Tosohn Pty Ltd v Director General, Department of Fair Trading [2003] NSWADT 1 (6 January 2003)

Last Updated: 3 March 2003

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL GENERAL DIVISION

CITATION: Tosohn Pty Ltd -v- Director General, Department of Fair Trading [2003] NSWADT 1

PARTIES: APPLICANT

Tosohn Pty Ltd

RESPONDENT

Director General, Department of Fair Trading

FILE NUMBERS: 023013

HEARING DATES: 25/06/2002, 26/06/2002

SUBMISSIONS CLOSED: 26-06-2002

DECISION DATE: 06-01-2003

BEFORE: Montgomery S - Judicial Member

LEGISLATION CITED: Administrative Decisions Tribunal Act 1997

Motor Dealers Act 1974

CASES CITED: Hinchcliffe v Building Services Corporation 24 July 1997 unreported

Zeims and the Prothonotary of the Supreme Court of NSW 1957 97 CLR

Department of Fair Trading v. Woods Unreported decision of the Licensing Court of NSW

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Hutchings -v- Commissioner of Police, New South Wales Police Service [2001] NSWADT 62

Ex Parte Tziniolis (1966) 67 SR (NSW) 448

APPLICATION: Motor Dealer - suspension of licence

Motor Dealers Act - motor dealer - suspension of licence

MATTER FOR DECISION: Principal matter

APPLICANT REPRESENTATIVE: APPLICANT

M Thangaraj, barrister

RESPONDENT REPRESENTATIVE: RESPONDENT

A Wilson, solicitor

ORDERS: 1. The decision of the Director General, Department of Fair Trading to cancel the Motor Dealers licence number 16094 held by Tosohn Pty Ltd and to disqualify Tosohn Pty Ltd and Mr Ian David Creak personally from holidng a Motor Dealer's Licence for a period of three years, or from being concerned in the direction, management or conduct of a business for the carrying on of which a motor dealers licence is required is affirmed.

Reasons for Decision:

THE APPLICATION

1 On 17 January 2002, Tosohn Pty Ltd ("Tosohn") applied to the Tribunal pursuant to s.20F(c) of the Motor Dealers Act, 1974 ("the Act") and s.38 of the Administrative Decisions Tribunal Act, 1997 for a review of the decision of the Director General, Department of Fair Trading ("the Director General") to cancel the Motor Dealers licence number 16094 held by Tosohn and to disqualify Tosohn and Mr. Ian David Creak, the sole Director and Secretary of Tosohn personally from holding a Motor Dealer's Licence for a period of three years, or from being concerned in the direction, management or conduct of a business for the carrying on of which a motor dealers licence is required. The decision of the Director General is date 14 January 2002.

2 At the time of filing the application to the Tribunal, Mr. Creak and Tosohn made an application for an urgent stay of the Director General's decision. That stay application came before the Deputy President of this Tribunal on 22 January 2002 and the stay was not granted. Following a further application the stay was granted on 31 January 2002 and has been extended each time the matter has been before the Tribunal.

BACKGROUND

The first Notice to Show Cause

3 The grounds on which the Director General made his decision were set out in a Notice to Show Cause issued on or about 8 August 2001 ("the second Notice to Show Cause") and served on or about 9 August 2001. An earlier Notice to Show Cause had been issued on 16 May 2001 ("the first Notice to Show Cause"). The first Notice to Show Cause relied on a single ground:

the holder of the Motor Dealer's licence has within the provisions of s.20D (1)(g) failed to meet the holder's liabilities on two occasions, the details of which are particularised in Schedule "A" of this Notice.

4 Schedule "A" of the first Notice to Show Cause provided allegations regarding Tosohn's failure to comply with an order of the Fair Trading Tribunal made on 16 October 2000 which required Tosohn to pay Gregelle Michory Pty Ltd an amount of $15,500; and an order of the Fair Trading Tribunal made on 5 December 2000 which required Tosohn to pay Mr. John Embury an amount of $24,465. The schedule asserted that neither order had been satisfied and that Tosohn had indicated that it could not pay the amount ordered. Tosohn thereby failed to comply with section 20D(1)(g) of the Act. .

5 Mr. Creak, on behalf of Tosohn, responded to the first Notice to Show Cause by letter dated 24 May 2001. In his response Mr. Creak raised issues in relation to the matters of Gregelle Michory Pty Ltd and Mr. Embury and offered some observations with respect to the operations of the Fair Trading Tribunal.

6 On 1 June 2000 the Deputy Chairperson of the Fair Trading Tribunal wrote to the Director General and advised him of a number matters before that Tribunal that involved Tosohn. In summary, that advice indicated:

MV 1999/6662 Ross Barnett v Tosohn

7 Mr. Barnett entered into a contract on 9 March 1999 to purchase a second hand Volvo 740 GL vehicle from Tosohn, subject to a satisfactory inspection report. The vehicle had covered 115,038 kms.

8 The vehicle was inspected by Mr. Barnett's engineer, who indicated that the gearbox was defective as it had been contaminated with engine cooling water. Mr. Barnett agreed to buy the vehicle only if a new radiator was fitted and all damaged parts of the gearbox replaced. This was entered as a term in the contract. It was also agreed that Mr. Barnett would be provided with a 20,000 km warranty on the gearbox,

9 Mr. Barnett took delivery of the vehicle on 15 March 1999 and was assured that the gearbox had been fully overhauled and worn parts replaced at a trade cost to the garage in excess of $950. Mr. Barnett paid a further $300 for additional work allegedly done to the gearbox which was not the result of water damage.

10 On 5 August 1999 the gearbox completely failed and was inspected by a NRMA recommended gear specialist. The gearbox was removed and dismantled and the expert indicated that in his opinion, the gearbox had not had any repairs done to it for a few years and that the failure was due to recent water contamination.

11 Mr. Barnett made a formal complaint to the Department of Fair Trading who investigated and obtained a job card, issued to Tosohn on 12 March 1999 by Allstates Automotive Transmission for a gearbox check and flush costing $290

12 Mr. Barnett issued a claim at the Tribunal against Tosohn on 5 November 1999, seeking a refund of $510, being the cost of the gearbox repairs, less a payment which he had received from Tosohn.

13 At a hearing in Sydney on 10 February 2000, Tosohn was ordered to pay Mr. Barnett $510 Tosohn did not attend the hearing. Tosohn did not comply with the Order and Mr. Barnett had to seek enforcement through the Local Court.

MV 1999/7812 Parker's Camellias & Others v Tosohn

14 Parker's Camellias agreed to purchase a second hand Isuzu truck from Tosohn on 6 June 1999. The truck had a mileage of 224,949 km. The truck was sold with no warranty.

15 Prior to the purchase, the salesman assured Parker's Camellias that the engine had been reconditioned at a cost of over $3,500 The work carried out was confirmed by Tosohn's mechanic and the salesman agreed that an invoice would be issued to Parker's Camellias, showing the work that had been carried out to the engine of the vehicle. The invoice issued by Tosohn itemised work to the engine costing $3,579.09.

16 Parker's Camellias drove the truck for 9,000 kms when it began to use a lot of oil and blow out smoke. An NRMA approved inspector examined the vehicle and observed severe piston damage, stating that it was difficult to believe that the extensive repairs listed in the May 1999 repair invoice were carried out.

17 Parker's Camellias issued an application at the Tribunal on 7 December 1999, seeking $6,000 to cover the engine repairs which he had instructed an Isuzu engine specialist to carry out. At a hearing on 3 March 2000, Tosohn was ordered to pay Parker's Camellias $5596.66 on or before 23 March 2000. Tosohn did not attend the hearing and claimed that they were not notified of the date. An application for rehearing was made by Tosohn and a stay was granted in the interim. On 21 June 2000, Tosohn was notified that its application for a rehearing had been refused. Parker's Camellias had to seek enforcement of the order through the Local Court.

MV 2000/2005 Dianne Kay Broad v Tosohn

18 Ms Broad issued an application at the Tribunal against Tosohn on 21 February 2000. The application sought a money order for $269.95 from Tosohn. Ms Broad alleged that whilst she was test driving a car belonging to Tosohn, her own vehicle was improperly used by Tosohn, causing the starter motor to burn out and the battery to go flat.

19 A hearing was listed at the Tribunal on Monday 15 May 2000 and Tosohn requested an adjournment, indicating that it would not be able to attend the hearing, due to stocktaking commitments and holidays. The application for an adjournment was refused. On 15 May 2000 a hearing took place and a settlement agreement reached between the parties was approved.

20 Tosohn was ordered to pay Ms Broad $50 on or before 31 May 2000. Ms Broad had to enforce the Order through the Local Court.

MV 2000/3387 Dianne Patricia Schultz v Tosohn

21 Ms Schultz issued a claim against Tosohn on 27 March 2000, seeking recovery of $4500 paid to Tosohn for a 1968 Volkswagen Beetle, which she purchased for her daughter on 18 August 1999.

22 Ms Schultz was issued with a pink slip when purchasing the car from Tosohn, but when it became due for registration in January 2000, a pink slip could not be issued due to extensive rust throughout the car. On the advice of the Department of Fair Trading, an NRMA report was prepared which indicated that the vehicle was unsafe to be driven.

23 At a hearing in Parramatta on 28 August 2000, an Order was made confirming the terms of an agreement reached between the parties. Tosohn was ordered to pay Ms Schultz $2250 and to pick up the vehicle from Ms Schultz's premises. Tosohn did not comply with the Order and the matter was re- listed, but was eventually settled between the parties and discontinued.

MV 2000/5012 Ivan Niksic v Tosohn

24 Mr. Niksic issued an application at the Tribunal on 12 May 2000, seeking a money order for $5000, following his purchase of a Mercedes Benz 230E from Tosohn on 11 December 1999. It was a term of the contract that Tosohn would fix the air conditioning in the vehicle which was defective prior to the sale. A two year warranty covering the vehicle was also provided by Tosohn.

25 Despite numerous attempts, Tosohn failed to fix the air conditioning system in the vehicle.

26 At a hearing in Parramatta on 28 August 2000, Tosohn was ordered to pay Mr. Niksic $2550 within 14 days. Tosohn did not comply with the Order and Mr. Niksic had to take action in the Local Court to enforce it.

MV 2000/6145 Gregelle Michory Pty Ltd v Tosohn

27 Gregelle Michory Pty Ltd issued an application before the Tribunal on 19 May 2000, seeking a money order for $15,500, following the purchase of a VW Transporter from Tosohn on 10 June 1999.

28 Prior to the purchase of the vehicle, Gregelle Michory took it for a test drive, when it was noticed that an oil warning lamp on the dash was illuminated and an alarm sounded. Tosohn's salesman who was notified of this problem promised that it would be rectified if Gregelle Michory purchased the vehicle. Gregelle Michory agreed to purchase the vehicle for use in its business at a price of $27,500. The purchase price was paid by way of a trade-in vehicle valued at $3000 and finance of $24,500 provided by Inchcape Financial Services (Australia) Limited.

29 On 26 June 1999 Gregelle Michory took possession of the vehicle. After driving 1 kilometre the oil light illuminated and the alarm sounded in the vehicle. Despite numerous attempts to rectify the fault by Tosohn, it was not resolved and on 6 August 1999 Gregelle Michory wrote to Tosohn to terminate the contract. In February 2000, the finance company repossessed and sold the vehicle for $16,500 and claimed the balance of the finance monies from Gregelle Michory.

30 Enquiries by Gregelle Michory with the previous owner of the vehicle indicated that Tosohn had backdated the service record for the vehicle. Tosohn claimed that entries in the service record had been made in error.

31 On 16 October 2000, .the Tribunal ordered Tosohn to pay Gregelle Michory $15,500 on or before 28 October 2000. Gregelle Michory had to enforce the Order through the Local Court.

MV 2000/9063 Linda Taylor v Tosohn

32 On 16 December 1999, Ms Taylor took a Volkswagen Caravelle vehicle for a test drive from Tosohn's garage. Ms Taylor signed a Road Test Authorisation Form, whereby she accepted responsibility for any damage caused to the vehicle during the test drive. Ms Taylor claimed that whilst she was driving the vehicle at a traffic junction, the brakes failed and she collided with another vehicle. Tosohn claimed that Ms Taylor had already purchased the vehicle at the time of the accident and that any damage caused to the vehicle was her responsibility.

33 Ms Taylor issued an application at the Tribunal on 17 August 2000, seeking an order that she did not have to pay $1500 and for the return of monies already paid out, being a $200 deposit plus interest accrued on her credit card account.

34 On 5 December 2000 the matter came before the Tribunal and Tosohn did not attend the hearing. It was ordered that Tosohn pay Ms Taylor $328.39 and a finding was made that Ms Taylor did not purchase the vehicle from Tosohn. Ms Taylor had to enforce the Order through the Local Court.

The second Notice to Show Cause

35 As indicated above, the second Notice to Show Cause was issued on or about 8 August 2001. It appears that the second Notice to Show Cause was issued following advice provided by Ms Jane Gibson, the Team Leader Investigator with the Rapid Response & Assessment Unit of the Department of Fair Trading ("the Department"). Ms Gibson's Memorandum, dated 22 June 2001, appears to have been prepared following receipt of the 1 June 2000 memorandum from the Deputy Chairperson of the Fair Trading Tribunal and Mr. Creak's response to the first Notice to Show Cause. Ms Gibson's Memorandum provided the following advice:

"The response provided by Mr. Creak makes no reference to the financial position of Tosohn and consequently fails to provide any evidence that the company is in a position to meet its financial liabilities.

Further while Mr. Creak claims that the matter with the Crossland's has been resolved it appears that another party has actually satisfied the order.

The Department has recently received information from the Fair Trading Tribunal in relation to a further seven Fair Trading Tribunal Orders ... which Tosohn has failed to satisfy. While this information cannot form part of this disciplinary proceedings it indicates the manner in which Mr. Creaks is operating his business and places more credence on the claims made by the consumers which form part of this NTSC proceedings.

Consideration could be given to issuing a further NTSC encompassing the seven new outstanding Orders. However this should only be considered if the current NTSC does not provide sufficient grounds to warrant the recommended disqualification."

36 The second Notice to Show Cause included a second ground and insofar as is relevant to these proceedings it provided:

"I, Christopher Pacey, Manager, Legal Services, under delegation from the Director General of the Department of Fair Trading, have reasonable grounds to believe that:

pursuant to s.20D(1)(e) the business to which the licence relates is being carried on in an unfair manner; and

pursuant to s.20D(1)(g) the holder of the Motor Dealer's licence has within the provisions of s.20(1) failed to meet the holder's liabilities.

The details of the conduct which establish my belief are set out in Schedule "A" of this Notice."

37 Schedule "A" of the second Notice to Show Cause provided details consistent with the information included in the 1 June 2000 memorandum from the Deputy Chairperson of the Fair Trading Tribunal and asserted that the conduct referred to constituted a failure of the holder of the licence to satisfy monetary and other Orders of the Fair Trading Tribunal.

38 The schedule also provided details of Tosohn's failure to comply with the Fair Trading Tribunal Orders in favour of Mr. Embury and Tosohn's indication that it was not in a financial position to pay any monies and that its business bank account was overdrawn to the amount of $337,000. This and the other identified failures to satisfy Orders of the Fair Trading Tribunal were said to constitute a failure of the holder of the licence to meet its liabilities within s.20D(1)(g) of the Act.

39 Mr. Creak, on behalf of Tosohn, responded to the second Notice to Show Cause by letter dated 29 August 2001. In his response Mr. Creak presented explanations in relation to the matters of Mr. Barnett, Parker's Camellias, Ms Broad, Ms Schultz, Mr. Niksic and Mr. Embury. He also offered some further observations with respect to the operations of the Fair Trading Tribunal. Mr. Creak noted the Department's concerns about Tosohn's financial viability and offered to obtain financial statements if required.

40 The Department subsequently requested that Mr. Creak provide financial statements in respect of Tosohn. No such statements were provided in response to the Department's request. It appears that Ms Gibson provided further advice with respect to the action that should be taken following the second Notice to Show Cause. In Ms Gibson's Memorandum, dated 25 September 2001 she recommended that the matter be finalised by a determination in similar terms to that finally taken by the Director General.

The Director General's Determination

41 As indicated above, on 14 January 2002 the Director General determined to cancel the Motor Dealers licence held by Tosohn and to disqualify Tosohn and Mr. Creak from holding a Motor Dealer's Licence for a period of three years, or from being concerned in the direction, management or conduct of a business for the carrying on of which a motor dealers licence is required. The Notice of Determination was in the following terms:

"DETERMINATION OF DISCIPLINARY PROCEEDINGS PURSUANT TO S.20E OF THE MOTOR DEALERS ACT 1974

You are a Director of Tosohn Pty Ltd ACN 075 028 465 which is the holder of Motor Dealer's licence number 16094 trading from premises at 6-8 Railway Parade, Thornleigh.

On or about 8 August 2001 a Notice to Show Cause under s20D of the Act was issued as I was of the opinion that there were reasonable grounds for believing that:

within the meaning of s.20D(1)(e) the business to which the licence relates is being carried out in an unfair manner; and

within the meaning of s.20D(1)(g) the holder of the Motor Dealer's licence, being a corporation, failed to meet its liabilities.

I am satisfied that the Notice to Show Cause was served on or about 9 August 2001.

On receipt of the Notice to Show Cause a Mr. Stan Franks, Manager Payroll/Accounts Tosohn Pty Ltd, requested an extension of time to respond as Mr. Ian David Charles Creak, a Director of the Licensee and responsible for its management, was interstate. A facsimile was forwarded to Mr. Franks on the 9 August 2001 advising that Mr. Creak should request the extension of time in his capacity as both the Director and Secretary of Tosohn Pty Ltd. A further facsimile was received on the 10 August 2001 from Mr. Stan Franks advising that Mr. Creak was approximately 150 nautical miles east of Mooloolaba thus being uncontactable and unable to fax his response.

On 15 August 2001 Colman & Greig Solicitors wrote to the Department advising that they acted for Tosohn Pty Lid requesting an extension of time to reply until 31 August 2001. The Department responded that if an extension was to be granted a Solicitor's undertaking would be required. On 29 August 2001 Mr. Creak provided written submissions pursuant to s20D(2) of the Act. On the 13 August 2001 Mr. Creak was asked to provide a financial statement which to date has not been provided.

I am satisfied on the balance of probabilities that the grounds stated in the Notice have been substantiated against the licensee for the following reasons:

1. On 3 March 2000 Parker's Camellias successfully obtained an order against Tosohn Pty Ltd at the Fair Trading Tribunal for $6,000 The $6,000.00 was for engine repairs to a second hand Isuzu truck. Tosohn Pty Ltd refused to pay the mount ordered by the Tribunal. Parker's Camellias had to seek enforcement of the order through the Local Court.

Enforcement action by the Sheriff revealed that all assets of Tosohn Pty Ltd are encumbered to the National Australia Bank and the order has not been satisfied. Mr. Creak states that the vehicle was bought on a Form 14 and Mr. Creak is of the opinion that if a customer signs a contract that says no warranty the vehicle has no warranty. However, the truck was brought to Barry Smith Isuzu by a Salesman from Tosohn Pry Ltd for a visual inspection for the purpose of purchase. The Salesman informed Barry Smith Isuzu that the truck had just had a full engine rebuild which was confirmed by the place of repair.

After purchase the truck developed a knock and also developed an increasing oil consumption. Barry Smith Isuzu found excessive movement and wear in the pistons and rings. Tosohn's response to the Fair Trading Tribunal's decision was to accuse it of using fraudulent documentation from Barry Smith Holden and to state its actions have been unfair, unjust and without the slightest regard for the Motor Dealers Act. Mr. Creak remains silent about the Sheriff being unable to enforce an order of the Local Court. This shows that the business to which the licence relates is being carried on in an unfair manner in breach of s20D(1)(e) and that the corporation failed to meet its liability within s.20D(1)(g).

2. Tosohn Pty Ltd refused to pay $50.00 to Dianne Kay Broad after reaching settlement in The Fair Trading Tribunal. Ms Broad had to seek enforcement through the Local Court. Enforcement action by the Sheriff revealed that the assets of Tosohn Pty Ltd are encumbered to the National Australia Bank and the order has not been satisfied showing that the business to which the licence relates is being carried on in an unfair manner in breach of s20D(1)(e) and the corporation failed to meet its liability within s.20D(1)(g).

3. Tosohn Pty Ltd was ordered by the Fair Trading Tribunal to pay Mrs Schultz $2,250.00 which it did not comply with. Although following relisting, the matter was eventually settled between the parties and discontinued, Tosohn Pty Ltd demonstrated again that it was prepared to ignore Orders of the Tribunal showing that the business to which the licence relates is being carried on in an unfair manner in breach of s20D (1)(e) and the corporation failed to meet its liability within this s.20D(1)(g).

4. Tosohn Pty Ltd was ordered by the Fair Trading Tribunal to pay Ivan Niksic $2,550.00 within 14 days for repairs to the air conditioning system in a Mercedes Benz 230E. Tosohn did not comply with the order and enforcement action had to be taken in the Local Court showing that the business to which the licence relates is being carried on in an unfair manner in breach of s20D (1)(e) and the corporation failed to meet its liability within s .20D(1)(g).

5. Tosohn Pty Ltd was ordered by the Fair Trading Tribunal to pay Linda Taylor $328.39 which it refused to do. Ms Taylor had to take enforcement action in the Local Court showing that the business to which the licence relates is being carried on in an unfair manner in breach of s20D(1)(e) and the corporation failed to meet its liability within s.20D(1)(g).

6. On 5 December 2000 Mr. John Embury successfully obtained an order of the Fair Trading Tribunal against Tosohn Pty Ltd for $24,465.00. Mr. Embury approached Tosohn Pty Ltd regarding payment of the order and received a written reply dated 4 January 2001 that Tosohn Pty Ltd was not in a financial position to pay any monies and provided a copy of a Bank statement indicating the business was overdrawn to the amount of $337,000.00 in breach of the Act. Further, the Department requested on 13 September 2001 a financial statement which to date has not been supplied. These circumstances are sufficient for me to form a reasonable ground for believing that the corporation is not able to meet its liability as the holder of a licence.

Accordingly, I have determined that pursuant to section 20E(1)(f) of the Act, Motor Dealers licence number 16094 is cancelled.

I also determine, pursuant to Section 20E(1)(d) that Tosohn Pty Ltd and Mr. Creak as the sole Director and Secretary of Tosohn Pty Ltd be disqualified from holding a Motor Dealer's Licence for a period of three years, or from being concerned in the direction, management or conduct of a business for the carrying on of which a motor dealers licence is required."

42 The matter was listed for hearing on 11 March 2002. It came before me on that day and Tosohn sought an adjournment on the basis that on about 8 March 2002 the Director General had served it with new material advising that he would be relying on two further grounds and Tosohn had insufficient time to respond to the new material. The additional grounds were:

the holder of a licence may have failed to comply with an order of the Fair Trading Tribunal applicable to the holder; and

the holder of the licence is not a fit and proper person to continue to hold a licence.

43 The adjournment was granted. The matter finally came before me for hearing on 25 June 2002.

RELEVANT LEGISLATION

44 Section 20D of the Act makes provision for the Director General to issue to the licence holder a notice to Show Cause. So far as is relevant that section provides as follows:

"20D Notices to show cause

(1) Where, at any time, the Director-General is of the opinion that there are reasonable grounds for believing that:

(a) a licence may have been improperly obtained or, at the time a licence was granted, there may have been grounds for refusing to grant it,

(b) the holder of a licence has been convicted of an offence against this Act or the regulations or any other enactment administered by the Minister,

(c) the holder of a licence may have failed to comply with this Act or the regulations, a condition or restriction to which the licence is subject or an order of the Tribunal applicable to the holder,

(d) the holder of a licence has, within the period of 10 years that last preceded the grant of the licence, been found guilty of an offence involving fraud or dishonesty punishable on conviction by imprisonment for 3 months or more,

(d1) the holder of a licence has (as an adult), within the preceding 10 years or the period of 10 years that last preceded the grant of the licence, been found guilty of:

(i) an offence involving, or relating to, stealing a motor vehicle (within the meaning of section 154AA of the Crimes Act 1900 ), or

(ii) receiving, or being in unlawful possession of, a motor vehicle (within the meaning of section 154AA of the Crimes Act 1900 ) or a motor vehicle part,

(d2) in the light of evidence acceptable to the Director-General, the holder of the licence is probably receiving or dealing in stolen goods,

(e) the business to which a licence relates is being carried on in a dishonest or unfair manner,

(f) if a person were not the holder of a licence, the Director-General would be required by section 12 (2) or (4) to refuse an application by the person for a licence,

(g) in the case of a holder of a dealer's licence (being a body corporate), the holder:

(i) is in the course of being wound up,

(ii) is under official management,

(iii) is a body corporate in respect of which a receiver or manager has been appointed, or

(iv) has entered into a compromise or scheme of arrangement with its creditors,

or may, for any other reason, be unable, or is likely to become unable, to meet the holder's liabilities,

(h) the holder of the licence has, for a period of 1 month or more, ceased to carry on the business to which the licence relates at a place of business to which the licence relates,

(i) the holder of the licence is contravening another Act or an instrument made under another Act by carrying on the business to which the licence relates at a place of business to which the licence relates, or

(j) the holder of a licence is, for any other reason, not a fit and proper person to continue to hold a licence,

the Director-General may, by notice in writing served on the holder of the licence, call upon the holder to show cause, within such period, being not less than 14 days, as is specified in the notice, why the holder should not, for the reasons specified in the notice, be dealt with in accordance with this Division.

(1A) By way of example of the operation of subsection (1) (d2), the Director-General may consider that the holder of a licence in whose custody stolen goods are found is probably receiving or dealing in stolen goods.

(2) The holder of a licence on whom a notice to show cause has been served, a person with whom, pursuant to section 19 (2), the holder of the licence carries on, in partnership, the business to which the licence relates or, where the holder is a body corporate, a director or officer of the body corporate may, within the period specified in the notice, make submissions, orally or in writing, and adduce evidence with respect to the matters to which the notice relates.

(2A) The holder of a licence on whom notice to show cause has been served under this section may not surrender the licence unless the Director-General has made a determination under section 20E in relation to each matter to which the notice relates.

(3) The Director-General may conduct such inquiry or make such investigation in relation to the matters to which the notice relates and the submissions made, if any, and the evidence adduced, if any, by or on behalf of the holder of the licence in relation to those matters as the Director-General thinks fit.

45 Section 20E of the Act makes provision for the Director General to make a determination as to what disciplinary measures should be taken against the licence holder where a notice to Show Cause has been issued under s.20D(1). This section provides:

"20E Determination of disciplinary measures by the Director-General

(1) If, after compliance with section 20D, the Director-General is satisfied that any matter referred to in section 20D (1) has been established, the Director-General may do any one or more of the following:

(a) reprimand the holder of the licence,

(b) require the holder of the licence to comply within a specified time with a requirement specified by the Director-General,

(c) suspend the licence for a period not exceeding 12 months,

(d) disqualify the holder of the licence or any person concerned in the direction, management or conduct of the business to which the licence relates from holding a licence or from being concerned in the direction, management or conduct of a business for the carrying on of which a licence is required, either permanently or for such period as the Director-General thinks fit,

(e) impose a condition or restriction to which the licence shall be subject,

(f) cancel the licence.

(1A) Without limiting the powers conferred by subsection (1), among the requirements that the Director-General may specify under subsection (1) (b) is a requirement that the holder of the licence concerned:

(a) make an additional contribution to the Fund of such amount as the Director-General specifies, or

(b) indemnify the Fund to such extent as the Director-General specifies in the event of a particular contingency arising concerning the activities of the holder of the licence.

(1B) Despite subsection (1), the Director-General must cancel the licence concerned if satisfied that:

(a) a matter referred to in section 20D (1) (d1) has been established, or

(b) in the case of a licence holder that is a body corporate, if the body corporate were not the holder of a licence, the Director-General would be required by section 12 (4) (k) to refuse an application by the body corporate for a licence.

(2) Where, under subsection (1), the Director-General requires the holder of a licence to comply with a requirement specified by the Director-General, the holder of the licence shall comply with the requirement within the time specified by the Director-General under that subsection.

(3) Where the Director-General disqualifies the holder of a licence under subsection (1) (d), the Director-General shall cancel the licence.

(4) Where the Director-General suspends or cancels a licence under this section, the suspension or cancellation shall take effect on and from such day as is determined by the Director-General and notified, by notice in writing, to the holder of the licence.

(5) Where the Director-General:

(a) suspends a licence--the holder of the licence, or

(b) cancels a licence--the former holder of the licence,

shall return the licence to the Director-General within a period specified by the Director-General when suspending or cancelling the licence.

(6) A person disqualified under subsection (1) (d) shall not, while disqualified:

(a) hold a licence, or

(b) be concerned in the direction, management or conduct of a business for which this Act requires a licence to be held."

46 Section 20F of the Act makes provision for an application to the Administrative Decisions Tribunal for a review of the Director General's decision. Section 20F(1) provides:

20F Reviews by the Administrative Decisions Tribunal

(1) If the Director-General:

(a) refuses to grant an application for, or suspends or (under any provision of this Act) cancels, a licence, or

(b) imposes a condition or restriction under section 13, or

(c) imposes a disqualification referred to in section 20E (1) (d),

the applicant for the licence, the person who held the licence or the person disqualified (as the case may be) may apply to the Administrative Decisions Tribunal for a review of the decisions of the Director-General.

47 Section 24 of the Act relates to the prescribed notices which are to be displayed on vehicles on a motor dealer's premises. Insofar as it is relevant to these proceedings, section 24 provides:

"24 Dealers' notices in respect of sale of second-hand motor vehicles, second-hand motor cycles, demonstrators and damaged new motor vehicles

...

(2) Where a dealer offers or displays for sale a second-hand motor vehicle (not being a second-hand motor cycle), the dealer shall attach, or cause to be attached, to the vehicle, in the prescribed manner, a notice, in the prescribed form, containing the prescribed particulars in relation to the vehicle.

...

(4) In any proceedings against a dealer for failing to comply with the requirements of subsection (2), it shall be presumed, in the absence of proof to the contrary, that a second-hand motor vehicle (not being a second-hand motor cycle) found at a place of business in respect of which a dealer's licence is granted is offered or displayed for sale unless:

(a) the vehicle has attached to it, in the prescribed manner, a notice, in the prescribed form, specifying that the vehicle is not for sale, and

(b) the vehicle does not have any other notice attached to it, or any marking on it, that purports to be the price of the vehicle or that suggests that the vehicle is being offered or displayed for sale.

...

(11) Where:

(a) a person carrying on (whether in partnership or otherwise) the business of a dealer does not comply with any requirement imposed on the person by subsection (2), (3), (5), (6) or (7), the person is guilty of an offence, or

..."

48 Part 6 of the Act provides for the establishment and operation of a Motor Dealers Compensation Fund. The provisions relevant to these proceedings are found in sections 39 and 40 which fall within Part 6 of the Act. Insofar as they are relevant to these proceedings sections 39 and 40 of the Act provide:

"39 Motor Dealers Compensation Fund

(1) The Director-General is to cause to be established and maintained in the accounting records of the Department of Fair Trading a fund, to be called the Motor Dealers Compensation Fund.

...

(4) Subject to section 42, there is to be paid out of the Fund:

(a) the amount of any loss that is certified by the Director-General under section 40, and

40 Claims against Fund

(1) Any person wishing to make a claim against the Fund shall submit the person's claim in writing, verified by statutory declaration, to the Director-General.

(2) Subject to this section, if the Director-General is satisfied that a person submitting a claim has incurred a loss in connection with a motor vehicle (not being an exempted motor vehicle):

(a) because of the failure of a dealer or car market operator to comply with any requirement under this Act or the regulations or of the failure of a dealer or car market operator to account, or

(b) without limiting the generality of paragraph (a), by reason of the fact that a dealer has not passed an unencumbered title to the vehicle, or

(c) without limiting the generality of paragraph (a), by reason of the failure of the dealer to repay or return to the person any money or thing applied by way of deposit on, or part-payment of the price of, the vehicle, or

(d) because of a breach by a dealer or car market operator of a contract made by the person with the dealer or car market operator (being a breach of a kind prescribed by the regulations),

the Director-General may certify the amount of the loss.

...

(3B) The Director-General must not give a certificate under subsection (2) or (3A) unless satisfied:

(a) that the dealer or a car market operator with whom the person submitting the claim was dealing at the relevant time was the holder of the appropriate licence, or

(b) that the person submitting the claim believed on reasonable grounds that, at the relevant time, the dealer or car market operator with whom that person was dealing was the holder of such a licence.

(4) No loss shall be certified by the Director-General under subsection (3A) unless the Director-General is satisfied that the claimant has taken all reasonable steps to exercise such legal remedies and other rights of action available in respect of the loss incurred by the claimant."

49 Section 63 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") provides for the approach to be taken by this Tribunal in determining an application for a review of a reviewable decision. Section 63 of the ADT Act provides:

"63 Determination of review by Tribunal

(1) In determining an application for a review of a reviewable decision, the Tribunal is to decide what the correct and preferable decision is having regard to the material then before it, including the following:

(a) any relevant factual material,

(b) any applicable written or unwritten law.

(2) For this purpose, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant enactment on the administrator who made the decision.

(3) In determining an application for the review of a reviewable decision, the Tribunal may decide:

(a) to affirm the reviewable decision, or

(b) to vary the reviewable decision, or

(c) to set aside the reviewable decision and make a decision in substitution for the reviewable decision it set aside, or

(d) to set aside the reviewable decision and remit the matter for reconsideration by the administrator in accordance with any directions or recommendations of the Tribunal."

50 Section 73 of the ADT Act provides for the procedure of the Tribunal generally. Insofar as it is relevant to these proceedings, section 73 provides:

"73 Procedure of the Tribunal generally

(1) The Tribunal may, subject to this Act and the rules of the Tribunal, determine its own procedure.

(2) The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.

(3) The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms.

(4) The Tribunal is to take such measures as are reasonably practicable:

(a) to ensure that the parties to the proceedings before it understand the nature of the assertions made in the proceedings and the legal implications of those assertions, and

(b) if requested to do so--to explain to the parties any aspect of the procedure of the Tribunal, or any decision or ruling made by the Tribunal, that relates to the proceedings, and

(c) to ensure that the parties have the fullest opportunity practicable to be heard or otherwise have their submissions considered in the proceedings. ..."

(5) The Tribunal:

(a) is to act as quickly as is practicable, and

(b) is to ensure that all relevant material is disclosed to the Tribunal so as to enable it to determine all of the relevant facts in issue in any proceedings, and

(c) may require evidence or argument to be presented in writing and decide on the matters on which it will hear oral evidence or argument, and

(d) in the case of a hearing--may require the presentation of the respective cases of the parties before it to be limited to the periods of time that it determines are reasonably necessary for the fair and adequate presentation of the cases, and

(e) may require a document to be served outside the State, and

(f) may adjourn proceedings to any time and place (including for the purpose of enabling the parties to negotiate a settlement), and

(g) may dismiss at any stage any proceedings before it if the applicant withdraws the application to which the proceedings relate, and

(h) may dismiss at any stage any proceedings before it if it considers the proceedings to be frivolous or vexatious or otherwise misconceived or lacking in substance.

(6) A judicial member may:

(a) hold a directions hearing in relation to any proceedings before the Tribunal, or

(b) authorise a non-judicial member, the Registrar or a Deputy Registrar to hold a directions hearing in relation to any proceedings before the Tribunal."

Preliminary Issue

51 There appears to be no question that the determination under review was made in relation to the two grounds referred to in the second Notice to Show Cause. There is also no question that on about 8 March 2002 the Director General advised Tosohn that he would be relying on two further grounds. As indicated above, the additional grounds were that Tosohn may have failed to comply with an order of the Fair Trading Tribunal; and that Tosohn is not a fit and proper person to continue to hold a licence.

52 At the commencement of the hearing on 25 June 2002, Mr. Thangaraj, Counsel for Tosohn, requested that the Tribunal determine, as a preliminary issue, whether the Director General is entitled to rely on the additional grounds. I agreed to this proposal and argument was presented on behalf of each of the parties.

53 Mr Thangaraj's argument is essentially that section 20D of the Act authorises the Director General to issue a Notice to Show Cause if he is of the opinion that there are reasonable grounds for believing that certain identified circumstances exist. The first Notice to Show Cause was issued on the basis of a single ground. Ms Gibson's Memorandum dated 22 June 2001 referred to a further seven Fair Trading Tribunal Orders which Tosohn had failed to satisfy. Ms Gibson advised that "this information cannot form part of this disciplinary proceedings" and that "Consideration could be given to issuing a further NTSC encompassing the seven new outstanding Orders". This was in fact done and the second Notice to Show Cause was issued. The second Notice to Show Cause included an additional ground pursuant to s.20D(1)(e) i.e. Tosohn's business is being carried on in an unfair manner. No third Notice to Show Cause has been issued to include the additional grounds notified on 8 March 2002. The Director General has not complied with the requirements of section 20D of the Act with respect to those grounds.

54 Mr Thangaraj argued that the Tribunal stands in the shoes of the Director General. It has no additional powers to those possessed by the Director General. Pursuant to section 73 of the ADT Act the Tribunal is to act subject to the rules of natural justice. The document notifying of the additional grounds cannot constitute a Notice to Show Cause as it was not issued until after these proceedings had commenced. The Tribunal cannot take the additional grounds into account as they were not the basis of the Director General's decision. To do otherwise would be to circumvent the purposes of section 20D of the Act.

55 Mr Wilson for the Director General argued that section 20E refers to section 20D of the Act and does not refer to the Notice to Show Cause. The Director General merely has to be satisfied that any matter referred to in section 20D (1) of the Act has been established before he can take action under section 20E of the Act. Mr. Wilson argued that there is no obligation to accord procedural fairness in relation to the exercise of the power under section 20E of the Act. He urged the Tribunal to follow the approach espoused by the Commercial Tribunal in Hinchcliffe v Building Services Corporation 24 July 1997 unreported. The provisions should, consistent with its language, be given a broad as opposed to a narrow construction and one which will serve to achieve the broad objects and consumer protection purposes Parliament had in mind.

Ruling in relation to the Preliminary Issue

56 I agree with Mr. Wilson's argument that the regulatory regime provided for by Part 2 of the Act, in which sections 20D and 20E are found, is clearly for the purpose of consumer protection. I also agree that protective provisions generally attract an interpretation which will achieve the broader objects and purpose parliament had in mind. However, I do not accept that this precludes the need to accord procedural fairness. There can be no doubt that the powers given to the Director General by section 20E of the Act are broad and can have severe implications for the business of a licensee. Where the exercise of the Director General's powers can have such consequences, procedural fairness must be seen to apply in the absence of clear words to the contrary. The wording of these provisions does not support the view that procedural fairness is not applicable.

57 In my view, the Director General must accord procedural fairness before taking action under section 20E of the Act. In the circumstances of this matter, according procedural fairness requires that a decision cannot be made under section 20E of the Act unless the requirements of section 20D of the Act have been followed. Consequently, the Director General cannot rely on grounds for cancelling a licence unless those grounds have been included in a Notice to Show Cause and the licensee has been given a reasonable opportunity to respond.

58 I agree with Mr. Thangaraj's argument that this Tribunal stands in the shoes of the Director General and has no additional powers to those possessed by the Director General. The Tribunal undertakes a review of the Director General's decision, to decide what the correct and preferable decision is. In doing so it may have regard to any material before it but this does not mean that it can allow new grounds to be brought as the basis of the decision. The Tribunal cannot take the additional grounds into account as they were not the basis of the Director General's decision.

59 The Tribunal is therefore to decide what the correct and preferable decision is, based on the grounds contained in the second Notice to Show Cause and the evidence before it.

EVIDENCE

60 Both the Director General and Tosohn placed many documents into evidence. The Director General's evidence comprised five large volumes of material, including affidavits from the individuals referred to in the schedule to the second Notice to Show Cause and copies of relevant material from the Fair Trading Tribunal files relating to the matters concerning those individuals. Whilst they were available, none of those individuals were called to give evidence and they were not required for cross-examination. Affidavits from Ms Gibson, Mr. Grahame Alderton, Mr. James Wright and Ms Sharon Slack-smith, Department of Fair Trading officers who had been associated with the preparation of material relevant to this matter, were also put in evidence. Ms Slack-smith was subject to brief cross-examination.

61 Tosohn also placed many Affidavits into evidence. Included in these affidavits were many testimonials from clients of Tosohn who stated that they had satisfactory on going dealings with Tosohn or Mr. Creak or both Tosohn and Mr. Creak. Each stated that they would have no hesitation in dealing with them again. In addition to the testimonials, Affidavits from Mr. Creak, his partner Ms Lisa Jane Creak, Mr. Neil Honan an Accountant, Tosohn's Finance Manager Mr. Kenneth Simmons and Mr. Alfonzo Calisti, Tosohn's Senior Manager, were placed into evidence. Mr. Creak and Mr. Honan gave evidence and both were subject to cross-examination.

62 As most of the documentary evidence was not in dispute, it is convenient to deal with the evidence in so far as it related to the various grounds on which the Director-General made his decision to cancel Tosohn's licence and disqualify Tosohn and Mr. Creak. While Mr. Creak disputed some conversations referred to in the affidavits relied on by the Director General, the deponents were not required for nor subjected to cross-examination. I note that Counsel for Tosohn also made submissions that much of the material contained in affidavits relied on by the Director General is hearsay evidence. Notwithstanding that being the case, I do not need to address these issues for reasons which will become apparent later in these reasons.

Tosohn's evidence

63 The principal evidence on behalf of Tosohn is that of Mr. Creak and Mr. Honan. Mr. Honan's evidence goes to the ground that Tosohn has failed to meet its liabilities. Mr. Honan is a practicing accountant and qualified auditor. He has worked as accountant and business advisor for Mr. Creak and his related entities since 1984. He was therefore aware of Tosohn's financial position in recent years and the fact that Tosohn failed to satisfy the Fair Trading Tribunal Orders as alleged by the Director General. Mr. Honan's evidence was that notwithstanding its failure to satisfy the Fair Trading Tribunal Orders Tosohn was never insolvent because its assets always exceeded its liabilities. If it wasn't for its losses from the licence cancellation and legal expenses, Tosohn would have shown a profit of between $100,000 and $120,000. In Mr. Honan's opinion this can be expected to continue into the future.

64 Mr Honan gave evidence of the advice that he had given Tosohn and how the company had been restructure in accordance with his advice. His evidence is that Tosohn is now able to meet its liabilities. There are no longer any financial concerns. The bank debt remains and therefore so does the charge over the assets; however the account is now in significant credit. The factors which prevented Tosohn from meeting its liabilities have been addressed and consequently the issue is unlikely to reoccur.

65 Tosohn has been able to bring its account into credit through the injection of funds from Mr. Creak. This was possible because of the sale of property owned by Mr. Creak and an associated company. Tosohn has also undergone a restructure and there have been significant cost savings as a result of staff changes. Mr. Creak is no longer drawing a salary from the business and he now undertakes much of the work previously performed by former staff members.

66 Mr Honan provided financial statements which he indicated supported his views. He conceded however that he did not prepare the balance sheet in evidence and that it has not been audited. He would not allow it to go to a financier without it being checked more thoroughly. Mr Honan stated that he had prepared budget statements for the next trading year however these were not available for consideration by the Tribunal.

67 While the balance sheet indicates that Tosohn has a negative equity of over $600,000, Mr. Honan stated that this figure fails to account for the value of stock of used vehicles. This stock is valued at over $900,000. If this value were taken into account the balance would be in credit. Mr. Honan's view is that discrepancies have occurred as the result of Tosohn's use of three separate computer systems. Mr. Honan has advised that Tosohn adopt a single system. In his affidavit Mr. Honan indicated that he estimated the goodwill of the business at a minimum of $250,000. In contrast the balance sheet provides for goodwill of $666,186.60. Mr. Honan conceded that his view may differ to that of Mr. Creak with respect to the value of the goodwill.

68 Mr. Creak's evidence goes to both grounds. That is, that Tosohn has failed to meet its liabilities and that the business to which the licence relates is being carried on in an unfair manner. Mr. Creak gave evidence of the background to Tosohn's financial problems and the steps he took to address those problems. His evidence is that the problems stemmed from his decision in 1997 to move four businesses that he operated on three different sites into a single site. As a consequence of his concentration on other issues, he lost touch with Tosohn's day to day business. He left that business in the hands of a manager. The small amount of time that he did devote to Tosohn's business was mostly taken up in persuading SEAT to reintroduce its product to Australia. This was achieved in 1998.

69 Mr Creak said that Tosohn's manager between 1997 and 1998 was dismissed and replaced by Mr Graham Lawrence. During the period under consideration, the business was managed by Mr. Lawrence who was given considerable latitude and considerable responsibility. Mr Creak's evidence is that Mr. Lawrence was under considerable emotional stress and that he finally "broke down" in about February 2001.

70 Mr Creak said that Tosohn's business was severely affected by the introduction of the goods and services tax. As a result of the GST the price of new cars dropped and consequently the price of used cars also fell. The stock value of Tosohn's used cars dramatically decreased, sometimes below the cost price.

71 In summary, Mr Creak stated that he suffered personal and business pressure generated by the juxtaposition of factors which will not reoccur. Those factors were:

the development of the properties;

the departure of Tosohn's long-term manager in 1996, problems with the new manager who was subsequently dismissed, and problems experienced with Mr Lawrence;

time expended in persuading SEAT to re-introduce their product to Australia; and

the advent of the GST.

72 Under cross-examination, Mr Creak conceded that Tosohn may well have had sufficient resources to pay individual judgment debts. He stated that he had not received legal advice and had not understood the powers of the Fair Trading Tribunal. He stated that had he been aware that Tosohn's licence could be cancelled as a consequence of its failure to satisfy the Fair Trading Tribunal Orders, he would have adopted a different approach.

73 Mr Creak stated that the circumstances that led to the problems that are now under consideration would never reoccur. As a consequence of the business restructure, Tosohn is now financially stable and is able to meet all its liabilities. The company's financial position improved dramatically in mid 2001 when the proceeds of sale of other property was received and were applied in reduction of outstanding bank debt.

74 In his affidavit Mr Creak also offered comment in relation to the issues referred to in the schedule to the second Notice to Show Cause. He did not generally seek to re-ventilate Tosohn's position in relation to each of the matters which had been dealt with by the Fair Trading Tribunal but did so in relation to some aspects. He sought to provide a response to certain allegations made in affidavits provided by the parties concerned. In summary, the response in relation to each of those matters is as follows.

Parker's Camellias

75 Mr Creak stated that he played no part in relation to this matter and that it was dealt with by Mr Lawrence. Mr Creak argued that this matter relates to Tosohn's repairer's licence and has nothing to do with its motor dealer's licence. He denied certain conversations attributed to him in relation to settlement of the outstanding amount but stated that the parties had agreed on a settlement figure. Tosohn was not in a position to pay the judgment debt of Parker's Camellias in mid 2000 because of its financial position.

Diana Kay Broad

76 Mr Creak stated that he played no part in relation to this matter and that it was dealt with by Mr Lawrence. He stated that he believes that Ms. Broad's claim is without foundation. He denied allegations made by Ms Broad in her affidavit and referred to evidence which had been presented at the Fair Trading Tribunal. He stated that the debt had been completely satisfied.

Diana Patricia Schultz

77 Mr Creak stated that he played no part in relation to this matter and that Mr Lawrence dealt it with. He recounted a conversation that he had with Ms Schultz on 23 January 2002 and states that the judgment debt had been completely satisfied.

Ivan Niksic

78 Mr Creak stated that he played no part in relation to this matter and that Mr Lawrence dealt it with. He denied aspects of conversations attributed to him in Mr Niksic's affidavit. He states that the judgment debt was paid in full in May 2001.

Linda Taylor

79 Mr Creak stated that he played no part in relation to this matter and that Mr Lawrence dealt it with. Mr Lawrence did not attend the Fair Trading Tribunal hearing on advice from police. Mr Creak outlined attempts that he had made to contact Ms Taylor and stated that if he is successful in finding her, he intends to pay the full amount of her claim.

John Embury

80 Mr Creak stated that he played no part in relation to this matter and that Mr Lawrence dealt it with. Mr Creak first met Mr Embury in January 2001 after he had obtained an order from the Fair Trading Tribunal. He denied aspects of conversations attributed to him in Mr Embury's affidavit and he recounted conversations that he had with Mr Embury on about 4 January 2001 and 24 January 2002. Mr Creak explained that as Mr Embury was to receive a payment from the NRMA he would be unjustly enriched if Tosohn was also to make payment. He has therefore not taken the matter any further.

Jimmy Borg

81 Mr Creak stated that he played no part in relation to this matter and that it was dealt with by Mr Laurie Graham, a sales manager for Tosohn between February 2001 and December 2001. Mr Creak denied aspects of conversations attributed to him in Mr Borg's affidavit and stated that the issues were satisfactorily resolved with Mr Borg.

Raymond Sherriff

82 Mr Creak stated that the dispute with Mr Sherriff relates to Tosohn's repairer's licence and has nothing to do with its motor dealer's licence. Mr Creak concedes most of the conversations referred to in Mr Sherriff's affidavit but denied some aspects of conversations attributed to him. Tosohn was not in a position to pay Mr Sherriff's judgment debt due to the fact that at that time, it was experiencing severe cash flow problems. It has now sent Mr Sherriff a cheque for the amount awarded by the Fair Trading Tribunal.

Anthony Meers

83 Mr Creak stated that the dispute with Mr Meers relates to Tosohn's repairer's licence and has nothing to do with its motor dealer's licence. He explained Tosohn's position in relation to this matter and said that Tosohn relies upon the terms of the contract for sale with respect to its entitlement to claim for the cost of repairs carried out in accordance with the contract when a customer decides not to proceed with the sale. Tosohn has now paid Mr Meers in full satisfaction of his claim.

84 In summary, Mr Creak stated that all of the transactions relating to the individual claimants referred to in the annexure to the second Notice to Show Cause relate to vehicles which were all outside the warranty requirements of the Act. Further, several of those customers obtained additional warranty insurance for which they paid and the work carried out on the vehicles as alleged in their respective affidavits was either carried out pursuant to the private warranty insurance agreements or was outside that warranty. Mr Creak stated that all of the vehicles referred to in the affidavits of Mr Parker, Ms Broad, Ms Schultz, Ms Taylor, Mr. Embury, Mr. Sherriff, Mr. Niksic, Mr. Meers, Mr. Borg and Mr. Parker were cars which were at least 15 years old or were trade/commercial vehicles. He said that in his experience, these types of vehicles are prone to experience mechanical problems after such a long period of use or old age generally. All the vehicles had travelled in excess of 100,000 kilometres and many, being European cars, required European parts which were difficult and/or expensive to locate and install due to the age of the vehicles,.

85 Mr Creak stated that for the period January 1999 to 27 February 2002, Tosohn sold approximately 1,302 used cars. The complaints referred to in the annexure to the second Notice to Show Cause represent a minute percentage of the transactions Tosohn carried out over that period.

86 During the period 16 January 2002 to 30 January 2002 Tosohn did not sell any vehicles to the public. No vehicle evaluations were carried out for trade in purposes. No finance quotes were submitted to any person during that period. Four vehicles were sold during that period, all on 30 January 2002, and all were "inter dealer" sales. As no sales were made, no funds were received in relation to any such sales. Some funds were received from sales made prior to 16 January 2002, where delivery of the vehicle had already occurred.

87 Mr Creak stated that on receiving the Director General's determination he convened a meeting of staff and ceased trading. He said that all prescribed forms 4, 7, 8 and 14 were removed from vehicles on the lot. The forms were not replaced in the vehicles until 31 January 2002, the day after a temporary stay was granted. All weekly advertisements in the Trading Post and Sydney Morning Herald were immediately cancelled. Tosohn did not alter its website during the relevant period, having regard to the cost involved. Further, it was not possible to cancel the advertisement in the monthly Chronicle because bookings are made annually in advance nor was it possible to cancel the advertisement in "Unique Cars" for February 2002, because it was too late to do so. However, the advertisement for March 2002 was cancelled.

88 Mr Creak asserted that Tosohn was not trading during the period 16 January 2002 to 30 January 2002, and he rejected any inference which is suggested to the contrary by the Affidavits of Mr Wright, Mr. Alderton and Ms Slack-Smith. He stated that a number of vehicles displayed Form 10 Notices prescribed under the Act which are to be displayed to show that a vehicle is not for sale.

89 The premises were open, to permit access to the other businesses which operate from the premises. Those businesses continued to operate between 16 and 30 January 2002 and therefore it was necessary to permit access to them. Further, the administrative offices, which also include the offices of the sales personnel, serviced both the smash repair business, and the workshop and spare parts division. It was necessary to keep the administrative offices open accordingly. The whole of the premises were closed for the entire weekend of 26, 27 and 28 January 2002.

90 Mr Creak asserted that for the month of January 2002 Tosohn experienced a net trading loss for the sum of $63,523 This trading loss occurred solely during the period 16 January 2002 to 30 January 2002 when Tosohn's motor dealer's licence was suspended.

91 Mr Creak referred to recent management initiatives which he asserts have put him in the position of being able to manage effectively and run the business. Tosohn no longer has a General Manager or a Sales Manager. Mr Creak performs these roles himself. Mr Creak is paid as an employee with a salary of $30,000 per annum. All sales persons report to him, and he is present at the business every day for most of the working day. He now has full control of all aspects of the business, and a good working knowledge of all sales transactions which are taking place at any one time in the business. Consequently, he is able to deal effectively with and handle any customer complaints himself, and carry out any undertakings which might be given to customers in order to finalise a sales transaction. Mr Creak is no longer involved in any other business on a day to day basis.

92 The MYOB accounting systems has been installed in the office computers, and is linked to Mr. Honan's accounting system. Mr Creak receives daily management reports from MYOB. He is able to review the accounting position of the company on a daily basis, and where appropriate, hold discussions with Mr. Honan. Tosohn retained Mr. Simmons, who is a chartered accountant, on a part time basis as a permanent member of staff, to oversee the implementation of MYOB in the business; to ensure that the business correctly records its transactions within the parameters of MYOB; and to complete all necessary returns.

93 Mr Creak asserted that he is confident that with the above initiatives, the level of complaints previously made against Tosohn should fall substantially. Customers will be dealt with in a way that will limit complaints, and ensure that if any complaints are made they will be resolved amicably and fairly.

94 Mr Creak said that historically Tosohn was involved in the sale of second hand prestige vehicles. He said that this part of the business is continuing however, Tosohn has changed the focus by excluding any vehicles which have a retail value of less than $10,000 Mr Creak said that most complaints have been generated in relation to sales of this nature. In future, Tosohn will only sell second-hand prestige vehicles with a market value of $10,000 or more. In addition, Tosohn has recently expanded its business by embracing a franchise from Suzuki. This will allow Tosohn to sell new vehicles and expand its business, accordingly. It will also allow Tosohn to increase the volume of sales through service and spare parts.

95 Mr Creak said that Tosohn is up to date with all quarterly returns to the Australian Taxation Office, and has made all quarterly payments of tax and GST as required. Tosohn pays all employee entitlements every week when due. Mr Creak said he believes that Tosohn is capable of delivering an effective efficient and viable service to the public of selling used prestige vehicles and new Suzuki vehicles.

96 He asked the Tribunal to consider the consequences of a permanent closure of Tosohn's business. The vehicles on the lot would become difficult to sell, and would only be able to be sold on a wholesale basis. The stock value would be reduced by some 60% resulting in an immediate crystallised loss of around $900,000. The premises would only be of interest to another car yard and would be difficult to sell at their market value. He said he believes that all his assets would need to be sold to pay out debts, leaving him bankrupt.

97 He said that he has invested a significant part of his life in Tosohn's business. The events of 1999, 2000 and 2001 caused stresses and strains in his personal life and in his relationship with his wife. They have now moved past those stresses and strains and are looking forward to their new family. He wishes to be able to do so in the knowledge that he has learned a lesson from his experiences and will behave differently in the future in connection with the way he runs Tosohn. He requests that he be afforded the opportunity to put in place the lessons he has learned.

The Director-General's evidence

98 As indicated above the Director General relies on the documents contained within the volumes of material in evidence. Each of the matters referred to in the schedule to the second Notice to Show Cause are disputes which resulted in claims before the Fair Trading Tribunal and Orders made in favour of the complainant. In each case Tosohn failed to comply with the Tribunal order. Issues relating to each matter are contained in the 1 June 2001 memorandum from the Deputy Chairperson of the Fair Trading Tribunal referred to above. Affidavits provided by the individuals who were party to those matters confirm the details contained in the Fair Trading Tribunal memorandum. They also deposed to conversations and events in relation to their particular matters and the unsatisfactory response they received from either Tosohn or Mr. Creak or both of them. In most cases they depose to personal dealings with Mr Creak. This evidence is to be contrasted with that of Mr. Creak in which he asserted that he had not had any dealings in relation to many of the matters.

99 The Director-General also relied on evidence with respect to observations made of Tosohn's premises in January 2002 during the period after the Director general's determination but prior to the granting of the stay. In essence, the evidence is that Tosohn's sales staff were seen mingling amongst the cars with what appeared to be customers. Mr Wright attended the premises on 19 January 2002 made these observations and took photos of what he observed. Ms Slack-Smith went into Tosohn's premises on 21 January 2002 and inquired about a Porsche. The office was open; there were no signs to indicate that the business was not trading. Vehicles displayed prices and prescribed notices. The notices were not the prescribed Form 10 which indicates that a vehicle is not for sale. A salesman came forward and gave Ms Slack-Smith a business card. He advised her of the business trading hours and did not indicate that the business was not currently trading.

100 Mr. Alderton stated that he attended Tosohn's premises on 30 January 2002 and had discussions with a member of Tosohn's sales staff about a Subaru wagon on the lot. All vehicles on the lot displayed a notice "Not for sale" and a further explanatory note with words to the effect "As a mark of respect following the sudden death of a valued client the dealership is not trading."

101 The Director General asserted that that conduct constituted advertising and carrying on business. There is also clear evidence that the forms displayed on the vehicles were not the prescribed Form 10. Ms Slack-Smith's evidence is that at the time she visited the premises on 21 January 2002 no vehicle carried a Form 10 Notice.

102 The significance of that conduct is that once the disqualification of Tosohn's licence became effective, any person who purchased a vehicle from Tosohn and had difficulty with it would have their right to claim against the Motor Dealers Compensation Fund under section 40 of the Act severely restricted. That is because the Director General must not give a certificate under section 40 of the Act unless he is satisfied that the dealer with whom the person submitting the claim was dealing at the relevant time was the holder of the appropriate licence, or that the person submitting the claim believed on reasonable grounds that, at the relevant time, the dealer was the holder of such a licence. There is therefore a real risk to the public posed by a trader continuing to trade without a licence.

103 The evidence is that Tosohn has a long history of financial problems. There has consistently been a hardcore debt of over $1 million. All Tosohn's properties are secured. The consequence has been that debtors have been unable to get enforcement of Tribunal Orders. If Tosohn is not able to meet its financial obligations, there is a real risk to the public posed by it continuing to have its doors open.

TOSOHN'S SUBMISSIONS

104 Mr. Goldsworthy, Tosohn's former Counsel, prepared written submissions. Tosohn relies on those submissions. Mr. Thangaraj also prepared further submissions on behalf of Tosohn. Those submissions repeat and build on the matters raised by Mr. Goldsworthy. Mr. Thangaraj argued that the question for this Tribunal is:

As of June 2002, is it correct and preferable that the Respondent disqualified Mr Creak for three years and cancelled the licence of Tosohn, on the basis of s. 20D(1)(e) and s 20D(1)(g) of the Motor Dealers Act?

105 In relation to this question he submitted that Tosohn is able to meet its liabilities in June 2002; and Tosohn is not being run in an unfair manner in June 2002. Therefore, there cannot be any disqualification or cancellation.

106 It is submitted that the Director General misdirected himself in a number of areas. He appears to have taken a great deal of hearsay and other inadmissible material into account. For example, the Director General considered matters relevant to the Tosohn's Motor Vehicle Repairers Licence. This is a separate licence which can be held to the mutual exclusion of Tosohn's Motor Dealer's Licence. Much of the subject matter of the complainants' affidavits is immaterial to the Dealer' s Licence. The matters relating to Parker's Camellias, Mr Niksic, Mr Embury, Mr Borg, Mr Sherriff and Mr Meers are in reality complaints related to the workshop.

107 It is also submitted that the Director General wrongly disqualified Mr Creak personally, whereas, the alleged "unfair" treatment was at the hands of an employee of Tosohn, namely Mr Lawrence. In that case, only the licence of the company should have been affected.

108 The Tribunal has to look at Tosohn's business as a whole; not at isolated cases. The eight complaints under consideration represent 0.6 of one % of Tosohn's used car sales in the period January 1999 to 27 February 2002. The vast majority of the work carried out by Tosohn has been of a high standard. Most of these complaints are relatively trivial. Some are just pedantic. For example the claim for $50 pursued by Ms Broad. All of the cars involved are very old tired cars and it is likely that some persons may just have had unrealistic expectations. In every Tribunal case Mr Creak had a strong belief in the fact that his business had acted properly. It is conceivable that had these cases been properly presented to the Tribunal he may have been successful in at least some of the cases. Instead the mismanagement of Mr Lawrence meant that most matters were dealt with ex parte. Most of the complaints relate to the management of Mr Lawrence. The Tribunal should also note that many of the complainants indicated that Tosohn had loaned them cars when it was not obliged to do so, and that on occasions Tosohn undertook repair free of charge.

109 It is submitted that Mr Creak and Tosohn have brought considerable service, employment and benefit to the West Pennant Hills and Thornleigh community over many years. That success was interrupted by the combination of the several events. In 1997 Tosohn lost Mr Neil Dawson, a very successful manager. Almost single-handedly Mr Creak attempted to convert 546 Pennant Hills Road from a car rental business and mechanical repair business to a Liquorland outlet. Likewise, he attempted to construct a multi-storey car operation at Pennant Hills. In 1999 SEAT Motor Vehicles decided to withdraw from Australia. This withdrawal following Mr Creak making significant changes to his business to accommodate them. The introduction of the GST leading to a dramatic overnight reduction in value of stock held. There were crippling effects industry wide.

110 Most of these matters were entirely outside of Mr Creak or Tosohn's control. As a result, the period between 1998 and 2001 visited considerable financial hardship upon Mr Creak. In order to survive financially he was forced to sell his smash repair business; car rental business; Liquorland outlet; and home.

111 Massive business and structural change has been instigated in order to correct the mistakes of the past and to have in place a system which prevents difficulties in the future. The matters causing issue have been comprehensively and professionally addressed under the guidance of Mr Honan. They are unlikely to re-occur. Tosohn relies on some 27 affidavits from well satisfied customers. Many are repeat customers. Tosohn has effectively fined itself $63,823 in lost sales during the period of the cancellation up to the granting of the stay. It is submitted that this is a significant penalty.

112 Mr Thangaraj submitted that the company is not being carried on in a dishonest and unfair manner. He argued that it is not unfair and dishonest to submit that the repairer's licence is different to the dealer's licence when it is a fact. He also argued that it is not unfair and dishonest for Tosohn to have a debt structure such that a bank has a charge over its assets. That is the requirement of the bank. In any case, Tosohn is now in significant credit. It is conceded that at the time the Director General was considering the matter Tosohn had difficulties meeting some debts. That was why debts against the company could not be enforced. It was not because the company was being run in an unfair manner. Mr Creak admits that he acted without legal or accounting advice and that he was foolish in doing do.

113 With Mr Creak's personal investment and the re-structure put in place by Mr Creak, Mr Honan and Mr Simmons, there are no longer any financial concerns. The bank debt remains and therefore so does the charge over the assets. However the account is now in significant credit. Once the re-structure was in place, debt reduction took place. There are no outstanding complaints but for Ms Taylor who cannot be located. Mr Creak is willing and able to satisfy her complaint immediately.

114 The company has not been and is not being 'carried on in a dishonest or unfair manner'. Past problems and mistakes have been acknowledged however even at that time there were 10 complaints out of 1,300 car sales. There can be no suggestion that as at June 2002 the company is being 'carried on in a dishonest or unfair manner'.

115 Mr Thangaraj submitted that the protective policy aim of the legislation has been achieved. Systemic problems within Tosohn have been completely removed. Significant investment and restructuring means that future problems are highly unlikely. There can be no suggestion that the company is unable to meet its liabilities in June 2002. There can be no suggestion that the company will not be able to meet its liabilities in the future. There is currently working capital of $349,000.

116 There are significant public and private interests as to why the Tribunal ought not disqualify or cancel Tosohn's licence even if it made an adverse finding against Tosohn or Mr Creak. Mr Thangaraj submitted that on balance there is a greater public benefit in issuing a reprimand under section 20E(1)(a) of the Act. It would be against the public interest to dismantle a business that is now fiscally well constructed and make up to 20 employees redundant.

117 It must be kept in mind that the legislation is protective and not punitive. Notwithstanding that being the case, Mr Creak has suffered the great stress of losing his career and business. Additionally he has incurred great expense and loss when the business was shut down and in conducting these proceedings.

118 Mr Thangaraj conceded that it could be appropriate for the Tribunal to reprimand Mr Creak for his mistakes. He also stated that while there is no need for any ongoing assessment of Tosohn's financial viability, Mr Creak is willing to provide quarterly reports to either the Tribunal or the Respondent as a condition of Tosohn's licence.

THE DIRECTOR GENERAL'S SUBMISSIONS

119 The Director General opposed Tosohn's application. Mr. Wilson prepared and filed written submissions on behalf of the Director General. He also presented oral submissions.

120 Mr. Wilson asked the Tribunal to note that Tosohn failed to comply with the requirements under the Act and the Regulations. In some instances, Mr. Creak gave an explanation of why there had been a failure, while in others he contested the conclusions reached by the Fair Trading Tribunal. Mr. Wilson argued that the affidavits from people who are apparently satisfied with Tosohn do not displace the fact that Tosohn failed to comply with Fair Trading Tribunal Orders and had the business arranged in such a way that the Orders could not be enforced.

121 Mr. Wilson argued that in effect the affidavits are character witnesses and the evidence of character witnesses is incapable of displacing the inference compelled by the serious and sustained misconduct: Zeims and the Prothonotary of the Supreme Court of NSW 1957 97 CLR as quoted with approval in Department of Fair Trading v. Woods Unreported decision of the Licensing Court of NSW.

122 Mr. Wilson submitted that the Act is in force for the protection of the public. It is protective not punitive. Subjective matters cannot overtake the public interest: Hinchcliffe v. BSC. Therefore the matters raised in Mr. Creak's affidavit with respect to the effect of closure of the business are irrelevant to the current proceedings.

123 The Act has a clear purpose of consumer protection and, accordingly is to be given a broad as opposed to a narrow construction and one which is to achieve the broader objects and purposes parliament had in mind: Hinchcliffe v. BSC.

124 It is not in dispute that Tosohn failed to comply with Fair Trading Tribunal Orders. Mr. Wilson argued that a single order would provide sufficient reason for disciplinary action to be commenced. In this matter there are numerous Orders that were outstanding when disciplinary action was commenced. To state that funds were not available to meet at least some of those Orders is nonsense when some amounts were for $50, $144.73, $340.0, $342.13 and $328.39.

125 Mr. Wilson referred to the evidence of conversations had with Mr. Creak and other people at the premises of Tosohn when attempting to have the Orders satisfied. He submitted that these reflect the financial state of the company and the attitudes it had towards the Fair Trading Tribunal and show that the business was being operated in a dishonest and unfair manner. The unfairness being having the company finances arranged in such a way that people who had Orders made in their favour could not have them enforced.

126 Tosohn continually told people, including the Sheriff, that it did not have the finances to comply with the Orders. It was unable to meet its liabilities. This situation has not changed; Tosohn has merely obtained a further overdraft to pay the outstanding Orders. There is no reason to believe that these funds would not be used up and the same problems with enforcement of orders against Tosohn will arise. Tosohn funds are a result of an injection of funds by Mr Creak. Tosohn could not function without that injection. Further, the balance sheets provided with Mr Honan's affidavit show that Tosohn has a debt to another company for over $1 million. Clearly, Tosohn is not standing on its own feet. There is nothing to prevent similar financial difficulties and unfair conduct in the future.

127 Tosohn's misconduct occurred over a long period. Each of the complainants went to the trouble of instigating Fair Trading Tribunal action. The first of the Fair Trading Tribunal orders under consideration has made in March 2000. The Order was finally satisfied in February 2002. Mr Honan's evidence was that during the period under consideration Tosohn never made a loss and that the trust had funds to distribute. If that is the case then the funds could have been available to pay at least some of the amounts awarded by the Fair Trading Tribunal.

128 The budget statements prepared by Mr Honan for the next trading year were not available for consideration by the Tribunal. Mr Wilson submitted that the Tribunal may therefore assume that the material contained in those statements would not have been of any assistance to Tosohn. He argued that the Tribunal should therefore give less weight to Mr Honan's predictions as to Tosohn's future earning potential as those predictions are not supported.

129 Similarly, the Tribunal should note that the statement prepared by Mr Simmons failed to take account of existing stock. The Tribunal should have little confidence in the benefits to be expected from the involvement of Mr Simmons in the business.

130 Mr. Wilson asked the Tribunal to note that Mr Creak is the sole director of Tosohn and therefore must accept responsibility for the actions of its staff. Mr Creak was given an opportunity to reply to the second Notice to Show Cause. The majority of the complainants referred to conversations with Mr Creak. Mr Creak was directly involved in these matters and in Tosohn's failure to satisfy the Fair Trading Tribunal Orders. As a trustee he could access trust funds to pay debts but did not do so.

131 Mr. Wilson argued that the assertion that many of the complaints relate to Tosohn's repairer's licence is not correct. The relevant issue is the state of the vehicles sold. The vehicles in issue were not of merchantable quality. It was Tosohn's responsibility as the vendor of the vehicles to ensure that they were of merchantable quality. If that was not the case, the dealer is responsible. Therefore it was the dealer's licence which was relevant because the vehicles were sold under that licence.

132 Mr Wilson observed that if Tosohn's debts had been paid in a timely fashion, the Director General would not have taken action. However, the Orders were only satisfied after the Director General had cancelled Tosohn's licence. If Tosohn's circumstances had improved as has been asserted, the debts should have been paid at that time, not when the licence had been cancelled. The failure to pay the debts earlier constitutes carrying on business in an unfair manner

133 In any event, Tosohn had not paid all its outstanding debts even after it had received legal advice. Even after Tosohn's licence had been cancelled, Mr Creak tried to pay a lesser amount than the amount that the Fair Trading Tribunal had awarded. There is clear evidence that Mr Creak has been unable to deal with complaints appropriately. The witnesses who provided evidence of Mr Creak's and of Tosohn's response to their complaints were available and were unchallenged. There is a constant theme throughout the evidence of Tosohn's failure to meet Tribunal Orders and Mr Creak's attempts to get settlement for lesser amounts than that ordered. Even where the parties reached a settlement agreement to finalise a matter before the Fair Trading Tribunal Tosohn did not pay the amount agreed. Mr Wilson submitted that such conduct is unfair, improper, and unjust.

134 Mr Wilson submitted that the Tribunal should also find on the evidence that Tosohn continued to trade in January 2002 after its licence was cancelled. The evidence of the Department's officers who attended Tosohn's premises supports that finding. He argued that pursuant to section 24(4) of the Act there is an assumption that a vehicle on display at Tosohn's premises is for sale unless there is a prescribed Form 10 notice attached. The Form 10 "Not For Sale" sign is large and easily seen. It is unlikely that the Department's officers would have been mistaken about the notices displayed. Mr Creak was determined that he would continue to trade no matter what action the Department took. The Tribunal should find that section 24D is satisfied at the standard in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. That is, a standard less than the criminal standard but well higher than the civil standard of the balance of probabilities.

135 Mr Wilson argued that the Tribunal should disregard Tosohn's assertion that it suffered in excess of $63,000 in lost sales. This should not be taken into account in terms of the protective purpose of the Act because such losses flow from Tosohn's own actions.

136 Mr Wilson submitted that the Tribunal should not simply consider what circumstances exist as the June 2002. If the tribunal is satisfied that the other conduct referred to has occurred, section 20E of the Act can be activated. Mr Wilson referred to a decision of this Tribunal in Hutchings -v- Commissioner of Police, New South Wales Police Service [2001] NSWADT 62 and submitted that the Tribunal should consider the criteria set out in that matter in weighing Tosohn's conduct. The criteria are:

· whether improper conduct has occurred,

· whether it is likely to occur,

· whether it can be assumed that it will not occur, or

· whether the general community will have confidence that it will not occur.

137 Mr Wilson urged the Tribunal to affirm the Director General's decision. However he conceded that the Tribunal might not be satisfied that a suspension for three years is sufficient. He argued that a reprimand would send the wrong message to the industry. Allowing the licence to be retained subject to conditions would have no affect on Mr Creak. As Mr Creak was the sole director of Tosohn and therefore responsible for its conduct, this would not be a satisfactory outcome. The public interest requires that Tosohn's licence be cancelled and that a sufficient period of suspension follow for both Tosohn and Mr Creak.

FINDINGS

138 I agree with Mr Wilson in that it is my view that in considering whether the grounds of the second Notice to Show Cause are made out the Tribunal is not confined to consideration of the circumstances as they exist as at June 2002. The Tribunal's role is to determine what is the correct and preferable decision. In doing so it may consider all the material before it. This material clearly includes evidence of the events and circumstances which lead to the Director General's determination.

139 The second Notice to Show Cause contained two grounds. Firstly, pursuant to section 20D(1)(e) of the Act that the business to which the licence relates is being carried on in an unfair manner; and secondly pursuant to section 20D(1)(g) that the holder of the Motor Dealer's licence has within the provisions of s.20(1) failed to meet the holder's liabilities. The Tribunal must be satisfied, on the balance of probabilities, that the grounds have been proved. In applying that standard, the Tribunal must have regard to the gravity and importance of the matters to be determined in accordance with the principles set out in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 360-363. Sir Owen Dixon's words at p 361-362 are of particular relevance:

"Except upon criminal issues to be proved by the Prosecution it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the Tribunal. But reasonable satisfaction is not a state of mind that is obtained or established independently of the nature or consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be proved by inexact proofs, indefinite testimony, or indirect inferences.

140 On the evidence presented in this matter the two grounds are clearly intertwined. However, for convenience, I will deal with each separately.

The First Ground

141 It is not in dispute that at the time the Director General made the determination, Tosohn had failed to satisfy several orders of the Fair Trading Tribunal. It is also not in dispute that many of the orders, which were subsequently satisfied, were not satisfied in full. Tosohn in fact reached agreement with the other party for an amount that was less than the amount ordered by the Fair Trading Tribunal. Notwithstanding that those issues are not in dispute, in weighing Tosohn's conduct it is appropriate to give some consideration to the circumstances which existed and which resulted in Tosohn's failure to satisfy the Fair Trading Tribunal orders.

142 In each of the matters under consideration, Mr Creak had a firmly held view that Tosohn had no obligation to the complainant. Mr Creak believed that Tosohn's obligations to a purchaser did not extend past any statutory or dealer warranty that was applicable to the purchased vehicle. He did not believe that there was any other statute or common law principle applicable to these transactions. Mr Creak also believed that the Fair Trading Tribunal decisions were incorrect and that the Tribunal had "no teeth". He stated that if he had known that the Director General could cancel Tosohn's licence as a result of its conduct, he would have acted differently. This suggests to me that it was within Mr Creak's capacity to have adopted a business structure which would allow judgement debtors to access Tosohn's assets. Mr Creak was clearly aware of the Fair Trading Tribunal Orders and made no attempt to satisfy them. In my view, that conduct amounted to carrying on Tosohn's business in a dishonest or unfair manner within the meaning of that expression for the purposes of section 20D(1)(e) of the Act.

143 While the abovementioned are issues of importance, in my opinion, the main issue in this case is whether Tosohn's conduct was such to warrant the cancellation of its licence and the disqualification of Tosohn and Mr. Creak from holding such a licence or being involved in a company that was the holder of such a licence and, if so, whether that remains the correct and preferable decision.

144 I agree with Mr Wilson that the test referred to in Hutchings -v- Commissioner of Police supra, provides a useful guide to the criteria that the Tribunal should consider in weighing Tosohn's conduct. As noted, the criteria are:

· whether improper conduct has occurred,

· whether it is likely to occur,

· whether it can be assumed that it will not occur, or

· whether the general community will have confidence that it will not occur.

145 Many of the affidavits provided by the complainants give evidence of dealings with Mr Creak in relation to attempting to resolve their disputes. Mr Creak has asserted that the majority of the disputes were the consequence of conduct on the part of Mr Lawrence and he denied having had dealings with most of the complainants. With respect to these matters I do not consider Mr Creak to be a witness of truth. In my opinion, Mr Creak was aware of the practices engaged in by Tosohn and was a party to many of those practices. It is probable that he also engaged in deceptive and threatening conduct towards clients of Tosohn in an effort to avoid accepting liability for the orders made against it. As the sole director of Tosohn it was his responsibility to ensure that it complied with the legislation governing its conduct as a licensee. He should have been aware of Mr Lawrence's incompetence and done something about it.

146 I do not accept that there is any diminution of that responsibility because he acted without legal or financial advice. The evidence is that Mr Honan has worked as accountant and business advisor for Mr. Creak and his related entities since 1984. It cannot therefore be argued that Tosohn did not have financial advice available to it. I simply do not accept that Mr. Creak needed legal advice to understand that an order from the Fair Trading Tribunal was a legal and binding order which Tosohn was obligated to meet. Even if Mr Creak was totally ignorance of the provisions of the Act which empowered the Director General to take action, he must have been aware that Tosohn had obligations to the claimants who succeeded in the Fair Trading Tribunal.

147 I accept the evidence provided by the Director General in relation to the conduct at Tosohn's premises following the cancellation of the licence. On the evidence before me, I am not satisfied that Tosohn continued to buy, sell or exchange motor vehicles following the cancellation of the licence, however I am satisfied that, in contravention of section 9(1)(a) of the Act, Tosohn held out to the public that it was willing to carry on the business of a dealer during that period. I am satisfied that vehicles on its premises had attached prices and forms suggesting that the vehicles were being offered for sale. In the absence of proof to the contrary, by section 24(4) of the Act, those vehicles are to be presumed to be offered or displayed for sale.

148 In my view, Mr Creak was understandably concerned about the consequences of closing the business. However, he was also conscious of the potential consequences of trading while disqualified. He went to great lengths to give an impression to the public that the business was open for business while at the same time ensuring that no sales to the public took place.

149 A strict interpretation of the words of the statute may lead to the view that unfairly holding out that it would carry on the business cannot be said to amount to Tosohn carrying on of the business in an unfair manner. I do not agree with this narrow interpretation of the provision. I agree with Mr Wilson's argument that the Act should be given a broad as opposed to a narrow construction and one which will serve to achieve the broad objects and consumer protection purposes Parliament had in mind. In my mind this conduct constitutes carrying on of the business in an unfair manner for the purposes of section 20D(1)(e) of the Act. This conduct also further demonstrates Mr Creak's lack of integrity and is a further demonstration of his failure to be truthful.

150 Mr Creak has been associated with the motor trade for a number of years. He ought to have been aware of his obligations to his customers. If not, he should, at the very least, have made enquiries as to those requirements before seeking to embark upon any attempt to conduct a business as a motor dealer. Mr Creak's conduct demonstrated a reckless indifference to the Act and to the consumers who were exposed to the risks associated with his trading. The members of the public with whom he dealt were potentially at risk because he would not or could not adopt reasonable approaches to dispute resolution and when a dispute was pursued through the Fair Trading Tribunal a successful claimant could not enforce legitimate Tribunal orders. During the period of Tosohn's disqualification, potential customers were at further risk in that their rights to claim under the Motor Dealers Compensation Fund were compromised.

151 Although Mr Creak expressed to the Tribunal that he regretted his action, he persisted in seeking refuge in the alleged conduct of his manager or staff or the failings of the Fair Trading Tribunal. In cases such as this, the Tribunal should not assume that Mr Creak has become a reformed person. As Walsh JA said in Ex Parte Tziniolis (1966) 67 SR (NSW) 448 at 461:

"Reformations of character and of behaviour can doubtless occur but their occurrence is not the usual but the exceptional thing. One cannot assume that a change has occurred merely because some years have gone by and it is not proved that anything of a discreditable kind has occurred. If a man has exhibited serious deficiencies in his standards of conduct and his attitudes it must require clear proof to show that some years later he has established himself as a different man".

152 Mr Creak's conduct suggests that he was not a willing convert to the type of conduct envisaged by the Act. Rather, he has taken whatever steps were open to him to avoid meeting his obligations. It was only after Tosohn's licence was cancelled that he made any serious effort to pay the judgement debts. Even then he mislead several of the complainants to believe that Tosohn was going into liquidation. They therefore agreed to accept less than the judgement amount in order to avoid the risk of getting even less under a liquidation.

153 The most favourable comment that can be made is that in the areas of honesty, competence and knowledge Mr Creak has a less than satisfactory record. At best he merely acquiesced in dishonest and threatening conduct. At worst, he engaged in dishonest and threatening conduct himself.

154 While Mr Creak shows some insight into the consequences of his behaviour, he clearly does not appreciate its gravity. His subsequent behaviour in attempting to settle the outstanding debts on terms more favourable to Tosohn than those to which the judgement debtors were entitled reinforces my concern that he is reluctant to accept full responsibility for his actions. Mr Creak is quick to blame others including Mr Lawrence and various Tosohn sales staff for his own failure to provide adequate supervision and management. I cannot be satisfied on the evidence before me that he would not engage in such conduct again.

155 While Mr Creak continues to deny, minimise and deflect responsibility for his conduct, the public cannot have confidence that he will carry out fairly the responsibilities of a director of the holder of a motor dealer's licence. As Mr Creak is the sole director of Tosohn, the same view must follow with respect to Tosohn.

The Second Ground

156 Having formed that view with respect to the first ground of the second Notice to Show Cause, there is no need to explore the second ground in any great detail.

157 In my view, there is no doubt that, at the time the Director General made the determination, Tosohn had failed to satisfy several orders of the Fair Trading Tribunal. It had therefore failed to meet its liabilities within the meaning of that term for the purposes of section 20D(1)(g) of the Act. The only real aspect in doubt with respect to that issue is whether Tosohn had the capacity to meet its obligations and failed to do so or whether it did not have the capacity to meet them.

158 The evidence shows that throughout the period under consideration, Tosohn distributed earnings to the trust beneficiaries. Mr Honan gave evidence that Tosohn's assets are available to its creditors. Notwithstanding those facts, when successful parties to Fair Trading Tribunal matters sought to enforce orders against Tosohn they were unable to do so because of the way Tosohn assets were encumbered. On the evidence it is not possible for me to determine without doubt whether this was a deliberate ploy by Tosohn to avoid meeting its liabilities or a legitimate method of business operation. In my view it is probable that it was a deliberate ploy by Mr Creak to avoid meeting Tosohn's obligations. If that were the case, it would also follow that Tosohn had not merely failed to meet its liabilities for the purposes of section 20D(1)(g), but also that Tosohn's business was being carried on in an unfair manner for the purposes of section 20D(1)(e) of the Act.

159 I note that Mr Honan expressed confidence in Tosohn's future. However, I do not entirely share Mr Honan's confidence because of the high level of borrowings on which Tosohn's business is based. I have little doubt that if those borrowings were called in, Tosohn's business would collapse. Notwithstanding that view, I acknowledge the extent of the restructure that has taken place and the injection of funds into the business. These changes have gone a long way towards allowing Tosohn to meet its liabilities as they fall due. I also acknowledge the extent of the computerisation of the accounting systems that have been installed and the link to Mr. Honan's accounting system. Nevertheless, the effectiveness of the accounting system is limited by the abilities of the user and the extent to which Tosohn's management is committed to maintaining fiscally responsible practices. I have less concern with respect to Tosohn's ability to meet its liabilities than I have with its commitment to do so.

160 If the second ground were the only basis for the Director General's determination, I would confidently say that the public interest had been served in that Tosohn was no longer a risk to the public in terms of section 20D(1)(g) of the Act. Regrettably that is not the case. I am satisfied that the ground under section 20D(1)(e) of the Act has been made out. In my view, the business to which the licence relates was carried on in an unfair manner and that continued to be the case well after the Director General's determination was made.

161 I have taken note of the submissions made on behalf of Mr Creak with respect to the consequences which will inevitably follow cancellation of Tosohn's licence and the associated disqualifications. However, in my opinion the public interest must take precedence over Mr Creak's private interests. The Director General's powers are to be exercised for the benefit of the public not as a punitive measure. Taking account of all the circumstances in the matter it is my view that the public interest requires that the determination of the Director General to cancel Tosohn's licence and to disqualify Tosohn and Mr Creak should be affirmed.

ORDERS

162 The decision of the Director General, Department of Fair Trading to cancel the Motor Dealers licence number 16094 held by Tosohn Pty Ltd and to disqualify Tosohn Pty Ltd and Mr. Ian David Creak personally from holding a Motor Dealer's Licence for a period of three years, or from being concerned in the direction, management or conduct of a business for the carrying on of which a motor dealers licence is required is affirmed.