Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Pillay v Department of Fair Trading [2022] NSWCATOD 174 Hearing dates: 26 November 2021 Date of orders: 31 January 2022 Decision date: 31 January 2022 Jurisdiction: Occupational Division Before: Naida Isenberg, Senior Member Decision: The decision under review is affirmed. Catchwords: Licensing – real estate agent – fraudulent use of trust monies – plea of guilty - conviction – Applicant resiles from admissions – grounds for disciplinary action – appropriate disciplinary action Legislation Cited: Administrative Decisions Review Act 1997 Civil and Administrative Tribunal Act 2013 Evidence Act 1995 Oaths Act 1900 Property and Stock Agents Act 2002 Property and Stock Agents Regulation 2014 Cases Cited: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 Farah v Director General, Department of Finance and Services [2014] NSWCATAP 23 Gambino v Commissioner for NSW Fair Trading [2014] NSWCATOD 135 Huynh v Commissioner for Fair Trading [2016] NSWCATOD 2 Luk v Commissioner of Police, NSW Police [2019] NSWCATAP 23 Maher v Department of Fair Trading [2019] NSWCATOD 21 McDonald v Director General of Social Security (1984) 1FCR 353 at 357 Nakad v Commissioner of Police, New South Wales Police Force [2014] NSWCATAP 10 Parisi v Commissioner of Police, NSW Police Force 2018] NSWCATAD 155 Shi v Migration Agents Registration Authority [2008] HCA 31 Sudath v Health Care Complaints Commission [2012] NSWCA 171 Wilson v Commissioner of Police, NSW Police Force [2018] NSWCATAD 274 Category: Principal judgment Parties: Arvind Pillay (Applicant) Department of Fair Trading (Respondent) Representation: Counsel: A Douglas-Baker (Respondent) Solicitors: Safe Harbour Lawyers (Applicant) Legal, Corporate Services, Department of Customer Service (Respondent) File Number(s): 2021/166400 REASONS FOR DECISION 1. On 26 April 2013 the Applicant, Arvind Pillay, was granted a real estate agent's licence (licence) under the Property and Stock Agents Act 2002 (Act). In April 2020 his licence expired but it was reissued on 26 June 2020. On 18 March 2021 the Respondent, on the grounds specified in s 191(a), (c) and (e) of the Act, cancelled the Applicant's licence under s 192(1)(g) of the Act, declared the Applicant a disqualified person for a period of 10 years from that date under s 192(1)(h) of the Act, and disqualified him, under s 192(1)(i) of the Act, from being involved in the direction, management or conduct of business of a licensee for a period of 10 years. That decision was affirmed on internal review. 2. The Applicant now seeks review by this Tribunal. In particular, the Applicant seeks orders that the decision to cancel his licence and to disqualify him for a period of 10 years be set aside. Relevant legislation 1. The Act establishes a regime in respect of real estate agent licences. Section 8(1)(a) of the Act provides that a person must not act as or carry on the business of a real estate agent unless the person is the holder of a real estate agent licence. Sections 14 and 15 of the Act set out eligibility requirements and qualifications for a licence. 2. Section 16 of the Act sets out the circumstances in which a person is a "disqualified person" for the purposes of the Act. Relevantly, a person is a disqualified person if they have been convicted in New South Wales of an offence involving dishonesty that was recorded in the last 10 years (unless the offence should be ignored): s 16(1)(a) of the Act. An application for a licence must not be granted unless the Applicant is eligible to be granted the licence, as provided by s 14: s 19 of the Act. Relevantly, a person who is not fit and proper to hold a licence or who is a disqualified person is not eligible to hold a licence: s 14(1)(b) and s 14(1)(d) of the Act. 3. Section 32(1) of the Act provides that a licensee must properly supervise the business carried on by the licensee. Section 37(2) of the Act provides that a licensee who, without reasonable excuse, contravenes a Rule of Conduct prescribed for the purposes of the section, is guilty of an offence. The Rules are set out in Schedule 1 of the Property and Stock Agents Regulation 2014 (Regulation), including Rule 2 which provides that an agent must comply with the fiduciary obligations arising as an agent, and Rule 6 which provides that an agent must act in the client's best interests at all times unless it would be contrary to the Act or regulations or if otherwise unlawful to do so. 4. Section 86 of the Act provides that "trust money" (as defined in s 85(1) of the Act) received for or on behalf of any person by a licensee in connection with the licensee's business is to be held by the licensee exclusively for that person, and is to be retained in an approved authorised deposit-taking institution until paid or disbursed as directed by the person on whose behalf the money is held. 5. Pursuant to s 211 of the Act it is a statutory offence for a licensee to fraudulently convert any trust money to the licensee's own use or to the use of another person. The penalty for contravention is imprisonment up to 10 years. Section 218(2) of the Act refers to offences by a corporation and the consequent liability of directors. 6. Part 12 of the Act deals with complaints and disciplinary action. Section 191 of the Act sets out the grounds for taking disciplinary action and s 192 specifies the disciplinary action which may be taken under the Act. Under s 200 of the Act a person against whom disciplinary action is taken may apply to the Tribunal for administrative review under the ADR Act. Tribunal's role 1. Section 63 of the Administrative Decisions Review Act 1997 (ADR Act) provides that in determining an application for review the Tribunal is to make the correct and preferable decision having regard to the material before it, and any applicable written or unwritten law. It is well established that the Tribunal is not restricted to a consideration of the material that was before the decision-maker, but may have regard to any relevant material before it at the time of the review: Shi v Migration Agents Registration Authority [2008] HCA 31. Under s 28(2) of the Civil and Administrative Tribunal Act 2013 (CAT Act) the Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice: s 38(2) of the CAT Act. The Tribunal makes its own decision in place of the Commissioner's, and there is no presumption that the decision of the Commissioner is correct: McDonald v Director General of Social Security (1984) 1FCR 353 at 357. The standard of proof that applies in these proceedings is the civil standard, that is, on the balance of probabilities. There is no onus of proof: Nakad v Commissioner of Police, New South Wales Police Force [2014] NSWCATAP 10 at [28]-[34]. Evidence 1. The Applicant provided the following documents: 1. The Applicant's affidavit affirmed 31 August 2021 and a declaration dated 27 August 2021. 2. The affidavit of the Applicant's father, Raman Pillay affirmed 31 August 2021 and a declaration dated 28 August 2021. 1. In addition to the documents filed pursuant to s 58 of the ADR Act, the Respondent relied on the affidavit of Mark Nicoletti sworn 20 September 2020 and the affidavit of Jamie Coss sworn 21 September 2021, each of which annexed various material associated with the criminal proceedings against the Applicant. CONSIDERATION The investigation into the Applicant's real estate business 1. There was no dispute as to the history of the Applicant's real estate business. The Applicant was a director of Arvind Pillay Realty Pty Ltd (the Company) from 22 March 2013, the date of the Company's incorporation. He was the licensee-in-charge from when the Company was granted a corporate licence on 25 January 2016. He ceased to be a director of the Company on 24 November 2020, at which time his father, Raman Pillay, was appointed sole director and secretary of the Company. The Company owns and operates a real estate agent business under the name Raine & Home Quakers Hill and operates a Sales Trust Account (Trust Account). 2. There was also no dispute that a Qualified Audit Report for the Company dated 2 August 2017 was provided to the Respondent which disclosed that bank statements had not been provided for the entire financial year and that there were doubts about the accuracy of record-keeping in the Trust Account. As a result, in April 2018 the Respondent's investigators attended the Company's office to discuss an allegation of inappropriate handling of trust funds. In January 2019 the Applicant's then solicitor provided the Respondent with material which disclosed that between 3 August 2016 (sic) and 6 February 2018 sums totalling $926,000 were withdrawn from the Trust Account, and between 5 September 2017 and 20 February 2018 sums totalling that amount were deposited (repaid) into the Trust Account. The charges against the Applicant 1. On 30 July 2020 the Applicant was charged with a total of 9 offences under s 211(2) of the Act: fraudulent conversion of trust monies, or alternatively, under s 218(2) of the Act as an accessory to the commission of corporate offences. 2. On 4 September 2020, at Parramatta Local Court the Applicant, who was represented by counsel, pleaded guilty to each of the charges and signed a Statement of Agreed Facts (Agreed Facts), which was provided to the Magistrate. In the Agreed Facts the Applicant admitted procuring the commission of corporate offences by transferring trust money totalling $920,755 between August 2017 and February 2018, at the request of his father and one of the Company's salesmen, "Viren". He admitted that he did not disclose the transactions to his clients, had acted alone and did not consult anyone else in the Company. He also admitted that he sought to conceal his fraudulent conduct by falsifying the Company's accounts by using fictitious entries to falsely represent that the Trust Account balanced at the end of each month. 3. The Applicant was convicted of six counts of fraudulently converting trust money contrary to s 211(2), alternatively s 218(2) of the Act, with three further offences being taken into account. A 24-month intensive correction order (ICO) was imposed, with the Applicant to serve 10 months' home detention expiring on 3 October 2021. He admitted at the hearing that he had breached the ICO, which is due to expire on 3 December 2022. The Applicant was also required to perform 120 hours community service. 4. The Applicant appealed to the District Court against the severity of the sentence but, on 10 March 2021, the appeal was dismissed. Disciplinary action taken by the Respondent against the Applicant 1. On 20 August 2020 the Respondent issued the Applicant with a Notice to Show Cause (NTSC) under s 195 of the Act as to why disciplinary action should not be taken against him. Three grounds - ss 191(1)(a), (c) and (e) of the Act - and five contraventions of the Act were identified, specifically contraventions of ss 32(1), 37(2), 86(1) and 211(2) of the Act and of Rules 2 and 6. 2. In the NTSC, the Respondent alleged that between 9 August 2017 and 20 February 2018, the Applicant, on 10 separate occasions, fraudulently converted sums of money totalling $920,755, in contravention of s 211(2) of the Act. The Respondent also alleged that the Applicant failed to retain trust money received, and failed to disburse it only for the purpose for which it was received, on 10 separate occasions in contravention of s 86(1) of the Act. The Respondent also alleged that the Applicant failed to properly supervise the business, in contravention of s 32(1) of the Act, having regard to the Qualified Audit Report, the Applicant's admitted failure to complete a Trust Account audit for the financial year 2015-2016, and his fraudulent conversion of $920,755 over the course of 10 separate transactions. The Respondent also alleged that the Applicant breached s 37(2) of the Act and Rules 2 and 6. The Applicant did not respond to the NTSC. 3. On 18 March 2021 the Respondent found that each of the three disciplinary grounds had been established. The delegate decided to take disciplinary action against the Applicant, cancelling his licence, declaring him disqualified for a period of 10 years and disqualifying him from being involved in the direction, management or conduct of the business of a licensee for a period of 10 years. 4. On 15 April 2021 the Applicant, through his present solicitor, sought an internal review of the decision and relied on his affidavits of 19 February and 28 March 2019 (discussed below). In the written submissions in support of the internal review request the Applicant raised the influence of his father as a mitigating factor. 5. On 26 April 2021 the decision under review was affirmed. The delegate found that there were grounds established in accordance with ss 191(a), 191(c) and 191(e) of the Act for taking disciplinary action. Specifically, the delegate found that the Applicant had contravened ss 32(1), 37, 86(1) and 211(2) of the Act because he, as licensee-in-charge, had, over a period of 6.5 months (from 9 August 2017 to 20 February 2018) made 10 separate transfers from the Company's Trust Account, totalling $920,755. 6. The delegate found that the Applicant fraudulently converted $920,755 from the Company's Trust Account in contravention of s 211(2) of the Act, that he failed to retain those monies in the Trust Account exclusively for the persons who paid the money into the Trust Account in contravention of s 86(1) of the Act, failed to comply with Rules 2 and 6 as required by s 37 of the Act by transferring $920,755 and failing to retain those monies exclusively for the persons who paid the money into the Trust Account, and failed in his duty to properly supervise the conduct of the business by allowing himself and the Company to intentionally contravene provisions of the Act in contravention of s 32(1) of the Act. Accordingly, the delegate found the disciplinary ground in s 191(a) of the Act to be established. 7. The delegate also found that, by reason of the contraventions, the Applicant had, in the course of carrying on the business or exercising functions under the licence or certificate of registration, acted unlawfully. 8. The delegate also found that the Applicant was not a fit and proper person to be involved in the direction, management and conduct of the business of a licensee by reason of the contraventions. The Applicant's earlier evidence 1. The Applicant, in his capacity as the then sole director of the Company and licensee-in-charge, provided the Respondent with an affidavit sworn on 19 February 2019 and a supplementary affidavit dated 28 March 2019. 2. In his affidavit sworn on 19 February 2019, he made the following admissions: 1. On 9 August 2017, at the request of his father, he transferred $275,000 from the Trust Account to Arvideep Pty Ltd (Arvideep), a Company controlled by the father. He acted alone. His father repaid the sum of $275,000 on 5 September 2017. On 3 October 2017, again at the request of his father, he transferred $150,000 from the Trust Account to Arvideep and on 9 November 2017 Arvideep deposited $150,000 into the Trust Account. On 21 November 2017, at the request of his father, he transferred another $200,000 from the Trust Account to Arvideep. 2. On 8 December 2017, at the request of Viren, he transferred $100,000 from the Trust Account to Viren as a loan, which Viren promised to repay. On 11 December 2017, 18 January 2018 and 6 February 2018, again at the request of Viren, he transferred, respectively, another $60,000, $29,000 and $12,000 from the Trust Account to Viren. 3. By 20 February 2018 all the trust monies had been repaid. 1. In his affidavit sworn 28 March 2019, the Applicant made further admissions that on 9 August 2017 and on 16 January 2018, as licensee-in-charge, he authorised the deduction from the Trust Account of $80,000 and $14,720, respectively, in favour of his father as a loan. Both transactions were deposits to the account of a person, to whom his father owed money. These amounts were also repaid in full. The Applicant's evidence before the Tribunal 1. In the course of the Applicant's case it became apparent that the evidence he had provided in his affidavit of 31 August 2021 materially conflicted with that of his affidavits of 19 February 2019 and 28 March 2019. Having regard to the provisions of the Oaths Act 1900 I granted the Applicant a certificate under s 128 of the Evidence Act 1995 in respect of his evidence at the hearing in relation to the inconsistencies in his affidavits in relation to matters giving rise to the charges of which he had been convicted. 2. In his affidavit of 31 August 2021 the Applicant said his father started the real estate agency for him and "had him registered" and "set up" the Company's Trust Account. His father continued to pay all the office expenses as the business did not make much money and, without his father's help, it would not survive. He said his father continued to have access to all bank accounts including the Company's Trust Account. In his oral evidence he said that he knew his father should not have had that access. 3. He denied that he made any of the transfers from the Trust Account himself and his evidence was that his father had made all transfers. He said that he and his father met regularly at the office and his father would talk about his financial problems; he knew that his father owed a large amount of money to banks, at a high rate of interest. His father mentioned that he needed money. He said he "tried to advise" his father and told him [borrowing from the Trust Account] was not "the right thing to do". His father had said "we need [the money]" and just made "an executive decision" and did it anyway. 4. As to whether he knew his father was making the transfers he said "not really" but also said he "did not oppose" his father making the transfers, as he was at the time "very depressed". The Applicant provided no further information in relation to his alleged depression, but Dr Richard Furst, forensic psychiatrist, who prepared a report for the purposes of the Applicant's sentencing in the Local Court, did not diagnose any psychiatric condition. 5. It was only later, the Applicant said in his oral evidence, that he found out what his father had done. As to how frequently he checked the Trust Account, he said that he checked it at least monthly, although other staff looked at it weekly or fortnightly. He said that he had obtained his licence in 2013, and by the time the unauthorised transfers commenced he had forgotten what to do with respect to the Trust Account; he signed off on the accounts prepared on his behalf. He said he first became aware of the transfers only after the second or third transfer had been made. He said when he noticed a discrepancy, he asked his father about it, but his father "does what he wants". 6. He conceded in his evidence that he should have withdrawn his father's access to the Trust Account. 7. The Applicant said that he was advised (or, as he said in his evidence "instructed") by his then lawyer and barrister to admit "all the wrongdoings done by [his] father". He said he was advised that it was best that he accept responsibility as he was the licensee-in-charge. He said he took the blame to protect his father because he is old and "did not want him to suffer"; if anyone was to go to gaol, it would not be his father. He did not speak with either of his parents nor his wife at the time he made the admissions. He said in his oral evidence though, that his father was aware of the charges against him. 8. He described his father as very hard-working and that he was the "breadwinner" for the family; his father was mistakenly trying to do the best for the family. In his oral evidence he described his father as the "backbone" of the business and had supported it financially and had been involved in "every facet" of its operation. He said he did not receive any financial interest from the transfers made by his father. His father had paid back all the money two or three months after he had the money transferred, including the money "loaned" to Viren. 9. As to why only now (that is, since his affidavit of 31 August 2021) he says that his father made the transfers, he said that the penalty was too harsh and he had gained nothing because of what had occurred, and that he had just wanted to stop his father from going to gaol. He did not know that the consequences would be so harsh. 10. He said that he was concerned that Viren would report him to the Office of Fair Trading and he felt he was being blackmailed. Evidence of the Applicant's father 1. In his oral evidence, the Applicant's father said that he is now semi-retired; he "runs" hotels – since May 2021, he has only 3. Previously, he worked 12-hour days 7 days a week, travelling each day between his various motels and other businesses, including his son's business premises. He said that he made all the business decisions for the Company. He said he had access to the Trust Account which he had opened in 2013 when he set up the business for his son. He said he knew the password and had an access token. 2. In his affidavit the Applicant's father wrote that in the period during which the monies were transferred he was running the Company and made all decisions and that he had access and full control of the Company's general and trust accounts. 3. He said at the time of the transfers from the Trust Account he had owed over $35 million to banks, in what he described as a "temporary cashflow shortage". He told his son that he owed a lot of money to banks and that he did not have enough cash to pay the interest. At the time he had debts which totalled approximately $1.5 million on 48 credit cards with various banks. 4. He said that he personally made all transfers from the Company's Trust Account "without involvement, knowledge or influence" of his son. He made transfers to his companies, totalling $719,755. He said his son told him not to do it "because we'll get into trouble". He said that it was his understanding that his son became aware of the transfers after about a month; there were not many transactions on the Trust Account. He did not know if his son was aware of the first transfer before the second one occurred. 5. He said he discussed many of his personal matters with Viren. In about early December 2017 Viren approached him and asked for financial assistance in building a house, and reminded him that he had already taken money from the Trust Account. A few days later he decided to lend money to Viren and on 8 and 11 December 2017 transferred a total of $160,000 from the Trust Account to him. In January 2018, Viren again approached him – and another $60,000 was paid. On 6 February 2018 another $12,000 was transferred to Viren's builder. 6. All the monies transferred from the Company's Trust account were paid back by 20 February 2018. 7. He wrote in his affidavit that his son is "innocent of all allegations" as he had not committed any crime or made any transfers from the Trust Account. He believed that his son took the blame to protect him; he said his son's lawyers had "told him to take the blame". His son didn't speak to him for a while. He said that on "many occasions" his son said that he did not know that he would be so severely punished for taking the blame, although in his oral evidence said his son had only said that after his licence was cancelled. He also said he also did not know about the consequences and said he would admit the wrongdoings as his son should not be punished for his deeds, and agreed in cross-examination that he first said that after the Applicant's licence was cancelled. Conclusion as to the evidence on behalf of the Applicant 1. The Applicant's evidence before me squarely contradicted his sworn evidence in two earlier affidavits. In summary, he previously admitted that it was he who had made the unauthorised transfers from the Trust Account, whereas now his evidence is that it was his father, and not him, who made the transfers. It remains that he was convicted of 9 offences under s 211(2) of the Act: fraudulent conversion of trust monies, or alternatively, under s 218(2) of the Act as an accessory to the commission of corporate offences. It is clear that the offences involve dishonesty. 2. In his affidavit of 31 August 2021 and in his evidence before me, the Applicant asserted that he was advised by his then lawyers to ''admit all the wrongdoings done by [his] father". The Respondent submitted that it is inherently implausible that the Applicant would receive advice from a solicitor to accept responsibility for wrongdoing when he was not the responsible party. I do not canvass the advice the Applicant may have been given but I observe, that under the alternate charge under s 218 of the Act, the Applicant, as licensee-in-charge, had criminal responsibility for corporate offences by the Company. In Parisi v Commissioner of Police, NSW Police Force [2018] NSWCATAD 155, the applicant also claimed to have been poorly advised in criminal proceedings. see also Wilson v Commissioner of Police, NSW Police Force [2018] NSWCATAD 274. In Parisi, at [16], I discussed the absence of any reference to clear exculpatory evidence in criminal proceedings. 3. In Luk v Commissioner of Police, NSW Police [2019] NSWCATAP 23, at [34], in the context of a security licence the Appeal Panel considered one of the propositions arising from the decision of Farah v Director General, Department of Finance and Services [2014] NSWCATAP 23 to be that it is the offence itself that must involve dishonesty, and it is not permissible to look behind a conviction for that offence to consider the particular facts of the case. The agreed facts on which a guilty plea is based, the findings of the court in relation to a contested hearing and the sentencing remarks are not relevant, and those matters cannot be relied on to find that the person has engaged in dishonest conduct or behaviour or had a particular state of mind which was dishonest. 4. During the course of the criminal proceedings, the Applicant made admissions in the Agreed Facts detailing the conduct underlying his pleas of guilty and convictions. His present account is inconsistent with his guilty plea and the Agreed Facts. 5. Even if I were to accept that the Applicant decided to take the blame for his father in the criminal proceedings, it is more problematic, in my view, that he swore affidavits of 19 February and 28 March 2019 which he now says are not true. His change of position, it is clear, was precipitated not only by the penalty imposed by the Magistrate and by the District Court, but also by the disciplinary action taken by the Respondent. His present account is also inconsistent with the submissions made on his behalf in support of his application for internal review: he "did not know that the consequences [were] going to be so harsh and [he] made those admissions to protect his father". The submissions expressly relied upon the Applicant's two earlier affidavits in which he admitted making the transfers from the Trust Account himself. 6. The Applicant's evidence before me that at the time of the transfers he was "very depressed" was not supported by Dr Furst who prepared a psychiatric report for the purposes of the Applicant's sentencing in the Local Court which was that he is not suffering any psychiatric condition. 7. In these proceedings both the admitted conduct underlying the conviction and the convictions themselves are relied upon to establish disciplinary grounds, specifically contravention of the Act and conduct evidencing that the Applicant is not fit and proper to hold a licence; cf Sudath v Health Care Complaints Commission [2012] NSWCA 171. 8. Even if I were to accept that it was the Applicant's father who undertook all the transfers and not the Applicant, it remains that the Applicant failed to supervise the business by allowing his father to have access to the Trust Account, and failed to supervise the Company's Trust Accounts over a period of 6.5 months and identify unauthorised transactions on the Trust Accounts contrary to s 32 of the Act. Further, even on his present account, he became aware became aware of the transfers after the second or third transfer had been made, but still took no steps to intervene such as would have prevented the subsequent transfers. 9. I also consider that, because his position has so completely changed, it is inevitable that I conclude that the Applicant was prepared either to swear two false affidavits as to what occurred, endorse the Agreed Facts, enter pleas of guilty on the basis of that admitted conduct (including on appeal) and maintain that account through the Respondent's investigation, the NTSC process, and the internal review process, until fairly late in these (disciplinary) proceedings. 10. As was pointed out by the Respondent, the Applicant, having made full and voluntary admissions, expected a far more lenient outcome. Now, disappointed by the consequences of his admitted conduct, the Applicant seeks to undo the effect of his admissions by now relying on evidence which is materially inconsistent with his several sworn and signed admissions, and apparent instructions to successive legal representatives, including (at least initially), his present solicitor. In all the circumstances, it is difficult to accept the Applicant's evidence that it was not him but his father who was responsible for making each of the transfers. As a result, I consider that the Applicant cannot be relied upon to tell the truth where to do so might conflict with his own interests. Consequently, I have severe reservations, on the basis of the Applicant's evidence, as to his trustworthiness to hold a licence under the Act. Are there grounds for disciplinary action? 1. Section 191 of the Act sets out the grounds for taking disciplinary action. Has the Applicant contravened a provision of the Act or the Regulation?: s 191(1)(a) 1. The Applicant contravened ss 32(1) in that he failed to properly supervise the real estate business. He contravened s 37(2) in relation to rules of conduct, and s 86(1) in relation to his failure, as licensee, to properly hold and manage trust monies. Further, the Applicant has been convicted of offences under the Act: s 211(2) or s 218(2) of the Act. He breached Rules 2 and 6 by transferring, over the course of 6.5 months in multiple transfers, $920,755 in trust money to third parties. Has the Applicant acted unlawfully, improperly, unfairly, or incompetently in the course of carrying on business or exercising functions under the licence?: s 191(1)(c)? 1. As discussed above, the Applicant clearly acted unlawfully. He also admitted to attempting to conceal the fraudulent conduct by falsifying the Company's accounts by using fictitious entries to falsely represent that the Trust Account balanced at the end of each month. In addition, he admitted to being unfamiliar with his Trust Account obligations, and relied on others to prepare the records. At best, this conduct demonstrates incompetence in relation to his obligations. Is the Applicant a fit and proper person to hold a real estate agent's licence: s 191(1)(e)? 1. The expression "fit and proper person", on its own, carries no precise meaning and takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 (Bond), per Toohey and Gaudron JJ at 380. 2. In Sobey v Commercial Agents Board (1979) 22 SASR 70 at 76, Walters J said in relation to the licensing of commercial and private agents, that the expression means that an applicant must show that he or she "is possessed of sufficient moral integrity and rectitude of character as to permit him to be safely accredited to the public, without further inquiry, as a person to be entrusted with the sort of work which the licence entails." The statutory regime under the Act is protective, not punitive; the test, in this context, is directed towards maintaining appropriate standards by real estate agents. The licensed real estate agent role carries with it certain privileges. It also entails serious obligations, including in relation to the holding of trust money. The industry is regulated, not only to establish standards but to ensure that the public may be confident that licensed real estate agents will conduct themselves in accordance with the rules that have been established and behave honestly, competently and fairly. Such is the hallmark of a person who is fit and proper to hold a real estate agent licence. 3. In Maher v Department of Fair Trading [2019] NSWCATOD 21 at [124] Senior Member Montgomery observed: 124. A licensed real estate agent carries privileges and obligations. Agents are entrusted to hold deposits on sales of properties and to receive rent on behalf of landlords. The industry is regulated to provide the public with a measure of confidence that agents follow rules in respect of trust money and conduct themselves competently, honestly and fairly. Poor or dishonest use of trust funds or poor supervision of a corporation that manages the trust funds is behaviour that fails to meet those standards. If a licensee is unable to discharge his responsibilities, he is not a fit and proper person to remain licensed. 1. In this matter, the Applicant either himself dishonestly transferred trust monies or he failed, as sole director and licensee-in-charge, to ensure that trust monies were held in the Trust Account and disbursed only in accordance with an authorised direction. At best, on the Applicant's current version of events, for a period of some months, he failed to supervise the Trust Account and in that time trust monies totalling $920,755 were made to third parties. As noted in Sobey I must be satisfied that the Applicant is possessed of a requisite knowledge of the duties and responsibilities devolving upon him as the holder of the licence. I am not satisfied that the Applicant has the knowledge of what is required of a licensee to ensure compliance with the legislative requirements; if he did have that knowledge, then he chose to ignore his responsibilities. I consider that that the dishonest use of trust funds or, on the Applicant's present account, his failure to prevent unauthorised use of the trust monies and to act when he discovered his father's access, is conduct which demonstrates that he is not fit and proper to hold a real estate agent licence. 2. One question that may also be considered is whether the general community will have confidence that the improper conduct will not occur again. The Applicant had described the unauthorised transfers as a "one off" but in my view this was a gross understatement of what occurred, because the activity occurred on multiple occasions over several months. The Applicant claims, on his current version, that his father did what he liked notwithstanding that he, the Applicant, had counselled him against using the trust monies for his own purposes. The Applicant's evidence was to the effect that he was so subjugated to his father's influence that he, either was persuaded to improperly access the Trust Account or to permit his father to have ongoing improper access to the Trust Account. The Applicant's father was, and remains, it would appear from the evidence of both the Applicant and his father, a significant presence, and more relevantly, influence, in the Applicant's life. In my view, the public would not have confidence that, that the Applicant's father may not again impose upon his son if faced with financial difficulties, notwithstanding his recent more modest business undertakings. More importantly, if those circumstances were to arise again, the public would not be confident that the Applicant would not, once more, succumb to his father's wishes. What is the appropriate disciplinary action to take against the Applicant? 1. The submission on behalf of the Applicant, in summary, was that the disciplinary action taken against the Applicant was excessive. Both the Applicant and his father expressed concern was that the penalty imposed was "unfair", especially as the monies had been repaid. 2. In my view, what the Applicant did or was party to, was in fundamental disregard of the honesty and integrity required of those who hold a licence or a under the Act. That the Applicant thought the disciplinary action was unduly harsh also suggests that his knowledge of his obligations under the Act was significantly deficient: see Huynh v Commissioner for Fair Trading [2016] NSWCATOD 2. 3. Having regard to the standards imposed by the legislative regime, that the standards enhance consumer confidence, that there is an expectation in the general public that in matters of misconduct disciplinary action will be taken. 4. There are some mitigating factors against the imposition of a severe penalty. Firstly, the Applicant co-operated with the Respondent during its investigation, and had, very quickly, admitted the unlawful conduct. On the other hand, in 6.5 months nearly $1 million in trust funds were fraudulently converted, either by the Applicant himself, or while he was responsible for the business. His current evidence, at best, is that he was aware fairly soon after his father made the first one or two transfers that they were occurring, and yet he took no steps to curtail his father's access to the Trust Account. 5. I am satisfied that, even though restitution of the funds misappropriated from the Trust Account was made, the seriousness of the Applicant's actions, on either version of events, and his awareness that what he did was wrong (on either version) merits significant disciplinary action. His unauthorised use of trust account money (or permitting access to the trust money) on multiple occasions in the sum of nearly $1 million demonstrates a clear lack of honesty and integrity, and his licence warrants cancellation: s 192(1)(g). 6. Working in the real estate industry in any capacity requires the highest degree of integrity. I consider his conduct as sufficiently serious that a declaration that he is a disqualified person under s 192(1)(h) is warranted: see Gambino v Commissioner for NSW Fair Trading [2014] NSWCATOD 135 at [78]. It was submitted on the Applicant's behalf that he was immature at the time of the offences. Within a period of 10 years, it is hoped that he will have overcome his immaturity, and in that time, comes to grips with his father's influence, and be better aware of how to deal with possible blackmail. 7. For the same reasons I have reservations that, even if he were to work as a real estate agent other than a licencee-in-charge, he may still be subject to the influence of his father or others. Hence, it is appropriate that he not be involved in the direction, management or conduct of the business of a licencee for a period of 10 years: s 192(1)(i). I acknowledge that this would preclude him from working as a real estate salesperson in that period. 8. Having regard to the period during which the Applicant acted (or on his current version of events, failed to supervise the business), it is appropriate that the Applicant's licence is cancelled, that he is declared a disqualified person for a period of 10 years from 18 March 2021, and that he is disqualified from being involved in the direction, management or conduct of the business of a licensee for a period of 10 years from 18 March 2021 (ss 192(1)(g), (h) and (i) of the Act). The Applicant's conduct demonstrates a gross breach of trust and a failure to meet the standards expected of him by his clients and the public generally. decision 1. The decision under review is affirmed. ********* I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar Amendments 16 December 2022 - Unlinked legislation. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 December 2022