Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Porter v Department of Finance and Services [2014] NSWCATOD 93 Hearing dates: 28 May 2014 Decision date: 19 August 2014 Jurisdiction: Occupational Division Before: S Leal, Senior Member Decision: Pursuant to section 192(1)(a) of the Property, Stock and Business Agents Act 2002 (NSW), the Applicant is cautioned in respect of: (a) the contraventions of sections 43 and 86 of the Act and clause 21 of the Property Stock and Business Agents Regulation 2003 (NSW) as found in the decision of Porter v Director-General, Department of Finance and Services [2013] NSW ADT 211; and (b) the contravention of clause 13B of the Property Stock and Business Agents Regulation 2003. Catchwords: Real estate agents - penalty for breach of Property, Stock and Business Agents Act 2002 (NSW) - penalty for breach of Property Stock and Business Agents Regulations 2003 - applicant cautioned Legislation Cited: Administrative Decisions Tribunal Act 1997 (NSW) Civil and Administrative Tribunal Act 2013 (NSW) Property, Stock and Business Agents Act 2002 (NSW) Property, Stock and Business Agents Regulations 2003 (NSW) Cases Cited: Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 Director General, Department of Finance and Services v Porter [2014] NSWCATAP 6 Porter v Director-General, Department of Finance and Services [2013] NSWADT 211 Category: Principal judgment Parties: Peta Jennifer Porter Department of Finance and Services Representation: Counsel M Nicoletti, Solicitor (Appellant) A Rogers, Counsel (Respondent) NSW Fair Trading Legal Services (Appellant) Harrington, Maguire & O'Brien (Respondent) File Number(s): 1420141 reasons for decision Introduction 1The applicant, Mrs Peta Jennifer Porter (Mrs Porter), first obtained a real estate agent's licence in 2005. In 2007, she became a director of the family-held company, PMD Central Coast Pty Ltd ('PMD'). NSW Fair Trading appointed a manager to PMD in 2009 and at some point in 2010, Mrs Porter resigned as director of this company. In November 2010, she returned to the family business to work as a real estate agent for PMD. Receivers were appointed to PMD on 21 April 2011 and Mrs Porter began operating as a sole trader, trading as Coastwide Real Estate, in order to take over the business from PMD. On 23 August 2012, NSW Fair Trading made a decision to: * cancel Mrs Porter's real estate agent's licence, on the basis that she was not a fit and proper person to hold such a licence; * declare Mrs Porter to be a disqualified person until 20 April 2014; and * disqualify Mrs Porter from being involved in the 'direction, management and conduct of a business of a licensee' until 20 April 2014. 2Mrs Porter lodged an application for review to the Administrative Decisions Tribunal on 4 September 2012. A stay was granted on 6 September 2012 and on 27 September 2013, I set aside the decision of the Director-General, Department of Finance and Services cancelling Mrs Porter's real estate agent's licence, declaring her to be a disqualified person and disqualifying her from being involved in the 'direction, management and conduct of a business of a licensee. 3In making this decision, I found that: (a)Mrs Porter resigned as a director of PMD on 14 January 2010 shortly after discovering her brother's mismanagement of the company finances and therefore was not a disqualified person under s16 (1A)(d) of the Property, Stock and Business Agents Act 2002 (the Act); (b)it was due to an administrative error, without any dishonesty or intention on the part of Mrs Porter, that rent monies were paid into the company operating account and not the trust account as required under s86 of the Act and cl 21 of the Property, Stock and Business Agents Regulation 2003 between 27 April 2011 and 14 June 2011, and that this error was corrected without any disadvantage; (c)Mrs Porter did not intentionally breach s43 of the Act by employing her mother, Mrs Campbell, for although she was aware that she was not permitted to employ her as a real estate agent she believed that she was able to employ her in an administrative capacity given that the appointed Manager of PMD had employed Mrs Campbell as a book keeper while she was a disqualified person; and (d)the evidence did not support the conclusion that Mrs Porter was in breach of s 137 of the Act when she acted to acquire the rent roll of Coastwide Pty Ltd. 4In conclusion, I held that: (a)having considered the principles relating to fitness and propriety, Mrs Porter should not have her licence cancelled on the basis that she was not a fit and proper person to hold a licence; (b)on the evidence, Mrs Porter was not a disqualified person for the purpose of s16 of the Act despite the administrative error made in relation to the trust account monies and despite Mrs Porter employing Mrs Campbell in contravention of s43 of the Act. Her actions were not sufficient to warrant disqualification from being involved in the direction, management and conduct of the business of a licensee; and (c)the more appropriate action would be a caution or reprimand. 5On the misunderstanding that Mrs Porter's real estate licence had, in fact, been cancelled for the period of 23 August 2012 to 6 September 2012 (when a stay of proceedings was granted by the Administrative Decisions Tribunal (ADT)), I determined that no further action should be taken against Mrs Porter and the earlier decision should simply be set aside. 6On 24 October 2013, the Director General, Department of Finance and Services filed a notice of appeal against this decision. 7On 1 January 2014, the Civil and Administrative Tribunal of New South Wales (NCAT) was established and on its establishment the ADT was abolished: see Civil and Administrative Tribunal Act 2013, s 7 and cl 3 of Schedule 1. 8By operation of cl 7(1) of Schedule 1 to the Act, the appeal against my earlier decision was taken to have been commenced in NCAT and hence able to be heard and determined by NCAT. For this purpose and under cl 7(3), NCAT has and may exercise all the functions which the ADT previously had and the applicable legislation is that which would have applied if the NCAT legislation had not been enacted. Consequently, the Administrative Decisions Tribunal Act 1997 as in force at 31 December 2013 was applicable to the appeal and continues to be applicable in this matter. 9On appeal, the Director General relied on the following three grounds, formulated as questions to be addressed by the Appeal Panel: (a)Having made findings that the Applicant's contravention of ss 43 and 86 of the Property, Stock and Business Agents Act 2002 (NSW) and cl 21 of the Property Stock and Business Agents Regulation 2003 (NSW) did not involve dishonesty, did the Tribunal in assessing the Applicant's fitness and propriety to hold a real estate agent's license under the Act, fail to consider adequately or at all whether the Applicant possessed the requisite knowledge and ability to hold such a licence? (b)Did the Tribunal err in law in making a factual finding that the Applicant's license was cancelled for the period from 23 August 2012 to 6 September 2012? (c)Assuming either questions 1 or 2 above or both are answered in the affirmative; did the Tribunal misdirect itself as to the exercise of its discretion to impose a penalty on the Applicant under the Act? 10On 20 February 2014, the Appeal Panel allowed the appeal in part. 11The Appeal Panel found that I had not erred by failing to consider adequately or at all whether Mrs Porter possessed the requisite knowledge and ability to hold a real estate licence, nor had I failed to give adequate reasons for my decision in regard to Mrs Porter's fitness and propriety. 12The Appeal Panel did, however, find that I had made a factual error in finding that Mrs Porter's real estate licence had been cancelled for the period 23 August 2012 to 6 September 2012 (when a stay was granted by the ADT). Both parties had conceded that there was no evidence to support the finding that Mrs Porter's licence had, in fact, been cancelled for this period. 13The Appeal Panel found that this erroneous finding - namely that Mrs Porter's licence had been cancelled for the period from 23 August to 6 September 2012 - had played a significant part in my concluding that no further action should be taken her, as was permitted under s 193 of the Property, Stock and Business Agents Act. Because of this, the Appeal Panel found that I had erred in law in finding that Mrs Porter's licence had been cancelled in August and September 2012 and that my order therefore needed to be reconsidered. On this basis the matter was remitted to me in in accordance with cl 13(1)(b) and (2)(e) of Schedule 1 to the Act for determination of what disciplinary action, if any, should be taken against Mrs Porter. Director General, Department of Finance and Services v Porter [2014] NSWCATAP 6 Consideration of evidence 14On 28 May 2014, the parties appeared before me to make submissions in relation to what disciplinary action, if any, should be taken against the respondent. 15Mr Nicoletti, for the Director General, Department of Finances & Services, sought to tender further evidence which he submitted was relevant to the determination of what disciplinary action, if any, should be brought against Mrs Porter. In accordance with Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409, he submitted that the role of the Tribunal is to determine penalty in the light of all evidence available to the Tribunal at the time of decision. 16Mr Rogers, for Mrs Porter, did not object to the tender of the material on the condition that it was provided only in relation to the question of what penalty, if any, was to be given to Mrs Porter. Mr Nicoletti agreed to this condition and it is on that basis that the material has been considered by the Tribunal. 17The first of the new material is an affidavit sworn on 27 May 2014 by Mr Stephen Robinson, Senior Investigator, Consumer Protection, NSW Fair Trading. 18In his affidavit, he states that together with another investigator, Mr Roberto Buenaventura, he had attended the real estate agency of Mrs Porter on 28 March 2014, and requested proof of her completion of continuing professional development of staff, proof of professional indemnity insurance held by her in addition to the examination of some trust account records. 19According to Mr Robinson, during the inspection, Ms Porter provided all the necessary documentation except for a copy of her certificate of currency for her professional indemnity insurance. She spent a considerable period of time while we were there looking for it but all she could find was a quote for insurance from an insurance company....Ms Porter then said words to the following effect: 'I can't find my certificate but will email a copy to you when I do'. As no evidence could be provided by Peta Porter as to her holding a Professional Indemnity Insurance Policy and as the inspection had been completed, I agreed for her to email a copy of it to me on Monday 31 March 2014....On 31 March 2014 Ms Porter sent me 2 emails attaching certificates in respect of Professional Indemnity Insurance. 20In his affidavit dated 22 May 2014, Mr Buenaventuna gave a similar account of his attendance at Ms Porter's office with Mr Robinson. In both affidavits, there is what the Tribunal has taken to be a typographical error, namely that the inspection took place on 28 March 2013 rather than 28 March 2014. Before the Tribunal, both Mr Rogers and Mr Nicoletti agreed that the inspection had in fact taken place in 2014 and not 2013. 21Contained on file is a copy of a Certificate of Currency issued by NAS Insurance Brokers to Peta Porter T/A Coastwide Real Estate, with a period of cover from 31 March 2014 to 31 March 2015. 22Mr Nicoletti submitted that in light of the commencement of the cover, namely after the inspection of 28 March 2014 had taken place, the Tribunal could infer that Mrs Porter did not have the required indemnity insurance at the time of the inspection. Although Mrs Porter did not make any admissions in relation to this, Mr Rogers told the Tribunal that 'she consented to the issue of a caution in respect of the matter and all matters associated with the inspection by the respondent of 28 March 2014 pursuant to s192(1)(a) of the Property Stock and Business Agents Act.' 23The complication in this case is that because of the lengthy proceedings before this Tribunal, Mrs Porter was last issued with a real estate agent's licence on 24 March 2011 which had been due to expire on 23 March 2013 prior to its cancellation on 23 August 2012. Since then, a stay on the decision to cancel her licence has permitted her to remain trading as a real estate agent. 24Mrs Porter filed her application for renewal of her real estate licence on 24 March 2014. A copy of Mrs Porter's application for renewal of licence confirmed that she paid the application fee of $349.53 on 20 March 2014. Her application has not been considered by the Department of Finance and Services pending the finalisation of the proceedings before the Tribunal. 25Attached to Mrs Porter's completed application for renewal of her real estate agent licence is a two page document entitled Professional Indemnity Insurance Information Sheet. 26The document advises, in part, as follows: The Property Stock and Business Agents Amendment (Professional Indemnity Insurance) Regulation 2012, introduces new clause 13B to the regulation, that commences on 1 January 2013...The requirement for mandatory professional indemnity insurance applies to all licensees under the Act - including real estate agents, stock and station agents, business agents, strata and community managing agents, and on-site residential property manager....Although the new regulation commences from 1 January 2013, in order to permit licensees who may need to obtain insurance coverage sufficient time to arrange a suitable policy, the requirement imposed by the regulation will not take effect until 1 July 2013....From 1 January 2014, all licensees engaging in activities for which a licence is required under the Act will need to be insured under a policy that complies with all the requirements of the regulation. 27Mr Nicoletti submitted that as a real estate agent, Mrs Porter should have been aware of the recent requirement for real estate agents to have indemnity insurance. As proof of this, he referred to the information sheet attached to Mrs Porter's application to renew her licence. In submissions, Mr Roger queried whether, given the recent nature of the regulations, it applied to new renewals only or would also include someone in the applicant's position, who is continuing to operate on the basis of the stay granted by the Tribunal. 28As Mr Rogers has accepted the issue of a caution to Mrs Porter in this regard, the Tribunal is of the view that it is not necessary to make any further findings in this regard. What is undisputed, however, is that on 28 March 2014, Mrs Porter failed to have available for inspection to investigators from NSW Fair Trading a certificate of currency insuring her for professional indemnity insurance. What is also undisputed is that, since 31 March 2014, Mrs Porter has had the required indemnity insurance and, accordance to the certificate of currency, continues to have it at the time of decision. Findings 29In my earlier judgment in this matter, (Porter v Director-General, Department of Finance and Services [2013] NSWADT 211), I made the following findings: While trading as Coastwide Real Estate in the period from April 2011 to December 2011, did Mrs Porter operate in breach of section 86 of the Act and clause 21 of the Regulations to the Act? Section 86 of the Act provides that money received for or on behalf of any person by a licensee in connection with the licensee's business as a licensee is to be paid into and retained in a trust account. Clause 21 of the Regulations made under the Act stipulates that a licensee who receives trust money must pay it into the licensee's trust account before the end of the next banking day after the day of its receipt, if that is practicable, or if that is not practicable, as soon as practicable after that day. The respondent contends, and Mrs Porter concedes, that between April and December 2011, tenants paid their rent into the operating or general account for Coastwide Real Estate rather than into its trust account. According to Mrs Porter's evidence, this occurred due to an administrative error: letters sent out advising tenants how to deposit their rental payments provided the account details for the Coastwide operating account rather than for the Coastwide trust account. Mrs Porter submitted that whilst this was a regrettable mistake, it was one that could be explained, to some extent, by the fact that the account numbers for the two accounts were identical, apart from the two final digits. Both Mrs Porter and the respondent agree that once the error had been detected, all the money wrongly transferred into the operating account was transferred into the correct trust account. In some cases, however, money stayed in the operating account for up to two weeks before being transferred to the correct trust account. On the evidence before it, the Tribunal finds Mrs Porter to be in breach of s86 of the Act and clause 21 of the Regulations to the Act. The Tribunal accepts Mrs Porter's evidence that this was due to an administrative error, namely that in a letter sent to tenants providing bank details for the deposit of their rent monies, the account number for the Coastwide operating account rather than that of the relevant trust account had been provided. The Tribunal accepts that once this error was discovered, the monies were transferred from the general account to the trust account. The error does not reflect well on the applicant's administrative skills, both because the account details were not checked before the relevant letters were sent and because the error appears not to have been fully resolved for two months, in that monies were wrongly paid into the operating account between 27 April 2011 and 14 June 2011. Although this reflects poorly on Mrs Porter's organisational and accounting skills, the Tribunal accepts that the deposit of the monies into the operating rather than the trust account, whilst an administrative error, was not an intentional one. The Tribunal also accepts that the error was corrected without any disadvantage to either the relevant landlords or tenants and did not involve any dishonesty by Mrs Porter. Did Mrs Porter, in breach of s43 of the Act, employ her mother, Jennifer Campbell, in Mrs Porter's business when Mrs Campbell was a disqualified person under the Act? Relevantly, s43 of the Act provides that a licensee must not employ a person in any capacity in connection with the carrying on of the business conducted by the licensee if the person is a disqualified person or has had his or her licence or certificate of registration suspended or cancelled. Mrs Porter does not dispute that in 2012, she employed her mother, Mrs Jennifer Campbell, in her real estate business and that, at this time, Mrs Campbell was, and had been from 10 November 2009 to 21 January 2010 and again from 10 October 2011, a disqualified person pursuant to s16 of the Act. In her affidavit dated 6 March 2013, Mrs Porter declared that: My mother was working in the business when Rick Porter was managing it and continued working for me after I commenced trading. I was unaware, until about September 2012, that I could not employ my mother in any capacity if she was disqualified. I had understood that I could not employ her doing work as a real estate agent or as a real estate salesperson but I had been unaware of the full effect of section 43(1) of the Act. I had, in any event, not been aware that my mother was a disqualified person (i.e. that she had lost her appeal) until told by my father after these proceedings had commenced. I do not now employ any disqualified person (including my mother) in the business and will not do so in future if my application is successful. In his affidavit dated 11 September 2012, Mr Rick Porter declares that he was appointed manager to PMD on 11 November 2009, pursuant to s126(1)(b) of the Act. In his evidence before the Tribunal, Mr Porter confirmed that he had employed Mrs Campbell as a bookkeeper for the real estate agency despite the fact that she was, at the time, a disqualified person in accordance with s16 of the Act and that he had received approval from the respondent to do so. On the evidence before it, the Tribunal finds that Mrs Porter did employ her mother in breach of s43 of the Act. In making this finding, the Tribunal accepts Mrs Porter's evidence that whilst she was aware she was not permitted to employ Mrs Campbell as a real estate agent, she believed she was allowed to employ her in an administrative capacity. The Tribunal is satisfied that, in reaching this belief, Mrs Porter was influenced by the fact that Mr Rick Porter, the manager appointed to PMD by the respondent, had employed Jennifer Campbell as a bookkeeper, apparently with the approval of the respondent, despite the fact that Mrs Campbell was, at the time, a disqualified person. For these reasons, the Tribunal finds that whilst in breach of s43 of the Act, Mrs Porter's actions in employing Mrs Campbell were not an intentional breach of the section. 30It is on the basis of these findings that I have determined the penalty for Mrs Porter's breaches of s43 and s86 of the Property, Stock and Business Agents Act and cl 21 of the Property, Stock and Business Agents Regulation. 31In regards to the fresh evidence put before me in relation to the inspection of Mrs Porter's real estate agency on 28 March 2014, I find that Mrs Porter was unable to prove to investigators that she held professional indemnity insurance on 28 March 2014. On the basis of the certificate of currency provided by Mrs Porter, I am satisfied that she has held professional indemnity insurance from 31 March 2014 and continues to hold it at the date of decision. On the evidence before me, I find that on 28 March 2014, Mrs Porter was in breach of clause 13B of the Property, Stock and Business Agents Regulation which requires her to be insured under a policy of professional indemnity insurance. Disciplinary Action 32In accordance with s191 of the Property, Stock and Business Agents Act, disciplinary action may be taken against a licence holder where that person has contravened a provision of the Act or regulations under the Act (in this case, the Property, Stock and Business Agents Regulation 2003 (NSW)) Act 2002 (NSW) or where a 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. 33Section 192 of the Act provides that such action may include giving a caution or a reprimand to the person. 34On the basis of my findings as set out above, I have determined that the appropriate penalty in this case would be to issue a caution to Mrs Porter in relation to the following breaches: (a)the contraventions of sections 43 and 86 of the Property, Stock and Business Agents Act 2002 and clause 21 of the Property Stock and Business Agents Regulation 2003 (NSW) as found in the decision of Porter v Director-General, Department of Finance and Services [2013] NSW ADT 211; and (b)the contravention of clause 13B of the Property Stock and Business Agents Regulations 2003. Orders 35Pursuant to section 192(1)(a) of the Property, Stock and Business Agents Act 2002 (NSW), the Applicant is cautioned in respect of (a)the contraventions of sections 43 and 86 of the Act and clause 21 of the Property Stock and Business Agents Regulation 2003 (NSW) as found in the decision of Porter v Director-General, Department of Finance and Services [2013] NSW ADT 211; and (b)the contravention of clause 13B of the Property Stock and Business Agents Regulation 2003. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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. Decision last updated: 19 August 2014