Disciplinary action in QCAT: Unintentional is not good enough

In the recent decision of Chief Executive, Department of Justice and Attorney General v Jones & Anor [2020] QCAT 10, the Queensland Civil and Administrative Tribunal has provided a reminder to all real estate agents that it is prepared to exercise its disciplinary powers for breaches of the Property Occupations Act 2014 (Qld) (PO Act), the Agent's Financial Administration Act 2014 (Qld) (AFA Act), and the Agent's Financial Administration Regulation 2014 (Qld) (AFA Regulation), in order to ensure that the integrity of the industry, as well as the protection of consumers, is maintained.

Background

Mr Jones was a licensed real estate agent between 7 January 2015 and 7 January 2018. During this time, Mr Jones was the sole director and shareholder of Diligent Property Management Pty Ltd (Diligent), which held a corporate real estate licence that expired on 27 May 2016.

On 18 November 2016, the Office of Fair Trading (OFT) received a complaint from an owner of a property managed by Diligent. The owner alleged that he had not received all of his rental income from Diligent. The OFT commenced an investigation and discovered numerous breaches of the PO Act, the AFA Act and the AFA Regulation. The OFT provided further particulars of the alleged breaches by Mr Jones and Diligent (the Respondents), which included:

1. Acting as agent for property owners without holding a real estate licence and failing to renew Diligent's corporate real estate licence;[1]
2. Recovering commission of $88,288.58 during the period between 28 May 2016 to 8 March 2017, when there was no real estate licence in place;[2]
3. Acting as agent without an appointment for two properties in Cannon Hill and Gordon Park;[3]
4. Rendering a false 'Transaction Summary Report' on five occasions, representing that the tenant of a property had paid rent when in fact no rent had been received;[4]
5. Receiving $7,400 in rental bonds into the Respondents' trust account without paying the bonds to the Residential Tenancy Authority;[5]
6. Opening and operating a trust account for approximately four months while waiting for confirmation that a licence had been approved;[6]
7. Operating a trust account for approximately 10 months after their licence had expired;[7]
8. Lodging a trust account audit report 10 months and 8 days late;[8]
9. Making six payments from the trust account to Mr Jones and his partner, which were not authorized and were not related to a property transaction;[9]
10. Failing to keep particular books, accounts and records;[10]
11. Inability to provide trust account receipts;[11]
12. Failing to reconcile the trust account cash book balance at the end of each month with the trust ledger and the financial institution's statement balance;[12] and
13. Due to a shortfall of $18,087.75 in the trust account, a claim was made against the Claim Fund established under the AFA Act. The Respondents did not refund the same to the Claim Fund.

Prior to the proceedings before the Tribunal, Mr Jones was offered an opportunity to participate in a formal record of interview. In the interview, Mr Jones admitted that he:

1. was the person solely responsible for the business and the operation of the trust account;
2. did not issue trust account receipts;
3. did not undertake or keep compliant trust reconciliations;
4. did not maintain trust account cash books;
5. used accounting software for the trust account, which was not complaint;
6. did not keep trust account books and records for auditing; and
7. directed tenants to deposit trust monies into his general business account after the trust account was frozen.

Mr Jones maintained that the business was "simply a mum and dad business that made mistakes, non intentional".[13]

 

Grounds for taking disciplinary action against the Respondent

Pursuant to s 173 of the PO Act, the Chief Executive may start disciplinary proceedings by applying to the Tribunal to decide whether grounds exist under s 172 of the PO Act for taking disciplinary action against a licensee or real estate sales person. In the application, the Chief Executive outlined four grounds for taking disciplinary action against the Respondents, namely:

 

1. The breaches of the PO Act, the AFA Act and the AFA Regulation outlined above;
2. Where a claim was made against the Claim Fund and an amount has been paid from the fund;[14]
3. Pursuant to s 172(1)(g)(i) of the PO Act, Mr Jones is unsuitable to hold a licence; and
4. Pursuant to s 172(1)(g)(iii) of the PO Act, Mr Jones acted unprofessionally.

The Decision

The Chief Executive submitted that:

1. The Respondents' transgressions demonstrated either an unwillingness or inability to comply with legislative requirements and at the very lease, there has been a reckless disregard for compliance with the obligations of a real estate agent under the relevant legislation;
2. The Respondents' behavior was not an isolated one off event, but was persistent and repetitive;
3. The Respondents benefited financially and had not reimbursed the Claim Fund;
4. The legislative requirements contravened by the Respondents were in place to foster an industry that has the confidence of the public and could not be said to be technical or minor in nature; and
5. The Respondents had not repaid the trust account shortfall in the amount of $18,087.75, nor the fees of the receiver appointed by the OFT in the amount of $47,767.56, which shows a level of incompetence that demonstrates their unsuitability to be allowed to continue as licensees.[15]

The Tribunal was satisfied that the Respondents had breached the provisions of the PO Act, the AFA Act and the AFA Regulation outlined above. The Tribunal considered comparable decisions involving similar transgressions and ordered that:

1. Mr Jones be reprimanded, pay a fine of $5,000, and that he be permanently disqualified from holding or obtaining a licence or certificate of registration under the PO Act; and
2. Diligent be reprimanded, pay a fine of $10,000, and Diligent be permanently disqualified from holding or obtaining a licence or certificate of registration under the PO Act.

The Tribunal also ordered that the Respondents pay:

3. Compensation of $18,087.75 to the Claim Fund or as directed by the Chief Executive (the deficiency in the trust account); and
4. The legal costs of the Chief Executive amounting to $47,767.56.

Further, the Tribunal ordered that Mr Jones be permanently disqualified from being an executive officer of a corporation which holds any form of licence issued under the PO Act.

 

Conclusion

This case demonstrates that disciplinary proceedings against agents or agencies are intended to protect members of the general public, as well as the professional standards of other members of the real estate industry.

While the adverse publicity generated by decisions such as this can be damaging to the real estate industry, agents can also consider these decisions a win for the industry, serving as an assurance to the public that the industry has effective and transparent systems in place to protect and promote the integrity of the industry.

 

[1] Breach of s 97(1) of the PO Act.

[2] Breach of s 89(2) of the PO Act.

[3] Breach of s 102(1) of the PO Act.

[4] Breach of s 206(5) of the PO Act.

[5] Breach of s 22(5) of the AFA Act.

[6] Breach of s 136 of the AFA Act.

[7] Breach of s 136 of the AFA Act.

[8] Breach of s 35(2) of the AFA Act.

[9] Breach of s 21(2) of the AFA Act.

[10] Breach of s 3 of the AFA Regulation.

[11] Breach of s 8 of the AFA Regulation.

[12] Breach of s 17 of the AFA Regulation.

[13] Chief Executive, Department of Justice and Attorney General v Jones & Anor [2020] QCAT 10 [15].

[14] Section 172(1)(d) of the PO Act.

[15] Chief Executive, Department of Justice and Attorney General v Jones & Anor [2020] QCAT 10 [16].