Hinton & Ors v Commissioner for Fair Trading (No2) [2006] NSWADT 299

CITATION: Hinton & Ors v Commissioner for Fair Trading (No2) [2006] NSWADT 299

DIVISION: General Division

APPLICANTS PARTIES: Peter Leslie Hinton and Ereca Louise Hinton RESPONDENT Commissioner for Fair Trading, Office of Fair Trading

FILE NUMBER: 053005, 053056 and 053057

HEARING DATES: On the papers

DATE OF DECISION: 10/19/2006

BEFORE: Molony P - Judicial Member

CATCHWORDS: Property, Stock and Business Agents Act - Real Estate Agent - disciplinary determination

MATTER FOR DECISION: Disciplinary Action

Property, Stock and Business Agents Act 2002 LEGISLATION CITED : Fair Trading Act 1987 Property, Stock and Business Agents Regulation 2003

CASES CITED: Clyne v NSW Bar Association (1960) 104 CLR 186

Mr R Shelson instructed by Mr T Murray, Solicitor of Tress Cox REPRESENTATION: Mr P I Lakatos SC instructed by Mr J Coss, Legal Officer, Office of Fair Trading

ORDERS: 1. The decision of the Commissioner with respect to Mr Peter Hinton is affirmed; 2. The decision of the Commissioner with respect to Ms Ereca Hinton is affirmed; 3. The decision of the Commissioner with respect to Mahevi Pty Ltd is varied by removing the requirement that Mahevi Pty Ltd prepare a compliance manual. That decision is otherwise affirmed.

REASONS FOR DECISION Introduction 1 On 30 August 2006 I deliver my decision in respect of the substantive issues in this matter in Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257. As a result of the matters there canvassed I made the following orders: "1. The Tribunal finds that Mahevi Pty Ltd as licensee: i. concealed a material fact, namely the murders which occurred on the property at 6 Collins Street, and thereby induced the purchasers to enter into a contract to purchase the property, contrary to s.52(1) of the Property Stock and Business Agents Act 2002; ii. engaged in misleading or deceptive conduct, namely the non-disclosure of murders which occurred on the property, in breach of s.42 of the Fair Trading Act 1987; and iii. failed to act honestly, fairly and professionally in breach of rule 3(1) of the Rules of Conduct. 2 The Tribunal finds that Mr Peter Hinton as a Director and Licensee in charge of Mahevi Pty Ltd: i concealed a material fact, namely the murders which occurred on the property at 6 Collin Street, and thereby induced the purchasers to enter into a contract to purchase the property, contrary to s.52(1) of the Property Stock and Business Agents Act 2002; ii. engaged in misleading or deceptive conduct, namely the non-disclosure of murders which occurred on the property, in breach of s.42 of the Fair Trading Act 1987; and iii. failed to act honestly, fairly and professionally in breach of rule 3(1) of the Rules of Conduct iv. misled or deceived a party to a transaction in breach of rule 3(2) Rules of Conduct; and v. failed to supervise the business of the corporation in breach s.32 of the Property Stock and Business Agents Act 2002. 3 The Tribunal finds that Ms Ereca Hinton as a licensee: i. concealed a material fact, namely the murders which occurred on the property at 6 Collin Street, and thereby induced the purchasers to enter into a contract to purchase the property, contrary to s.52(1) of the Property Stock and Business Agents Act 2002; ii. engaged in misleading or deceptive conduct, namely the non-disclosure of murders which occurred on the property, in breach of s.42 of the Fair Trading Act 1987; iii. failed to act honestly, fairly and professionally in breach of rule 3(1) of the Rules of Conduct; and. iv. misled or deceived a party to a transaction in breach of rule 3(2) Rules of Conduct. 4 This application is listed for a directions hearing on 27 September 2006 at 9:30am to determine whether a further hearing is required on the issue of disciplinary action, and to consider reserved costs." 2 At the directions hearing held on 27 September 2006 the parties advised that they relied on their existing submissions as to what disciplinary action was appropriate, and did not seek to make any further submissions. I indicated that I would provide written reasons for decision with respect to disciplinary action shortly. These are those reasons. 3 The parties also reached agreement with respect to the outstanding issue of reserved costs: I made an order accordingly. 4 The full history of what has been a difficult and complex matter, together with a discussion of the relevant facts, legislation and law, as well as my findings in respect of those matters, is set out in my earlier reasons for decision. I do not propose to traverse them again. 5 It is sufficient to say that my findings as against each of the Applicants (set out above) are the same as those made by the delegate of the Commissioner on 16 December 2004, although there are some differences as to the precise findings of fact upon which those conclusions are reached. The delegate of the Commissioner made disciplinary determinations against each Applicant. Mahevi Pty Ltd was required to pay a monetary penalty of $13,200 and prepare a compliance manual. Mr Hinton and Ms Hinton were penalised $5,500 and $2,200 respectively. The Commissioner stands by those determinations, apart from the preparation of a compliance manual which it is agreed is not required. The Commissioner urged me to affirm the original decisions, with the exception of the compliance manual requirement. 6 The Applicants have submitted that the penalties imposed against them were excessive. It was said that: "The Agents have suffered considerable professional and personal detriment in consequence of the issues the subject of these proceedings and submit that the effective loss of their livelihood is penalty enough without the imposition of fines as well." In response the Commissioner said: "The penalties relating to E. Hinton and Mahevi Pty Ltd are related to breaches other than of s.32. The penalty in relation to P. Hinton does include such a breach; however having regard to the fact that the substantial complaints against him relate to concealment, misleading conduct and breaches of the rules, there should be no reduction of his penalty and only a nominal reduction if at all." Disciplinary Action 7 The disciplinary action which may be taken under the Property Stock and Business Agents Act 2002 is set out in s.192: it ranges from a caution or reprimand, through the imposition of monetary penalty, to the cancellation or suspension of licence, and the imposition of a period of disqualification. 8 The circumstances in which each of the Applicants has been found to have breached their obligations as licensees are highly unusual, if not unique. The findings against them result from their concealment, within the meaning of s.52 of the Property Stock and Business Agents Act 2002, from purchasers of that fact that a property was the scene of a notorious triple murder, which remained the subject of public attention at that time. Much of the debate before me went to the issue of whether that was a material fact, and whether it had been concealed, as well as whether the failure to disclose was misleading and deceptive. Those were difficult and complex matters of law about which there was significant and legitimate debate during the course of the hearing. I have concluded that debate by finding that the fact that the house was the scene of the murders was a material fact, which the Applicants relevantly concealed, and that they engaged in misleading and deceptive conduct and acted unfairly. With respect to both Mr Hinton and Ms Hinton I have found that they also misled a party to the transaction in breach of the rules of conduct. 9 In Mr Hinton's case I have also found that he as the person in charge of the business of the principal licensee (Mahevi Pty Ltd), failed to properly supervise that business. He was the architect of the strategy of which allowed these breaches to occur, and thereby failed to properly supervise employees of the principal licensee. 10 In considering what disciplinary action to take I am cognizant of the fact that the purpose of disciplinary action is not to punish the Applicants but to protect the public: Clyne v NSW Bar Association (1960) 104 CLR 186 at 20. Despite the unusual circumstances which gave rise to the present proceedings, the conduct of the Applicants, and the breaches of professional regulation they have committed, point to a real public interest in ensuring that the Applicants, and indeed all those whose occupations are regulated under the Property Stock and Business Agents Act 2002, do not act in a like fashion when similar circumstances arise in the future. 11 While it no doubt reflects the contentious nature of legal issues at the heart of this case, a factor that troubles me when considering an appropriate penalty is the stance adopted by both Mr Hinton and Ms Hinton to during the hearing. Their view of their obligations as selling agents impressed me as one in which they embraced the maxim caveat emptor (let the buyer beware) with mercantile vigour, and showed little understanding of their wider obligations as agents under the Property Stock and Business Agents Act 2002. My clear impression of both of them was that they could not conceive of why it might have been fair to disclose the property's history to prospective purchasers, let alone their professional duty might have been to do so. They were fixed in the belief that the fact that a notorious triple murder had occurred at the property, could not affect the property, and was not a material consideration. In this I have found they were wrong. 12 There can be no doubt that the public attention directed at the Applicants following the publicity attendant on the sale of the property, and the subsequent release of the purchasers from that sale, has caused both of Mr Hinton and Ms Hinton upset and discomfort. The business has lost out financially because of the loss of the sale, and their Counsel submits the business of the principal licensee has suffered as a result of the publicity. No doubt the disciplinary determination by the Commissioner and subsequent appeal to this Tribunal, with attendant publicity, has been a similar source of discomfort and unease. Their Counsel submits they have been punished enough. 13 Despite the difficulties and trauma, both financial and emotional, which the Applicants have suffered as a result of these events, it is my view that the public interest requires that a substantial penalty be imposed to ensure that both the Applicants themselves, and licensees generally, understand and comply with their professional obligation under the Property Stock and Business Agents Act 2002. The breaches found against the Applicants are serious, albeit the circumstances in which they have occurred are unusual. In the Applicants favour is that there are no prior breaches alleged against them. 14 I have given considerable thought to the question of what is an appropriate penalty. Because of the seriousness with which I view the conduct of the Applicants, and the public interest in ensuring that such conduct not be repeated (on both a specific and general deterrence basis), I have concluded that this is not a case where it would be appropriate to simply caution or reprimand the Applicants. 15 At the same time, because of the very unusual facts giving rise to the breaches, because the Applicants have been the subject of disciplinary action before, and because I am satisfied that the Applicants breaches arose, principally, from their wrongly held view as to the nature of what is a material fact, I do not think it would be appropriate to contemplate interfering with their licences. The imposition of a monetary penalty is appropriate to the breaches found in the circumstances, and conveys the level of censure which the public interest requires. 16 The fines imposed by the Commissioner appropriately reflect the level of responsibility of each of the Applicants in their respective roles. On balance, it is my view, that the decision of the Commissioner's delegate to impose monetary penalties he did reflected an appropriate balance of all these factors. 17 As a result, apart from varying the decision of the Commissioner with respect to Mahevi Pty Ltd to dispense with the requirement that it prepare a compliance manual, I consider that the correct and preferable decision is to otherwise affirm the decisions of the Commissioner. Orders 18 In the light of the above: 1. The decision of the Commissioner with respect to Mr Peter Hinton is affirmed. 2. The decision of the Commissioner with respect to Ms Ereca Hinton is affirmed. 3. The decision of the Commissioner with respect to Mahevi Pty Ltd is varied by removing the requirement that Mahevi Pty Ltd prepare a compliance manual. That decision is otherwise affirmed.