Chief Executive, Department of Justice and Attorney General v Halmarn Pty Ltd [2014] QCAT 99

CITATION: Chief Executive, Department of Justice and Attorney General v Halmarn Pty Ltd [2014] QCAT 099 PARTIES: Chief Executive, Department of Justice and Attorney General (Applicant/Appellant) v Halmarn Pty Ltd (First Respondent) Donald McGrath (Second Respondent) APPLICATION NUMBER: OCR158-12 MATTER TYPE: Occupational regulation matters HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Dr Cullen, Member DELIVERED ON: 20 March 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. The Second Respondent is to pay a penalty of $418,716.78 to the Applicant. 2. The Second Respondent is to pay compensation to property owners in the amounts contained in Annexure A of the Applicant’s submissions on penalty. 3. The First and Second Respondents are disqualified permanently from holding any license under the Property Agents and Motor Dealers Act 2000 (Qld). 4. The Second Respondent is disqualified permanently from being an executive officer of a corporation that holds a licence under the Property Agents and Motor Dealers Act 2000 (Qld). 5. The Second Respondent pay the Applicant’s costs of the disciplinary proceedings, fixed in the amount of $135,056.51. CATCHWORDS: PROFESSIONS AND TRADES – PROPERTY -- 1 of 9 -- 2 AGENTS – DISCIPLINARY PROCEEDINGS – where the first and second respondents were licensed real estate agents – where the first respondent is in liquidation – where the first and respondent were found to have contravened s 117 of the Property Agent and Motor Dealers Act 2000 (Qld) on 1,135 occasions by overcharging property owners at Magnetic Island International Resort and s 16 of the applicable Code of Conduct on 11 occasions, in acting where conflicting interests existed – appropriate penalty for systemic conduct – permanent disqualification of both respondents Property Agents and Motor Dealers Act 2000 (Qld) Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267 Chief Executive Department of Justice and Attorney-General v Brisbane City Student Accommodation Pty Ltd and Ors [2012] QCAT 49 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44 Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 APPEARANCES and REPRESENTATION (if any): This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act). REASONS FOR DECISION [1] On 1 November 2013, the Tribunal determined that grounds existed to take disciplinary action against both Halmarn Pty Ltd („Halmarn‟) and Mr Donald McGrath („Mr McGrath‟). The conduct that led to the Tribunal‟s findings was pervasive, and took place over a protracted period of time. [2] The Tribunal found that Halmarn contravened s 117 of the Property Agent and Motor Dealers Act 2000 (Qld) („the Act‟) on 1,135 occasions by overcharging property owners at Magnetic Island International Resort. The overcharging related to credit and charge card transactions, agents commissions, and the charging of ACCOR fees and commissions without authority. As Mr McGrath was then a director of Halmarn, he was found to be responsible for his actions in failing to ensure that Halmarn complied with the Act. -- 2 of 9 -- 3 [3] Additionally, the Tribunal also found that Halmarn, and by extension Mr McGrath, contravened s 16 of the applicable Code of Conduct on 11 occasions, in that it acted for unit owners in circumstances where Halmarn and Mr McGrath had conflicting interests with those of the unit owner. [4] Both Mr McGrath and Halmarn were licensed property agents, however their licenses both expired on 6 May 2013. The Department seeks that Halmarn and Mr McGrath be permanently disqualified from holding any license pursuant to s 529(1)(d)(iii) of the Act. [5] As Halmarn is in liquidation, the Department does not seek pecuniary orders against the company. Rather, the Department seeks only an order that Halmarn be permanently disqualified from holding a license. In relation to Mr McGrath, the Department seeks the following orders: 1. an order pursuant to section 529(1)(b)(i) of the Act that Mr McGrath pay to the Department a fine of not more than 200 penalty units for each established contravention by Mr McGrath of sections 117 of the Act; 2. an order pursuant to section 529(1)(b) of the Act that Mr McGrath pay to the Department a fine of not more than 200 penalty units for each established contravention by Mr McGrath of section 16 of the Code; 3. an order pursuant to section 529(1)(d)(i) of the Act that Mr McGrath‟s resident letting agent‟s licence number 3033863 held pursuant to the Act be cancelled; 4. an order pursuant to section 529(1)(d)(ii) of the Act that Mr McGrath be disqualified permanently from holding any licence pursuant to the Act; 5. an order pursuant to section 529(1)(e) that Mr McGrath be disqualified permanently from being an executive officer of a corporation that holds a licence under the Act; … 7. an order pursuant to section 529(1)(ba) of the Act that because of the acts or omissions of Mr McGrath that resulted in this disciplinary action, the Tribunal directs Mr McGrath to pay compensation to such persons and in such amounts as the Tribunal deems fit; 8. an order pursuant to section 102 of the Queensland Civil and Administrative Tribunal Act 2009 that the interests of justice require Mr McGrath pay the Department‟s costs of this disciplinary proceeding. [6] Having already determined that disciplinary action should be taken against Halmarn and Mr McGrath, the Tribunal must now make a decision about the appropriate penalties and costs. The Tribunal has received submissions from both the Department and from Mr McGrath. -- 3 of 9 -- 4 The Department seeks a substantial penalty [7] The Department seeks that the Tribunal impose a fine of $1,715,500.00 in relation to Mr McGrath‟s conduct, based upon the value of a penalty unit as at 1 January 2009.1 [8] The Department notes that many of the contraventions took place after a recent increase in penalty unit value. They have calculated the amount sought ($1,717,500.00) based upon seeking 20 penalty units in respect of each contravention (of which there are 1,146 contraventions), amounting to a total of 22,900 penalty units. In turn, 22,900 penalty units valued at $75.00 each equates to a fine of $1,717,500.00. [9] Whilst the penalty the Department asks the Tribunal to impose is very significant, the Department submits that the quantum is warranted as Mr McGrath‟s conduct was pervasive and systemic. The Department also indicates that in seeking an amount of 20 penalty units for each contravention, it is seeking a penalty of only 10% of the possible penalty amount (as each contravention could carry with it 200 penalty units). [10] Mr McGrath submits that the Tribunal should consider that each of the 1,146 contraventions were for comparatively small amounts of money. He submits that the Tribunal should not penalise him for each individual contravention, but rather should consider an overall penalty, not to exceed $2,000.00, reflective of same. Additionally, he suggests that he should be reprimanded, as opposed to being permanently disqualified from holding a license. [11] I agree with the Department that the conduct in issue was both pervasive and systemic. Mr McGrath‟s conduct took place over a lengthy period of time and was in relation to numerous unit holders. Had the Department not begun its investigation, it is quite likely that the conduct, devised to fly under the radar, would have gone on for much longer. Mr McGrath asserts that the skimming took place because of a change in accounting systems, yet, has never explained to the Tribunal how such errors could have taken place, and for such a long period of time. Factors to consider in relation to penalty [12] There are several factors that must be considered in determining the appropriate penalty here:  Mr McGrath has not previously been disciplined;  The contravening conduct led to Halmarn receiving more than $200,000.00 of money it was not entitled to;  Mr McGrath demonstrates no apparent remorse for his conduct; and 1 The value of a penalty unit before 1 January 2009 was $75.00, and from 1 January 2009 onward, $100.00. -- 4 of 9 -- 5  Halmarn and Mr McGrath have done little, if anything, to assist the Department in either its investigation, or handling of this matter in the Tribunal. Mr McGrath’s lack of remorse [13] It is the case that Mr McGrath has taken steps to repay some of the amounts that were wrongly retained by Halmarn. Whilst this is viewed positively by the Tribunal, it is also the case that Halmarn has merely given back to the overcharged property owners some of the amounts it wrongfully retained. At no stage has Mr McGrath sought to repay any of the overcharged property owners from his own funds. In these circumstances, I do not consider Mr McGrath‟s arranging for repayment of funds wrongfully retained by Halmarn to be an act of genuine remorse, but rather an act of obvious necessity in circumstances where he and the company were caught out. [14] Genuine remorse, in my view, requires more than capitulating and then doing what is right to begin with; genuine remorse requires an active effort to put right the circumstances that the victims have found themselves in. For example, Mr McGrath could have prepared a plan whereby he took responsibility for the conduct, and made payment arrangements to the affected owners, over an extended period of time, and with interest, to ensure that there was no financial loss to the property investors that had once trusted him. Nothing of this nature happened. [15] It is of some moment to note that even in his submissions on penalty, Mr McGrath continues to dispute the Tribunal‟s finding that both he and Halmarn engaged in contravening conduct. He uses such phrases as „technical non-disclosure‟ and „at the end of the day, this was a very minor transgression‟. Mr McGrath’s health and age [16] Mr McGrath asserts that he is in poor health, and says that at 67 years of age, a ban on his holding a license would effectively oust him from the working market. Mr McGrath‟s period of ill health post dates the conduct in question, and thus bears little relevancy to the question of penalty. I would consider Mr McGrath‟s health to be more relevant in circumstances where he was experiencing health difficulties at the time of the conduct. That is because in those circumstances, it could be suggested that the ill health was, in part, the reason for one‟s conduct. For example, someone suffering from cancer may find themselves so involved with their own medical treatment, that they take their eye off other obligations, and fail to properly manage their agency. There is no suggestion that this was the case in Mr McGrath‟s circumstances. [17] Regardless, I have considered Mr McGrath‟s age, ill health, and arguments that the Tribunal should not penalise him separately for each contravention in coming to my decision on penalty. -- 5 of 9 -- 6 The contraventions should be considered as a group in relation to the penalty imposed [18] It is my view that whilst a very significant penalty is warranted here, in order to act as a deterrent to other license holders and protect consumers, the amount sought by the Department is beyond that which would be appropriate to impose an individual in these particular circumstances. I also accept the argument advanced by Mr McGrath that the penalty should be one that takes into account the commonality of the contraventions. [19] There are no analogous Tribunal decisions that afford guidance about the appropriate penalty for the Tribunal to impose in these circumstances. The distinguishing factor between this case and others previously decided relates to the long-term conduct and numerous contraventions by Mr McGrath. In contrast, previous PAMDA disciplinary proceedings commenced in the Tribunal have involved minimal numbers of contraventions (usually one or two). Halmarn and Mr McGrath‟s conduct is unparalleled. [20] In Chief Executive Department of Justice and Attorney-General v Brisbane City Student Accommodation Pty Ltd and Ors,2 the Tribunal did have occasion to deal with conduct involving multiple, small contraventions of a similar nature. However, in sharp contradistinction to this matter, in Brisbane City Student Accommodation, the conduct was admitted at an early juncture, there was agreement in relation to the facts and proposed penalty, and cooperation throughout the entire process. There, the Tribunal imposed a penalty of $45,000.00 against the first of four respondents, as well as ordering that compensation be paid to persons who were overcharged. [21] Some guidance can be found by analogy to the principles applied by the Federal Court in cases involving the imposition of civil penalties in trade practices/consumer protection cases. The objectives are similar in that the purpose of a penalty in such cases is “to protect the consumer by eliminating unfair trade practices”.3 [22] Quite recently, the Federal Court considered a case in which similar arguments relating to penalty were raised by the parties. In Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2),4 his Honour Justice Mansfield imposed a penalty against persons knowingly involved in the contravention of the Trade Practices Act 1974 (Cth) by Excite Mobile. [23] In Excite Mobile, the Australian Competition and Consumer Commission argued that a penalty in the range of approximately 75% of the upper range of the possible penalty should be imposed (in similar fashion to the 2 [2012] QCAT 49. 3 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, Mason J at 204. 4 [2013] FCA 1267. -- 6 of 9 -- 7 Department‟s submissions here, the argument related to the total number of penalty units possible under the legislation, and value of penalty units). [24] The Federal Court accepted that the approach urged by the Australian Competition and Consumer Commission was correct, which is in broad terms analogous to the approach urged by Mr McGrath – that the Judge should „not routinely isolate‟ every contravention, and should: apply the one transaction principle and group together a number of separate acts of Excite Mobile in contravention of the TPA into a smaller number of “courses” or “episodes” of conduct, in order to determine the maximum penalties available. In the case of the individuals, the relevant acts are those of being knowingly concerned in each episode of conduct.5 [25] His Honour Justice Mansfield noted that: [t]he one transaction principle was considered and endorsed in Singtel6 at [53]-[55], which quoted with approval the authoritative statements of principle collected by Middleton J in Australian Competition and Consumer Commission v Telstra Corporation Ltd (citations omitted). Middleton J held that, in the final analysis, in applying the one transaction principle, the question is one of discretion in coming to the correct, adequate and appropriate penalties. [26] The “one transaction principle” is a concept taken from the criminal law, jurisdiction, the purpose of which is to ensure that offenders are not punished more than once for the same conduct. Thus, before the “one transaction principle” applies, it must be the case that there exists an interrelationship between the legal and factual elements of the conduct in question. There are a number of common legal and factual elements to the types of conduct that Mr McGrath engaged in knowingly whilst a director of Halmarn. [27] I have carefully considered the Department‟s submissions and the serious nature of Mr McGrath‟s conduct, but consider that a penalty substantially lesser than that proposed by the Department will achieve the objectives of acting as a deterrent to similar conduct by an individual. [28] As exhibited in attachment 5 to the Department‟s submissions on penalty, Halmarn and Mr McGrath‟s conduct resulted in Halmarn‟s retaining $209,358.39 that it was not entitled too. Accordingly, the Tribunal will fix the penalty that Mr McGrath is to pay for this conduct at $418,716.78 (twice $209,358.39). The fixing of a penalty, for which there can be no mathematical formulae, must have regard to the unique factual matrix of each case. In doubling the amount retained by Halmarn to calculate the penalty Mr McGrath must incur for his conduct, I have had careful regard to both the Department and Mr McGrath‟s submissions. 5 Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267 at [17]. 6 Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 at [53]-[55]. -- 7 of 9 -- 8 Compensation Orders are appropriate [29] The Department asserts that Mr McGrath should not achieve any advantage by having used a company structure, Halmarn Pty Ltd, to conduct business. I agree, and think it is appropriate that Mr McGrath also be ordered to compensate the owners effected, and be held accountable for his conduct whilst a director of Halmarn. The Tribunal will order that Mr McGrath repay the amounts sought in Annexure A of the Department‟s submissions on penalty. Those amounts consist of: a) Losses suffered by complainants were no PAMDA 20A was held - $142,512.80; b) Losses suffered by complainants where there was a PAMDA 20A, but no schedule A attachment - $65,316.12; c) Losses for Accor affiliation fees - $3,960.00; d) Losses for Accor commission fee - $3,576.26. Halmarn and Mr McGrath are permanently disqualified [30] The purpose of the PAMDA legislation is to ensure consumer protection, and in circumstances where the conduct engaged in by Halmarn and Mr McGrath was pervasive and took place over several years, the Tribunal considers that any lesser order than permanent disqualification would not reflect the seriousness of the conduct. The Tribunal will therefore order that both Halmarn and Mr McGrath are permanently banned from holding any license under the PAMDA Act. This will create a deterrent effect for other holders of residential letting agency licenses in Queensland, and promote consumer protection by ensuring that agents keep proper books and accounts. Costs against Mr McGrath are warranted [31] I accept that communicating with Mr McGrath was not straightforward for the Department. It was difficult to secure Mr McGrath‟s attendance for the hearing, and involved last minute adjournments in circumstances where the Department had briefed Counsel and was ready to proceed. It would, I think, not be unfair to suggest that Mr McGrath engaged in a sort of “cat and mouse” game with the Tribunal, forcing the Tribunal to take extra measures to contact him and ensure that he had access to all of the Department‟s material, receive his materials late, and arrange for remote attendances, in circumstances where he was less than forthcoming with the Tribunal as to his whereabouts and contact details. [32] Mr McGrath suggests that these difficulties occurred for the reason that he was, for most of the proceedings, located remotely overseas. I do not accept this as a full explanation for the difficulties experienced by the Department and the Tribunal in contacting him. In today‟s modern society, it is not difficult to liaise with overseas persons who want to be contacted. -- 8 of 9 -- 9 [33] It became necessary for the Tribunal to make orders that the Department‟s materials be collected by Mr McGrath or his nominated agent, prior to the original hearing date listed for this matter, as Mr McGrath insisted that he had not received the materials. This insistence was despite the Department having filed an affidavit of service which clearly indicated that Mr McGrath had, in fact, been provided with a copy of the relevant materials. The Tribunal reluctantly adjourned the initial hearing date for the reason that Mr McGrath‟s insistence that he had not been given the Department‟s materials was made with such conviction that it seemed preferable. All of this “extra handling” is not required in matters where the parties are readily available. [34] This extra flurry of activity on the part of the Department, occasioned by Mr McGrath‟s handing of the matter before QCAT comes at a significant cost to the Department, and therefore to the State of Queensland. At no stage, did Mr McGrath endeavour to liaise with the Department about which points were agreed and not agreed. As such, the entire matter needed to be prepared for hearing, which in this case consisted of substantial volumes of detailed, financially complex, affidavit material. There was no reduction of issues in contention between the time of filing and the time of hearing, yet Mr McGrath and Halmarn were found to have engaged in virtually all of the conduct that the Department alleged. [35] Mr McGrath‟s focus has been on vigorously putting the Department to proof, rather than on the unfortunate conduct engaged in by himself and Halmarn. This cost should not be borne by the Department, which is publically funded. The Department has provided an outline of the costs it has occurred, all of which I accept as being necessarily incurred in this matter. Those costs amount to $135,056.51. [36] The Tribunal orders that Mr McGrath pay costs fixed in the amount of $135,056.51 to the Department. -- 9 of 9 --