letter is or who signed it. Mr MacDonnell gave evidence that he wrote "no director" next to Mr Frugtniet's name on the letter. The proof sheets provided by Mr Frugtniet do not include the card that he gave to Mr O'Dwyer. 96 Mr Frugtniet's agent submitted that the cards with Managing Director were never printed. There was merely a sample made initially and then the instructions were that there was to be "no director" put next to Mr Frugtniet's name on the card. Mr MacDonnell's evidence was that "there were no sample cards produced of this specific business card whatsoever" and that he "is not in the practice of producing sample glossy business cards at all." He said that Mr Frugtniet gave him the instructions as to what was to be printed on the cards and checked the cards prior to collection. 97 Mr MacDonnell also gave evidence that in June 2002 Mr Frugtniet called on him again and asked him to "delete the old design and all the files you have on that job and give me all the documentation and other material regarding the last job you did in November." Mr MacDonnell said he returned all the material related to the job and deleted all the information relating to Travel Action Pty Ltd from his computer. He then completed a second job for Mr Frugtniet in relation to Travel Action Pty Ltd. Mr Frugtniet says he asked Mr MacDonnell to discard all the old material because the details and design of the new cards were substantially different since his son had taken over as sole director and moved to city premises. 98 Brian Frugtniet admitted that he was not a director, shareholder or manager of any corporate entity, nor was he a migration agent. He said that he did not know that it was a breach of s 283 of the Migration Act 1958 for a person to falsely represent that he or she is a migration agent. He said that he had the card printed in relation to all the projects which he wished to start in the future, to see what it would look like. While that may have been his intention in relation to some of the businesses referred to on the card, Mr Frugtniet admitted that he never intended to become a Managing Director of Travel Action Pty Ltd. Mr Frugtniet said that the card was not intended to mislead anyone into believing that he was the Managing Director of Travel Action Pty Ltd and that once it was brought to his attention he has not continued to use the cards. 99 Findings in relation to business card. I do not accept Mr Frugtniet's evidence that the card was printed as a sample. That evidence is not credible given Mr MacDonell's evidence which is directly contradictory and which is corroborated by the documentation attached to his statement. Mr Frugtniet did not consistently say that he requested 10 or 20 cards and there is no evidence that such a request was made in the quotation documents or the acceptance letter. It is true that Mr MacDonnell wrote "no director" next to Mr Frugtniet's name, but the cards were printed with Managing Director written on them and Mr Frugtniet checked the cards before taking them. Even if Mr Frugtniet only requested and was given a sample of the cards, there is no doubt that the cards, either as a sample, or in a batch of 500, were printed at Brian Frugtniet's direction. 100 The only plausible explanation for having the cards printed, was so that they could be distributed to potential clients and that those clients would rely on the information on the card. There is evidence that at least one card was distributed and that Mr O'Dwyer formed the impression on the basis of looking at the card that Mr Frugtniet was the Managing Director of Travel Action Pty Ltd. Mr Frugtniet acted dishonestly in having the cards printed and in distributing them. The fact that he ceased to distribute them once it was brought to his attention does not diminish his culpability. 101 Alleged request of Ms Collins. A further allegation in relation to Brian Frugtniet was that he asked Siobhan Collins, a person employed briefly by Travel Action Pty Ltd, to ring Kerry Airport, one of her former employers in the United Kingdom, and ask them to add 6 months to her length of experience in the travel industry. Ms Collins gave evidence to that effect and said that she told Mr Frugtniet that she was not prepared to do so. Ms Collins says she told Brian Frugtniet that she was not qualified to act as a manager as she had not been selling international tickets for long enough. Despite Mr Elliott's suggestion in his submissions that Brian Frugtniet asked Ms Collins to request an extension of her experience after receipt of the initial reference, that was not Ms Collins' evidence. She did not indicate when Mr Frugtniet made the request. 102 Brian Frugtniet denied that he asked Ms Collins to request that Kerry Airport extend the length of her experience. He recollects that Ms Collins' resume, which was on the notice board in the office, stated that she had 8 years experience. In his view, that was more then enough for her to qualify as a manager. 103 On 19 March 2002 Sascha Frugtniet wrote to Ms Lorelle Love in the Licensing Branch of the Department nominating Ms Collins as a "suitable candidate" to be the manager. He attached Ms Collins' employment experience which showed, among other things, that she had worked for Kerry Airport from 1997 to 1999. Ms Love requested further particulars of Ms Collins' experience and Sascha Frugtniet wrote again on 21 March 2002 elaborating on her experience. Following a request on 2 April 2002 for written references, those references, including one from Kerry Airport faxed on 4 April 2002, were forwarded to the Department on 17 April 2002. Ms Collins emailed at least one of her former employers, Air UK Ltd, on 21 March 2002 requesting a written reference. She says that she does not recall requesting any of the other references however she said in oral evidence that she obtained one reference from Fleet Street Travel and one from Kerry Airport. 104 Finding in relation to allegation of request to extend references. While I agree with Mr Elliot that Ms Collins has no reason to lie about what Mr Frugtniet told her, there is no evidence to corroborate her allegation and she was not available for cross examination. Mr Frugtniet denies the allegation. In those circumstances, I cannot be satisfied, on the balance of probabilities that he did ask her to request that Kerry Airport extend the length of her experience. 105 Previous involvement with travel agencies. One of the reasons for the disqualification of Brian Frugtniet was his previous association with other travel agencies. The background to that involvement is set out above. As with Suzanne Frugtniet, Brian Frugtniet was directly or indirectly involved with several failed travel agencies. 106 In his defence, Brian Frugtniet stated that he was given a merit award from the governor of the prison for instigating a charity fund raising event in Bathurst in 1994 for a young girl whose parents died in a house fire. His agent submitted that he has not caused any harm, detriment or loss to anyone. There has been no complaint from the public since his involvement with Travel Action Pty Ltd. According to his agent he should be regarded as a man who has been rehabilitated and is now of good character. 107 Brian Frugtniet's behaviour at the 12 December 2002 meeting is a relevant, though not determinative factor in my conclusion about his fitness. (See [122] to [126] below.) Findings as to fit and proper 108 The Tribunal's consideration of Mr Frugtniet's fitness spans the period from 1991 to the present. In the latter part of 1991, while the proprietor of a travel agency, Brian Frugtniet engaged in conduct which ultimately resulted in convictions in both NSW and Victoria relating to the production of counterfeit American Express travellers' cheques. He was sentenced to imprisonment for 18 months in relation to the NSW conviction (although he says he only served 3 months in gaol) and 3½ years in relation to the Victorian conviction. The length of these sentences reflects the extremely serious nature of those offences. 109 Mr Frugtniet's agent attempted to downplay the significance of his convictions by saying they were "really ultimately of only incidental relevance". That is not the case. Previous convictions, especially convictions for offences as serious as those for which Mr Frugtniet was convicted are of crucial importance in determining his fitness to be involved in a travel agency business. 110 These offences occurred during a period when Brian Frugtniet was either directly or indirectly involved in various failed travel agencies. Some of the details of that involvement are set out earlier in these reasons. 111 He also organised to have cards printed which falsely represented that he was the Managing Director of Travel Action Pty Ltd and a migration agent. He distributed at least one of these cards to a person who assumed that the information on the card was correct. In 2001, Mr Frugtniet demonstrated a lack of candour in relation to his Victorian convictions when responding to the Commissioner's notice to show cause. In December 2002 he exhibited unacceptable behaviour by preventing Mr Whittaker and Mr Grahame from leaving a meeting. In his defence, Brian Frugtniet cited fund raising efforts that he had made whilst in prison. 112 A person involved in a travel agency must exhibit a high degree of honesty because of their position of trust with client's money and the opportunity to defraud the airlines. Mr Frugtniet was involved in high level criminal activity in the early 1990s. He maintains that he has done nothing wrong despite several unsuccessful appeals against his convictions. 113 While it is acknowledged that a person can reform their character, there is no indication that Mr Frugtniet has done so. He has been directly and indirectly involved in several failed travel agencies. Following the serious criminal activity in 1990, Mr Frugtniet again engaged in dishonest conduct, in 2001 in relation to the printing and distribution of business cards which falsely represented his position. He prevented investigators from leaving a meeting in December 2002. The final matter concerning his failure to disclose the Victorian conviction to the Commissioner is relatively minor but it provides an example of his lack of candour. His involvement in charitable activities, while commendable, does not tip the scales in his favour. I find that he is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. Appropriateness of outcome 114 The final question in relation to Brian Frugtniet is whether permanent disqualification from being involved in the direction, management or the conduct of business as a travel agent or holding a licence issued under the Act is the appropriate outcome. The Commissioner has the power under s 21(2) to disqualify a person from holding a licence or from being involved with a travel agency either permanently or for a specified period of time. Brian Frugtniet's agent submitted that if any disciplinary measure is appropriate then it should be that Brian Frugtniet not be involved in the management or direction of the company until at least five years have lapsed from the date of his release from prison. Since he was released in October 2001, any such disqualification would have approximately 3 years to run. 115 The disqualification of a person under the Act is not a measure designed to punish the person concerned, but rather to protect the travelling public and to discourage others from engaging in similar conduct. Mr Frugtniet's involvement with failed travel agencies, the seriousness of his criminal offences and the fact that he has continued to engage in dishonest conduct as recently as 2001, suggests that he is not a person who is willing to or capable of reforming his character. 116 In those circumstances, the Commissioner's decision to permanently disqualify Brian Frugtniet from being involved in the direction, management or the conduct of business as travel agent or holding a licence issued under the Travel Agents Act, is affirmed. DECISION 3: SASCHA FRUGTNIET Summary of issues 117 It is not in dispute that Sascha Frugtniet has been involved in the direction and management of Travel Action Pty Ltd, at least since 18 February 2002. The remaining issue is whether or not he is a fit and proper person to be so involved. The final question is whether disqualification for ten years is the appropriate disciplinary measure. Fit and proper person 118 The Commissioner put forward numerous reasons as to why Sascha Frugtniet is not a fit and proper person to be involved in the direction, management or conduct of a travel agency. These were that: · he makes scurrilous allegations of bad faith against investigators; · he obstructed Mr Whittaker and Mr Grahame in their investigation including holding them against their will; · he misrepresented the extent of Suzanne Frugtniet's criminal record; · he failed to comply with a provision of the Act by operating the agency for certain periods without an approved manager; · he represented that Siobhan Collins was the day to day manager of the business without her knowledge or consent; · he attempted to obtain a false statement from Ms Collins; · he does not pay creditors in a timely and business like fashion; and · the business is not financially viable. 119 Two of the matters listed above relate to the corporate licensee (Travel Action Pty Ltd) rather than to Sascha Frugtniet as director. Section 20(1)(c) allows the Director-General to issue a notice to show cause to the licensee for failing to comply with the Act. Similarly, s 20(1)(e) allows the Director-General to issue a notice to show cause to the licensee if it does not have, or is not likely to continue to have, sufficient financial resources to enable it to carry on business. Consequently these matters will be dealt with under the fourth decision relating to Travel Action Pty Limited. 120 Allegations of bad faith. Mr Elliot representing the Commissioner, submitted that Sascha Frugtniet has made assertions about the mala fides of investigating officers without a plausible basis for doing so. There is no doubt that such allegations were made, and I have concluded that there was insufficient evidence to make a finding of bad faith in relation to the decisions themselves. According to Mr Elliot, the effectiveness of regulators depends to a significant extent on the honesty and candour of the operators in the industry. Mr Elliot submitted that Sascha has frustrated the attempts by regulators to verify the operations of the business. For example, his demand that any further enquiries by the Commissioner be made in writing. 121 Findings. While I find that Sascha has made allegations of bad faith against investigators and failed to fully co-operate with their requests, his behaviour is not sufficiently egregious to reflect adversely on his fitness to be involved in the management or direction of a travel agency. 122 12 December incident. There was detailed evidence as to what occurred when Mr Whittaker and Mr Grahame visited the offices of Travel Action Pty Ltd in December 2002. That evidence was largely consistent, but where it was not, I have set out my findings. Sascha Frugtniet initially indicated to Mr Whittaker and Mr Grahame that the books were available to be inspected. However, when Mr Grahame asked Sascha Frugtniet a question, he challenged his authority to be present and accused him of trespassing. Sascha was not satisfied with the explanation the investigators gave and asked Mr Grahame to leave. As they were preparing to leave, Brian Frugtniet came into the office and asked Mr Grahame who he was and what authority he had to be there. Brian Frugtniet then closed the door and stood in front of it. Mr Grahame and Mr Whittaker repeatedly stated that they wanted to leave but they were not permitted to do so. Suzanne Frugtniet then said that she wanted to speak to the Trustees of the TCF. After Suzanne Frugtniet made some calls which failed to satisfy her, Brian Frugtniet suggested that she call the police. Ms Horvathova called the police and passed the phone to Sascha who told the police that they had unauthorised intruders in the office and they were holding them until the police came. 123 Despite repeated requests, Brian Frugtniet refused to allow Mr Whittaker and Mr Grahame to leave. I do not accept Brian Frugtniet's evidence that he merely told Mr Whittaker and Mr Grahame to wait for the police to arrive and did not block their path. Although the room was small, Mr Whittaker and Mr Grahame were under the very clear impression that they were being detained until the police arrived. This is consistent with Sascha's evidence which was that he wanted the police to arrive before Mr Whittaker and Mr Grahame left. After further phone calls to the TCF which failed to satisfy Suzanne Frugtniet, she said "Let them go." 124 According to Mr Elliot, Sascha Frugtniet's behaviour in being a party to detaining Mr Whittaker and Mr Grahame inside the office after they had indicated that they wished to leave, demonstrates a lack of willingness to co-operate with regulators. 125 The applicants' agent submitted that "there is no substance to the allegation that Mr Grahame or Mr Whittaker were held against their will because all they had to do was wait a while as requested till the police arrived and report the matter to the police so that action could be taken if there was any substance to the allegation." Clearly Mr Grahame and Mr Whittaker did not want to "wait a while". 126 Findings in relation to December 2002 meeting. I find that the conduct of Sascha and Brian Frugtniet, in preventing Mr Whittaker and Mr Grahame from leaving their office when they indicated a wish to do so, was harassing and threatening. It was unacceptable behaviour for any person to engage in. 127 Misrepresented extent of Suzanne Frugtniet's criminal record. Following receipt of a Notice of Suspension of Licence in relation to Travel Action Pty Ltd, Sascha Frugtniet responded with a statement sworn on 17 May 2002. The Notice of Suspension set out Suzanne Frugtniet's criminal convictions in NSW but did not include the fact that she had a further conviction in Victoria resulting in a goal sentence. 128 In his response to this Notice, Sascha wrote that the deception took place in January 1995 and that Suzanne Frugtniet "has not acted in breach of any law since". He went on to say that: "From my own knowledge she is in full time employment of some 45 to 50 hours on average per week, has her own legal secretarial services business since November 1999 and does a lot of charity and pro bono work . . ." Later Sascha said "My mother has, for the past three and half years, been in full time employment in legal firms in the city and has also been conducting her own legal secretarial business since November 1999 and is involved in pro bono and charitable activities." 129 When asked how his mother could have been engaged in legal work for the last three and a half years when she had only been released from goal in mid July 1999, Sascha said that he had made an error and that he should have written two and a half years. Mr Elliot put to Sascha that he had downplayed the extent and seriousness of his mother's convictions in his affidavit. He denied that he had done so apart from admitting to the "miscalculation" in relation to the time. While I agree that Sascha's response was misleading, I do not find that it was deliberately so, and I draw no adverse inference in relation to his fitness to be involved in a travel agency from that response. 130 Operating agency without an approved manager. A further ground for alleging that Sascha Frugtniet is not a fit and proper person to operate a travel agency is that, for certain periods, he operated the agency without an approved manager and misrepresented to Departmental officers that he had an approved manager, when he did not. The Commissioner alleged that this amounted to a breach of s 20(1)(c) because it was a failure to comply with the Act. That provision is addressed to the licensee, not to a person involved in the direction of the business. Consequently it is dealt with below. 131 Failing to inform Ms Collins that she was to be nominated as manager. On 19 March 2002, Sascha interviewed Ms Collins for a position in the agency. On the same day, he sent details of her experience to the Licensing Branch of the Department. Ms Collins commenced working with Travel Action Pty Ltd on 20 March 2002. Following a phone call from the Licensing Branch, advising Sascha that Ms Collins' experience was insufficient for an unrestricted licence, Sascha sent further details of Ms Collins experience on 21 March 2002. 132 It was put to Sascha Frugtniet that Siobhan Collins had not agreed to act as the manager of Travel Action Pty Ltd when he forwarded the correspondence to the Licensing Branch. Sascha said that he did ask Ms Collins if she wanted to be the manager and she had agreed. Sascha said that he told Ms Collins that she needed five years experience to be a manager and that she would be replacing Valentina Parikian. 133 Ms Collins gave evidence that she understood the job to be as a travel consultant and denies that she was ever asked if she wanted to be the manager. Ms Lorelle Love attests in a statement dated 28 April 2003 that she had a conversation with Ms Collins on 19 March 2002 in the following terms: Love: Travel Action Pty Ltd does not have an international travel agents licence and is relying on you to be the day to day manager of the business. A day to day manager of an international licence is required to have at least five years international travel consultancy experience or two years international travel consultancy experience with an approved course. Have you completed an approved course? Collins: I have not completed an approved course. Love: If you have not completed an approved course you would need to provide evidence from prior employers of experience totalling 5 years international travel consultancy experience. 134 Mr Elliot submitted that despite Ms Love's statement, she did not tell Ms Collins that she was to take on the role of day to day manager because that statement is not consistent with her more contemporaneous file note of 22 July 2002. In that file note she states that: "I am uncertain whether I mentioned the word 'manager' to her, but the presumption on my part is that her employer (Mr Frugtniet) had nominated her as the day to day manager of the travel agency and my conversation with her was in relation to this nomination." 135 According to Mr Elliot, it was not up to Ms Love to tell Ms Collins that she was to be the manager and Ms Collins made it clear in her evidence that she did not agree to be the manager. Ms Collins said that the first time she realised that Travel Action Pty Ltd was representing to the Department that she was the manager was a few days later when Brian Frugtniet put a letter on her desk saying that Siobhan Collins is the qualified manager. 136 Findings in relation to advice as to manager. I find on the basis of all the evidence that Ms Collins was not aware and did not agree to Sascha putting her name forward as manager of Travel Action Pty Ltd. However, I find that Sascha did not intend to mislead Ms Collins, he simply failed to explain to her clearly enough that she would be taking on a statutory role and that she would be "in charge" of the day-to-day conduct of the business. Sascha assumed by his conduct and what he said to Ms Collins that she understood this, but she did not. I further find that Lorelle Love did not make it clear to Ms Collins in her phone conversation that she was to be the statutory manager of the agency. While Ms Love assumed that Ms Collins understood that to be the case, Ms Collins was not aware of the precise reasons she was being asked to provide written references. She said that she thought it was for her employer's benefit to see if she had the required experience. This incident is merely an example of poor communication, rather than a deliberate attempt on Sascha's part to deceive Ms Collins. I draw no adverse inference from it. 137 Misrepresented to Departmental officers that he had an approved manager. Another aspect of Sascha Frugtniet's conduct which allegedly renders him unfit to be a licensee is that he misrepresented to Departmental officers that he had an approved manager when he did not. Mr Mignacca visited the premises of Travel Action Pty Ltd on 20 May 2002 and asked Sascha Frugtniet where Ms Collins was. Mr Mignacca says that Sascha Frugtniet told him that she was sick and that she had also been sick the previous Monday. Sascha Frugtniet denies this. He says that he made a general comment that the staff had been away sick. 138 On the same day, Mr Mignacca telephoned Ms Collins on the mobile phone number Sascha Frugtniet had given him. Ms Collins told Mr Mignacca that she had stopped working at Travel Action Pty Ltd about a month ago. She said that she was not the manager and that she had only worked there for about two weeks and then left. Ms Horvathova's evidence was that she has never met Siobhan Collins and that she was never in the office from the first week in April when she started to work, on a part-time basis. 139 When Mr Mignacca put to Sascha Frugtniet that Ms Collins had told him she had left Travel Action Pty Ltd, Sascha Frugtniet said that they have a qualified person by the name of Iveta Horvathova but they have not yet sent in her details to the Department for approval. Sascha says that he did not know Ms Collins had left even though she had not been in attendance since 30 March 2002. He thought that since she had her own keys she was not coming in very often. Ms Collins was approved as the manager on 19 April 2002. 140 Findings. I find that Sascha Frugtniet is not being fully frank about his understanding of Ms Collins whereabouts. While Ms Collins did not tell him that she was leaving, he must have know that she had left given that it was at least seven weeks since he had seen her. Despite the fact that all staff worked on a commission only basis and that he sent a memorandum on 18 February 2002 stating that staff should only be in the office when clients had appointments, I find that Sascha did know, long before 20 May 2002, that Ms Collins was no longer working for Travel Action Pty Ltd. He told Mr Mignacca and Mr Anderson that Ms Collins was sick in an attempt to hide the fact that she had not been in attendance. 141 Requesting Collins to make a false statement. The evidence Ms Collins gave in her statement of 23 May 2002 was that Sascha asked her to say that she had only informed him that she had left Travel Action Pty Ltd a couple of days ago." Ms Collins said that she told Sascha that she was not prepared to lie and he knew that she was not working there any more. 142 In oral evidence given at the stay hearing, Ms Collins said that Sascha asked her not to give a statement and "to say that I was, to say that I still worked there or had only just left a couple of days previous." Ms Collins written and oral evidence was not consistent. She did not say in her written evidence that Sascha asked her not to give a statement. The substance of what she said Sascha told her is different in each account. 143 Mr Frugtniet agreed that he told Ms Collins on 20 May 2002 "to inform anyone who contacted her to make sure she told them that she had first given me notice of her departure only just then on 20 May 2002". That evidence is broadly consistent with what Ms Collins said in her statement, but not with what she said in her oral evidence. I find that Sascha Frugtniet did ask Ms Collins to say that she had only recently given notice, but not that he asked her to say that she had only left Travel Action Pty Ltd a couple of days ago. Furthermore, I am not satisfied that Sascha Frugtniet asked Ms Collins not to make a statement. Findings as to fit and proper and failure to comply with the Act 144 The findings which reflect adversely on Sascha Frugtniet's fitness to be involved in the direction, management or conduct of the business are as follows: · he prevented Mr Whittaker and Mr Grahame from leaving the office when they indicated a wish to do so; and · he misrepresented to Departmental officers that his "manager" was sick when he knew that Ms Collins was no longer working for Travel Action Pty Ltd. 145 These findings indicate that Mr Frugtniet is antagonistic towards investigators and has misled them on occasions. While these matters are of serious concern they do not, by themselves, support a finding that he is not a fit and proper person to be involved in the direction, management or conduct of a travel business. Appropriateness of outcome 146 Given these findings, the decision to disqualify Sascha Frugtniet for a period of ten years from 27 September 2002 from holding a licence issued under the Act and further to disqualify him for ten years from being involved in the direction, management or the conduct of business as travel agent is set aside. Sascha Frugtniet admitted that because he has a close knit family it would be virtually impossible for him to tell his mother not to be involved in the business and that he intended to continue to allow her to be involved. He will have to change his mind on this point if he wants to continue to work in the travel industry. DECISION 4: TRAVEL ACTION PTY LTD Summary of issues 147 The basis for the decision to cancel the licence and disqualify the corporate licensee from holding a licence for a period of 10 years is based on three grounds: · that the licensee has failed to comply with the Act (s 20(1)(c)); · that the licensee does not have, or is not likely to continue to have, sufficient financial resources to enable the licensee to continue to carry on business as a travel agent (s 20(1)(e)); and · that a person (other than the licensee) involved in the direction, management or conduct of a business to which the licence relates is not a fit and proper person to be so involved (s 20(1)(i)). Failure to comply with the Act 148 Section 36 of the Act states that: A licensee shall not carry on business as a travel agent unless, at each place at which the licensee so carries on business, there is present and in charge of the day-to-day conduct of the business at that place a person (whether or not the person is the licensee) who has the prescribed qualifications. Penalty: 10 penalty units. 149 Because s 36 creates a criminal offence, the applicants submitted that there could not be a failure to comply with the Act under s 20(1)(c) unless the licensee had been convicted of an offence under that section. They also pointed out that conviction of an offence against the Act is a separate ground justifying the giving of a Notice to Show cause. The Commissioner submitted that the words "failure to comply with the Act" in s 20(1)(c) are used in contradistinction to words such as "convicted of an offence" in s 20(1)(b). According to the Commissioner, a failure to comply with the Act can relate to a section which creates a criminal offence, but for which a person has not been convicted. 150 In my view a failure to comply with the Act, pursuant to s 20(1)(c), can include a failure to comply with s 36 of the Act, even though that section creates an offence. Section 36 may not have been complied with even where there has been no prosecution for an offence under that section. Where the question is whether there has been a failure to comply with s 36, then that issue must be determined on the basis of the civil, and not the criminal, standard of proof. 151 The applicants further submitted that as long as there was a person with the requisite qualifications on the premises, and the Department had been notified of the name of that person, it did not matter whether the Department had approved that person to be the manager. Section 36 merely requires the presence of a person who has the prescribed qualifications who is in charge of the day-to-day conduct of the business. 152 The Commissioner submitted that a licensee would be in breach of s 36 unless the manager is approved by the Commissioner. In support of that submission the Commissioner said that the Act should be read as a whole. Section 8(4)(h) requires the person who is proposed to be in charge to be nominated in the application for a licence. Section 10(4) allows the Director-General to refuse the application if such a person is not nominated. Further, under s 15(1), once the licence is issued, the Director-General is required to keep a register that contains the name and address of the person "last notified" as in charge, in compliance with s 36. 153 According to the Commissioner, this requirement cannot be read as referring to the person who was originally the manager but has since resigned. It is therefore clear that a licensee is only approved in the context of a manager being nominated. If that person does not continue as manager then the scheme of the legislation places an obligation on licensees to have a person in charge who satisfies s 36 and for that to be communicated to the Commissioner. 154 Conclusion on meaning of s 36. The words in s 36 must be given their plain and ordinary meaning. If there is any doubt about that meaning then the provision should be interpreted narrowly because it creates an offence. (Rumbolt v Schmidt (1882) 8 QBD 603 at 608 per Huddleston B; Nationwide News Pty Ltd v Wills (1992) 44 IR 282 at 282.) In this case the meaning is unambiguous. It is not permissible to read into s 36 a requirement that the Director-General approve a person as the manager before meeting the requirement of that section. Consequently, if Sascha Frugtniet's assertion that he had nominated a suitably qualified manager to be present and in charge of the day-to-day conduct of the business at all relevant times is correct, then Travel Action Pty Ltd as the corporate licensee, will not have failed to comply with s 36. 155 The minimum qualification for the manager of Travel Action Pty Ltd in accordance with Clause 18 of the Travel Agents Regulation 2001, is "5 years of experience in the selling of tickets or the arrangement of rights of passage by aircraft to or from a place outside Australia." The alternative qualifications and experience set out in the Regulation do not apply to the circumstances of this case. 156 History of managers. When the three former directors first purchased Travel Action Pty Ltd, Susan Javor agreed to stay on as the manager. She resigned on 31 January 2002. On 8 February 2002, Travel Action Pty Ltd forwarded the name of Valentina Parikian to the Department for approval as manager. Probity checks disclosed that Ms Parikian had a criminal record. On 14 March 2002, Ms Parikian told Lorelle Love from the Licensing Branch of the Department that she did not wish to proceed with her application to be approved as manager. 157 My understanding of the applicants' submission is that despite not being approved as manager during the period from 18 February 2002 (when Sascha Frugtniet became a director) until 14 March 2002, Valentina Parikian was nevertheless qualified to be the manager and was nominated as the manager on 8 February, consequently there was no breach of s 36 during this period. I do not understand the Commissioner to be submitting that Ms Parikian was not qualified to be the day-to-day manager. I put to one side the question of whether her criminal conviction affected her eligibility. Ms Parikian had been nominated as the manager and she understood that that was to be her role. Consequently it does not appear that there was any failure to comply with the Act between 18 February and 14 March 2002. 158 When Mr Mignacca visited Travel Action Pty Ltd's offices on 18 March 2002 he asked Sascha Frugtniet whether Travel Action Pty Ltd had a qualified manager. Sascha Frugtniet told Mr Mignacca that he had been advised a few days previously that the nominated person, Valentina Parikian, was not acceptable to the Department and that he had one month to advise the Department of a suitably qualified person. 159 While Mr Mignacca did not dispute that the licensing branch of the Department had given Sascha Frugtniet that advice, he told him that it was incorrect and that Travel Action Pty Ltd could not trade without a qualified day-to-day manager. The applicants submitted that Sascha was justified in relying on the advice from the Licensing Division because Mr Mignacca was not from the Licensing Branch. Mr Elliot submitted that advice by a person in authority that is contrary to law does not mean the law can be ignored. In addition, the verbal advice of Mr Mignacca on 18 March 2002 was confirmed in a letter bearing the Department of Fair Trading letterhead on 19 March 2002. In Mr Elliot's submission, a reasonable person, acting honestly, who received that letter would have known that a manager needed to be found immediately if the licensee was to continue trading. 160 I agree with the Commissioner's submission on this point. As of 18 March, Sascha Frugtniet was on notice that he needed to have a qualified manager in order to continue trading. On 19 March the Commissioner placed a restriction on the licence which limited the business to domestic surface travel because Radojka Pantich, another employee, did not qualify as a manager under s 36. This restriction remained in place until 19 April 2002 during which time there was no requirement for a qualified manager. 161 On 19 March 2002 Sascha Frugtniet nominated Ms Collins as the manager. She started work on 20 March 2002. By 2 April 2002, she had left Travel Action Pty Ltd and had commenced work with another travel agency. As there was restricted trading during this period, there is no need to decide whether Ms Collins' presence during that time met the requirements imposed by s 36. 162 On the basis of this evidence, during the period 18 February to 19 April there was no qualified day-to-day manager on 15 or 18 March 2002, presuming Travel Action Pty Ltd did not trade on the weekend. 163 On 8 April 2002, Ms Horvathova began working at Travel Action Pty Ltd, however it was her understanding that she did not take on the role as manager until after the business moved to the City in June 2002. On 14 May 2002 Sascha nominated Ms Horvathova as "assistant" manager of the agency. On 20 May 2002, the Commissioner again placed a "domestic surface travel only" restriction on the licence because adequate supporting information relating to Ms Horvathova's qualifications and experience had not been provided. 164 The question arises as to whether having Ms Horvathova working in the office during the period from 20 April to 15 May when there was no restriction on the licence, met the requirements of s 36 of the Act. I concluded above that there is no need for a person to be approved by the Commissioner in order to comply with s 36, however they must have at least been nominated as the manager. Ms Horvathova has the prescribed qualifications, as evidenced by the fact that she was later approved as the manager. She was present at the business during the relevant period. However she was not nominated as the manager or "in charge of the day-to-day conduct of the business" during that time and did not understand her role to be that of manager. In fact, during this period, Sascha was endeavouring to have Ms Collins approved as the manager and eventually succeeded in doing so on 17 April, despite the fact that Ms Collins was no longer working for Travel Action Pty Ltd by that time. 165 I find that Ms Horvathova's presence during the period of unrestricted trading from 20 April to 19 May does not suffice to meet the requirements of s 36. As there was no one else present during this period who was in charge of the business, there was a failure to comply with s 36 during this period. The restricted trading condition was lifted on 19 April 2002 when Ms Collins was approved as manager. 166 The applicants' agent submitted that during the period from 18 March 2002 to the end of May, Travel Action Pty Ltd was manned "as and when required". The inference is that it was not trading continuously so that a manager was not required at all times. The difficulty with this submission is that Travel Action Pty Ltd had an unrestricted licence from 20 April to 19 May. Under s 16 of the Act, such a licence authorises the licensee to carry on business as a travel agent subject to the Act and the conditions and restrictions to which the licence is subject. One of the requirements of such a licence is that a manager is present and in charge of the business as set out in s 36. There was no evidence that Travel Action Pty Ltd was not carrying on business as a travel agent during the relevant period, despite the submission that the office was only manned "as and when required." Insufficient financial resources 167 When deciding to disqualify Travel Action from holding a licence for 10 years, the Commissioner was satisfied under s 20(1)(e) that it did not have sufficient financial resources to enable the licensee to continue to carry on business as a travel agent. It should be noted that this ground for disciplinary action is independent of the TCF's requirements for financial viability. However, those requirements may be relevant to the question of sufficiency of financial resources. 168 In February 2002, after visiting Travel Action Pty Ltd's offices, Mr Whittaker told Sascha that in his view Travel Action Pty Ltd did not have sufficient financial resources to carry on business as a travel agent since Travel Action Pty Ltd had a negative cash flow and an overdraft of $291.39. Mr Whittaker requested that Travel Action Pty Ltd deposit $10,000 into its working account in order to comply with the Financial Criteria and Reporting Requirements imposed by the TCF. Point 2.1 of those Requirements states that: "Participants must maintain a minimum level of equity dependent upon the scale of operations measured by the annual turnover (both travel and non-travel)." The minimum level of Capital and Reserves where turnover is less that $750,000 is $10,000. 169 According to the Guidelines published pursuant to TCF's Trust Deed, equity, for TCF purposes, consists of the sum of: paid-up share capital, realised capital profits reserves, asset revaluation reserves, share premium reserves, accumulated profits, guarantees provided to the TCF and share capital as defined under the Corporations Law. 170 On 22 February 2002 Sascha Frugtniet wrote to the TCF in response to concerns and advised that he would be depositing $10,000 into the agency's working account. That amount was deposited on 28 February 2002. By 1 May 2002, the amount had fallen to $2,996.09. 171 It was clear on the basis of his oral evidence that Sascha Frugtniet does not have a comprehensive understanding of what constitutes "capital and reserves". He maintained at various times, that unpaid commissions and personal assets should all be taken into account in determining whether Travel Action Pty Ltd was "financially viable." In his view the amount of $10,000 could fluctuate over time and there was no minimum requirement to keep that sum of money in his trading account at all times. Sascha Frugtniet was under a misapprehension that he was only obliged to hold the equivalent of two months overheads ($5,000) in capital and reserves. 172 In my view Sascha Frugtniet does not understand, and does not want to understand, the financial criteria of the TCF that, given his level of turnover, he maintain a minimum level of equity of $10,000. The fact that Travel Action Pty Ltd has consistently been unable to meet that requirement is one indication that the business may not be financially viable. 173 On 17 May 2002 and 4 June 2002 the Tribunal heard a stay application and the substantive application, respectively, by Travel Action Pty Ltd in relation to the suspension of its licence. Between 31 May 2002 and 4 June 2002 deposits were made into one bank account bringing the balance as at 4 June 2002 to $10,350.63. As at 15 September 2002, Travel Action Pty Ltd's bank balance was $3,091.72. 174 On 24 September 2002, Travel Action Pty Ltd applied to the Tribunal for a review of the Department's decision to cancel Travel Action Pty Ltd's licence. On 27 September 2002 an amount was deposited into Travel Action Pty Ltd's account bringing the balance to $9,012.54. When asked whether it was coincidental that the amounts in the bank accounts increased around the times of Tribunal hearings, Sascha said "Obviously it's not a coincidence." Apart from this comment, he downplayed the fact that money was deposited in the accounts at or close to the time when the Tribunal was to be hearing the case. 175 I find that money was deposited around the time of proceedings in the Tribunal, in an attempt to satisfy the Tribunal of the financial viability of Travel Action Pty Ltd. However, this does not establish that the business had insufficient financial resources. 176 Having examined Travel Action Pty Ltd's record of client bookings which showed that between 4 and 11 travel bookings were made per month, Mr Whittaker concluded that such a business could not be financially viable. While a minimum level of transactions was not a requirement of the TCF's guidelines, according to Mr Whittaker, there is an overriding requirement that agencies have sufficient financial resources to conduct the business. 177 Sascha Frugtniet said that he disagrees that the level of transactions means that the business is not viable. Because overheads are low and everyone works on a commission only basis, he says the business is financially viable. Ms Javor gave evidence that in her 23 years of operating Travel Action Pty Ltd prior to selling the business, there would have been months where she only took bookings from four passengers. 178 Ms Horvathova gave evidence that she was paid on a commission basis and that during the months of April, May, June, July, August and November 2002 she did not receive any income from commission. In the months of September, October and December 2002 she received a few hundred dollars in commission, but in total she has not earned more than about $2,000 in all the time she has been working for Travel Action Pty Ltd. 179 Given that everyone associated with Travel Action Pty Ltd is remunerated on a commission only basis, Mr Whittaker's concern that Travel Action Pty Ltd is not financially viable given the number of bookings, is not persuasive. If there are concerns about compliance with the TCF's financial criteria and reporting requirements, those matters should be addressed by the TCF. 180 Non-payment of creditors. Mr Mignacca's evidence is that as of 29 August 2002, Travel Action Pty Ltd had the following debts: Orit Pty Ltd (former landlord) $9,754.64 Berger Rona & Co (accountant) $2,772.00 Lease Monitoring Services P/L (computer supplier) $2,580.00 Total known debts $15,106.64 181 Mr Wilson, from Lease Monitoring Services Pty Ltd later revised his invoice and agreed that he was owed $944.30. That brings the total owing down to $13,470.94. 182 As at 11 December 2002, Mr Mignacca says that Travel Action Pty Ltd has an additional debt owing to Nick Martin, bringing the total to $18,333.64. The matter relating to Mr Martin settled in the Local Court on 17 December 2002. 183 Sascha Frugtniet denied that Travel Action Pty Ltd was legally obliged to pay any of the above amounts. In his view, as the debts were incurred prior to him becoming a director or, for various other reasons, he does not intend to pay them. 184 Orit Pty Ltd (Orit) was the lessor of premises occupied by Travel Action Pty Ltd at Bondi Junction. Dr Gal, a director of Orit, gave evidence that some time in mid 2001 Susan Javor told him of the change of ownership of Travel Action Pty Ltd and, when the lease expired, he entered into a new leasing arrangement with the three new directors who were also the guarantors for the premises. The term of the lease was 3 years. Travel Action Pty Ltd vacated the premises in May 2002 and Dr Gal is pursuing the company for outstanding rent. 185 It was Travel Action Pty Ltd's case that one reason that the rent was outstanding was because Orit failed to afford Travel Action Pty Ltd "quiet enjoyment" of the premises. Dr Gal denies that he failed to do so. Travel Action Pty Ltd's claim relates to construction works which were being carried out adjacent to Travel Action Pty Ltd's offices and which allegedly disrupted the business. I do not need to comment on the merits of this claim. It suffices to say that Orit has commenced proceedings in the Local Court for the recovery of the outstanding rent and Travel Action Pty Ltd has put on a cross claim in relation to the "quiet enjoyment" issue. 186 In addition, it was Travel Action Pty Ltd case that the current director, Sascha Frugtniet is not liable for the outstanding rent because the arrears relate to a period when the former directors were in control. Since they were the guarantors, and they have never advised Orit of their resignation, Sascha Frugtniet maintains that he is not liable for the outstanding rent. 187 Mr Rona from Berger Rona & Co gave evidence that he completed an audit of Travel Action Pty Ltd's accounts, at the request of the three former directors, in August 2001. Mr Rona and his receptionist, Ms Wolf, have pursued the debt with both Suzanne Frugtniet and Barbara Johnson since that time. Ms Wolf said that Barbara Johnson told her she would pay the amount, but she has not done so. Barbara Johnson said that she told Ms Wolf that Mr Rona deserved to be paid, not that she would pay him. 188 Barbara Johnson said she was not liable for Mr Rona's fee because Joseph Stanislav (another director) owed her in excess of $6,000 which was money she lent him to go on holidays. When Barbara Johnson resigned as a director she agreed to pay $3,000 to Joseph Stanislav, but did not do so given that he owed her a greater amount. 189 Mr Rona said that Sascha Frugtniet told him that he is now the sole director and claims that he reached an agreement with two of the previous directors and Ms Wolf, that Barbara Johnson would accept liability for the debt. Ms Wolf gave evidence denying being party to any such agreement. Mr Rona replied to Sascha Frugtniet's letter saying that it is Travel Action Pty Ltd and not the former directors who owe him the money. 190 While the Department agreed that there is a guarantee from Barbara Johnson in relation to payment of the debt, Travel Action Pty Ltd is still legally liable to Mr Rona for the payment of his fees. Sascha said that he did not know what his legal obligations were in relation to the debt but he has no intention of paying it. 191 It is clear that Travel Action Pty Ltd is the legal entity that is prima facie liable for any debts, regardless of when, or in what circumstances, they were incurred. As at 27 September 2002, Travel Action Pty Ltd's bank balance was $869.93. Sascha admitted that Travel Action Pty Ltd does not currently have the funds to pay these debts assuming that they are due and payable. 192 As the Commissioner pointed out, there is no definition of "sufficient financial resources" in the Act. Non-compliance with the requirements for financial viability set down by the TCF in their guidelines is relevant to the issue of sufficiency of financial resources under s 20(1)(c). However, contrary to the applicants' submission it is not the only relevant consideration. I agree with the Commissioner's submission that the question as to whether a licensee has sufficient financial resources to enable it to carry on business as a travel agent is a question of fact to be decided in the light of all the relevant circumstances. 193 Travel Action's operates on extremely narrow margins. There is very little, if any, capacity to pay the outstanding debts. However, as these debts are disputed, I am not satisfied that they necessarily indicate that Travel Action Pty Ltd does not have sufficient financial resources to enable it to continue to carry on business as a travel agent. Involvement of Suzanne, Brian and Sascha Frugtniet 194 The final basis on which the Commissioner submitted that Travel Action Pty Ltd's licence should be cancelled was the involvement of Suzanne, Brian and Sascha Frugtniet in the business. Having found that Suzanne and Brian Frugtniet are unfit and that they are involved in the conduct of the business, it follows, according to the Commissioner, that the licensee is unfit to hold a licence. 195 I do not accept this submission. I have affirmed the decisions of the Commissioner in relation to Suzanne and Brian Frugtniet. Consequently, they cannot be involved in the business of Travel Action Pty Ltd or any other travel agency. In relation to Sascha Frugtniet, I have set aside the Commissioner's decision and found that he is a fit and proper person to be involved in the travel agency business. Appropriateness of outcome 196 The only adverse finding I have made in relation to Travel Action Pty Ltd is that it failed to comply with the Act by not having a qualified manager present and in charge of the business for certain periods. Given the circumstances of these breaches and the relatively short period of time involved, disqualification even for a limited period is not appropriate. Instead, the corporate licensee should be reprimanded, pursuant to s 21(1)(a), for its failure to comply with the Act. 197 Consequently I set aside the Commissioner's decision to cancel the licence No 2TA001406 and to disqualify Travel Action Pty Ltd for a period of 10 years from 27 September 2002 from holding a licence issued under the Act. In substitution for that decision Travel Action Pty Ltd is reprimanded for its failure to comply with the Act. COSTS 198 The applicants applied for costs. The Commissioner submitted that since the applicants were not represented by a legal practitioner there is no basis for a claim for costs. Under s 88 of the ADT Act, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs. If either party wishes to apply for costs and is both entitled to apply and has evidence of "special circumstances" then such an application should be made within 28 days of receiving these reasons. If such an application is filed, then directions will be made prior to determining the matter.

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