Ye v Commissioner for Fair Trading; Ucer Investments and Resources Management Pty Ltd v Commissioner for Fair Trading

How the question arises

1. Ms Ye was the holder of a real estate agent licence issued under the Act on 11 April 2011 and due for renewal on 10 April 2016. She is also the sole director and secretary of UCER Investment and Resource Management Pty Ltd, a company incorporated for the purpose of providing real estate agency services. UCER also holds a licence under the Act. Ms Ye was the licensee in charge of UCER's business.
2. On 24 May 2016 the Commissioner cancelled Ms Ye's licence and disqualified her from being involved in the direction, management or conduct of the business of a licensee to 10 years. The Commissioner directed UCER to pay the Property Services Compensation Fund $818,815.76. The Commissioner also directed Ms Ye to ensure that UCER complies with that direction. Finally, the Commissioner cancelled UCER's licence and disqualified it from holding a licence or from being involved in the direction, management or conduct of the business of a licensee for 5 years.

Circumstances giving rise to disciplinary action

1. The circumstances which gave rise to the taking of the disciplinary action are set out in detail in the Commissioner's statement of reasons. Below is a short summary of the Commissioner's factual and legal findings.
2. SOAR Development Group Pty Ltd (SOAR) engaged UCER to act as buyer's agent to purchase a property which was initially on the market for $40 million. SOAR ultimately purchased the property for $27,250,000. On 2 December 2014 SOAR gave UCER $3.4 million as a deposit on the property and Ms Ye placed that amount in UCER's trust account. On 22 December 2014, Ms Ye withdrew that money from the trust account and deposited it in a term deposit account in the name of UCER. The Commissioner found that this was done without receiving any instructions to do so from SOAR. The Commissioner noted that UCER had submitted that it had verbal instructions from Mr Mai, a director of SOAR, and "the other directors" to transfer the money. The Commissioner did not accept that any such instructions were given because UCER did not produce any evidence to that effect other than Ms Ye's assertion and Mr Mai had signed a statement dated 2 October 2015 stating that no such instructions had been given.
3. When the money was in the term deposit account it earned interest of $10,395.62. On 27 January 2015 Ms Ye deposited the $3.4 million and the interest into a cash reserve account in the name of the UCER. That money earned further interest of $5920.14. Later SOAR decided to withdraw from the purchase of the property and, on 9 March 2015, requested that UCER return the money. On 16 March 2015 Ms Ye withdrew the $3.4 million from the business cash reserve account and deposited it back into UCER's trust account. On the same day she deposited the money into an account in the name of AVNA Group Pty Ltd.
4. On the advice of UCER, SOAR had entered into a consultancy agreement with AVNA that related to the proposed purchase. On 15 October 2014, SOAR had deposited $400,000 with AVNA representing 1% of the initial purchase price. Ms Ye was not a director of AVNA.
5. The Commissioner found that on 16 March 2015 Ms Ye held at least $3.8 million of SOAR's money (the $3.4 million plus the $400,000) on trust having received the money in the course of her business as a licensee. At some point that money was held by Ms Ye in an account in the name of AVNA. On 17 March 2015, $2,997,500 was withdrawn from the AVNA account and paid to the seller's agent as a deposit. An amount of $802,500 remained under Ms Ye's control. According to the Commissioner, neither Ms Ye, nor UCER, accounted to SOAR for that amount. On 23 March 2015 SOAR again requested that UCER return the money within 7 days but UCER did not do so.
6. On 17 April 2015 Mr Lam, on behalf of SOAR, lodged a complaint with the Commissioner that UCER had not returned the deposit to SOAR. After that complaint was made, SOAR decided to buy the property at a reduced price of $27,250,000 plus GST. The sale was due to be completed in December 2015. Mr Lam subsequently withdrew the complaint.
7. On 17 September 2015 UCER's trust account was credited with $16,315.76 via an online banking transaction from UCER's business account. That amount represents the two amounts of interest received on the $3.4 million. Prior to that transaction the balance of the UCER's trust account was $50.00. According to the Commissioner, the date of the transaction is significant because it occurred 10 days after the Commissioner issued the Show Cause Notice detailing the outstanding interest amounts.
8. The Commissioner found that Ms Ye held herself out as a director of AVNA when she was not. She nevertheless advised SOAR to deposit $400,000 into an account in the name of AVNA. That account was not a trust account and AVNA did not have a licence under the Act.

Legislative scheme

1. Section 191 of the Act prescribes the grounds on which the Commissioner can take disciplinary action. Those grounds include that: 1. the person has contravened a condition of the Act or the Regulations under the Act: s 191(a); 2. the person has, in the course of carrying on business or exercising functions under their licence, acted unlawfully, improperly, unfairly or incompetently: s 191(c); 3. the person is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee: s 191(3).
2. Under s 192 of the Act, the disciplinary action which the Commissioner may take under includes cancelling the person's licence, declaring the person to be a disqualified person for a specified period and disqualifying the person from being involved in the direction, management or conduct of the business of a licensee. The Act also prescribes various standards to which licensees are subject. Under s 86 "trust money" must be held exclusively for the person who paid it and, until it is paid back to the person or disbursed as the person directs, it must be paid into and retained in a trust account. Section 211(2) and 211(3) make it an indictable offence to fraudulently convert money to a person's own use or to fraudulently omit to account for, deliver or pay the money to the person from whom it was received or to the person or persons entitled to it.
3. Clause 18 of the Property, Stock and Business Agents Regulation 2014 (NSW) (the Regulation) obliges licensees who receive trust money to pay it into the licensee's trust account as soon as practicable. Section 37(2) of the Act proscribes contravention of prescribed rules of conduct without reasonable excuse. The prescribed rules of conduct are set out in Sch 1 of the Regulation and include that the agent must comply with fiduciary obligations, must act honestly, fairly and professionally with all parties, must exercise reasonable skill, care and diligence, must act in client's best interests and must cat in accordance with a client's instructions.

Commissioner's findings and disciplinary action

1. The Commissioner found that Ms Ye and UCER had breached various provisions of the Act including s 86(1) and s 211(2) and (3), and cl 18 of the Regulation.
2. In summary, the Commissioner found that UCER had: 1. taken and held trust money in connection with its business as a licensee on behalf of SOAR. UCER initially took and held $400,000 and then later took and held $3,400,000. Both those sums were taken and held by UCER in connection with its business as a licensee; 2. breached s 86(1) of the Act by taking $400,000 on trust and transferring it to AVNA which was an unlicensed entity under the Act, thus failing to hold the money exclusively for SOAR, by failing to disburse the money as SOAR as directed and by failing to retain the money in a trust account; 3. breached s 86(1) by taking money on trust and using the money and the interest for itself, thus failing to hold the money exclusively for SOAR, by failing to disburse the money as SOAR directed, and by failing to retain the money in a trust account; 4. breached s 86(1) of the Act by taking money on trust in the ordinary course of its business and dispersing $802,000 that is held in trust for SOAR to AVNA, thus failing to the money exclusively for SOAR, failing to disburse the money as SOAR directed and by failing to retain the money in a trust account; 5. breached 37(2) of the Act by failing to comply with several General Rules of Conduct; 6. breached cl 18 of the Regulation by failing to pay the $400,000 into its own trust account; 7. breached s 211(2) of the Act by transferring the second deposit into other accounts to earn interest for its own use and that it breached s 211(3) on three separate occasions by not accounting to SOAR for the sum of $3,800,000 and by failing to account to SOAR for the amount of $802,500.
3. In summary, the Commissioner found that Ms Ye was also liable for the breaches under the accessorial provisions in s 213 and s 218 of the Act and personally.
4. The Commissioner made the following decisions in relation to Ms Ye: 1. In accordance with section 192(1)(c) of the Act, I direct Rebecca Haria Ye to ensure that UCER Investments and Resources Management Pty Limited complies with the Notice of determination directing it to pay to the Property Services Compensation Fund an amount of $818,815.76 within 28 days of the date of the Notice, or enter into a payment arrangement suitable to Fair Trading; 2. in accordance with section 192(1)(g) of the Act, I cancel licence number 1630963 held by Rebecca Haria Ye; and 3. in accordance with section 192(1)(h) of the Act, I declare Rebecca Haria Ye to be disqualified from holding a licence or certificate of registration for the purposes of the Act for a period of 10 years; and 4. in accordance with section 192(1)(i) of the Act, I disqualify Rebecca Haria Ye from being involved in the direction, management or conduct of the business of a licence fee for a period of 10 years.
5. The Commissioner made the following decisions in relation to UCER: 1. in accordance with s 192(1)(c), I direct the corporation to make a payment, or entered into an arrangement acceptable to Fair Trading, the payment of the sum of $818,815.76 to the Property Services Compensation Found as established pursuant to Part 10 of the Act, within twenty-eight (28) days of the date of this determination; 2. in accordance with s 192(1)(g) of the Act, I cancel licence number 1002 5564 held by UCER investments and resources Management Pty Ltd; and 3. in accordance with s 192(1)(h) of the Act I declare UCER Investments and Resources Management Pty Ltd to be disqualified from holding a licence the purposes of the Act for a period of five years; and 4. in accordance with section 192(1)(i) of the Act, I disqualify UCER investments and resources Management Pty Ltd from being involved in the direction, management or conduct of the business of licensee for a period of five years.
6. These determinations took effect on 21 June 2016. On 22 June 2016 Ms Ye and UCER lodged an application for review of these decisions and a stay application. Amended stay applications were lodged at the hearing on 5 July 2016. Ms Ye and UCER seek orders staying the operation of the Commissioner's decisions and reinstating each applicants' licences pending determination of the substantive applications.

Principles applicable to stay applications

1. Applications for review of decisions by the Commissioner to take disciplinary action come within the Tribunal's administrative review jurisdiction: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), s 30, Administrative Decision Review Act 1997 (NSW), s 9, Property, Stock and Business Agents Act 2002 (NSW), s 200, s 32. The guiding principle to be applied to practice and procedure in the Tribunal "is to facilitate the just, quick and cheap resolution of the real issues in the proceedings" consistent with the objects and principles under the Act: NCAT Act, s 36.
2. Subject to s 60 of the ADR Act, an application to the Tribunal for an administrative review of a decision does not affect the operation of the decision or prevent the taking of action to implement the decision: ADR Act, s 60(1).
3. Section 60(2) gives the Tribunal power to stay the decision or make an order "otherwise affecting the operation of the decision under review as it considers appropriate to secure the effectiveness of the determination of the application." Section 60(3) lists the matters the Tribunal must take into account when determining whether it is satisfied that is desirable to make an order: (3) The Tribunal may make an order under this section only if it considers that it is desirable to do so after taking into account: (a) the interests of any persons who may be affected by the determination of the application, and (b) any submission made by or on behalf of the administrator who made the decision to which the application relates, and (c) the public interest.
4. In AVS Group of Companies Pty Ltd v Commissioner of Police [2010] NSWCA 81 at [149] Campbell JA held that it is "mandatory" to take into account the public interest when considering whether to exercise power under s 60. Although not an express statutory object, protection of the public from unsuitable people working in the industry and maintaining the integrity of and public confidence in the real estate industry are significant purposes of the Act.
5. In New South Wales Bar Association v Stevens [2003] NSWCA 95 at [103] and [104] Spigelman CJ (as he then was), with whom Meagher and Sheller JJA agreed, held that the public interest is entitled to "significant weight" where the underlying law is designed to protect the public.
6. It is also mandatory for the Tribunal to take into account the interests of any person who may be affected and the submissions of the Commissioner.
7. The power in s 60 includes the power to re-instate a licence which has been cancelled: AVS Group of Companies Pty Ltd v Commissioner of Police [2010] NSWCA 81 at [96] (Campbell JA) (Handley AJA agreeing at [191].
8. Neither party submitted that a stay should be granted subject to conditions: ADR Act, s 62.
9. The corresponding provision in the Administrative Appeals Tribunal Act 1975 (Cth), section 41, is in similar term but does not list the public interest as a mandatory consideration. Nevertheless, the prospects of success or the merits of the applicant's case on review have been regarded as relevant: Re XTWK and Australian Securities and Investments Commission (2007) 46 AAR 350 at 354.
10. In AHJ v NSW Trustee and Guardian [2011] NSWADT 311 at [14] the former Administrative Decisions Tribunal held that the phrase "secure the effectiveness of the determination" is another way of saying that there needs to be irreparable loss or harm to the applicant before consideration will be given to making an interim order. The Tribunal went on to say- [15] Section 60 is to be read keeping in mind the common law principles in relation to the exercise of interlocutory injunctions. In Castlemaine Tooheys Limited v South Australia [1986] HCA 58, Acting Chief Justice Mason said at paragraph 11: "The principles governing the grant or refusal of interlocutory injunctions in private law litigation have been applied in public law cases, including constitutional cases, notwithstanding that different factors arise for consideration. In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction".
11. In a practical sense the onus is on the applicant to make out a case that it is appropriate for the Tribunal to make such an order: Bentran Pty Ltd v Sabbarton [2014] NSWCATAP 37 at [9], Wright J, President citing Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694.
12. In 1st Fleet Pty Ltd v Australian Cooperative Foods Ltd [2006] NSWSC 881 (29 August 2006) at [5] the Supreme Court emphasised that it is not the Court's task "to conduct a preliminary hearing". But, in determining whether there is a "serious question to be tried", it is to be assumed that any conflict would be resolved in the plaintiff's favour."

Is a stay appropriate to secure the effectiveness of the determination of the application?

1. Before granting a stay the Tribunal must be satisfied that it is necessary to "secure the effectiveness of the determination". ADR Act, s 60. The effectiveness of the Tribunal's ultimate decision will not be preserved if, for example, Ms Ye loses her business in the meantime, suffers irreparable losses or loses money for which she cannot be compensated: Williamson v Director-General, Department of Transport [2000] NSWADT 16 at [15] and [17].
2. Ms Ye gave evidence by way of a statement dated 4 July 2016, that her sole income is derived from UCER and that, based on last year's income, she earned approximately $6,500 a week. She provided no tax returns, bank statements or other evidence to support this assertion. Nevertheless I find that whatever income she derived from the business, she will be unable to continue to earn that income if a stay is refused. Even if the Tribunal sets aside the Commissioner's decisions, she will not receive any compensation for lost income. In that sense, she will suffer irreparable loss or harm if a stay is not granted.

Interests of Ms Ye and her family

1. Ms Ye gives evidence that her current expenses are approximately $5,000 per fortnight including mortgage repayments and expenses for her two sons and her parents. I note that neither Ms Ye nor UCER has any employees.
2. The Department provided a bank statement relating to UCER's trust account showing that the balance on 4 April 2016 was $16,365.76. There was very little activity on the account. The Department also provided some photographs of UCER's business premises but there was no evidence as to when the photographs were taken or any detail as to what the Tribunal was being asked to infer.
3. I am satisfied that it is in Ms Ye's financial interests for a stay to be granted. Ms Ye provides no evidence of any other household income, her assets or the level of dependency of her sons or her parents. I am not satisfied simply on the basis of Ms Ye's assertion, that the level of her financial loss will put "a significant financial strain" on her and her family.

Submissions of the administrator

1. The Commissioner opposed the stay on public interest grounds.

Public interest

1. Relevant factors to be taken into account in assessing the public interest include: 1. the nature and seriousness of the allegations; 2. whether they relate to the activity for which the applicant is licensed; and 3. whether the interests of the public may be prejudiced if the applicants continue to operate.
2. The findings the Commissioner has made against Ms Ye and UCER are extremely serious and involve a great deal of money. They occurred in the course of Ms Ye conducting business as a real estate agent. Ms Ye accepts that there may have been some miscommunication between her and the directors of SOAR and undertakes to obtain written instructions in relation to the movement of money in and out of trust accounts in the future. Ms Ye accepts only that she may have breached the Act in a technical sense. The interests of the public may be prejudiced if Ms Ye and UCER continue to operate in the manner in which they have previously operated. I am not satisfied that obtaining instructions in relation to the movement of money in and out of trusts accounts will wholly protect the public. Whether that is the case is a matter for Ms Ye to establish at the hearing. It is not a matter that is capable of resolution at an interlocutory stage.

Prospects of success

1. Ms Ye submitted that she had high prospects of success on review. In response to the Commissioner's findings, Ms Ye states that: 1. instructions were provided to her to invest, transfer and use the funds provided by SOAR; 2. the directors of SOAR were aware of the status of funds provided by SOAR with respect to the purchase of the subject property and she did not fail to account to SOAR with respect to the funds provided; 3. interest was never earned for her benefit; 4. she was not providing services as real estate agent or pursuant to any agency agreement; 5. she did not hold herself out to be a director of AVNA; 6. SOAR proceeded with the purchase of the subject property; 7. in the alternative, the sanctions imposed excessive.
2. At the hearing, Ms Ye submitted that the critical finding of fact was that she had paid money out of the trust account and withheld $802,500 without instructions from SOAR. It was Ms Ye's view that if those steps were taken with instructions it is difficult to see how they could constitute a contravention of any provision in the Act or the Regulation. Further, if there were instructions to take those steps and there was nevertheless some contravention of the Act or Regulation, it would be likely to be a technical one which would not warrant the grave sanctions imposed by the Commissioner.
3. Ms Ye also submitted that the Commissioner has not afforded her procedural fairness because the statement of Mr Mai, that he had not given instructions to Ms Ye to transfer the money, was not provided to her before the Commissioner made the decisions. Ms Ye considers it unfair in the circumstances for the Commissioner to have failed to convene an oral hearing during which the evidence could be tested.
4. Ms Ye also criticised the legal basis of various findings that the Commissioner made.
5. Ms Ye may be able to adduce evidence at the hearing that contradicts one or more of the Commissioner's findings. But I note that she was given an opportunity to provide evidence as to the instructions she received from the directors of SOAR and that the Commissioner took that evidence into account. Without hearing all the evidence and submissions from the parties, I am unable to assess the prospects of success of the applications for review made by Ms Ye and UCER.

Conclusion

1. Although the balance of convenience is a factor when determining whether or not to grant an interlocutory injunction, that factor is subsumed in the public law context by taking into account both the interests of Ms Ye, and anyone else who may be affected by the determination, as well as the public interest: ADR Act, s 60.
2. The public interest is to be given significant weight. The allegations against Ms Ye and UCER are extremely serious. They involve licensed entities dealing with money held on trust. There is no dispute that money was transferred out of the trust account and into a high interest bearing account. The Commissioner alleges that that was done without instructions and that the interest of some $16,315.76 was not held for the benefit of the client. That amount was not re-paid to the client and was only said to be available to be re-paid after a Notice to Show Cause was issued. The conduct also includes failure to account for $802,500 which remains outstanding. Finally the Commissioner found that two amounts deposited by SOAR were put into accounts in the name of AVNA, a company that was not licenced under the Act.
3. Ms Ye stands to lose money if a stay is not granted and she will not be able to recover that amount if the Tribunal sets aside the Commissioner's decision. That is a significant prejudice to her but it is outweighed in this case by the extreme seriousness of the allegations and the fact that the merits of her application cannot be determined without hearing the evidence and submissions in full.
4. On balance, despite the fact that Ms Ye will suffer a financial loss and the fact that UCER will not be able to continue to trade, in my view the public interest requires that a stay be refused.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 June 2018