COMMISSIONER FOR CONSUMER PROTECTION and LUXURIDE PTY LTD

[2020] WASAT 16

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: MOTOR VEHICLE DEALERS ACT 1973 (WA)

CITATION:   COMMISSIONER FOR CONSUMER PROTECTION and LUXURIDE PTY LTD [2020] WASAT 16

MEMBER:   DR B DE VILLIERS, MEMBER

MS R MOORE, MEMBER

MR A TOWNSEND, SESSIONAL MEMBER

HEARD:   DETERMINED ON THE DOCUMENTS

DELIVERED          :   29 JANUARY 2020

FILE NO/S:   VR 69 of 2019

BETWEEN:   COMMISSIONER FOR CONSUMER PROTECTION

Applicant

AND

LUXURIDE PTY LTD

First Respondent

NICOLAS NGO

Second Respondent

Catchwords:

Motor vehicle dealer - Sale of vehicles by consignment - Conduct of a party causing a disadvantage - Disqualification until further order by the Tribunal

Legislation:

Fair Trading Act 2010 (WA)
Motor Vehicle Dealers Act 1973 (WA), s 20(1)(a)(i), s 20(1), s 20(1)(b), s 20(1)(b)(i), s 20A, s 31C, s 32B, s 32B(1), s 32D, s 32D(1), s 32G, s 55
State Administrative Tribunal Act 2004 (WA), s 48, s 48(2), s 48(2)(b)(i), s 48(4), s 60(2)

Result:

Application successful; orders made

Category:    B

Representation:

Counsel:

Applicant	:	Mr S King
First Respondent	:	Non-appearance
Second Respondent	:	Non-appearance

Solicitors:

Applicant	:	Department of Mines, Industry Regulation and Safety
First Respondent	:	N/A
Second Respondent	:	N/A

Case(s) referred to in decision(s):

Hughes and Vale Pty Ltd v New South Wales [No 2] (1955) 93 CLR 127

Minniti v Motor Vehicle Industry Board [2011] WASCA 275

Motor Vehicle Industry Board and Dawson [2006] WASAT 8

Real Estate and Business Agents Supervisory Board and LJW [2011] WASCA 35

Real Estate and Business Agents Supervisory Board v Barnett (unreported, WASCA, Library No 970426, 26 August 1997)

Sobey v Commercial and Private Agents Board (1979) 22 SASR 70

Tavelli v Johnson, unreported; SCt of WA; Library No 960693; 25 November 1996

Wood v Glenn (unreported Judgments SCt of SA; BC8361134; 14 April 1983

REASONS FOR DECISION OF THE TRIBUNAL:

Background

1. These disciplinary proceedings concern an allegation that the first and second respondents had contravened the provisions of the Motor Vehicle Dealers Act 1973 (WA) (Act) and that the conduct renders them unfit to be holders of authorisations under the Act.

2. The respondents no longer hold authorisations pursuant to the Act since the previously held authorisations have expired. Section 20A(2) of the Act provides however that an order disqualifying a person from holding or obtaining an authorisation may be made even if a person does not currently hold an authorisation.

3. The applicant seeks orders for the respondents to be reprimanded; for the respondents to be disqualified from holding an authorisation under the Act until further order of the Tribunal; and for the second respondent to be disqualified, until further order of the Tribunal, from being concerned in the management or conduct of a body corporate that is a holder of an authorisation under the Act. 

4. The respondents failed to make submissions in response to the application.  The matter was therefore determined on the documents.

Summary of facts

1. The background facts as set out in the application dated 15 May 2019 and contained in greater detail in the applicant's book of documents dated 19 June 2019 are accepted by the Tribunal.  The background facts are usefully summarised by the applicant in its application as follows.

2. The first respondent, Luxuride Pty Ltd is a proprietary company registered in Western Australia and is the registered holder of the business name Luxuride.  The first respondent was the holder of a motor vehicle dealer's licence (MD23895), which expired on 17 October 2019.  The second respondent, Mr Nicolas Ngo (also known as Mr Khoi Nguyen Ngo and Mr Nguyen Khoi) is the sole director and secretary of the first respondent.  The first respondent formerly operated from two authorised premises at 12-16 Cleaver Street, West Perth and 595 Newcastle Street, West Perth.

3. In February 2018, the first and second respondents were each charged with 23 offences under the Act and six offences under Australian Consumer Law (WA) (ACL).  The criminal proceedings concluded on 12 December 2018, and the first and second respondents were convicted of all charges, in absence, in the Perth Magistrates Court.

4. The respondents engaged in the sale of motor vehicles by consignment.  A consignment sale is one in which a dealer enters into a written agreement to sell a vehicle on behalf of the consignor for no less than the agreed minimum sale price stipulated in the consignment agreement.  The dealer may sell the vehicle for more than the minimum sale price, and retains the amount in excess of the minimum sale price as its commission.  The consignor can therefore expect to receive the full minimum sale price following sale of the vehicle.  Pursuant to the Act, and funds received by a dealer for consignment sales must be deposited into a consignment trust account within one day of receipt, and paid to the consignor within two business days.

5. The first and second respondents were each convicted of 23 contraventions of the Act as follows:

   1)accepting vehicles on consignment without a written agreement contrary to s 32B of the Act (four charges);

   2)failure to deposit consignment funds into a trust account contrary to s 32D of the Act (10 charges);

   3)failure to pay consignment sale proceeds to the consignor within two business days contrary to s 32G of the Act (seven charges); and

   4)employing people in roles for which they were not licensed contrary to s 31C of the Act (two charges).

6. In respect of each of the 23 offences against the Act, the second respondent was convicted vicariously as director of the first respondent, pursuant to s 55 of the Act. The first and second respondents were convicted of six counts of making of false or misleading representations to consignors regarding the price paid, or payable, for the sale of their vehicles, contrary to s 151(1)(i) of the ACL. In respect of each of the six ACL offences, the second respondent was convicted vicariously as director of the first respondent.

7. The modus operandi of the respondents was briefly as follows.  The first respondent entered into a consignment agreement with a consignor for a stipulated minimum sale price.  The first respondent received an offer from a purchaser and, in many cases, executed a contract of sale at the offered price.  The first respondent subsequently contacted the consignor and misrepresented the offer, telling the consignor that the offer was up to $10,000 less than it actually was.  The first respondent neither terminated nor properly completed the consignment, in each case, having the consignor sign a Form S07 Notice of Sale (Form 7), a form of ambiguous effect that indicated the consignor would receive the misrepresented offer.  In each case, the consignor believed that the purchase was occurring in accordance with the consignment agreement, and that the misrepresented offer was the best they could receive.  The price received by the consignor was less than the minimum sale price, and the respondent received a significantly higher price.

8. In this way, the first respondent increased its profit margins at the consignor's expense; led the consignor to believe that the vehicle was still under consignment, allowing the first respondent to delay payment to the consignor until after the buyer paid the purchase price; and purported to have terminated its consignment agreement with the Form 7, ostensibly avoiding the requirement to deposit funds into its trust account, to pay a consignor within two days of receipt, and avoiding audits of its trust account.

9. This conduct meant that the respondents were able to mislead consignors to increase their profits; maintain this criminal conduct unnoticed, because any audit of the trust account would not disclose the actual payments received; and delay payment to consignors, because they never deposited funds into the trust account, so any audit of the trust account would not disclose the failure to pay in compliance with the Act.

10. The applicant therefore alleges that, arising from the summary of facts, that the first respondent has contravened s 32B(1), s 32D(1), s 32G and s 31C of the Act, contrary to s 20(1)(a)(i) of the Act; and engaged in conduct rendering it unfit to be the holder, or joint holder, of an authorisation, contrary to s 20(1)(b)(i) of the Act. The applicant further alleges that, arising from the summary of facts, that the second respondent has contravened s 32B(1), s 32D(1), s 32G and s 31C of the Act, contrary to s 20(1)(a)(i) of the Act; engaged in conduct rendering him unfit to be the holder, or joint holder, of an authorisation, contrary to s 20(1)(b)(i) of the Act; and engaged in conduct rendering him unfit to be concerned in the management or conduct of a body corporate that is the holder, or joint holder, of any authorisation.

Orders sought

1. The applicant seeks the following orders:

   1)The first and second respondents be reprimanded, pursuant to s 20A(6) of the Act.

   2)The first respondent be disqualified from holding or obtaining, whether solely or jointly, any authorisation until further order of the Tribunal, pursuant to s 20A(2) and s 20A(7)(b) of the Act.

   3)The second respondent be disqualified from holding or obtaining, whether solely or jointly, any authorisation until further order of the Tribunal, pursuant to s 20A(2) and s 20A(7)(b) of the Act.

   4)The second respondent be disqualified from being concerned in the management or conduct of a body corporate that is the holder of an authorisation under the Act until further order of the Tribunal, pursuant to s 20A(3) and s 20A(7)(b) of the Act.

Summary of contentions by the applicant

1. The applicant contends that the proposed orders are justified on the basis that the respondents are unfit to be authorised under the Act due to the offences committed in the course of them being authorised as a licensed motor vehicle dealers.  The offences entailed significant planning, dishonesty and misleading conduct.  The criminal convictions recorded against the respondents highlights their lack of moral integrity and rectitude of character that are essential requirements to be authorised under the Act.  The second respondent was the mind behind the scheme and directed the activities of the first respondent.  Both respondents should therefore be disqualified from registration for a motor dealer's licence under the Act.

2. In regard to the question for what period a disqualification should be imposed, the applicant says the disqualification should be until further orders by the Tribunal.  The essential qualities of honesty, integrity, insight and remorse that are absent from the respondents should guide the Tribunal if and when an application is received to again be authorised under the Act.  The public should be protected against the respondents being authorised under the Act until such time that the Tribunal is satisfied that they could again be licensed.  The orders sought are reasonable and appropriate in light of the facts before the Tribunal and the ongoing conduct of the respondents. 

Consideration by Tribunal

1. The Tribunal determined the matter on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act). The respondents failed to comply with orders of the Tribunal to file and service materials in response to the application. The Tribunal must, regardless of the failure on the part of the respondents, consider all the material before it to determine if disciplinary action is justified and if so what orders should be made.

2. The consideration of the Tribunal is set out under the following headings:

   •Conduct of a proceeding causing a disadvantage;

   •Assessment of conduct;

   •Should orders be made if the respondents no longer hold authorisations?; and

   •Orders to be made.

Conduct of a proceeding causing a disadvantage

1. Section 48 of the SAT Act provides that the Tribunal may, at its own initiative or at the request of a party, make orders against a party who by its conduct causes a disadvantage to another party. In this proceeding the applicant did not rely on the provisions of s 48 but the Tribunal may at its own initiative make orders pursuant to the section (s 48(4)).

2. Section 48 provides in short that when a party fails to comply with directions of the Tribunal, or when a party fails to comply with the enabling Act, or when a party fails to attend a hearing, then the Tribunal may make orders against such a party. It is the view of the Tribunal that orders ought to be made pursuant s 48 against the first and second respondents.

3. The first and second respondents were ordered on 20 May 2019 to file and serve a response to the application and the statement of issues, facts and contentions submitted by the applicant. The respondents had to comply with the order by not later than 10 July 2019. This date was later varied to require the first and second respondents to file and serve their documents in reply to the application by not later than 6 August 2019. The first and second respondents were also ordered to file and serve by not later than 20 August 2019 any evidence and written submissions on which they wish to rely. The respondents were put on notice that if they fail to comply with the programming orders of the Tribunal, the matter may be determined entirely on the documents pursuant to s 60(2) of the SAT Act. In addition to the foregoing, the respondents were also put on notice that if the matter were to be determined on the documents, that the documents as contained in the book of documents of the applicant dated 19 June 2019 would be accepted as evidence on which the applicant relies. By email dated 24 July 2019 the applicant also cautioned the second respondent in his personal capacity and his capacity as sole director of the first respondent that if he were to fail to file and serve documents pursuant to orders of the Tribunal, the matter would be determined by the Tribunal on the documents filed by the applicant.

4. Neither the first nor the second respondent complied with orders      4 or 6 dated 23 July 2019.

5. The powers pursuant to s 48(2) of the SAT Act can only be exercised by a legally qualified member. The presiding member of the Tribunal, Dr B De Villiers, is a legally qualified member.

6. The Tribunal finds that the first and second respondents by their conduct caused a disadvantage to the applicant by failing to comply with programming orders of the Tribunal. The orders sought by the applicant shall therefore be made pursuant to s 48(2)(b)(i) of the SAT Act.

Assessment of conduct

1. The Tribunal accepts the contentions of the applicant that by virtue of the convictions entered against the respondents on 12 December 2018, that a finding can be made that the respondents have contravened the Act and that disciplinary steps should be taken against them.  In addition, by virtue of the further convictions entered pursuant to provisions of the ACL and Fair Trading Act 2010 (WA) against the respondents on 12 December 2018, the first and second respondent engaged in conduct rendering them unfit within the meaning of s 20(1)(b) of the Act. Section 20A(1) of the Act provides that, if an allegation under s 20(1) is established, the Tribunal may make any order provided for in s 20A.

2. The Tribunal concurs with the applicant that the conduct of the first and second respondents renders them unfit to hold an authorisation under the Act.  The expression 'fit and proper person' has been the subject of much judicial consideration.  The expression gives the widest possible scope for judgment, and is said to involve in essence three things: honesty, knowledge and ability (see Hughes and Vale Pty Ltd v New South Wales [No 2] (1955) 93 CLR 127; cited in Real Estate and Business Agents Supervisory Board and LJW [2011] WASCA 35 and Real Estate and Business Agents Supervisory Board v Barnett (unreported, WASCA, Library No 970426, 26 August 1997) (4­5)). A licensee under the Act must not only demonstrate knowledge of the subject material, but also exhibit 'sufficient moral integrity and rectitude of character' to be authorised under the Act (Sobey v Commercial and Private Agents Board (1979) 22 SASR 70 at [76]). The convictions recorded against the respondents in the course of work in the motor vehicle industry are of particular relevance to the respondents being regarded by the Tribunal as unfit to be licensed (Tavelli v Johnson, unreported; SCt of WA; Library No 960693; 25 November 1996).  The first respondent was licensed at the time of the offending, whereas the second respondent was the sole director and therefore in control of the conduct of the first respondent.  The offences entailed significant dishonesty, planning, misleading of clients,       cover-up and a blatant disregard for the law, the ethics of the profession and the interests of the public.  The respondents lack the moral integrity and rectitude of character that would permit them to be licensed under the Act.

3. The Tribunal concurs with the applicant that the second respondent is unfit to be concerned in the management or conduct of a body corporate under the Act.  The second respondent was the sole director of the first respondent; he directed, planned and managed the conduct of the first respondent; and he was convicted for the offending conduct.  It is likely that the second respondent authorised or permitted the commission of the offences and in doing so he facilitated dishonesty, misleading conduct and a breach of standards that the public would regard as reasonable and essential for a person authorised under the Act.

4. The question arising from the above is for what duration the respondents should be disqualified?

5. Neither of the respondents are currently licenced under the Act.  The Tribunal may impose a period of disqualification or, as is proposed by the applicant, impose a disqualification until further orders by the Tribunal (s 20A(7)(b) of the Act).  The latter means of course that a party who wishes to be licenced must seek from the Tribunal an order to be able to seek registration from the applicant (Minniti v Motor Vehicle Industry Board [2011] WASCA 275). Such an application would inevitably have the character of an original proceeding, but it also highlights that in the most serious cases of misconduct the Tribunal wishes to retain some jurisdiction to determine whether a person should be allowed to re-apply to be licensed under the Act (Wood v Glenn (unreported Judgments SCt of SA; BC8361134; 14 April 1983) at 2).  This in itself sends a strong signal not only to those the subject of a disciplinary proceedings, but also to others within the profession and it seeks to reassure the public at large. 

6. The Tribunal is satisfied that in light of the serious and significant dishonesty perpetrated by the respondents, that the conduct was committed over a period of time within the profession for which they were licensed; that the conduct exploited vulnerable members of the public; and that there is a need for deterrence and reinforcing proper regulatory standards within this industry, that the disqualification should have effect until further order of the Tribunal.  This finding of the Tribunal is reinforced by the failure of the respondents to participate in this proceeding.

7. The orders sought by the applicant should therefore be made.

Should orders be made if the respondents no longer hold authorisations?

1. The respondents no longer holds authorisations under the Act. Section 20A(2) of the Act states that an order disqualifying a person from holding or obtaining an authorisation may be made whether or not the person holds a current authorisation. It may be unusual for the Tribunal to make an order to the effect that a person is disqualified if they no longer hold an authorisation (Motor Vehicle Industry Board and Dawson [2006] WASAT 8 at [29]), but the Tribunal is satisfied that in this matter the public interest and the seriousness of the convictions justify the making of the orders sought. Refer in this regard to the sentencing remarks of the respondents made by Magistrate E. Campione that '[t]hese sorts of transactions are extensive throughout the community and it is an important consideration that consumers are able to rely on motor vehicle dealers and that the industry as a whole is regulated'; ts 12, 12 December 2019. Measures should be taken to send a clear signal to those involved in the industry about the consequences of dishonest behaviour, and steps should also be put in place to prevent the respondents from seeking to be authorised without further orders by the Tribunal.

Orders to be made

1. In light of the above findings of fact and the reasoning of the Tribunal, the following orders should be made pursuant to s 20A of the Act:

   1.The first respondent be disqualified from holding or obtaining, whether solely or jointly, any authorisation until further order of the Tribunal, pursuant to s 20A(2) and s 20A(7)(b) of the Act.

   2.The second respondent be disqualified from holding or obtaining, whether solely or jointly, any authorisation until further order of the Tribunal, pursuant to s 20A(2) and s 20A(7)(b) of the Act.

   3.The second respondent be disqualified from being concerned in the management or conduct of a body corporate that is the holder of an authorisation under the Act until further order of the Tribunal, pursuant to s 20A(3) and s 20A(7)(b) of the Act.

   4.The first and second respondents be reprimanded, pursuant to s 20A(6) of the Act.

Orders

1.The first respondent be disqualified from holding or obtaining, whether solely or jointly, any authorisation until further order of the Tribunal, pursuant to s 20A(2) and s 20A(7)(b) of the Motor Vehicle Dealers Act 1973 (WA).

2.The second respondent Mr Nicholas Ngo (also known as Mr Khoi Nguyen Ngo and Mr Nguyen Khoi) be disqualified from holding or obtaining, whether solely or jointly, any authorisation until further order of the Tribunal, pursuant to s 20A(2) and s 20A(7)(b) of the Motor Vehicle Dealers Act 1973 (WA).

3.The second respondent be disqualified from being concerned in the management or conduct of a body corporate that is the holder of an authorisation under the Act until further order of the Tribunal, pursuant to s 20A(3) and s 20A(7)(b) of the Motor Vehicle Dealers Act 1973 (WA).

4.The first and second respondents are reprimanded, pursuant to s 20A(6) of the Motor Vehicle Dealers Act 1973 (WA).

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

DR B DEVILLIERS, MEMBER

29 JANUARY 2020