CITATION: Bonello v Commissioner for Fair Trading [2006] NSWADT 360 DIVISION: General Division APPLICANT PARTIES: Saviour Bonello RESPONDENT Commissioner for Fair Trading, NSW Office of Fair Trading FILE NUMBER: 063232 HEARING DATES: 12/10/06 SUBMISSIONS CLOSED: 10/12/2006 EXTEMPORE DECISION DATE: 10/12/2006 DATE OF DECISION: 12/20/2006 BEFORE: Montgomery S - Judicial Member CATCHWORDS: Property, Stock and Business Agents Act - Real Estate Agent - disciplinary determination MATTER FOR DECISION: Principal matter LEGISLATION CITED : Property, Stock and Business Agents Act 2002 APPLICANT K Ginges, Barrister REPRESENTATION: RESPONDENT V Griswold, Solicitor ORDERS: The determination by the Commissioner for Fair Trading that Mr Bonello is to pay a monetary penalty of two penalty units in relation to a contravention of section 72 of the Property Stock and Business Agents Act 2002 is set aside. REASONS FOR DECISION 1 Mr Bonello is the holder of a real estate licence and is the principal of Aspect Real Estate Services New South Wales. He has held the licence since June 1992 and is also a certified valuer. This matter concerns a decision by a delegate of the Commissioner for Fair Trading to take disciplinary action against Mr Bonello under sections 191 and 192 of the Property Stock and Business Agents Act 2002 ("the Act") for alleged contravention of section 72 of the Act. 2 The Commissioner's delegate determined that Mr Bonello had contravened section 72 of the Act and should pay a monetary penalty of two penalty units or $220. Mr Bonello applied to this Tribunal for an external of the determination. 3 The application came before me for hearing on 12 October 2006. Following the hearing I found that Mr Bonello had not contravened section 72. I set aside the Commissioner's determination and gave brief reasons for my decision. Mr Bonello has sought written reasons for the decision and more detailed reasons are now provided. Background 4 In October 2003 Mr Bonello was employed as a sales manager by Gold Real Estate Pty Limited ("Gold"), which traded as Laing & Simmons at Wentworthville. Mr Bonello estimated the selling price of the residential premises at 15 Burra Place, Greystanes ("the Burra Place property") as of 23 October 2003 as being $600,000. The premises were subsequently advertised with a selling price of $615,000. The property was ultimately sold by another real estate licensee in October 2004 for $472,500. 5 The owners of the Burra Place property, Mr and Mrs Drysdale lodged a complaint against Mr Bonello. The Office of Fair Trading issued a Notice to substantiate to Gold under section 74(1) of the Act. The Notice required Gold to substantiate the reasonableness of Mr Bonello's estimation of the Burra Place property's selling price. Both Gold and Mr Bonello responded to the Notice with information about the basis for Mr Bonello's estimation. On 25 October 2004 a Fair Trading investigator interviewed Mr Bonello in relation to the matter. 6 In November 2004 Mr Drysdale notified Fair Trading he wished to withdraw his complaint following his acceptance of an ex gratia payment of $23,000 from Gold. Fair Trading subsequently sought information from Mr and Mrs Drysdale and required Starr & Duggan (Real Estate) Pty Limited ("Starr Partners") to provide a physical comparison between the properties located at 136 Whalans Road, Greystanes ("the Whalans Road property") and the Burra Place property and an opinion as to the selling price estimate as of October 2003 of the Burra Place property. 7 Starr Partners and Carrolls Real Estate of Greystanes provided estimates as to the selling price range for the Burra Place property as of October 2003. These agents' estimates fell within the range of $520,000 to $550,000. The estimates were based upon price comparisons of several comparable houses sold during October 2003. 8 Mr Bonello provided a valuation prepared by Mr C Hubbard, a registered valuer of MVS Valuers Australia Pty Limited. Mr Hubbard estimated the selling price of the property, as of 21 October 2003, was $560,000 to $580,000. Mr Hubbard also offered the view the market was raising as of October 2003. 9 Fair Trading initially issued a Notice to Show Cause to Mr Bonello in June 2005. A fresh notice to Show Cause was issued in July 2005. A determination was issued to Mr Bonello in December 2005. The determination found that Mr Bonello had contravened sections 52 and 72 of the Act and imposed a monetary penalty of 15 penalty units. Mr Bonello sought an internal review of that determination. That application was partially successful but determined that Mr Bonello had contravened section 72 of the Act and should pay a monetary penalty of two penalty units. Mr Bonello subsequently lodged an application with this Tribunal. Applicable Legislation 10 The Act, amongst other things, makes provision for the licensing, professional regulation and discipline of real estate agents. The licensing regime requires individuals and corporations who conduct business as agents to be licensed and for salespersons to hold a certificate of registration. The Act contains provisions regulating who will be eligible to hold a licence or certificate, and prescribing necessary qualifications. The Act regulates the conduct of real estate agents. Section 52·provides in part: "52 Misrepresentation by licensee or registered person (1) A person who, while exercising or performing any function as a licensee or registered person, by any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the person or not) or by any concealment of a material fact (whether intended or not), induces any other person to enter into any contract or arrangement is guilty of an offence against this Act." 11 Section 72 provides that real estate agent or employee of a real estate agent must not make a false representation to a seller or prospective seller of residential property as to the agent's or employee's true estimate of the selling price of the property. 12 Section 74 provides that the Commissioner can issue a written notice to a real estate agent requiring the agent to provide evidence of the reasonableness of any estimate of the selling price of a residential property by the agent. 13 Section 191(a) provides that disciplinary action can be taken against a holder of a real estate licence who has contravened a provision of the Act. Section 192(1)(d) provides that the Commissioner can impose a monetary penalty of an amount not exceeding 100 penalty units in the case of an individual where disciplinary action has been made out. 14 Section 195 provides that the Commissioner may serve a show cause notice on a person if she is of the opinion that there is reasonable cause to believe that there are grounds for taking disciplinary action against the person. Such a notice requires a person to show cause why disciplinary action should not be taken against them on the grounds specified in the notice. 15 Section 206 provides that an authorised officer can on reasonable grounds issue a written notice requiring a person who is capable of giving information, producing records or giving evidence to do so. The Evidence 16 The Commissioner relies on evidence of Mr Steve Jones, the Manager of the Investigations Branch of the Office of Fair Trading. As Manager of the Compliance and Standards Division, Mr Jones undertook the internal review. He gave evidence with respect to the process he undertook and the material that was taken into account in reaching the determination that is the subject of these proceedings. Essentially he found evidence of a price comparison for only one other property, that of the Whalans Road property. He was also concerned that Mr Bonello had failed to keep an accurate record of any other evidence that he had relied upon to form his estimate of the property's value. He considered that the distinctions between the Whalans Road property and the Burra Place property were so marked as to render a comparison ineffective. 17 The evidence is that neither Mr Bonello nor Mr Hubbard conducted a physical inspection of both properties. Mr Bonello inspected the Burra Place property but not the Whalans Road property. Mr Hubbard's valuation of the Burra Place property was carried out from the street. Starr Partners were in a position to compare the properties. In an unsigned, un-attributed report they indicated that the Burra Place property was older, smaller in size and not as well designed as the Whalans Road property. Mr Jones had placed greater weight on this comparison than on that of Mr Bonello or Mr Hubbard. 18 Mr Bonello's evidence was that when he was contacted by the investigator from the Office of Fair Trading he was only given a few hours notice of the interview. He had not worked for Gold for a significant time and did not have access to the file in relation to the sale of the Burra Place property. The whole interview only lasted a few minutes and that included the time he was allowed to read the section 206 Notice. He relied on what limited memory he retained of the sale and therefore was unable to provide complete details of the approach he had taken to estimate the selling price. He concedes that he may have appeared vague in his answers to the investigator because he had not had adequate time to recall his assessment process. All his research documentation was still contained in the relevant files at Gold. 19 He said that he left Gold in June 2004. In his role as a listing agent for Gold he conducted about 120 market appraisals between October 2003 (when he assessed the Burra Place property) and June 2004. He said that all of those appraisals were thoroughly researched and provided an outline of the usual process that he undertook in making an assessment. 20 He disputes the assessment of the Whalans Road property as a better property than the Burra Place property. His view is largely based on the relative locations of the properties. The Whalans Road property is on the lower side of a busy road, near a roundabout whereas the Burra Place property is in a quiet culdesac. He made his assessment at a time when the market was in fact at its peak but at a time when it appeared to be a rising market. It is now common knowledge that the market subsequently fell significantly. 21 Mr Bonello's evidence was that he represented to Mr and Mrs Drysdale what he considered to be the true estimate of the selling price of the Burra Place property. He said that he believed that the Burra Place property was valued at $600,000 in the circumstances of the rising market at that time. Findings 22 After considering the evidence provided on behalf of each of the parties I am satisfied that Mr Bonello's assessment of the Burra Place property was reasonable in the circumstances. I accept that he took adequate steps to estimate the selling price. 23 The evidence suggests that Mr Bonello's usual approach was to identify the property's overall characteristics and then compare the property to similar Gold listings. He would obtain a 1.5 km property radius search and suburb search to identify similar properties and their selling prices for the previous 6 months and peruse local press and real estate pictorial magazines and average the advertised prices of similar properties from other local agents. He could then establish a "starting price" which would be used as a guide. Following an inspection of the property he could then establish a final selling price. I am satisfied that this is the general approach that Mr Bonello took with respect to the assessment of the Burra Place property. 24 Clearly his estimated final selling price was wrong. In my view the mistake was largely a consequence of the peak and fall of the market. Mr Bonello could not be expected to have been able to predict the market change. Therefore, I do not consider that the mistaken estimation was through any fault of Mr Bonello. Had the market continued to rise the result may well have been significantly different. 25 It follows, in my view, that I do not consider that Mr Bonello represented a selling price for the Burra Place property that was not his true estimate of the selling price. That being the case, it cannot be said that he has contravened section 72 of the Act. 26 The correct and preferable decision is that Mr Bonello has not contravened section 72 of the Act in relation to the sale of the Burra Place property. Accordingly, the decision under review should be set aside. Orders The determination by the Commissioner for Fair Trading that Mr Bonello is to pay a monetary penalty of two penalty units in relation to a contravention of section 72 of the Property Stock and Business Agents Act 2002 is set aside. 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.