Tassios v Commissioner for Fair Trading [2005] NSWADT 179

CITATION: Tassios v Commissioner for Fair Trading [2005] NSWADT 179 DIVISION: General Division APPLICANT PARTIES: John Tassios RESPONDENT Commissioner for Fair Trading, Office of Fair Trading FILE NUMBER: 053013 HEARING DATES: 18/04/2005 SUBMISSIONS CLOSED: 04/18/2005 DATE OF DECISION: 08/05/2005

BEFORE: Montgomery S - Judicial Member APPLICATION: Property, Stock and Business Agents Act - Real Estate agent - cancellation of licence - Property, Stock and Business Agents Act - Real Estate agent - disqualification - Real Estate agent - cancellation of licence - Real Estate agent - disqualification MATTER FOR DECISION: Principal matter LEGISLATION CITED : Property, Stock and Business Agents Act 1941 Property, Stock and Business Agents Act 2002 CASES CITED: APPLICANT REPRESENTATION: In person RESPONDENT A Wilson, solicitor ORDERS: (1) I affirm the Commissioner's decision to permanently disqualify Mr Tassios from involvement in the management, direction or conduct of the business of a licensee; (2) I remit the remainder of the matter for reconsideration by the Commissioner.

REASONS FOR DECISION 1 John Tassios was the holder of a real estate agent's licence, number 867101, issued pursuant to the Property Stock and Business Agents Act 2002 ("the Act"). The Act replaced and repealed the Property Stock and Business Agents Act 1941 (the 1941 Act) with effect from 1 September 2003. Breaches of the 1941 Act can be addressed under the disciplinary provisions of the Act. 2 A company associated with Mr Tassios, J & V Tassios Pty Ltd, ("the company") was also licensed under the Act and traded as Elders Real Estate Blacktown from 17 September 1999 to June 2003. The company's licence expired on 16 September 2003. 3 In April 2004 notices to show cause why disciplinary action should not be taken were sent to Mr Tassios and the company. 4 Mr Tassios's licence was to expire on 4 February 2005 however it was cancelled on 23 December 2004. A delegate of the Commissioner, Mr Christopher Hanlon, determined that Mr Tassios's licence be cancelled, that Mr Tassios be permanently disqualified from holding a licence or a certificate of registration under the Act and that Mr Tassios be permanently disqualified from involvement in the management, direction or conduct of the business of a licensee. 5 Mr Tassios has applied to the Tribunal for review of the Commissioner's delegate's determination. The matter first came before Judicial Member Molony on 13 January 2005. At that time Mr Molony determined to deal with the matter in the absence of an internal review and ordered that the determination be stayed pending final determination. The terms of the stay are as follows 1. Mr Tassios is not to act as a licensee in charge of any real estate agency. 2. Mr Tassios is not to be a director of or involved in the day to day management of any entity operating as a real estate agency. 3. Mr Tassios is not to receive or handle trust monies in any form. 4. Mr Tassios is only to act in the capacity of a real estate salesperson. 5. Mr Tassios is not to act as a property manager. 6. Mr Tassios is not to act in any supervisory capacity. 7. Mr Tassios is to lodge outstanding audit returns and statutory declarations for the years ending June 2002 and June 2003 and repay $1885.95 due to the Property Services Compensation Fund by 4 February 2005. 8. Mr Tassios is to disclose the conditions to which he is subject to any licensee by whom he is employed and any owner of the business prior to the commencement of his employment. 9. In relation to 8. above Mr Tassios is to provide written confirmation from his current or any new employer that he disclosed the conditions to which he is subject prior to the commencement of his employment. 10. OFT agrees to return Mr Tassios's licence on and from 4 February 2005 subject to the above agreed conditions pending determination of the application for review. 6 In the circumstances I am satisfied that this matter should be finally determined in the absence of an internal review. Applicable legislation 7 Section 36 of the 1941 Act relevantly provides: "36 Money to be paid to trust account (1) All moneys received for or on behalf of any person by any licensee shall be held by the licensee or, where the licensee is employed by a corporation, by the company, exclusively for such person, to be paid to such person, or to be disbursed as the person directs, and until so paid or disbursed the moneys shall be paid into a bank, building society or credit union operating in New South Wales to a trust account, whether general or separate, and retained therein. In any case where the licence is held by a corporation the trust account shall be in the name of the company and in any other case the trust account shall be in the name of the licensee or of the firm of licensees of which the licensee is a member. The words "Trust Account" shall appear in the name of the trust account and in the description of the trust account in the boob and records of the licensee and also on all cheques drawn on the trust account." 8 Section 38D of the 1941 Act provided in part: " 38D Audit of licensees' books and other records (1) In this section: person to whom this section applies means: (a) a licensee, (b) a person who has been, but after the commencement of this section ceases to be, a licensee, and (c) the personal representative of a licensee who has died after that commencement. prescribed day means the thirtieth day of June or, in respect of any particular person to whom this section applies, such other day as the Director-General may, on the application of that person, fix by order in writing addressed to that person. (2) Within three months after the prescribed day in every year applicable to the person, a person to whom this section applies shall: (a) cause the books, papers, accounts and other documents relating to any moneys held during the year ended on that day in a trust account kept by the person in accordance with section 36 to be audited by a person qualified under section 38E to act as an auditor, and (b) lodge the auditor's report on the audit with the Director-General. (2A) Where a person to whom this section applies receives the report referred to in subsection (2) earlier than fourteen days before the expiration of three months after the prescribed day in any year applicable to the person, the person shall lodge it under that subsection not later than fourteen days after so receiving it." 9 The Act provides for similar obligations in relation to payment of money into a trust account and in relation to audit requirements. Section 86 of the Act provides: " 86 Trust money to be paid into trust account (1) Money received for or on behalf of any person by a licensee in connection with the licensee's business as a licensee: (a) is to be held by the licensee or (if the licensee is employed by a corporation) by the corporation, exclusively for that person, and (b) is to be paid to the person or disbursed as the person directs, and (c) until so paid or disbursed is to be paid into and retained in a trust account (whether general or separate) at an authorised deposit-taking institution in New South Wales and approved by the Director-General for the purposes of this Part. (2) If the licence is held by a corporation, the trust account is to be in the name of the corporation and in any other case is to be in the name of the licensee or of the firm of licensees of which the licensee is a member. (3) The words "Trust Account" are to appear in the name of the trust account and in the description of the trust account in the books and records of the licensee and also on all cheques drawn on the trust account. (4) When opening a trust account at an authorised deposit-taking institution for the purpose of complying with this section, the licensee concerned must ensure that the authorised deposit-taking institution is notified in writing that the account is a trust account required by this Act. (5) A licensee must, within 14 days after closing a trust account, notify the Director-General in writing of the closure." 10 Section 111 of the Act relevantly provides: " 1 11 Requirement for audit (1) A person who is a licensee, a former licensee or the personal representative of a licensee must, within 3 months after the end of the audit period applicable to the person: (a) cause the records and documents relating to any money held during that period in a trust account kept by the person in accordance with this Act to be audited by a person qualified to act as an auditor for the purposes of this Division, and (b) lodge the auditor's report on the audit with the Director-General. (2) The Director-General may in a particular case or class of cases by order in writing extend the period of 3 months under subsection (1). (3) The person must retain a copy of the auditor's report on the audit for a period of three years after the date on which the report was made. (4) The auditor's report is to be in a form approved by the Director-General and is to be signed by the auditor." 11 Section 191 of the Act sets out the grounds for taking disciplinary action against a licensee or certificate holder. Section 191 relevantly provides: " 191 Grounds for disciplinary action Disciplinary action under this Part can be taken against a person who is or was the holder of a licence or certificate of registration on any one or more of the following grounds: (a) the person has contravened a provision of this Act or any other Act administered by the Minister, or the regulations under any such Act, whether or not the person has been prosecuted or convicted of an offence in respect of the contravention, (b) the person has contravened a condition of the licence or certificate of registration, (c) the person has, in the course of carrying on business or exercising functions under the licence or certificate of registration, acted unlawfully, improperly, unfairly or incompetently, (d) the person is a disqualified person or is otherwise not eligible under section 14 to hold a licence or certificate of registration, (e) the person is not a fit and proper person to be involved in the direction, management or conduct of the business of a licensee, (f) the person has failed to pay any part of a contribution or levy that is due and payable under Part 10 (Compensation Fund), (g) the person has breached an undertaking given by the person to the Director-General under this Act or the Fair Trading Act 1987 , in respect of the person's conduct of business or exercise of functions under the licence or certificate of registration, (h) the person has failed to comply with a direction given to the person by the Director-General pursuant to the taking of disciplinary action under this Part, (i) the person has failed to pay a monetary penalty imposed on the person by the Director-General pursuant to the taking of disciplinary action under this Part, (j) the issue of the person's licence or certificate of registration was obtained by fraud or mistake, (k) grounds specified in the regulations as grounds for the taking of disciplinary action against a person under this Act." 12 Where there are grounds for disciplinary action against a licensee or former licensee or a certificate holder or former certificate holder the Commissioner for Fair Trading or his delegate may issue a Notice to Show Cause under section 195 of the Act. Section 195 provides: " 195 Show cause notice (1) The Director-General may serve a show cause notice on a person if the Director-General is of the opinion that there is reasonable cause to believe that there are grounds for taking disciplinary action against the person. (2) A show cause notice is a notice requiring a person to show cause why disciplinary action should not be taken against the person under this Act on the grounds specified in the notice. (3) A show cause notice is to be in writing and is to specify a period of not less than 14 days after service of the notice as the period that the person to whom the notice is directed has to show cause as required by the notice. (4) The person on whom a show cause notice is served may within the period allowed by the notice make oral or written submissions to the Director-General in respect of the matters to which the notice relates. In the case of a corporation, submissions may be made by a director or officer of the corporation." 13 Where a decision has been made to take disciplinary action against a licensee or former licensee or certificate holder or former certificate holder action can be taken under section 192 of the Act. " 192 Disciplinary action (1) Each of the following actions is disciplinary action that the Director-General can take against a person under this Act: (a) caution or reprimand the person, (b) give a direction to the person requiring the person to give a specified undertaking to the Director-General as to the manner in which the person will conduct business or exercise functions under a licence or certificate of registration held by the person, (c) give a direction to the person requiring the person to take specified action within a specified time in connection with the conduct of business or the exercise of functions under a licence or certificate of registration, (d) impose a monetary penalty on the person of an amount not exceeding 100 penalty units in the case of an individual or 200 penalty units in the case of a corporation, (e) impose a condition on the person's licence or certificate of registration, (f) suspend the person's licence or certificate of registration for a period that does not exceed the unexpired term of the licence or certificate of registration, (g) cancel the person's licence or certificate of registration, (h) declare the person to be a disqualified person for the purposes of this Act, either permanently or for a specified period, (i) disqualify the person from being involved in the direction, management or conduct of the business of a licensee. (2) A power conferred by this Act to take disciplinary action against a person is a power to take any one or more of the actions that constitute disciplinary action. (3) When a licence or certificate of registration is suspended, it is taken not to be in force except for such provisions of this Act or the regulations as the regulations may prescribe as provisions that remain applicable to a suspended licence or certificate of registration." 14 Section 197 provides that the Commissioner may conduct enquiries and make investigations in relation to the matters to which a notice to show cause relates and any submissions made by or on behalf of the person to whom the notice was issued. Evidence and submissions 15 The Commissioner has asserted various matters that Mr Tassios has not contested. The evidence tendered by the Commissioner supports the Commissioner's contentions. In particular, the Investigator's Report of 29 March 2004 outlines the breaches and complaints on which the Commissioner relies. 16 The company traded for a time as Elders Real Estate Blacktown. The Commissioner has asserted that since 1 July 2001 the company failed to bank trust monies into an account maintained for that purpose. The trust account maintained by the company, and for which Mr Tassios had responsibility as licensee, had a debit balance from November 2001 to the end of January 2002. False entries were made in the tenants' ledger maintained by the company in respect of properties it managed. The evidence supports this contention. 17 The Commissioner also asserted that the company failed to pay for repair work arranged by the company in respect of properties it managed. The company failed to properly discharge its obligations as a property manager in relation to ensuring that rent was collected and accounted to landlords, that properties were inspected and that trust accounts and tenant ledgers were kept were properly maintained. 18 The Commissioner submits that Mr Tassios and the company committed the breaches of the 1941 Act and 2002 Act as outlined above and that these are serious breaches. He contends that the breaches relating to the failure to pay money into the company's trust account are of concern because they adversely affect consumer confidence in their dealings with intermediaries such as real estate agencies. It is important to an orderly property market that consumers have confidence in agents to demonstrate and integrity in the manner in which they handle trust creditor funds. 19 He further contends that appropriate handling and accounting in respect of trust creditors' funds is one of the most important obligations placed on a licensee. A licensee who fails to demonstrate integrity in respect of their dealings in trust money should not be permitted to continue carrying on business. Mr Tassios failed to meet his obligations to landlords in relation to his and the company's management of rental properties and landlords suffered as a result. 20 Mr Tassios does not deny that the breaches and complaints are serious. However he raised several concerns about the approach that officers of the Office of Fair Trading took in their dealings with him. He also contends that several significant issues have not been included in the investigator's report on which the Commissioner relies. 21 Mr Tassios submits that he had suffered serious emotional problems for some time prior to and more so after July 2002 being shortly after he separated from his wife. This was also around the time that his first child was born. Mr Tassios had been unable to see his child except for a handful of hours in the last two or so years. Family law proceedings with his wife, which involved property and children's matters, were traumatic for Mr Tassios and were finalised around January 2004. 22 The Real Estate business, which Mr Tassios conducted as licensee, was sold in June 2003. At that time the financial obligations to landlords had been met so as to recompense them for any shortfalls during the time he was licensee. Mr Tassios lodged all Auditors' Reports and Statutory Declarations for the relevant periods up to and including 30 June 2002. 23 Mr Tassios submits that neither he nor his company acted fraudulently nor intentionally benefited for personal gain or otherwise from the alleged breaches of the Trust Account requirements. He contends that the property manager who was employed at the real estate business had falsified records, taken client's funds, failed to account for all monies received and had concealed these facts from him as licensee. He was therefore unable to properly discharge his duties and obligations as licensee. This occurred at the same time as Mr Tassios was battling the stress of his matrimonial problems and Court proceedings associated with them. Mr Tassios reported the property manager to the Police but the Police did not charge the property manager. 24 Mr Tassios submits that the breaches and complaints referred can be explained as simple mismanagement of the real estate business with no question of malice nor intent to personally gain from such mismanagement. 25 The breaches and complaints resulted to a significant extent from dishonesty by the property manager. It is important to note that also it is common for certain classes of people and employees to take advantage of others when they are stressed or preoccupied as was Mr Tassios at the relevant time. 26 Around July 2004 the Licensee of Richardson & Wrench Parramatta approached Mr Tassios, and offered him a position in that office. Mr Tassios was subsequently issued Licence No 867101. No conditions were imposed on that licence. Richardson & Wrench Parramatta has employed Mr Tassios since 1 September 2004 on the basis he holds a licence or certificate authorising such employment. 27 Mr Tassios has indicated that he does not wish to work in the industry in any capacity other than as a real estate salesman. He contends that he was an outstanding salesman but a very poor officer in charge. 28 Mr Tassios considers himself to be a fit and proper person to hold a license. He contends that the decision under review imposes a harsh and restrictive penalty, which in light of the facts and circumstances is unnecessary, unjust and unreasonable. Findings 29 The evidence supports each of the Commissioner's contentions. I agree with the Commissioner that Mr Tassios has failed to meet his obligations as a licensee and it is beyond question that this has resulted in serious detriment to his clients. Appropriate handling and accounting in respect of trust funds is one of the most important obligations placed on a licensee. Mr Tassios failed to meet these obligations. 30 I cannot agree with Mr Tassios's contention that this can be explained as simple mismanagement. These are issues that go to the heart of a licensee's obligations. The period over which the breaches occurred could not be explained in terms of misplaced trust in an employee. The extent of the problems can be seen from the difficulty that was subsequently experienced in unravelling the financial situation. 31 In light of these findings, I agree with the Commissioner's finding that Mr Tassios should not be permitted to continue carrying out any management functions under the Act. However, in my view, Mr Tassios should be permitted to work as a real estate salesperson. The terms of the stay that is currently in place seem to me to provide appropriate safeguards to members of the public who would deal with Mr Tassios in that capacity. I recommend that Mr Tassios be granted the appropriate authority to allow him to work as a real estate salesperson subject to conditions comparable to those imposed in relation to the stay. Orders (1) I affirm the Commissioner's decision to permanently disqualify Mr Tassios from involvement in the management, direction or conduct of the business of a licensee. (2) I remit the remainder of the matter for reconsideration by the Commissioner.