Department of Employment, Economic Development & Innovation v Baldwin [2011] QCAT 484

CITATION: Department of Employment, Economic Development & Innovation v Baldwin [2011] QCAT 484 PARTIES: Department of Employment, Economic Development & Innovation v Michael John Baldwin APPLICATION NUMBER: OCR061-11 MATTER TYPE: Occupational regulation matters HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Peta Stilgoe, Member DELIVERED ON: 11 October 2011 DELIVERED AT: Brisbane ORDERS MADE: 1. Michael John Baldwin is reprimanded. 2. Michael John Baldwin is disqualified permanently from being the holder of any form of licence or certificate of registration issued under the Property Agents and Motor Dealers Act 2000. 3. Michael John Baldwin is prohibited permanently from being an executive officer of a corporation that holds any form of licence issued under the Property Agents and Motor Dealers Act 2000. 4. Michael John Baldwin pay a fine of $9,000 (90 penalty units) within 30 days of the date of this order. 5. Michael John Baldwin pay the Chief Executive’s costs of this proceeding fixed at $510 within 30 days of the date of this order. CATCHWORDS: PROPERTY AGENTS – where misuse of trust account – where five unauthorised withdrawals – where loss of $600,000 – appropriate penalty -- 1 of 5 -- Property Agents and Motor Dealers Act 2000, ss 384, 496 The Chief Executive, Department of Tourism, Fair Trading and Wine Industry Development v Cornwell J [2005] CCT X007-05 The Chief Executive, Department of Tourism, Racing and Fair Trading v Gunther [2004] QCCTPAMD 18 The Chief Executive, Department of Tourism, Racing and Fair Trading v Gunther [2004] QCCTPAMD 68 Department of Employment, Economic Development and Innovation v Welburn [2010] QCAT 202 APPEARANCES and REPRESENTATION (if any): This matter was heard and determined on the papers in accordance with section 32 of the Queensland Civil and Administrative Tribunal Act 2009. REASONS FOR DECISION [1] Gold Coast Property Investments & Management Pty Ltd, trading as Ray White Southport held a real estate corporation licence from 18 August 1997 to 22 July 2010. Mr Baldwin was a director of the company and held a real estate principal licence from 18 December 2002 to 22 July 2008. He surrendered his licence on 22 July 2008 and has not sought reinstatement. [2] Between March 2008 and June 2008, Mr Baldwin signed cheques to effect five unauthorised withdrawals from the company trust account: a) On 31 March 2008, $382,000 drawn from Rental Trust Account 1 was deposited into the company’s general account. b) On 9 April 2008, $110,000 drawn from Sales Trust Account 2 was deposited into the company’s general account. c) On 1 May 2008, $50,000 drawn from Sales Trust Account 2 was deposited into Rental Trust Account 1. d) On 30 May 2008, $60,000 was drawn from Sales Trust Account 2 and deposited into Rental Trust Account 1. e) On 10 June 2008, $110,000 was drawn from Rental Trust Account 1 and deposited into Sales Trust Account 2. [3] The company was placed under external administration. The administrator identified a shortfall in the rental and sales trust accounts totalling $613,186. The funds were not recovered and the Department was required to make payments from the statutory fund to consumers. Neither the company nor Mr Baldwin has reimbursed the statutory fund. -- 2 of 5 -- [4] I have already determined that the company is guilty of disciplinary charges and I have imposed penalties accordingly. [5] The Chief Executive has referred Mr Baldwin to the tribunal for disciplinary proceedings under s 496 of the Property Agents and Motor Dealers Act 2000 on the basis that: a) He is an executive officer of a corporation that has been found guilty of disciplinary charges.1 b) He is not a suitable person to hold a licence2. c) In carrying on business, he has been incompetent or acted in an unprofessional way.3 [6] Mr Baldwin has not filed any material in reply to the Chief Executive’s application. I am satisfied that he has breached s 384(1), has acted in an unprofessional way and is not a suitable person to hold a licence. I am therefore satisfied that disciplinary proceedings are appropriate. [7] The Chief Executive points out that the primary object of disciplinary proceedings is to protect members of the public from professional misconduct. The Act imposes a clear prohibition against dealing with trust money without authority and the Chief Executive submits that a proper account of trust funds is central to the integrity of the real estate industry. [8] The misuse of trust account funds was not an isolated incident. Without authority, Mr Baldwin transferred a total of $712,000 in five transactions. As a result of those transactions, there was a shortfall in trust money of $613,186.30. The Department of Justice and Attorney General made an ex gratia payment of that amount to the statutory fund to cover consumer losses. [9] The Chief Executive urges the tribunal to: reprimand Mr Baldwin; disqualify him permanently from holding a licence; impose a fine of 200 penalty units ($20,000); and order him to pay costs of $510. [10] I am satisfied that the conduct of Mr Baldwin is so serious that he should be reprimanded and permanently disqualified from holding a licence, whether personally or as an officer of a corporation. [11] In support of the imposition of a fine of $10,000, the Chief Executive has referred me to The Chief Executive, Department of Tourism, Fair Trading and Wine Industry Development v Cornwell J4 and The Chief Executive, Department of Tourism, Fair Trading and Wine Industry Development v Ruffo Pty Ltd & Judith Ruffo5. The penalty in Cornwell was 40 penalty units; the penalty in Ruffo was 20 penalty units. [12] The highest penalty that I can find was one of 100 penalty units imposed in The Chief Executive, Department of Tourism, Racing and Fair Trading v 1 Section 496(1)(g)(v). 2 Section 496(1)(g)(ii). 3 Section 496(1)(g)(iii). 4 [2005] CCT X007-05. 5 Unreported. -- 3 of 5 -- Gunther6. In that case, Mr Gunther devised a scheme to sell houses at up to 74% more than their value to first home buyers who: were fairly recent arrivals in Australia; had English as their second language; were commercially naïve and unsophisticated; and belonged to the same church. In order to finance the sales, Gunther drew the contracts to hide the true position from the banks advancing funds to the purchasers. Gunther organised eight transactions in this way and stood to make a profit of almost $160,000. The tribunal imposed a substantial penalty because the scheme was: “deliberately manipulative, it was cleverly designed to deceive the bank, it was devised to make large profits resulting in the purchasers acquiring houses at prices well above their value, and it callously led these purchasers to become indebted to the bank and to Gunther’s companies when they had little or no prospect of servicing those debts. The Tribunal is satisfied that Gunther’s conduct undermines the purpose of the legislation, and the standing of the real estate industry and erodes the confidence of the community in that industry.7 [13] Mr Baldwin’s conduct in this case is not so serious. It is true that there was a substantial amount withdrawn from trust in a series of transactions but it appears that the trust money was used to prop up the company’s operating expenses. The transactions occurred over a fairly short period at a time when the global financial crisis was affecting the Gold Coast property market. There is no suggestion that he was engaged in any conduct calculated to deliberately deceive or defraud the public. [14] I accept that the loss of over $600,000 places Mr Baldwin in a more serious position that that of Cornwell, particularly in view of the fact that there is no evidence that he has cooperated with the Chief Executive. [15] This tribunal imposed a penalty of 70 penalty units in The Chief Executive, Department of Employment, Economic Development and Innovation v Welburn8. That case involved more trust account breaches over a longer period but lower amounts, all of which were repaid. The appropriate penalty is something more than 70 penalty units but something less than 100 penalty units. I am satisfied that the penalty should be $9,000, or 90 penalty units. Mr Baldwin should not expect a discount from the penalty I imposed on the company simply because his offences are less “direct”. To all intents and purposes, he was the company and he should share equal responsibility for the penalties. [16] The Chief Executive has submitted the same material in this proceeding and in OCR061-11. There should only be one order for costs because the Chief Executive should not be compensated twice for the same work. The company is in administration and there is little possibility that it will be able to pay the penalty or any costs that might be awarded. I declined to order costs against the company but it is appropriate that Mr Baldwin pays the Chief Executive’s costs fixed in the amount of $510. 6 [2004] QCCTPAMD 18. 7 The Chief Executive, Department of Tourism, Racing and Fair Trading v Gunther [2004] QCCTPAMD 68 at [160]. 8 [2010] QCAT 202. -- 4 of 5 -- [17] The orders should be: a) Michael John Baldwin is reprimanded. b) Michael John Baldwin is disqualified permanently from being the holder of any form of licence or certificate of registration issued under the Property Agents and Motor Dealers Act 2000. c) Michael John Baldwin is prohibited permanently from being an executive officer of a corporation that holds any form of licence issued under the Property Agents and Motor Dealers Act 2000. d) Michael John Baldwin pay a fine of $9,000 (90 penalty units) within 30 days of the date of this order. e) Michael John Baldwin pay the Chief Executive’s costs of this proceeding fixed at $510 within 30 days of the date of this order. -- 5 of 5 --