When Anti-Marekteering Laws Claimed Their First Scalp

OPINION
by Tim O’Dwyer M.A., LL.B Queensland Solicitor & Consumer Advocate watchdog@argonautlegal.com.au

After almost six years the Beattie government finally nailed its first over-priced property marketeer, yet had the temerity to give its subsequent crowing media release this caption: "Breakthough in marketeering battle".

More a lucky shot than a breakthrough, to my mind, and more a struggle than a battle.

Just as gangster Al Capone, blamed but never convicted for scores of murders, was eventually jailed on comparatively minor income tax evasion charges, Gold Coast real estate agent Philip James Hall and two companies of his were found by the Commercial and Consumer Tribunal to have breached anti-marketeering sections of the Property Agents and Motor Dealers Act over a six months period in 2002. These related to misleading conduct and false and misleading representations.

Hall and his companies, Northern Sun Realty and Starlink Promotions, were not convicted of ripping anyone off, mind, and there was no evidence that interstate buyers stitched up on clearly over-priced house-land packages were personally misled.

There were, however, some delightful ironies in this "breakthrough" where Hall came unstuck after falsely declaring Northern Sun Realty was the land-sellers’ agent and failing to disclose the full fees paid by the house-builder, Martin Grange Homes.

Firstly some of Hall’s false and misleading representations, made to novice investors, apparently misled only the Gold Coast solicitors to whom he and his cronies referred these buyers: Tony Gray and Gregory Pointon (of Grays Lawyers) and Kenneth Appleyard (of Appleyard Lawyers). The Tribunal ruled that their conveyancing clients had "constructive knowledge" of information possessed by these solicitors who, the Tribunal accepted, thought some of Hall’s representations were true.

Secondly, Hall had no legal obligation to give the Form 27b declarations he used. Apparently acting on free legal advice from Gray, he completed these unnecessary government forms in a fatal "abundance of caution". Gray told him it was better to err on the side of caution with building contracts. Despite Hall’s "honest mistake", which Fair Trading investigators astutely picked up on, the Tribunal was satisfied the disclosures, however cautionary, were both false and misleading.

Thirdly, Hall’s lawyers argued that the conveyancing solicitors to whom buyers were referred to buyers knew the true arrangement whereby the builder’s contracts included $27,500.00 mark-ups to cover Hall’s companies’ fees and commissions. There was no evidence the solicitors knew of the arrangement, nor was this put to them in cross-examination. It was not relevant for the Tribunal to ask whether the solicitors should have suspected their gullible clients might be entering into loaded building contracts, or whether reputable lawyers would have warned out-of-town clients of over-priced marketeering risks. Certainly no buyers sought genuinely independent legal or valuation advice before signing in their referred solicitors’ offices.

Fourthly, and this was not addressed by the Tribunal, Hall also mislead his builder mate with invoices referring to an "REIQ fee". While Northern Sun Realty is a member of the Real Estate Institute of Queensland, there is no recommended REIQ fee or scale. Fair Trading has already warned a number of other agents about misleading consumers by describing commissions as "REIQ".

Fifthly, the Tribunal found that to identify fees "by means of percentages" was misleading when the amounts were known. The use of percentages, the Tribunal recognised, was a "deliberate device" to avoid the disclosure of actual amounts built into the building contracts. Funny how this was apparently not recognised by the buyers’ solicitors when they advised their clients on the documentation.

Sixthly, although Fair Trading relied on only ten settled and four non-settled deals to establish a pattern, Hall’s lawyers audaciously argued there was no evidence of what happened in "up to 100" other transactions. The Tribunal would have none of this, was "not impressed" with Hall’s evidence or explanations and regarded these as "artificial beyond belief."

Neither the Tribunal in its judgement, nor Fair Trading Minister Margaret Keech in her release, mentioned how The Gold Coast Bulletin first blew the whistle in December 2001 on overpriced house-land scams and warned of a likely loophole in the new laws. No mention either that I exposed Hall’s methods in The Bulletin the following year after rescuing four couples from his clutches (the "non-settled deals"). Nor that I reported my concerns about his conduct to the Office of Fair Trading which promptly used the information and material I supplied to begin its investigations. My clients’ evidence ultimately helped secure the government’s "breakthrough".

Hall was a clever and cost-cutting marketeer. For many years others funded or subsidised the airfares and accommodation costs of interstate bunnies who had been cold-called, seminared and financially assessed in their home towns. Hall, however, had his lackies nobble holidaymakers already on the Coast. These unsuspecting targets would be accosted while shopping and conned into attending free breakfast presentations on the Gold Coast’s developments with bonus tips on improving wealth and lifestyle, how to eliminate your home mortgage plus an "obligation free appraisal (value $395)". Before long many folk found themselves inspecting land developments, meeting builders and consulting financial advisors before being wheeled into solicitors’ offices.

The full Tribunal report on these prosecutions can be accessed here: The Chief Executive, DTFTWID v Northern Sun Realty Pty Ltd; Starlink Promotions Pty Ltd Hall [2004] QCCTPAMD 25 (24 November 2004)

At the end of the day Hall and his companies were fined a total of $66,000 and banned from operating in the real estate industry for one year. The Fair Trading Minister subsequently said a “heavy price” had been paid. The report on the penalties imposed can be accessed here: The Chief Executive, DTFTWID v Northern Sun Realty Pty Ltd, Starlink Promotions Pty Ltd and Hall, P.J. [2005] QCCTPAMD 13 (28 April 2005)

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