Filippini v Chief Executive, Department of Tourism, Fair Trading & Wine Industry Development [2008] QCA 96 [2009] 1 Qd R 230

SUPREME COURT OF QUEENSLAND CITATION: Filippini v Chief Executive, Department of Tourism, Fair Trading & Wine Industry Development [2008] QCA 96 PARTIES: HEATHER FILIPPINI t/a HEATHER FILIPPINI ISLAND REAL ESTATE (appellant/respondent) v CHIEF EXECUTIVE, DEPARTMENT OF TOURISM, FAIR TRADING AND WINE INDUSTRY DEVELOPMENT (respondent/appellant) FILE NO/S: Appeal No 514 of 2008 DC No 2348 of 2006 DIVISION: Court of Appeal PROCEEDING: Application for Leave s 118 DCA (Civil) ORIGINATING COURT: District Court at Brisbane DELIVERED ON: 24 April 2008 DELIVERED AT: Brisbane HEARING DATE: 11 April 2008 JUDGES: Keane and Fraser JJA and Lyons J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDER: 1. Application for leave to appeal granted 2. Appeal allowed 3. Orders made by the District Court set aside; and in lieu thereof it is ordered that the appeal to the District Court be dismissed 4. Respondent to pay the appellant's costs of and incidental to the application for leave to appeal and the appeal, and of the proceedings in the District Court, to be assessed on the standard basis CATCHWORDS: PROFESSIONS AND TRADES – AUCTIONEERS AND AGENTS – CONSTRUCTION OF STATUTORY PROVISIONS – QUEENSLAND – LICENCES – where the respondent is a licensed real estate agent – where the respondent was found to have, on two occasions, contravened s 145 of the Property Agents and Motor Dealers Act 2000 (Qld) by obtaining a beneficial interest in a property placed with her for sale – where the District Court overturned the decision to cancel the respondent's real estate agent's licence, imposing in lieu thereof -- 1 of 10 -- 2 fines for the offending conduct – whether the respondent is a "suitable person" to hold a real estate agent's licence – whether the offending conduct justified the cancellation of the respondent's real estate agent's licence District Court of Queensland Act 1967 (Qld), s 118(3) Property Agents and Motor Dealers Act 2000 (Qld), s 10, s 21, s 26, s 28, s 145, s 496(1), s 529(1) Berceanu v Boltons Real Estate Pty Ltd & Ors (2004) Qld Lawyer Reps 308; [2004] QDC 018, applied Monte Carlo Caravan Park Pty Ltd v Curyer [2007] 2 Qd R 57; [2006] QCA 363, applied New South Wales Bar Association v Evatt (1968) 117 CLR 177; [1968] HCA 20, cited COUNSEL: M D Hinson SC for the appellant K S Howe for the respondent SOLICITORS: Crown Law for the appellant Michael Sing Lawyers for the respondent [1] KEANE JA: Ms Filippini, the respondent to this application, is a real estate agent licensed under the Property Agents and Motor Dealers Act 2000 (Qld) ("the PAMDA"). On 29 June 2006 the Commercial and Consumer Tribunal ("the Tribunal") found Ms Filippini had, on two occasions, contravened s 145 of the PAMDA by obtaining a beneficial interest in property placed with her for sale. In dealing with these contraventions, the Tribunal's jurisdiction was disciplinary rather than penal: its jurisdiction was conferred by s 496(1)(b)(i) of the Act. The Tribunal's powers, where it finds a person guilty of a disciplinary charge, are conferred by s 529(1) of the PAMDA. [2] On 1 August 2006 the Tribunal made orders whereby Ms Filippini's real estate licence was cancelled, she was disqualified from holding a licence or registration certificate under the PAMDA for four years, and she was fined $3,750 in respect of one charge and $7,500 in respect of the other. Ms Filippini appealed to the District Court against these orders. Ms Filippini also appealed unsuccessfully to the District Court in relation to her conviction on one of the charges. [3] On 21 December 2007 the District Court allowed her appeal, set aside the orders of the Tribunal and made orders whereby she was reprimanded in respect of her conduct, and fined $7,500 in respect of one charge and $10,000 in respect of the other. [4] The District Court held that the Tribunal erred in imposing a penalty which was manifestly excessive, and, in particular, in concluding that a substantial fine was insufficiently deterrent and in concluding that a disqualification should be imposed in addition to a fine. [5] The Chief Executive now seeks leave to appeal against the decision of the District Court. An appeal against such a decision under s 100 of the Commercial and Consumer Tribunal Act 2003 (Qld) lies only on the grounds of jurisdictional error -- 2 of 10 -- 3 or error of law. Leave to appeal is required by s 118(3) of the District Court of Queensland Act 1967 (Qld). [6] The Chief Executive contends that the District Court erred in law in failing to appreciate the disciplinary character of the proceedings and in failing to appreciate the matters which warranted cancellation of Ms Filippini's licence and disqualification. [7] It is well settled that leave to appeal will be granted where the decision in question is attended by sufficient doubt to warrant its reconsideration and where it is the cause of a substantial injustice which would be corrected on appeal.1 In this case, the Court proceeded on the footing that the appropriate course was to hear argument on the merits of the appeal while reserving the question of leave. [8] In order to understand the basis on which it is asserted that the decision of the District Court is affected by error of law, it is convenient to refer first to the reasons of the learned District Court judge where his Honour summarised the facts relating to Ms Filippini's misconduct, and then to his Honour's reasons for setting aside the decision of the Tribunal. The contraventions of s 145 of the PAMDA [9] Section 145 of the PAMDA provides as follows: "Beneficial interest–other than options (1) This section applies to property placed by a person (client) with a real estate agent for sale, but does not apply if section 144 applies. (2) The real estate agent commits an offence if the agent obtains a beneficial interest in the property. Maximum penalty–200 penalty units or 3 years imprisonment. (3) A real estate salesperson employed by the real estate agent commits an offence if the salesperson obtains a beneficial interest in the property. Maximum penalty–200 penalty units or 3 years imprisonment. (4) A person does not contravene subsection (2) or (3) if— (a) the person— (i) before a contract for the sale of the property is entered into, obtains the client’s written acknowledgment in the approved form that the client– (A) is aware that the person is interested in obtaining a beneficial interest in the property; and (B) consents to the person obtaining the interest; and (ii) acts fairly and honestly in relation to the sale; and (b) no commission or other reward is payable in relation to the sale; and 1 Monte Carlo Caravan Park Pty Ltd v Curyer [2007] 2 Qd R 57. -- 3 of 10 -- 4 (c) the client is in substantially as good a position as the client would be if the property were sold at fair market value." [10] The learned District Court judge summarised the facts relating to the charge which was the subject of the unsuccessful appeal against conviction: "Mrs Denise Love listed her property at 17 King Charles Drive, Sovereign Islands for sale with Ms Filippini's real estate agency in or about June or July 2003. On 9 September 2003, Mrs Love contracted to sell the property to 'A.A. Fedotov or nominee' for the sum of $1,300,000. A week or more after the contract was signed A.A. Fedotov nominated 'Heather Isobel Penney' as transferee pursuant to the contract. It is not disputed that 'Heather Isobel Penney' was in fact the applicant utilising her maiden name. On 29 October 2003, Mrs Love signed a transfer in favour of the applicant for the sum of $1,300,000, the transfer was produced to the Land Titles Office on 12 December 2003 and the applicant has been the registered owner of the property since that date."2 [11] His Honour summarised the facts relating to the other charge in the following terms: "On 18 June 2006, Alexei Fedotov and Sarah Fedotov entered into a contract to purchase from Mr & Mrs Fenech their property at 33 King Arthur's Court, Sovereign Islands. Sarah Fedotov was at the relevant time married to Alexei Fedotov and is the applicant's daughter. Consequently, Sarah Fedotov (known as Sarah Filippini as at the date of Member Gallagher's decision delivered on 29 June 2006) was an 'associate' as defined in Schedule 2 of PAMDA. Sarah Fedotov/Filippini provided no monies for the purchase of the property of Mr & Mrs Fenech and gave evidence that the only reason for the inclusion of her name on the contract was because of Mr Fedotov's difficulties in meeting the requirements of the Foreign Investments Review Board ('FIRB'). Member Gallagher found that at the time of the purchase of the property of Mr & Mrs Fenech, Mr Fedotov and Ms Fedotov/Filippini were in a 'traditional matrimonial relationship' (having commenced a relationship in 1998, married in 2001 and separated in early 2005). Member Gallagher was satisfied that the purchase of the property of Mr & Mrs Fenech was made for Ms Fedotov/Filippini as well as for Mr Fedotov. Member Gallagher was also satisfied that for the purposes of PAMDA s 145, it was not necessary for the real estate agent to know at the relevant time that a beneficial interest had been obtained, other than in respect of the issue of penalty. Member Gallagher found that the applicant obtained a beneficial interest in the property of Mr & Mrs Fenech because the purchase of that property was made for her daughter, Ms Sarah Fedotov/Filippini, who was the applicant's 'associate', which placed the applicant in breach of PAMDA s 145."3 2 Filippini v Chief Executive, Department of Tourism, Fair Trading & Wine Industry Development [2007] QDC 351 at [8]. 3 [2007] QDC 351 at [27]. -- 4 of 10 -- 5 [12] The learned District Court judge summarised the points which weighed with the Tribunal in determining the orders which were appropriate in the circumstances: "Member Bradley made the following points in sentencing:- (a) 'Mrs Filippini contested both disciplinary charges. It follows that she can not have the benefit of the reduction in penalty which is appropriate in cases where licensees plead guilty to disciplinary charges, particularly at an early point in time. (b) Mrs Filippini is the principal of her own real estate agency. The standard of responsibility expected of such a licensee is necessarily higher than that expected of an employed salesperson, expected to work under a principal's close personal supervision. The penalties imposed on principals whose employees have offended might be expected to be lower than those for misconduct by a principal. (c) Mrs Filippini has no previous convictions for misconduct and has not been the subject of previous disciplinary charges. The two proven disciplinary charges involve separate transactions. For reasons of deterrence and example the penalty for two contraventions of s 145 will necessarily be higher than for a single first contravention. The fact of two contraventions also indicates that the misconduct was not a 'one off' event, the risk of which to the public might be met by a lesser level of penalty. (d) Mrs Filippini operates at the higher end of the real estate market. As an indication of this, I note that each of the two sales the subject of the charges involved commissions in excess of $30,000. The level of deterrent of a maximum fine of $15,000 is necessarily limited in such circumstances. (e) In all of the circumstances and given the, at best, moderate expression of regret for the conduct, I am satisfied that to protect consumers from further breaches by Mrs Filippini and to deter other licensees from such breaches it is necessary to remove Mrs Filippini from the industry for some period of time.'"4 [13] The learned District Court judge then went on to criticise the reasons given by the Tribunal Member. His Honour said: "In my view, it is somewhat disingenuous to make the point in sentencing that the applicant contested the two disciplinary charges for which she was to be sentenced, when five disciplinary charges proceeded to trial and the applicant was successful (i.e. found not guilty) in respect of three of those disciplinary charges. Although it is clear that the principal of a real estate agency who breaches the legislative requirements must receive a higher penalty than a principal whose breach has occurred as a result of the actions of an employee, the utilisation of a disqualification for such a principal is (in realistic terms) a much higher and more substantial penalty than an increased monetary penalty. 4 [2007] QDC 351 at [29]. -- 5 of 10 -- 6 Member Bradley correctly noted that the applicant had no previous misconduct convictions nor had previously been the subject of disciplinary proceedings, but conversely noted the fact that the proven disciplinary charges involved separate transactions, on the facts some three years apart (although no reference was made to this in Member Bradley's decision). Member Bradley also noted the fact that the applicant operated at what he described as 'the higher end of the real estate market' with consequent substantial commissions involving sums in excess of $30,000. However, his observation that in those circumstances, 'the level of deterrent of a maximum fine of $15,000 is necessarily limited in such circumstances', is in my view not a basis on which it could be considered that a fine, even at a maximum level, was an insufficient deterrent to other licensees and/or insufficient protection to consumers to proceed by way of financial penalties as opposed to financial penalties and disqualification. It is submitted on behalf of the applicant that in respect of disciplinary charge 3, the vendor (Ms Love) was aware that the applicant was purchasing the property and had signed a form acknowledging the relevant transaction noting that the applicant was purchasing the property. Although I do not accept that the breach can be described as 'purely technical' as is submitted on behalf of the applicant, it cannot in my view be said that the breach was so serious as to be analagous [sic] to a trust account violation. Conclusion In the circumstances, I consider that the penalty imposed by Member Bradley was manifestly excessive, and that the conduct of the applicant, although clearly in breach of relevant legislative provisions and occurring on two separate occasions separated by a period of three years, can and should have been adequately dealt with by way of substantial monetary fines. In reaching that conclusion, I have carefully considered the comparatives placed before Member Bradley in the CCT, and before this court, on appeal. I consider Member Bradley was in error in concluding that a substantial fine was insufficiently deterrent, and that (consequently) a disqualification should also be imposed. The comparatives I have referred to at paragraph 28, above, justify the imposition of substantial fines rather than disqualification for the conduct in respect of these two charges."5 [14] There are two comments about his Honour's reasons which may conveniently be made here. The first is that it was common ground in the hearing in this Court that the contract of sale involving Mr and Mrs Fenech was made in June 2002, not June 2006 as his Honour recorded. Accordingly, the two contraventions were separated by 15 months rather than three years. [15] The second comment to be made at this point relates to the form of acknowledgment signed by Ms Love. Ms Filippini produced a letter signed by Ms Love in the following terms: 5 [2007] QDC 351 at [30] – [35]. -- 6 of 10 -- 7 "I Betty Denise Love am aware Heather Isobel Penney whom sold my property at 17 King Charles Drive, Sovereign Island is the nominated buyer of the said Sovereign Island Property for transfer Purposes. I enter into the such sale with knowledge of the fact that Heather Isobel Penney would be the nominated Buyer for transfer purposes. I release the said Heather Isobel Penney from any claims of any nature in respect of such transaction & we agree that Heather Filippini Island Realty is entitled to commission in the sum of 32,950 + GST $3,295 & consent to full Commission being paid from deposit monies held in trust by Heather Filippini Island Realty." [16] Ms Love was unable to recall signing this document which was presented to her for signing by Ms Filippini. The letter suggests that Ms Love was always aware that Ms Filippini would be the purchaser of the property in question. In this regard, it is quite inconsistent with Ms Filippini's evidence to the Tribunal that she, Ms Filippini, arranged for Mr Fedotov to nominate her as purchaser under the contract only after Mr Fedotov had failed to obtain Foreign Investment Review Board approval for his purchase of the land. More importantly for present purposes, this letter shows that Ms Filippini was intent upon retaining the commission payable on the sale, a position which she could not have adopted if she had actually obtained Ms Love's consent under s 145(4)(a) of the PAMDA. I would, therefore, agree with the learned District Court judge that Ms Filippini's contravention of s 145 of the PAMDA in her dealings with Ms Love was not "purely technical". At best for Ms Filippini, her conduct showed a gross disregard for the limits upon a real estate agent's ability to prefer her own interests to the interests of her clients, limits which find statutory expression in s 145(4)(b) of the PAMDA. The Chief Executive's argument [17] On behalf of the Chief Executive, it is contended that the learned District Court judge, unlike the member of the Tribunal, did not appreciate that the orders made by the Tribunal were appropriately directed to the protection of the public and the maintenance of proper professional standards.6 There is much force in this contention. [18] The proceedings against Ms Filippini were disciplinary in nature. By virtue of s 21(1), s 26 and s 28 of the PAMDA, the holder of a real estate agent's licence must be "a suitable person". By virtue of s 28(1)(a) and (g)(iv) of the PAMDA, a person's character and ability to perform satisfactorily the activities of a licensee are relevant to the suitability of a person. Section 10(3)(a) of the PAMDA expressly contemplates that the objects of that Act "are to be achieved mainly by ensuring – only suitable persons … are licensed or registered". The disciplinary jurisdiction and powers of the Tribunal are one of the principal means whereby the privileges attaching to a real estate agent's licence are available only to suitable persons. [19] Satisfactory performance of the activities of a licensee requires conformity with the normative standards established by or recognised in the PAMDA. These standards include s 145. Suitability to be licensed requires that a person adhere to the standards of behaviour required of a real estate agent. According to those standards, a real estate agent should be ready and willing to exert himself or herself selflessly 6 New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183 – 184. -- 7 of 10 -- 8 in the interests of his or her principal in order to ensure that the principal obtains the best deal available from the transaction the subject of the agency. It is the lesson of experience that a satisfactory outcome for the principal is unlikely to be achieved if, unbeknown to the principal, the agent has taken a personal interest in the other side of the transaction. Section 145 of the PAMDA gives statutory force to the well-settled rule of the general law that a fiduciary should not allow himself or herself to take an undisclosed interest in a transaction in conflict with the interests of the fiduciary's principal.7 [20] The reasons of the learned District Court judge do refer to the protection of consumers, but focus principally upon the consideration of deterrence. His Honour's reasons do not address the possibility that Ms Filippini's "non-technical" contraventions of the PAMDA, occurring as they did on two occasions separated by 15 months, meant that Ms Filippini could not be regarded as a suitable person to hold a real estate agent's licence. [21] If one focuses upon the question of Ms Filippini's suitability, it is, with respect, difficult to conclude that she was a suitable person to be a real estate agent. At the very least, it must be acknowledged that it was open to the Tribunal to take the view that she was not a suitable person to enjoy the powers and privileges conferred on licensed real estate agents. What Ms Filippini did on the two occasions when she was found to have contravened s 145 of the PAMDA was inconsistent with the fundamental obligation of a real estate agent to her principal. This is so, even if the view is taken that her conduct was not deliberately contrived to disguise her breach of this obligation. These contraventions, occurring as they did many months apart, revealed a flaw which cannot be characterised as merely an error of judgement or a momentary indiscretion. [22] The Tribunal rightly adverted to the need to protect the community against further breaches of this kind by Ms Filippini. The learned District Court judge's assessment that the orders of the Tribunal were excessive in terms of deterrence is an indication that his Honour did not appreciate that deterrent orders are not the sole, or even the best, means of ensuring that the protective objectives of the PAMDA are achieved. [23] So far as the consideration of deterrence is concerned, real estate agents who act at "the higher end of the real estate market" may earn commissions which are of such an order that the prospect of the fines which may be imposed for a contravention of s 145(2) of the PAMDA do not serve as a real deterrent. More importantly, the profits of concealed self-interested dealing by an agent may dwarf those commissions. In this commercial context, a fine may be unlikely to have any real, deterrent effect. The theory of deterrence postulates persons who calculate the relative advantages and disadvantages of breaking the law. The assumption on which deterrent sanctions work is that potential miscreants actually calculate the relative advantages and disadvantages of their misconduct. In the milieu of real estate agents acting in large transactions, fines may be unlikely to provide effective deterrence, and the only sanction likely to afford reliable protection for the public against predatory conduct is the removal of the licences of persons who have demonstrated that they are not suitable to be accorded the privileges involved in holding a licence. 7 Berceanu v Boltons Real Estate Pty Ltd & Ors (2004) 24 Qld Lawyer 308 at 316 [34]. -- 8 of 10 -- 9 [24] In my respectful opinion, the learned District Court judge erred in proceeding on the footing that the "sufficient deterrence" was the only appropriate means which the Tribunal might deploy to ensure the protection of the public. The Tribunal was entitled to take the view that Ms Filippini was not a suitable person to hold a real estate agent's licence and to make orders which gave effect to that view. Even if it be accepted that Ms Filippini's principals did not suffer any actual loss by reason of her contraventions of the PAMDA, Ms Filippini's conduct inconsistent with her most fundamental obligations could have justified the conclusion that the protection of the public required the loss of her licence. [25] The observation by the learned primary judge that "it cannot … be said that [Ms Filippini's] breach [in relation to the Love transaction] was so serious as to be … [treated as equivalent to] a trust account violation" affords another indication that his Honour failed to appreciate that Ms Filippini committed a breach of trust of a kind which was quite inconsistent with her suitability to be licensed as a real estate agent under the PAMDA. A breach of s 145(2) involves a betrayal of trust which will often be as serious for the principal as a trust account violation. Further, the betrayal of trust involved in a contravention of s 145(2), and the insidious nature of such a breach of s 145(2) and the harm it does to the principal, is often likely to be more difficult to discover than a trust account violation. The circumstance that, in this case, Ms Filippini sought to retain her commission was quite inconsistent with a real estate agent's fundamental obligations. That, as happened here, Ms Filippini ultimately refunded the commission to Ms Love was something which the Tribunal was entitled to regard as "too little, too late". [26] It should also be said, à propos of the learned District Court judge's criticisms of the Tribunal, that the circumstance that Ms Filippini successfully contested three other charges brought against her in no way cancels out all possibility of a conclusion of unsuitability suggested by the contraventions which were established, viz that she was not a suitable person to retain the privileges and powers conferred by a real estate agent's licence. Once again, I consider that the learned District Court judge's criticism of the decision of the Tribunal was misplaced. Conclusion and orders [27] For these reasons, I conclude that the learned District Court judge erred in law in failing to appreciate that the protection of the public was the paramount consideration in proceedings in the Tribunal's disciplinary jurisdiction, and that the view taken by the Tribunal, that cancellation of Ms Filippini's real estate agent's licence and disqualification were warranted by the need to protect the public, was a view which was open to the Tribunal. [28] Leave to appeal should be granted. The appeal should be allowed. The orders made by the District Court should be set aside; and, in lieu thereof, it should be ordered that the appeal to the District Court should be dismissed. [29] The respondent should pay the appellant's costs of and incidental to the application for leave to appeal and the appeal, and of the proceedings in the District Court to be assessed on the standard basis. [30] FRASER JA: I agree with the reasons of Keane JA and the orders proposed by his Honour. -- 9 of 10 -- 10 [31] LYONS J: I have had the advantage of reading the reasons of Keane JA. I agree with the reasons of Keane JA and with the orders proposed. -- 10 of 10 --