CITATION: Bice -v- Director General, Department of Fair Trading [2000] NSWADT 157 DIVISION: General Division APPLICANT Allen Bice PARTIES: RESPONDENT Director General, Department of Fair Trading FILE NUMBER: 003254 HEARING DATES: Decison on the papers SUBMISSIONS CLOSED: 10/13/2000 DATE OF DECISION: 11/09/2000 BEFORE: Hennessy N (Deputy President) APPLICATION: Pawnbrokers & Second-Hand Dealers Act - second-hand dealers licence - impose a condition on licence - Second-Hand Dealers licence - impose a condition on licence MATTER FOR DECISION: Principal matter LEGISLATION CITED : Pawnbrokers and Second-hand Dealers Act 1996 CASES CITED: Flens v Department of Fair Trading [1999]NSWADT 76 APPLICANT REPRESENTATION: In person RESPONDENT T Grey, solicitor ORDERS: 1. The decision of the Director General to impose a condition on the applicant's licence is affirmed; You must use electronic means of creation and storage of records for the purposes of section 16 and 28 of the Pawnbrokers and Second-hand Dealers Act 1996, using software which complies with the specifications issued by the New South Wales Police Service Titled "Pawnbroker and second-hand Dealer system (Dealer Software Specifications)' as modified from time to time Background 1 In May 1997 Mr Bice applied to the Director General, Department of Fair Trading (the administrator), for a Second Hand Dealer's licence under the Pawnbrokers and Second-hand Dealers Act 1996 (the Act). That application was granted on 31 October 1997. On 20 October 1999 Mr Bice lodged an application for the renewal of the licence, together with an application for an exemption from keeping computerised records. By letter of 29 May 2000, the administrator advised Mr Bice that he did not qualify for an exemption and the following condition was imposed on the licence: You must use electronic means of creation and storage of records for the purposes of section 16 and 28 of the Pawnbrokers and Second-hand Dealers Act 1996, using software which complies with the specifications issued by the New South Wales Police Service Titled "Pawnbroker and Second-hand Dealer system (Dealer Software Specifications)" as modified from time to time. 2 On 24 July 2000 Mr Bice lodged an application with the Tribunal for a review of the administrator's decision to impose this condition on his second-hand dealers licence. 3 The parties agreed that the Tribunal should determine this matter without conducting a hearing. Section 76 of the Administrative Decisions Tribunal Act 1997 allows the Tribunal to conduct a "paper" hearing. That sections states that: The Tribunal may determine proceedings by considering the documents or other material lodged with or provided to the Tribunal and without holding a hearing if it appears to the Tribunal that the issues for determination can be adequately determined in the absence of the parties. The Tribunal did convene briefly on 3 November 2000 to clarify one of the administrator's submissions. Mr Bice was advised of this hearing, but was not able to attend, and agreed that it should be conducted in his absence. Relevant law 4 The Tribunal has jurisdiction to hear this matter pursuant to section 38 of the Administrative Decisions Tribunal Act 1997 and section 39(2) of the Act. 5 Under s 11(1) of the Act the Director General may issue a license subject to any conditions that he or she thinks fit. The Pawnbrokers and Second-hand Dealers Regulations 1997 (the Regulations) regulate the imposition of conditions. (See s 11(2) of the Act.) 6 Pawnbrokers and second hand dealers must keep records as prescribed by the Regulations. Section 16(1) of the Act states that: (1) A licensee must keep records, in the manner and containing the particulars prescribed by the regulations, of all transactions: (a) for the acquisition or disposal of second-hand goods, or (b) for the redemption of any pawned goods, or the disposal of any forfeit pledge, and of such other matters pertaining to the business of a licensee as the regulations may prescribe. 7 Section 16(7) of the Act allows Regulations to be made about electronic methods of creation and storage of records. That sub-section states that: Without affecting the generality of subsections (1) and (2) or the power of the Director-General under section 11, the regulations may make provision for or with respect to requiring the use by licensees of electronic methods of creation and storage of records that licensees are required under this section to keep. 8 The Regulatory Impact Statement to the Regulations set out the objective of the record keeping requirements of the Regulations in the following terms: The proposed Regulation specifies that licensees must keep detailed records and maintain records in a computerised form. This is to enable the direct transmission of data to police on a regular and timely basis. This data is then able to be cross checked against computerised records of stolen goods. These requirements help to ensure that the Act operates to increase the effectiveness of law enforcement to recover stolen goods and apprehend offenders. 9 The Regulations make detailed provisions in relation to electronic record keeping. Clause 13A of the Regulations contains certain exemptions from conditions requiring the use of electronic record keeping and storage. It provides, in part, that: (1) A person who held a second-hand dealer's licence under the Second-hand Dealers and Collectors Act 1906 immediately before the repeal of that Act on 30 April 1997 and who has never held a licence issued with a condition requiring the use of electronic means of creation and storage of records, may, when applying for the issue or renewal of a licence on or after 1 January 1999 (being a licence authorising the person to carry on the business of a second-hand dealer, but not the business of a pawnbroker), apply to have the licence issued or renewed without such a condition. (2) Despite clause 13 (4), if a person makes such an application, the Director-General must not impose such a condition if: (a) the Director-General is satisfied that the person was entitled to make such an application, and (b) the Director-General is satisfied, after having regard to both of the relevant documents in relation to the person's business, that the gross receipts of the business relating to used goods totalled $150,000 or less in the previous financial year or (if appropriate) the financial year before that. (Emphasis added.) 10 "Used good" are defined in Clause 13A(8) of the Regulations in the following terms: In this clause: used goods means goods that have been used or that are represented by a vendor of the goods to be goods purchased (otherwise than by the vendor) previously but unused, and includes second-hand goods. 11 Clause 13A also identifies the documents that are relevant to take into account when determining gross receipts. Clause 13A(3) states that: For this purpose, the relevant documents in relation to the person's business are: (a) the person's income tax return or audited financial statement for the previous financial year, and (b) a statutory declaration by the person declaring that the gross receipts of the business relating to used goods totalled $150,000 or less in the previous financial year. (8) In this clause: used goods means goods that have been used or that are represented by a vendor of the goods to be goods purchased (otherwise than by the vendor) previously but unused, and includes second-hand goods. 12 The effect of these provisions is that as long as the following conditions are met, the Director General cannot impose a condition on a licence that the licensee keep electronic records: · the licensee must have held a licence immediately prior to 30 April 1997; · the licensee must never have held a licence issued with a condition requiring the use of electronic means of creation and storage of records; · the licensee must have applied for a second hand dealers licence on or after 1 January 1999 without such a condition; · the Director-General must be satisfied, after having regard to the person's income tax return or audited financial statement for the previous financial year and a statutory declaration by the person, that the gross receipts of the business relating to used goods totalled $150,000 or less in the previous financial year or (if appropriate) the financial year before that. 13 Unless an applicant meets all these requirements, the Director General must impose a condition to keep electronic records (See Flens v Department of Fair Trading [1999]NSWADT 76 at [22] 3 September 1999.) Issue 14 Both parties agreed that Mr Bice complied with the requirements of Clause 13A(1), which are reflected in the first three dot points set out above in paragraph 11. The only issue in this case is whether the gross receipts of the applicant's business relating to used goods totalled $150,000.00 or less in the previous financial year or (if appropriate) in the financial year before that. In order to determine this issue, the Tribunal must take into account both the person's income tax return or audited financial statement for the previous financial year and a statutory declaration by the person declaring that the gross receipts of the business relating to used goods totalled $150,000 or less in the previous financial year. Evidence 15 Mr Bice's income tax return for the year ended 30 June 1999 shows that the gross income for the partnership between Mr Bice and KF Bice was $192,797. Mr Bice signed a statutory declaration that "our gross receipts from our used goods business was less than $150,000.00." 16 Prior to 1 March 2000 Mr and Mrs Bice had two shops, Maclean Trading and Ye Olde Red Shoppe. The only part of the business which requires second hand dealers licence is Maclean Trading. Mr Bice wrote in a statement to the Tribunal that: On the advice of the Fair Trading Inspector who visited both our business premises, and who is familiar with our two shops, he suggested that as our antique and collectables shop "Ye Olde Red Shoppe" does not sell any prescribed goods and does not require a licence, we could split the two businesses, which would then show that Maclean Trading . . . would fall well below the $150,000 that is required before we are required to keep electronic records. 17 Mr Bice submitted a statement which attached a document headed "AA & KF Bice t/a Maclean Trading, Trading Account for the year ended 30 June 1999." That document shows that the Sales from Second Hand Goods at Argyle Street were $133,557.70, while the sale of antiques/collectables at the "Red Shoppe" were $59,239.45. 18 Both parties agreed that the applicant changed his business structure with effect from March 2000, approximately four months after the application for a renewal and exemption was filed with the Department. Submissions 19 The administrator pointed out that the income tax return for the year ended 30 June 1999 shows that the gross income for the partnership was $192,797. These amount covers all "used goods" as defined in Clause 13A(8) of the Regulations. The administrator points out that the meaning of "used goods" differs from the meaning of "second hand goods." While a second hand dealers licence is only required to sell "second hand goods" it is the gross receipts of the "used goods" which is relevant for determining whether an exemption from electronic record keeping should be granted. 20 As the gross receipts for "used goods" is greater than $150,000, the applicant does not qualify for an exemption from the condition to keep electronic records. 21 The document provided by the applicant showing the Trading Account for the period ended 30 June 1999 is not audited as required by Cl 13A(4)(a) of the Regulations and is inconsistent with the income tax return of the partnership. 22 In the administrator's submission, a change in the structure of the applicant's business that may produce a lower gross receipt for used goods in future, would not satisfy the requirements of paragraph 13A(2)(b). The applicant's future income tax returns for the business are not "relevant documents" for the purposes of sub-clause 13A(3). 23 The applicant submitted that since he split the businesses on 1 March 2000, "the partnership has now adjusted its affairs to comply with the licensing requirements, allowing them to continue with the manual operation of their books and record keeping . ." Reasons and Decision 24 The pre-requisites set out in the legislation which would allow Mr Bice to avoid electronic record keeping are straightforward. There is no dispute that all but one of these pre-requisites is met. The only question is whether the gross receipts of the business relating to used goods totalled $150,000 or less in the previous financial year or (if appropriate) the financial year before that. Despite Mr Bice's statutory declaration, the evidence satisfies me that the gross receipts for all "used goods" during the previous financial year (the year ended 30 June 1999) totalled more than $150,000. Even though Mr Bice only required a licence in relation to prescribed goods sold through Maclean Trading, the gross receipts in relation to all "used goods" must be included for the purposes of determining his eligibility for an exemption from the electronic record keeping conditions. Because it is the gross receipts for the previous financial year that are the basis for determining eligibility, the fact that Mr Bice has since restructured his business is not relevant. Orders The decision of the Director General to impose the following condition on the applicant's licence is affirmed. You must use electronic means of creation and storage of records for the purposes of section 16 and 28 of the Pawnbrokers and Second-hand Dealers Act 1996, using software which complies with the specifications issued by the New South Wales Police Service Titled "Pawnbroker and Second-hand Dealer system (Dealer Software Specifications)' as modified from time to time. 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.