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Consumer Affairs Victoria - The Reason We Need A Corruption Commission!
Eight long years ago an over-zealous clerk at Consumer Affairs Victoria told me that I must either shut down Lawyers Real Estate Pty Ltd or obtain an estate agent's licence, otherwise Consumer Affairs Victoria would prosecute me for being an unlicensed estate agent. When Consumer Affairs Victoria investigated the matter and informed me that there would be no prosecution and no further investigations, I regarded the matter as settled. I did not expect that Consumer Affairs Victoria would join forces with the REIV and a prominent politician in a strategy that would fall within the definition of "corrupt conduct".
What Is Corrupt Conduct?Victoria does not yet have a Corruption Commission, so I will refer to the definition of corrupt conduct as it appears on the website of the New South Wales Independent Commission Against Corruption:
In this particular case Consumer Affairs Victoria (CAV) tried to stop me and my firm, Lawyers Real Estate Pty Ltd (Lawyers Real Estate) from offering real estate sales services to the consumers of Victoria. Because CAV knew that legal action would not succeed, it embarked on a strategy of misinformation, harassment and intimidation over a period of 8 years. During those 8 years I experienced the following:
Involvement of the Real Estate Institute of VictoriaThe REIV has been a driving force behind CAV's attempts to stop Lawyers Real Estate from offering its services to Victorian consumers. When he appeared on Channel 7's Today Tonight current affairs program, Mr. Enzo Raimondo (CEO of the REIV) took the opportunity to tell lies about my legal qualifications, and to openly demand that CAV should stop me from operating Lawyers Real Estate. (Click the video link below to hear Mr. Raimondo's lies.)
The lies told by Mr. Raimondo are contained in this sentence: "Estate agents need to meet certain requirements, educational and legal, he doesn't, and he needs to be stopped." As a qualified legal practitioner I have been admitted to practice as a barrister and solicitor of Supreme Court of Victoria and the High Court of Australia, I regularly teach lawyers, conveyancers and paralegals conveyancing and property law at the Leo Cussen Institute, and I have been selling real estate in my capacity as a real estate lawyer for the past 8 years. I am more qualified to sell real estate than any non-lawyer real estate agent in Victoria, and certainly more experienced and better qualified than Mr. Raimondo. The second lie, "...he needs to be stopped" is obviously directed to CAV. It should be noted that Mr. Raimondo did not call for a full investigation, or for the matter to be determined by a court or tribunal. Mr. Raimondo was telling viewers that it is in their interests to have me stopped, when the truth is that the REIV wants me stopped because it feels threatened by the Lawyers Real Estate concept. The REIV has access to legislation, legal advice and the details of the Lawyers Real Estate business model. So, how is Mr. Raimondo able to tell such lies on national TV? The answer can be found in the relationship between CAV and the REIV. Mr. Raimondo knows that CAV will continue to support the REIV by falsely claiming that Lawyers Real Estate breaches the Estate Agents Act 1980 when it sells real estate. The REIV knows that CAV would rather stop Lawyers Real Estate from selling real estate than to suffer the wrath of an angry REIV. After all, if the REIV is able the call on political muscle in the form of the Hon. Bruce Atkinson MLC and put it on display in Parliament in an effort to stop one lawyer from selling real estate, imagine what it could do to CAV, its Director and the Minister for Consumer Affairs. Such is the close relationship between the REIV and CAV that Mr. Raimondo's call, "...and he should be stopped" was immediately acted upon CAV. Despite having previously confirmed to me in writing that CAV had finished its investigations and would be taking no action, the Director of CAV sent me a letter dated 5 July, 2010 stating:
Astounded by the stupidity of this statement, after all that had been said and done by CAV over the past 8 years, I wrote a 30 page submission to Dr. Noone attached to a letter in which I put the following to her:
In response, I received a letter dated 30 July, 2010, signed by Mr. Stephen Devlin, which contained the following denials:
Unfortunately, CAV was not interested in my proposal for a proper investigation. Mr. Devlin proposed instead that I should select documents and files, and send them to CAV. Frustrated by CAV's refusal to conduct a proper and final investigation, I responded by email as follows:
I added that CAV's conduct had left me with no alternative but to seek redress through other channels.
Why Consumer Affairs Victoria Is WrongIt is not hard to demonstrate that CAV is wrong when it declares that a law firm cannot sell real estate. The Estate Agents Act 1980 contains a clear exemption for legal practitioners. Section 4 of The Estate Agents Act 1980 contains the following definition of "estate agent":
Every lawyer and conveyancer in Victoria who represents a vendor or purchaser in a real estate transaction is required to become involved in the sale or purchase of their clients' property, and of course, representing the client in negotiations is an obligation that continues from the sale, through the conveyancing process, and often all the way to settlement and beyond. Because lawyers are captured by the Section 4 definition of "estate agent", the Act provides an exemption for lawyers at Section 5:
Ordinary functions of an Australian legal practitionerThe Estate Agents Act 1980 does not attempt to define the functions of a lawyer, nor does it attempt to constrain lawyers in any way. Functions of an estate agentThe Estate Agents Act 1980 does not attempt to define the functions of an estate agent, but an examination of the role of an estate agent in a sale transaction reveals that an estate agent performs no functions that are not already the functions of the lawyer (e.g. dealing with sale documents, negotiating terms and conditions of the sale, holding trust funds), the valuer (estate agent "appraisals" are simply informal valuations) or no-one in particular (no special qualifications are required to place ads or to take telephone calls). CAV's positionCAV insists that any lawyer who sells real estate is doing so as an estate agent; that it is impossible for a lawyer to sell real estate without instantly "becoming" an estate agent. This proposition is patently absurd. Lawyers acting as lawyersIt is clear that a lawyer cannot act as a real estate agent without an estate agent's licence. But this does not mean that a lawyer cannot sell real estate. What matters is that when a lawyer sells real estate he or she does so as a lawyer and not as an estate agent. It is this simple concept that CAV refuses to recognise, and deliberately misrepresents. It is helpful to examine the way South Australia approaches the same issue. South Australian legislationLike the CAV website, the website of South Australia's Office of Consumer and Business Affairs informs visitors:
But, unlike CAV, the OCBA openly admits that lawyers are not constrained by the Land Agents Act 1994, with this:
Section 6 of South Australia's Land Agents Act 1994 prohibits a person form carrying on a business or holding themselves out as an agent unless they are registered as an agent under the Act. However, Section 4 of the Act states:
Thus, no-one, including lawyers, can operate as a Land Agent unless they are licensed as a Land Agent, but a lawyer who sells real estate in his or her capacity as a lawyer is free to do so without also having to be licensed as a Land Agent. Deliberate Thwarting By The Business Licensing AuthorityThe Business Licensing Authority (BLA) is a statutory body attached to the office of the Minister for Consumer Affairs (see chart), and controls the issuing of estate agent licenses. Back in 2002, after being refused advertising space in a real estate magazine because I was not a licensed estate agent, I decided to obtain a licence in order to satisfy the publisher's requirements. I must emphasise at this point that I did not want an estate agent's licence in order to sell real estate as an estate agent; I wanted it for the sole purpose of satisfying the requirements of the real estate magazine publisher and gain access to advertising space. Section 14(1)(c) of the Estate Agents Act 1980 provides that a person can be granted an estate agent's licence if they have met requirements establishing competency set out in the regulations. Of the eight members who make up the BLA, four are estate agents, and two of these are required to be nominated by the REIV. As a lawyer with many years of experience in real estate transactions and property law, I submitted an application to be granted a licence pursuant to Section 14(1)(c). In received the following response from the Registrar of the BLA:
The BLA still refuses to set competency standards, and so Section 14(1)(c) cannot be used by anyone, no matter how competent they may be. It is relevant to note that the REIV was very quick to establish a "Fighting Fund" to lobby the BLA and politicians when an attempt was made to have lawyers recognised as having automatically satisfied licensing requirements by virtue of their existing competencies. (See the REIV's "Action items for Licensing Lobbying Campaign") My attempt to obtain an estate agent's licence on the basis of existing competencies, and the BLA's arrogant refusal to set standards against which my application could be evaluated was not the end of the matter. Someone from the BLA/CAV leaked this information to Hon. Bruce Atkinson MLC, which he then used to attack the Minster for Consumer Affairs in Parliament. Mr. Atkinson was not entitled to receive this information, and my view is that the person who procured it, and passed it on to Mr. Atkinson, committed an act of theft. For his part, the Hon. Bruce Atkinson MLC engaged in corrupt conduct by naming me personally, naming my law firm, and attacking the Minister with the false allegation that I had been "refused" a licence, and that I was "trading as a real estate agent when his application for a real estate agent's licence has been refused by the Business Licensing Authority". The Honourable Member must have been aware that my application had not been considered, rather than refused, but he had his agenda and he wanted to drive his point home. He repeated his false allegations two more times in Parliament. Mr. Atkinson also issued a press release, which he kept on his official website until early in 2010. A further act of corrupt conduct whereby he used his political office to intervene in a contest between commercial interests in order to further the interests of the REIV and the expense, both personal and commercial, of Peter Mericka and Lawyers Real Estate.
What Has Caused Consumer Affairs Victoria To Engage In Corrupt Conduct?CAV is in a state of perpetual damage control. The real estate industry in Victoria is widely regarded as the most corrupt in Australia, with deception and dishonesty so much the norm that it has become common understanding, if not common experience, that consumers will be lied to and cheated by real estate agents. Poorly drafted legislationMatters have gone from bad to worse in recent years. Poorly drafted and ill-considered legislation has been pushed through Parliament, with CAV taking a leading role in advising government on what it perceives as being in the interests of consumers. See these three examples of ridiculous legislation:
As new and impossible-to-enforce legislation is enacted, CAV attracts criticism for its "keystone kops" attempts at regulation and law enforcement. Embarrassed by its ineptitude in regulating the real estate industry, CAV has become extremely sensitive to criticism over its inability to deal properly with complaints or to proactively prevent them. Like Basil Fawlty in the "Don't Mention The War", one must not mention the volume of complaints. Unless, that is, it's possible to put a positive spin on the problem by suggesting that a ridiculously high number of complaints is acceptable because it's not getting any higher. (See "Real estate rogues forced to refund big money") Pressure from REIVWhen it comes to the making of complaints, the REIV is not only a strident critic of CAV, it is also enormously powerful. This was demonstrated to CAV when the REIV was able to have the Hon. Bruce Atkinson MLC stand up in Parliament and attack the Minister for Consumer Affairs by accusing her of allowing Lawyers Real Estate to sell real estate without holding an estate agent's licence. To its shame, CAV did not provide its Minister with the information and advice she needed to defend herself. Instead, CAV allowed itself to be drawn into the issue on the side of the REIV, leaving the Minister to muddle along as best she could. It is interesting to note that, when attacking the Minister in Parliament, the Hon. Bruce Atkinson MLC was able to refer to private information concerning my application for an estate agent's licence (see above), improperly passed on to him by staff of CAV. The Labor Minister was effectively being "white-anted" by CAV to the Liberal member who was attacking her. Poor leadership and adviceDr. Claire Noone is the Director of CAV. Dr. Claire Noone's doctoral thesis is titled "Managing Compliance - A study of Compliance Programs In Australian Organisations". The work is a scholarly examination of a number of large Australian organisations. It is interesting to note that the abstract of the thesis refers to the Australian Standard AS-3806-1988 Compliance Programs and contains the following observation at page 2: "The assessment of current compliance programs against the Australia Standard AS-3806 shows that organisations are not satisfying all aspects of the Standard. It shows that generally organisations are performing better on the structural elements of the Standard, having put in place policies and allocated specific responsibility for compliance. However they have done less to operationalise the compliance program and embed in it the day to day activities of the business. Nor have they developed an organisational approach that aligns corporate strategies, business goals and individual motivations with their compliance approach. The reality for firms is that they focus their compliance activities on education and training as a basis for satisfying external parties that they take compliance seriously." It would appear that CAV has adopted a similar approach. Mr. Stephen Devlin is the Manager of CAV's Legal Development Branch, and is responsible for providing Dr. Claire Noone with legal advice regarding compliance issues. Mr. Devlin's legal advice to Dr. Noone and to the Minister does not stand up to scrutiny, and quality control in the Legal Development Branch appears to be seriously lacking. A benign legal professionThe legal profession has been conspicuously absent from any debate about the role of the lawyer in real estate transactions. Most real estate transactions are dealt with by small law firms or licensed conveyancers (the latter are also regulated by CAV). Client trafficking is common throughout the industry, with licensed conveyancers openly offering bribes to real estate agents in return for client referrals. Some conveyancing lawyers are also known to foster such relationships. While CAV could address problem with the assistance of the ATO (few, if any, referral payments to real estate agents are declared for income tax or GST purposes) through a combination of law enforcement and education initiatives, it does nothing. The lawyers and conveyancers whose business rely heavily on cosy referral arrangements with real estate agents are silent, as is the Law Institute of Victoria whose membership base is comprised largely of small suburban law firms. The legal profession is unlikely to act as "whistleblower" or to call for changes that would destablise the comfortable co-existence of lawyers and estate agents. Fear of calls for legislative changeIn 1995 the New Zealand case Lewis v Real Estate Institute of New Zealand [1995] 3 NZLR 385 the court found that a lawyer was guilty, under legislation that existed at that time, of acting as an unlicensed real estate agent. Since that case was decided, the Real Estate Agents Act 2008 was passed, and it emphasises that lawyers need no special qualifications in order to sell real estate. In fact, the New Zealand legislation goes even further by including licensed conveyancers in its exemption, which states:
The REIV and CAV are concerned that any change to the status quo could result in calls for legislative change that would see Victorian lawyers and conveyancers competing with real estate agents. While this would be a boon to consumers, such a change would undoubtedly result in the loss of market share for the REIV, and the loss of regulatory responsibility and control for CAV. The REIV has demonstrated it ability to create a "Fighting Fund" for political lobbying whenever legislative change of any significance is contemplated, and CAV knows which side it needs to be on if this should happen.
Lawyers Real Estate - A Serious Threat To A Corrupt CAVDr. Claire Noone and Stephen Devlin are quite aware that their positions will be threatened if a new breed of property lawyers should win market share from real estate agents. This threat takes a number of forms. Scrutiny by the Legal Services CommissionerWhile the REIV is able to exert an enormous amount of influence over CAV, CAV is very much in control of the real estate industry insofar as its role is not eclipsed by that of any other regulator. And that's the way CAV likes it. CAV has the ear of the Minister for Consumer Affairs, and it still has a great deal of credibility with the community generally. However, the CAV fiefdom is likely to come crashing down around the Minister and the Director if another regulator becomes involved, and shines light into the hitherto dark and and dingy areas of the real estate industry. The Legal Services Commissioner is responsible for the conduct of legal practitioners, and his office takes matters of professional misconduct very seriously. Conflicts of interest, professional misconduct and unethical methods are not tolerated in the legal profession. CAV's lax attitude to such matters in the real estate industry would soon be exposed as the conduct of real estate lawyers and real estate agents is compared. As more and more lawyers become involved in real estate sales, and unfair and illegal practices are exposed, CAV will become accountable in ways it has not previously. The improper and illegal behaviours commonly experienced by real estate consumers have evolved over a long period of time. An investigation into the management of CAV, and its failure to clean up the real estate industry, would be highly embarrassing. Lawyers providing higher quality at lower costLawyers Real Estate is franchising its operations in a very strict and measured way. Only lawyers who can demonstrate a commitment to change, ethical conduct and consumer protection will be considered as franchisees. At the same time, the costs charged by Lawyers Real Estate franchisees will be fixed and capped, so that consumers have the benefit of high quality at low cost. As Lawyers Real Estate grows, it will become quite apparent to consumers that CAV has been asleep on the job when it comes to consumer protection, and questions will be raised as to why CAV has worked so hard to prevent consumers from accessing a cheaper, safer and more transparent real estate sales service. Increases in consumer complaints to CAVAs consumers become more aware of their rights, and lawyers raise the level of professionalism and ethical service in the real estate industry, CAV will undoubtedly experience an increase in the number of consumer complaints lodged against real estate agents. This, in turn, will reflect adversely on CAV, its poor management of the industry and its neglect of consumer interests over a long period of time. Loss Of StandingConsumers will seek out lawyers for their higher levels of expertise and accountability, and will prefer to have complaints dealt with by the Legal Services Commissioner rather than the Director of CAV. Loss Of the Real Estate IndustryEventually, real estate agents may seek to operate through an incorporated legal practice structure, rather than the discredited real estate agency model. This would result in an industry shift, from CAV control to control by the Legal Services Commissioner. Lawyers Real Estate has already received numerous franchise enquiries from licensed real estate agents who want "jump ship".
ConclusionFor the past 8 years I have attempted to convince CAV that a lawyer, acting in his or her capacity as a lawyer, is entitled to sell real estate in the State of Victoria. However, CAV has made it clear that it will not abandon its untenable and self-interested position. When CAV wrote to me after I had appeared on Channel 7's "Today Tonight", I invited Dr. Claire Noone and Mr. Stephen Devlin to conduct a full and final investigation into the operations of Lawyers Real Estate, and to take whatever action they deemed appropriate. Instead, CAV has:
On the basis of the definition of "corrupt conduct" adopted by the New South Wales Independent Commission Against Corruption, I now regard CAV, the REIV and Hon. Bruce Atkinson MLC as forming a corrupt triumvirate, controlling the real estate industry and attempting to control my involvement in it. My problems with CAV would have ended long ago if Victoria had its own Corruption Commission. A broad definition of "corrupt conduct" similar to that adopted by the New South Wales Independent Commission Against Corruption would have seen the behaviour of CAV, and that of the REIV and the Hon. Bruce Atkinson MLC, scrutinised and properly dealt with. Hopefully, the Corruption Commission will have the authority to investigate retrospectively, and CAV, the REIV and the Hon. Bruce Atkinson MLC will be held to account. In the meantime, the consumers of Victoria will have to endure the type of conduct described above. In any event, Lawyers Real Estate will continue to grow despite the corrupt efforts of CAV, the REIV and the Hon. Bruce Atkinson MLC. A further complaint to the Ombudsman Victoria has been submitted.
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by Peter Mericka B.A., LL.B
