CITATION: Flens & Anor -v- Department of Fair Trading [1999] NSWADT 76 DIVISION: General APPLICANT: Wendy Flens and Klass Flens RESPONDENT: The Director General, Department of Fair Trading FILE NUMBER: 993088 HEARING DATES: 07/30/1999 SUBMISSIONS CLOSED: 07/30/1999 DATE OF DECISION: 3 September 1999 G Fleming - Judicial Member BEFORE: PRIMARY LEGISLATION: Pawnbrokers and Second Hand Dealers Act 1996, Pawnbrokers and Second Hand Dealers Regulation 1997 APPLICATION: Review of a decision to issue a second hand dealers licence subject to conditions - MATTER FOR DECISION: Principal Matter Applicant: In person REPRESENTATION: Respondent: A Grey, Senior Legal Officer, Department of Fair Trading ORDERS: 1. The decision under review is affirmed 1 On 13 May 1999 Wendy Flens and Klaas Flens ('the Applicants') lodged an application to this Tribunal for review of two decisions of the Director General, Department of Fair Trading('the Respondent'). The decisions were in relation to the issue of licences to act as second-hand dealers, subject to certain conditions. Separate licenses were issued, and review decisions made, in relation to Wendy Flens and Klaas Flens. As the two decisions are closely related and concern the same law and facts the Tribunal has heard and determined the matters together. 2 Klaas and Wendy Flens are husband and wife and they operate a business known as Brunswick Used Furniture in Brunswick Heads in northern New South Wales. 3 On 21 December 1998 Klaas Flens applied to the Director General, Department of Fair Trading for the issue of a licence to act as a second hand dealer, pursuant to section 7 of the Pawnbrokers and Second-Hand Dealers Act 1996. That application was stamped as received by the Department on 24 December 1998. On 8 February 1999 a licence was issued to Klaas Flens subject to the condition that "You must use electronic means of creation and storage of records for the purposes of Sections 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 Dealers System( Dealers Software Specifications)', as modified from time to time". 4 On 18 January 1999 Wendy Flens lodged an application for a license to act as a second hand dealer, pursuant to section 7 of the Pawnbrokers and Second-Hand Dealers Act 1996. She was issued with a license on 8 February 1999 subject to the same condition as set out above. 5 On 22 March 1999 Klaas and Wendy Flens lodged an application with the Director General, Department of Fair Trading, for internal review of the decisions to issue them with a license subject to the condition stated. The decisions were affirmed on 29 March 1999. 6 The Tribunal has accepted the applications for review and extended the date for application to 13 May 1999, pursuant to section 57 of the Administrative Decisions Tribunal Act 1997. 7 There are two issues to be determined in this application. The primary issue is whether the licenses issued to Wendy and Klaas Flens are required to be issued subject to a condition in relation to the keeping of computerised records. Wendy and Klaas Flens object to the imposition of such a condition on their license to trade as second hand dealers. The second issue is whether the terms of the condition imposed are in accordance with the Pawnbrokers and Second-Hand Dealers Act 1996 and the Pawnbrokers and Second-Hand Dealers Regulations 1997. THE RELEVANT LAW 8 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 Pawnbrokers and Second-hand Dealers Act 1996. 9 The Pawnbrokers and Second-Hand Dealers Act 1996 ('the Act') provides, among other things, that the Director General, Department of Fair Trading, may issue a license subject to any conditions that he or she thinks fit (section 11(1)). The Pawnbrokers and Second-hand Dealers Regulations 1997 ('the Regulations') set out the provisions in relation to such conditions (section 11(2)). 10 Sections 16 of the Act require licensed second hand dealers to keep certain records. It provides, where relevant to this application, as follows; 16 Records (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, (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) 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. 11 Clause 13 of the Regulations addresses the method of keeping of records generally and provides as follows; 13 Records Generally (1) Records maintained for the purposes of the Act may be kept electronically or in a bound (not loose-leaf) book. . . . . (2) In the case of any licence issued or renewed on or after 1 January 1999, the Director-General is to require the licensee, by way of a condition of the licence, to use electronic means of creation and storage of records kept for the purposes of section 16 or 28 of the Act using software specified, or of a kind specified, in the condition. 12 Clause 13A of the Regulations contains certain exemptions in relation to the condition requiring the use of electronic record keeping and storage. It provides as follows; 13A Special provisions relating to the keeping of records by certain licensees. (3) A person who held a 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, apply to have the licence issued or renewed without such a condition (4) 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. 13 It is relevant here to describe the objective of these provisions. The Regulatory Impact Statement to the Pawnbrokers and Second-Hand Dealers Regulation 1997 set out the objective of the record keeping requirements of the Regulations as follows; 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. THE EVIDENCE 14 The Tribunal held a directions hearing in this matter on 1 July 1999 and the applicants attended by telephone. The Director-General was represented in person by his Senior Legal Officer. Following the directions hearing both parties made written submissions which are before the Tribunal. Wendy Flens lodged an Affidavit, dated 9 July 1999, which detailed the history of the license application and attached financial records for Brunswick Used Furniture for the year ending 30 June 1999. The Respondent filed an Affidavit of Geoffrey Paul Aitchison, Investigator, Department of Fair Trading, dated 27 July 1999. Also before the Tribunal is a copy of documents provided by the Department of Fair Trading pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. 15 The Tribunal held a hearing on 30 August 1999. At the Applicants request they were represented by Wendy Flens by telephone. The Director General's representative attended in person. 16 The Applicants submitted to the Tribunal that the Director General should not impose a condition on the licenses issued to them. They stated, in summary, that to impose a condition requiring the keeping of electronic records would impose undue hardship on them because of the nature of their business, that it was unfair and that it was discriminatory. The Applicants submitted, in the alternative, that the terms of the condition imposed were onerous and that an alternative means of electronic record keeping could satisfy the requirements of the Regulations. 17 The Applicants run a small business in the town of Brunswick Heads which they bought on 1 June 1998. To their knowledge this business had been trading for about six years prior to this, without a license in relation to second hand goods. The business is owned and operated by Wendy and Klaas Flens as trustees of the Flens Superannuation Fund. The business deals primarily in used furniture and household items and also sells fishing bait and tackle. The gross income for the year ending 30 June 1999 was $105,389.19. Of this income the Applicants estimate that only 4% would relate to sales for which a second-hand dealers license is required. 18 The Applicants submitted that given the small volume of trading for which the license was required the cost of purchasing a computer system and the required software was prohibitive. These costs would involve the need to upgrade their computer hardware, purchase the software package specified, access the Internet and then maintain this computer system. Wendy Flens suggested that records could be simply retained on a diskette and forwarded to the police at regular intervals. 19 Klaas Flens had lodged his application on 21 December 1999. The Applicants argued that, had the Department processed it prior to 1 January 1999, the license could have been issued without condition. The Department did not contact them until January 1999 to advise that they would both, individually, need to hold a license. They submitted that the Department's delay had disadvantaged them. They also submitted that as they had been living in Victoria prior to purchasing their business in 1998 they did not hold a NSW license and to expect them to do so was discriminatory. 20 The Respondent submitted that the Tribunal had no discretion in relation to the imposition of the condition on the license that the licensee use electronic means of creation and storage of records. Section 11 of the Act provides that a license is subject to any conditions which the Direction General sees fit to attach to it and further provides that the Regulations may make provision in relation to conditions to be imposed. Clause 13 of the Regulations directs the Director General, in mandatory terms, to require the use of electronic means of storage. Clause 13 further requires that the software to be used be "of a kind specified in the condition". The Respondent argued that the terms of the condition imposed were in accordance with the powers of the Director-General to impose 'any condition [he or she] sees fit' ( Section 11 of the Act). 21 The Affidavit of Geoffrey Paul Aitchison, an Inspector attached to the Investigations branch of the Department of Fair Trading detailed the changes to record keeping requirements for pawnbrokers and second-hand dealers. Since 1 January 1999 pawnbrokers and second hand dealers licenses have been issued with subject to the condition requiring electronic record keeping (the same condition which is described above and was imposed on the licenses issues to the Applicants). In conjunction with this the NSW Police Service has initiated procedures for the collection of this information on diskettes, kept by license holders. It is ultimately intended that records be transferred to the Police electronically via the Internet. The data contained on the diskettes is downloaded onto the police computer system where it is then matched with police records in relation to stolen goods. Licensees are required to purchase a compatible software system so that the information can be retrieved by the police and linked to their records. Unless there is uniformity of software used by licensees this computerised and centralised record keeping and monitoring by the police service is not possible. In Mr Aitchison's experience the purchase of the required programs cost in excess of $2000 in some instances although a modified program, suitable only for second-hand dealing, could be purchased for about $500. FINDINGS 22 The Tribunal has first considered whether the Respondent has the power to impose the condition on the Applicants license. The Tribunal is of the view that Clause 13(4) of the Regulations is in mandatory terms. It states that the Director General is to require the licensee to keep electronic records by way of imposing such a condition on the license, unless the licensee falls within an exemption. Thus the Director-General had no discretion in imposing a condition requiring the keeping of electronic records, unless the Wendy and Klaas Flens came within the exemption described in Clause 13A of the Regulations. 23 The application of Klaas Flens was received by the Respondent on 24 December 1998 and thus was not issued prior to the cut off date of 1 January 1999. The Tribunal is of the view that it was not reasonable to expect that the Respondent could process the application and issue the license between 24 December 1998 and 1 January 1999. Having issued the licence to Klaas Flens after 1 January 1999 he was affected by the new requirements of the Regulations. The application by Wendy Flens was made after 1 January 1999 and so does not concern this issue. 24 The Tribunal finds that the Applicants do not fall within the exemption from this condition set out in the Regulations. It is not disputed that the Applicants did not previously hold a license under the Second-hand Dealers and Collectors Act 1906 Clause 13A(2) applies only to those persons described in Clause 13A(1) namely persons who previously held the required license without a similar condition. Thus the exemption is not applicable unless the applicants are persons described in Clause 13A(1), which they are not. The Tribunal notes that the Applicants view these provisions as discriminating against them as they previously traded in Victoria. The Tribunal is of the view that this has no bearing on the claim to an exemption from the condition to be placed on the license. 25 The Tribunal now turns to the second issue in dispute, namely whether the power to impose the condition has been properly exercised in the terms of the condition imposed. The Applicants have claimed that to purchase the particular software specified, namely 'software which complies with the specifications issued by the New South Wales Police Service titled 'Pawnbrokers and Second-hand Dealer system (Dealer Software Specification)' is expensive, would diminish the returns on their business and would cause them financial hardship. The Applicants argue that they could simply record the particulars required on a computer diskette and deliver this to the police for their supervision. 26 The power given to the Director-General to impose conditions on a license is in broad terms (Section 11). The Director-General is also specifically authorised to regulate 'for or with respect to requiring the use by licensees of electronic methods of creation and storage of records' (Section 16(7)). Clause 13 of the Regulations then further delegates to the Director-General the specification of the condition to be placed upon the license. The Respondent has submitted that the drafting of the Regulation in this way, in contrast to the Regulation itself imposing the detailed condition, is to allow for flexibility in relation to the particular electronic means of record keeping to be required. This view makes sense in light of the rapidly changing nature of electronic methods of data collection and storage. 27 Having regard to the purpose of the provisions in relation to record keeping, the Tribunal is of the view that the condition imposed is a proper exercise of the power of the Respondent and is both reasonable and appropriate. The provisions of Clause 13(2) expressly direct the Director General to specify the software which is to be required as a condition of the license. The condition imposed directs that the software used for record keeping comply with the requirements of the NSW Police Service system into which the information is to be placed. The specification of software to be used by licensed second-hand dealers is a matter with respect to the electronic creation and storage of records. It is clear that without the specification of uniform software to be used by all licensees the purpose of requiring electronic record keeping would be lost. If information stored could not be centrally collated and checked by police then electronic record keeping arguably has no advantage over existing manual record keeping systems. The identification of the detailed software required in the terms of the condition of the license is a step towards ensuring uniformity of record keeping and thus the workability of the centralised data collection system. 28 The Tribunal finds that the decision of the Respondent to issue Second Hand Dealers Licenses to Wendy and Klaas Flens subject to the condition stated is the correct and preferable decision in the circumstances of the case. 29 The Tribunal notes that the condition imposed will place some hardship on the Applicant and that the Respondent undertook, at the Tribunal hearing, to provide assistance to the Applicants in terms of information about appropriate software and about ongoing licensing requirements. DECISION 30 The Tribunal affirms the decision under review. 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.