ACT CIVIL & ADMINISTRATIVE TRIBUNAL

COMMISSIONER FOR FAIR TRADING v MCPHERSON (Occupational Discipline) [2017] ACAT 6

OR 16/2016

Catchwords: OCCUPATIONAL DISCIPLINE – real estate agent – audit of trust accounts – failure of agent to provide audit of trust account – financial penalty – public reprimand – public reprimand as deterrent to other agents

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 7, 44, 65, 66Agents Act 2003 ss 7, 41, 113, 115, 171

SubordinateLegislation cited: ACT Civil and Administrative Tribunal Regulation 2009 s 4

Agents Regulation 2003 s17

Cases cited: Nursing and Midwifery Board of Australia v Izzard [2016] ACAT 68

Tribunal: Senior Member H Robinson

Date of Orders: 7 February 2017Date of Reasons for Decision: 7 February 2017

AUSTRALIAN CAPITAL TERRITORY )CIVIL & ADMINISTRATIVE TRIBUNAL ) OR 16/2016

BETWEEN:

COMMISSIONER FOR FAIR TRADINGApplicant

AND:

DONALD AMBROSE MCPHERSONRespondent

TRIBUNAL: Senior Member H Robinson

DATE: 7 February 2017

ORDER

The Tribunal orders that:

1. Pursuant to section 66(2)(a) of the ACT Civil and Administrative Tribunal Act 2008 the

respondent is publically reprimanded in the terms set out at Schedule 1.

2. Pursuant to section 66(2)(h) of the ACT Civil and Administrative Tribunal Act 2008 the

respondent is to pay to the Territory the sum of $1000.

3. Pursuant to section 66(2)(c) of the ACT Civil and Administrative Tribunal Act 2008 the

respondent must, within six months of the date of this Order, complete to the

satisfaction of the Commissioner, the following real estate industry training courses:

(a) Maintaining business records; and

(b) Minimising agency and consumer risk.

These courses should be designed for the Australian Capital Territory and they are not

to count toward the respondent’s continuing professional development (CPD)

requirement.

………………………………..Senior Member H Robinson

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REASONS FOR DECISION

1. By this application the Commissioner for Fair Trading (Commissioner) seeks

occupational discipline orders against Mr Donald McPherson (respondent) for a

contravention of section 115 of the Agents Act 2003 (Agents Act).

Background and Legislative Framework

2. The respondent is and was, at all relevant times, an agent licenced under part 3 of the

Agents Act.

3. Section 115(1) of the Agents Act provides as follows:

115 Requirement for audit

(1) A licensed agent must ensure that the records relating to any trust money held by the agent during an audit period of the agent are audited by a qualified auditor within 3 months after the end of the audit period or any longer period allowed by the commissioner for fair trading.

4. Pursuant to section 113 of the Agents Act the ‘audit period’ for a licenced agent is each

financial year or an alternative period as fixed by the Commissioner in writing. No

alternative period was fixed for the respondent.

5. The respondent did not file his audit report for the 2014/2015 financial year until

December 2016, well after the commencement of these proceedings.

6. Section 41 of the Agents Act sets out the grounds upon which occupational discipline

may be taken against a licensed agent. The Commissioner contended that by failing to

comply with section 115 of the Agents Act, the respondent was liable for occupational

discipline under:

(a) section 41(1)(a) on the basis that he contravened the fair trading legislation; and

(b) section 41(1)(b) on the basis that he contravened a rule of conduct.

7. For the purposes of section 41(1)(a) ‘fair trading legislation’ is defined in section 7 of

the Agents Act and the Dictionary to the Fair Trading (Australian Consumer Law) Act

1992 to include the Agents Act.

8. For the purposes of section 41(1)(b), the rules of conduct for agents are established

pursuant to section 171(1) of the Agents Act and regulation 17(1) of the Agents

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Regulation 2003 (the Regulations) and are set out in schedule 8 of those Regulations.

Relevantly, clause 8.5 of schedule 8 provides that an agent must “exercise reasonable

skill, care and diligence.”

9. Section 66 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) sets out

the occupational discipline orders that the Tribunal may make if satisfied that there are

grounds to do so.

Background

10. Having regard to the evidence filed with the Tribunal by the Commissioner and the

respondent, I am satisfied of the following facts.

11. On 3 September 2015, Ms Caroline Cogger, an investigator with Access Canberra, sent

a letter to all agents, including the respondent, reminding them of their obligations to

complete an annual trust account audit (audit report) for the 2014/2015 financial year

by 30 September 2015. There is no suggestion that the respondent did not receive this

letter.

12. The respondent did not file an audit report by 30 September 2015, and nor did he seek

an extension of time in which to file it.

13. On 27 October 2015 Ms Cogger telephoned the respondent to enquire as to why he had

not filed his audit report. The respondent did not answer his phone, so she left a

voicemail message asking that he call her back. Later that day, the respondent returned

her call and advised that the audit report had not been finalised and that he would “chase

it up”.

14. On 16 November 2015 and 25 November 2016 Ms Cogger again telephoned the

respondent. On both occasions he did not answer and she left a message asking that he

return the call.

15. On 14 December 2015 Mr John Turnbull, another senior investigator engaged by

Access Canberra, telephoned the respondent to discuss the outstanding audit report. The

respondent did not answer Mr Turnbull’s call, so he left a message explaining who he

was and the reason for the call. The respondent did not respond.

16. On 27 January 2016 Ms Cogger sent an email to the respondent requesting an update on

his late audit report.

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17. Later that day, the respondent sent Ms Cogger an email saying that the audit report was

“being finalised” by the auditor and that he would send Ms Cogger an email to keep her

updated and advise of the expected completion date. Ms Cogger did not receive any

such update.

18. On 3 May 2016 Ms Cogger sent the respondent an email with a letter attached advising

that the audit report must be submitted to Access Canberra by 10 May 2016. The letter

stated that if the respondent failed to comply, further action may be taken against him.

19. On 10 May 2016, Ms Cogger received a telephone call from the respondent advising

that his audit report had still not been completed by the auditor. He advised that he was

attending to “personal issues” but was arranging for the report to be completed within

four to five weeks. Ms Cogger advised that disciplinary action may be taken if he does

not comply with his obligations.

20. On 30 June 2016 the respondent’s ACT Real Estate Licence lapsed. As the respondent

failed to lodge a renewal application within three months of the expiration of his

licence, he was deemed to be unlicensed from 1 July 2016 (Agents Act, sections 36-37).

21. This application for disciplinary action was lodged with the Tribunal on 15 September

2016.

22. On 17 October 2016 the respondent lodged an application for a new licence, and that

licence was issued on 2 November 2016.

Hearing Process

23. This matter was first listed on 10 October 2016 for a directions hearing before

Presidential Member Daniel. On that occasion the Commissioner was represented by

Mr Mangeruca. The respondent initially failed to appear, but Presidential Member

Daniel contacted him by telephone and directions were made to bring the matter on for

hearing on 17 November 2016.

24. At the hearing on 17 November 2016 the Commissioner was again represented by

Mr Mangeruca. Mr McPherson appeared in person.

25. At that hearing, the respondent gave evidence as to a range of personal circumstances

which, he said, contributed to his inability to attend to his business affairs, including the

trust account audit, within the required time. His evidence included a serious crisis

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within his family and two medical conditions, including an accident in which he had

injured his knee. Due to the highly personal nature of this evidence, I do not need to

describe it in any detail here, although I note that neither medical condition was life

threatening nor required an extensive period of hospitalisation. There is little medical

evidence before the Tribunal of the extent of these conditions or their consequences for

his capacity to run a business. However, the respondent gave evidence that his family

difficulties had “consumed” him, that he had been “overwhelmed” by his personal and

medical issues and that it had “only been in the last week that everything has come to

the forefront.”

26. Under questioning from the Tribunal, the respondent gave evidence that his business

had sold some 45 properties in the previous 12 months, but said that he had another

employee working with him during that period.

27. During this hearing, it became apparent to the Tribunal that the respondent still had not

filed his audit report (and indeed had not filed his audit report for 2015/2016 either). I

was not comfortable making final orders as to disciplinary action without viewing the

outstanding trust account audit. Mr McPherson indicated that the process was

underway. Accordingly, the Tribunal adjourned the matter part heard to 23 December

2016 to enable the respondent to obtain further evidence about his assertions, including

confirmation that the audit report was being prepared. The matter was adjourned with

directions made to progress to a hearing on penalty.

28. Shortly after the hearing, information came to the attention of the Tribunal about just

how successful the applicant’s business had been over the relevant period. This

information was in the form of real estate listings from the Allhomes.com.au profile site

that indicated that the respondent had sold “6 properties over the past four (4) weeks.”

The Tribunal was concerned that this information was not consistent with the evidence

the respondent gave to the Tribunal at the first hearing about his capacity over the

proceedings weeks. Accordingly, the matter was set down for directions on

25 November 2016 to enable the respondent to address these concerns, and a series of

directions were made for the filing of medical evidence and affidavit evidence as to the

facts and circumstances that compromised the respondent’s ability to file his trust audit.

29. In the meantime, on 24 November 2016 the Commissioner filed an application for

interim and other others seeking an interim order suspending the respondent’s real

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estate licence. Directions for dealing with the interim application were made at the first

directions hearing on 25 November 2016, and the interim application was heard and

determined on 29 November 2016. Interim orders were made suspending the

respondent’s licence, and placing various conditions on his dealing with monies.

30. The matter came back before the Tribunal on 16 December 2016. By this occasion, the

respondent had filed an audit report prepared by Mr Peter Bauerhuit. The report

confirmed that the audit had been completed, but Mr Bauerhuit identified a number of

exceptions (or issues) that needed to be addressed. The parties sought consent orders

lifting the suspension but retaining the prohibition on the respondent releasing trust

monies. The respondent was directed file any further information and documents

relating to the exceptions identified in the Bauerhuit Report by 20 December 2016.

31. The matter returned to the Tribunal on 22 December 2016. On that date, the matter was

again adjourned at directions were made for the filing of evidence for the final hearing.

32. The final hearing occurred on 18 January 2016. The respondent filed a range of material

prior to the hearing, including medical reports and a statement addressing the exceptions

in the Baurhuit Report. The Commissioner made brief oral submissions as to penalty.

The respondent set out some matters in mitigation, but did not oppose the making of the

orders sought by the Commissioner.

Grounds for Occupational Discipline

33. I am satisfied that the respondent contravened section 115 of the Agents Act by failing

to provide his 2014/2015 trust account audit report to the Commissioner by the due

date. I am therefore satisfied that there is a ground for occupational discipline pursuant

to section 41(1)(a) of the Agents Act.

34. The next issue is whether the respondent, by failing to submit his trust account audit

report by the due date, failed to exercise “reasonable skill, care and diligence”, such that

there would be grounds for making an occupational discipline order pursuant to section

41(1)(b) of the Agents Act as well. This requires that I consider whether the respondent

has exercised a level of skill, care and diligence of a reasonable real estate agent.

35. I am also satisfied that by failing to ensure that the trust account audit was finalised by

30 September 2016 the respondent failed to exercise the skill and care expected of a

reasonable real estate agent. I am also satisfied that the respondent’s communications

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with the Commissioner about the steps he had taken to complete the report and the

likely timeframe for completion of the report were, whether intentionally or not,

misleading and demonstrative or a lack of care and diligence in complying with this

regulatory obligations. I am therefore also satisfied that there are grounds for making

an occupational discipline order under section 41(1)(b) of the Agents Act.

Role of the Tribunal

36. The respondent does not oppose the orders sought. The role of the tribunal in

disciplinary cases where the parties are in agreement or consent orders are sought was

discussed by Presidential Member Daniel in Nursing and Midwifery Board of Australia

v Izzard.1 This process, in essence, requires that the Tribunal be satisfied that the

occupational discipline orders sought are appropriate, notwithstanding they are agreed.

Considerations

37. Section 65(3) of the ACAT Act sets out the matters the Tribunal must take into account

when determining what occupational discipline orders to make under section 66 of that

Act. Section 65(3) states:

In considering what occupational discipline to use against the subject person, the tribunal must consider the following:

(a) whether the person took reasonable steps to avoid the action (the contravention) that is the ground for occupational discipline;

(b) whether occupational discipline has previously been used against the person for a similar act;

(c) whether the person has taken steps to mitigate the effect of the contravention;

(d) the impact of the contravention on any other person;

(e) the likelihood that the person will act in a way that is a ground for occupational discipline in the future;

(f) whether the entity bringing the application has applied for particular occupational discipline to be used and, if so, the kind of occupational discipline applied for.

38. Taking each of those considerations in turn:

1 [2016] ACAT 68

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Whether the person took reasonable steps to avoid the action (the contravention) that is the ground for occupational discipline

39. The respondent offered no evidence of any actions taken to avoid a contravention of

section 115 of the Agent Act, but he has submitted that his personal circumstances

provide a context and explanation for his breaches.

40. I accept that the respondent experienced a period of personal difficulty in 2015,

primarily due to family circumstances, but also due to medical conditions. I accept the

respondent’s evidence as to these circumstances, as far as it goes. Unfortunately, it does

not go very far.

41. The medical evidence supplied by the respondent does not confirm the extent of his oral

testimony as to his medical conditions, and nor does it address how those medical

conditions impacted on his ability to complete his audit accounts. I would, in the usual

course, be prepared to accept that certain medical conditions of the kind raised by the

respondent impact on a person’s capacity to operate their business. However, the

undisputed evidence in this case is that the respondent was running a very successful

business during the relevant period – indeed, in his own words, he was a “high

achiever”. It is difficult to reconcile this thriving business with the respondent’s

evidence that he was unable to attend to his affairs.

42. I do accept that the respondent’s personal affairs contributed to his poor record keeping

and business practices. I do not, however, accept that they were the only reason for

those deficiencies. In additional to failing to file his 2014/205 audit report by the due

date, the respondent failed to file his 2015/2016 audit report by its due date (or indeed

prior to this proceedings), failed to renew his licence within the required period,

committed mistakes in his audit process that may amount to a failure to account for trust

monies, and could not readily find necessary documentation for the completion of the

audit. It is apparent that the respondent’s processes, procedures and records were, prior

to the commencement of these proceedings, entirely inadequate. It is particularly

concerning that these deficiencies continued even after the breach of section 115 of the

Agents Act was brought to his attention by Ms Coggers and Mr Turnbull in 2014.

43. As such, I have little hesitation in finding that the respondent took no steps to avoid the

contraventions.

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44. For completeness, I note that I am satisfied that the respondent was put on notice by

way of Ms Cogger’s letter of 2 September that his audit report was due by 30

September 2014. He cannot, and does not, claim ignorance.

Whether occupational discipline has previously been used against the person for a similar act

45. The respondent has not previously been subject to an occupational discipline order.

Whether the person has taken steps to mitigate the effect of the contravention

46. There is no evidence before the Tribunal the respondent took any steps to mitigate the

effect of the contravention, other than the belated engagement of an auditor after the

commencement of these proceedings.

47. Notwithstanding his comments to Ms Cogger in October 2015 and May 2016 about the

progress of the audit report, there is no evidence that the respondent engaged an auditor

prior to November 2016. The respondent’s communication with Access Canberra was

misleading when it came to timeframes and the steps that he had taken to complete the

audit. If anything, this increased the regulatory burden imposed on the applicant.

48. Additionally, the respondent has only been in business since 2014, but has so far failed

to comply with the audit requirements for both the years that he has been in business.

Given that he only completed the requisite training for her Certificate IV in Property

Services (Real Estate) in June 2014, the requirements should have been fresh in his

mind.

49. Fortunately, the audit report, when finalised, confirmed that there were no effects on the

broader public that required mitigation.

The impact of the contravention on any other person

50. The respondent’s failure to submit his audit report on time caused the Commissioner to

incur the additional regulatory burden of enforcing this statutory requirement.

51. Additionally, as the trust accounts audits are the only mechanism available to the

Commissioner to ensure that agents are handling monies appropriately, the

Commissioner’s capacity to protect the public was compromised during the period that

the report was due and not filed.

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52. The respondent’s trust accounts showed a number of deficiencies. These are

demonstrative of poor record keeping and management practice. Such practices

inevitably expose members of the public to an increased risk their conveyance may go

awry. Fortunately, there is no evidence of any person was actually adversely affected.

The likelihood that the person will act in a way that is a ground for occupational discipline in the future

53. It is not possible to draw any firm conclusions about whether the respondent is likely to

act inappropriately in the future.

54. During the course of the final hearing the respondent made a series of submissions

about how the seriousness of this matter has “more than dawned” on him, and he stated

that he was determined to never risk his business again. While these concessions are

noted, it was somewhat concerning to the Tribunal that the seriousness of not

complying with accounting and trust reporting requirements did not fully dawn on him

prior to these proceedings. The importance of complying with audit requirements

should have been apparent from his training and education. Nonetheless, the question is

whether the respondent is likely to offend further in the future, and I accept that he is

motivated to avoid any further disciplinary action.

55. My concern is whether the motivation has been translated into appropriate action. It is

apparent to the Tribunal that the late audit report, and problems identified by the

auditor, are a consequence of disorganisation within the respondent’s office. The

respondent gave evidence as to the steps he has taken to address these deficiencies,

including additional training, the employment of an office manager, and the

implementation of the property tree software system. These are positive steps, but it

remains to be seen whether they will be sufficient to address any underlying issues.

56. Another positive sign was the the respondent’s acknowledgement that he should have

sought assistance earlier, and his statement that he is willing to do so in the future, if

necessary. It appears that he has a good mentoring arrangement in place and there is

every reason to believe that this will continue into the future.

57. The employment of a dedicated office manager is another positive step, but the

respondent must appreciate that it is ultimately the agent’s responsibility to know what

his obligations are and to ensure that they are met. His willingness, earlier in this

proceeding, to partially blame a previous office manager for the poor state of his records

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did not inspire confidence that he had fully understood this obligation prior to these

proceedings, but having regard to the evidence at the final hearing, I am as reasonably

satisfied that he does now.

Any other matter

58. The respondent has raised his personal circumstances as matters in mitigation. I am not

satisfied that the respondent’s personal circumstances are an excuse or an explanation

for the deficiencies in his record keeping, or for his failure to submit his audit report on

time. While I have no doubt that 2015 was a difficult year for the respondent, his

assertion that his personal affairs consumed him to such an extent that he could not

complete his audit report appears disingenuous when viewed against the evidence that

he successfully run his business, sold in excess of 45 properties and took a skiing

holiday during the relevant period.

59. Indeed, I still have little in the way of a satisfactory explanation as to why the

respondent’s audit report was so late. As noted above, I have some am view that the

delay was contributed to by poor record keeping and business management.

60. Nonetheless, I am satisfied that the respondent’s actions, in failing to submit his report

on time, were a consequence of negligent record keeping, rather than anything more

deliberate or sinister. It appears that the respondent’s business expanded very quickly,

and that he did not have the systems in place to deal with the increased book keeping

that expansion created. He is taking steps to rectify those deficiencies. It is fortunate

that these matters came to light before any member of the public suffered any loss.

Consideration

61. Having regard to the nature of the contravention, I am satisfied that a penalty of $1000

is appropriate. This is the maximum fine prescribed by legislation for an individual.2

62. I am also satisfied that it is appropriate to order that the respondent undertake the

suggested training courses and that he be publically reprimanded.

63. These orders reflect several considerations.

64. First, the magnitude of the penalty reflects that the Commissioner has had to expend

resources in enforcing compliance with what should be a routine annual obligation. It is

2 ACT Civil and Administrative Tribunal Regulation 2009 reg 4

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appropriate that the Commissioner recover some of these unnecessary costs from the

respondent. The maximum fine of $1000 represents only a small portion of those costs.

65. Second, it is apparent that the respondent’s approach to bookkeeping has been entirely

deficient, very probably since the commencement of his practice. This suggests that

there is some deficiency in his training, or his understanding of that training. The

interests of public protection require that he undergo appropriate additional training, in

addition to his usual continuing professional development obligations.

66. Thirdly, the breach is a significant one. It is a breach of an obligation that goes to the

protection of the public. The risk that other agents may neglect or overlook their trust

accounting obligations is a real one, and it is appropriate and necessary that steps be

taken to prevent it. One such step is a public record of the Commissioner taking steps to

address non-compliance. A public reprimand and a not insignificant fine are appropriate

means of ensuring that all agents are aware of their obligations, and of the consequences

of not meeting them.

Orders

67. The Tribunal makes the following orders:

1. Pursuant to section 66(2)(a) of the ACT Civil and Administrative Tribunal Act

2008 the respondent is publically reprimanded in the terms set out at Schedule 1.

2. Pursuant to section 66(2)(h) the respondent is to pay to the Territory the sum of

$1000.

3. Pursuant to section 66(2)(c) of the ACT Civil and Administrative Tribunal Act

2008 the respondent must, within six months of the date of this Order complete to

the satisfaction of the Commissioner the following real estate industry training

courses:

(a) Maintaining business records; and

(b) Minimising agency and consumer risk.

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4. These courses should be designed for the Australian Capital Territory’s legislative

environment and they are not to count towards the respondent’s continuing

professional development (CPD) requirement.

………………………………..Senior Member H Robinson

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Schedule 1

Mr Donald McPherson, the Tribunal has found that you have breached section 115 of the

Agents Act 2003 (ACT) by failing to file a trust account audit for the 2014/2015 financial year

within the required time. The report was finally filed in December 2016, over a year late, and

only after the commencement of these disciplinary proceedings.

As well as being a breach of your obligations under the Agents Act, your conduct amounts to

failure to exercise reasonable skill, care and diligence.

The trust report, when finally completed, revealed several exceptions that are indicative of

poor management and record keeping generally.

I accept that you had a range of personal and family difficulties during the 2014 to 2015

financial year and that these difficulties contributed to your contraventions. However, while

they offer some explanation, they do not provide an excuse. In any case, it was apparent that

you were capable of successfully managing most other aspects of your business during this

time. I am satisfied that your breach of the Agents Act was mainly due to inadequate

processes and procedures and record keeping.

Real estate agents hold significant sums of money on trust for other people. Agents have an

obligation to exercise a high degree of responsibility and diligence in the management of their

trust accounts, and a crucial part of this is the yearly audit. In the absence of an audit, neither

the Commissioner nor the public can have confidence in the integrity of an agent’s accounts.

Your breach of this obligation must be treated seriously so as to ensure the protection of the

public by deterring others from making a similar mistake.

Accordingly, the Tribunal has made orders that you be publically reprimanded, that you pay

$1000 to the Australian Capital Territory and that you complete training courses in

maintaining business records and managing consumer risk.

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HEARING DETAILS

FILE NUMBER: OR 16/2016

PARTIES, APPLICANT: Commissioner for Fair Trading

PARTIES, RESPONDENT: Donald Ambrose McPherson

COUNSEL APPEARING, APPLICANT N/A

COUNSEL APPEARING, RESPONDENT N/A

SOLICITORS FOR APPLICANT N/A

SOLICITORS FOR RESPONDENT N/A

TRIBUNAL MEMBERS: Senior Member H Robinson

DATES OF HEARING: 17 November 2016

16 December 2016

18 January 2017

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