CONSUMER AFFIARS VICTORIA

ENFORCEABLE UNDERTAKING

Pursuant to section 198 of the Australian Consumer Law and Fair Trading Act 2012

The commitments in this Undertaking are offered to the Director of Consumer Affairs Victoria by:

COLLEGE HOUSE MANAGEMENT PTY LTD

ACN 103 676 857

of 82 Eagle Street, Brisbane, Queensland

THE DIRECTOR OF CONSUMER AFFAIRS VICTORIA
  1. The office of the Director of Consumer Affairs Victoria (“the Director”) is provided for under section 107 of the Australian Consumer Law and Fair Trading Act 2012 (“the ACLFTA”). The holder of that office is responsible for the administration of the ACLFTA, together with Victoria’s other consumer protection legislation, including the Estate Agents Act 1980 (“the EAA”) and the Residential Tenancies Act 1997 (“the RTA”).
  2. Under section 198 of the ACLFTA, the Director may accept a written Undertaking from a person in connection with:

a)a matter in relation to which the Director has a power of function under the ACLFTA; or

b)a matter relating to a contravention of any other Consumer Act.

  1. Schedule 1 of the ACLFTA provides that the EAA and RTA are Consumer Acts under the ACLFTA.
BACKGROUND
  1. College House Management Pty Ltd ACN 103 676 857 (“the company”) is an Australian proprietary company limited by shares and is a subsidiary of UniLodge Australia Pty Ltd (ACN 078 931 169) (“UniLodge”).
  2. The company’s registered office and principal place of business is at 82 Eagle Street, Brisbane, Queensland 4000.
  3. The company is a licensed estate agent, with the licence number 67118L.
  4. Since 1 January 2015 the company has been engaged by landlords, including UniLodge, to manage student accommodation premises in Victoria.
  5. One such student accommodation premises is the property known as “UniLodge on A’Beckett”, located at 106-116 A’Beckett Street, Melbourne (“the property”) and the company conducts business at the property.
  6. The property contains 109 hostel beds (“the hostel rooms”) and 77 self-serviced apartments (“the apartments”).
LEGISLATION
  1. Section 406 of the RTA states that if a landlord receives an amount of bond from a tenant, the landlord must, within 10 business days after the amount of bond is received, give the amount of bond to the Residential Tenancies Bond Authority (“RTBA”), together with the completed bond lodgement form.
  2. Regulation 13(1) of the Estate Agents (Professional Conduct) Regulations 2008 (Vic) (“the Conduct Regulations”) obliges an estate agent to exercise all due skill, care and diligence in performing the agent’s functions as an estate agent.
  3. The Estate Agents (General, Accounts and Audit) Regulations 2008 (Vic) (“Accounts Regulations”) relevantly provides:

a)in Regulation 12 that an estate agent who uses pre-printed trust account receipts must keep a register of those receipts;

b)in Regulation 13(2)(i) that on each trust account receipt the estate agent must record the name of the person who made out the receipt;

c)in Regulation 17(1) that an estate agent who makes a payment from a trust account by cheque must keep a register of trust cheques;

d)in Regulation 18(4) that an estate agent which is a corporation and which makes payment from a trust account by cheque must ensure that the cheque is signed by the officer in effective control (“OIEC”);

e)in Regulation 19(3) that an estate agent which is a corporation and which makes payment from a trust account by electronic funds transfer must ensure that the payment is made under the direction of or with the authority of the OIEC;

f)in Regulation 23(1) that an estate agent must keep a separate identifiable account for each person on behalf of whom the estate agent holds that money.

  1. Section 12(1) of the Unclaimed Money Act 2008 (“UMA”) obliges a business holding “unclaimed money” (as those words are defined) on 1 March of a year to pay the amounts of unclaimed money to the Registrar of Unclaimed Money (“Registrar”).
CONSUMER AFFAIRS VICTORIA INVESTIGATION
  1. In November 2014, CAV received a complaint in relation to the property from a resident. The complaint alleged that representatives of UniLodge were requesting the property’s residents to pay bonds to the company and not the RTBA, because UniLodge did not lodge bonds with the RTBA in relation to the property
  2. From December 2014, CAV conducted a range of enquiries in relation to the property.
  3. On 6 July 2015 CAV staff conducted a compliance monitoring inspection at the property and gave a notice to the company on that date (“6 July 2015 Notice”).
  4. The company fully co-operated in CAV’s 6 July 2015 inspection and in answering the 6 July 2015 Notice.
  5. The company’s auditor for the purposes of the EAA provided an audit report dated 30 September 2015 for the year ended 30 June 2015 (“2015Audit Report”).
  6. On 14 January 2016 CAV served a notice to produce documents and answer questions pursuant to section 70C of the EAA (“14 January 2016 Notice”), which required a response by 28 January 2016, concerning matters including the company’s response to the 2015 Audit Report.
  7. After being granted an extension of time to do so, by its solicitors’ 16 February 2016 letter, the company fully responded to the 14 January 2016 Notice.
  8. The company’s auditor for the purposes of the EAA provided an audit report dated 28September 2016 for the year ended 30 June 2016 (“2016 Audit Report”).
  9. As a result of CAV’s investigation and the co-operation of the company, the facts in paragraphs23 to 73 have been established.
FACTS
The CASS Foundation Ltd & Taylors Institute of Advanced Studies Limited
  1. Prior to the company’s involvement:

a)the CASS Foundation Ltd ACN 005 274 760 (“the CASS Foundation”) was the registered proprietor of the hostel rooms in the property;

b)the apartments were, and continue to be, owned by individual investors;

c)all the owners of the apartments leased the apartments to the CASS Foundation (“the apartment Head Leases”);

d)the property was directly affiliated with Taylors Institute of Advanced Studies Limited ACN 005 432 155 (“Taylors Institute”), an educational facility that provides secondary college and university preparation courses, primarily for overseas students in Australia; and

e)Taylors Institute appointed the CASS Foundation to operate the property.

  1. On 9 July 2008, the CASS Foundation entered into an agreement to lease the hostel rooms to UniLodge until 31 December 2014 (“the hostel Head Lease”).
  2. On 31 October 2008:

a)UniLodge acquired the business at the property from the CASS Foundation;

b)the CASS Foundation assigned its rights and obligations under the apartment Head Leases to UniLodge;

c)the hostel Head Lease came into effect; and

d)UniLodge entered into an agreement with Taylors Institute in relation to the property until 31 October 2014 (“the Taylors Institute agreement”).

  1. The Taylors Institute agreement identified:

a)“The referral of students by (Taylors Institute) to (UniLodge)”;

b)“(Taylors Institute) having exclusivity in relation to occupation of Hostel Rooms for its students” and “(Taylors Institute) having preferential rights in relation to occupation of Apartment Rooms for its students”; and

c)“(Taylors Institute) underwriting an amount of rental revenue to be received by (UniLodge) from students referred by (Taylors Institute)”.

  1. On 31 December 2014, UniLodge exercised an option to extend the hostel Head Lease for an additional six (6) years.
  2. The apartment Head Leases expired on 31 December 2014.
The position with respect to apartments which should have prevailed, but did not prevail, from 1 January 2015 until about 20 February 2015
  1. In 2014 UniLodge entered into an agreement with the company to manage the hostel rooms (“the agreement”). The agreement was for an initial term of ten (10) years and was to come into effect on 1 January 2015.
  2. In late 2014 the company communicated with the owner of each apartment advising them that, because of the approaching expiration of the apartment Head Lease, the owner would have to make arrangements for the management of the owner’s apartment and may choose to appoint an estate agent, including the company, to manage the apartment.
  3. The owners of apartments had the option to engage any estate agent of their choice to manage their apartments, and 54 of them engaged the company.
  4. What should have occurred prior to 1 January 2015 with respect to apartments to be managed thereafter by the company was as follows:

a)the company should have identified one of its existing bank accounts opened for the purposes of section 59 of the EEA (“Trust Bank Account”), or established a new Trust Bank Account, as the bank account for the receipt of rent and bond payments relative to the property;

b)each of the residents who were to remain tenants of apartments after 31 December 2014 should have:

  1. executed a lease with the relevant apartment owner;
  2. been informed that after 1 January 2015, rent was to be paid into the Trust Bank Account.
  1. What should have occurred from 1 January 2015 with respect to apartments managed by the company was that each new resident should have:

a)been informed that rent and any bond was to be paid into the Trust Bank Account;

b)had his or her bond paid to the RTBA within 10 business days of its receipt.

  1. Due to the company’s failure to exercise all due skill, care and diligence in performing its functions, what occurred from 1 January 2015 until about 20 February 2015 was that because the company did not identify or establish a Trust Bank Account until 18 January 2015 and did not inform apartment residents of the details of that account until about early February 2015:

a)residents of apartments as at 31 December 2014 continued until about 20 February 2015 to pay rent into two (2) interest bearing bank accounts controlled by UniLodge (“the UniLodge bank accounts”);

b)until about early February 2015 persons who became residents of apartments after 1 January 2015 paid their bonds and rent into the UniLodge bank accounts.

The position with respect to hostel rooms which should have prevailed, but did not prevail, from 1 January 2015 until about 20 February 2015
  1. What should have occurred prior to 1 January 2015 with respect to hostel rooms was as follows:

a)the company should have identified one of its existing Trust Bank Accounts, or established a new Trust Bank Account, as the bank account for the receipt of rent and bond payments relative to the property;

b)each of the residents who were to remain tenants of hostel rooms after 31December 2014 should have been informed that after 1 January 2015, rent was to be paid into the Trust Bank Account.

  1. What should have occurred from 1 January 2015 with respect to hostel rooms was that each new resident should have:

a)been informed that rent and any bond was to be paid into the Trust Bank Account;

b)had his or her bond paid to the RTBA within 10 business days of its receipt.

  1. Due to the company’s failure to exercise all due skill, care and diligence in performing its functions, what occurred from 1 January 2015 until about 20February 2015 was that because the company did not identify or establish a Trust Bank Account until 18 January 2015 and did not inform hostel room residents of the details of that account until about early February 2015:

a)residents of hostel rooms as at 31 December 2014 continued until about 20February 2015 to pay rent into the UniLodge bank accounts;

b)until about 20 February 2015 persons who became residents of hostel rooms after 1 January 2015 paid their bonds and rent into the UniLodge bank accounts.

The Company discovers the problems and remedies it
  1. In about mid-January 2015, the company discovered the facts in paragraphs34 and37 and took steps to remedy the situation.
  2. Remedying the situation required, amongst other matters, each resident of an apartment or hostel room to complete the relevant form to allow bonds received by the company after 1 January 2015 in a Trust Bank Account to be lodged with the RTBA.
Bonds lodged with the Residential Tenancies Bond Authority
  1. Between 3 February 2015 and 15 April 2015, five (5)bonds in relation to the hostel rooms and the apartments received by the company were lodged with the RTBA more than 10 days after they were received.
Accounts Regulation 12
  1. In the 2015 Audit Report the auditor made a qualification because the company failed to keep a register of trust receipts in relation to the College House Management Pty Ltd - UniLodge on Lonsdale/Realty (Sales) trust account.
  2. On 1 October 2015 the company established a register of trust receipts.
  3. In the 14 January 2016 Notice, CAV staff asked the company what steps the company had taken to rectify the breach of Accounts Regulation 12.
  4. By its solicitors’ letter dated 16 February 2016, the company informed CAV staff that the company established a register of trust receipts and provided evidence to the CAV staff.
Accounts Regulation 13(2)(i)
  1. In the 2015 Audit Report the auditor made a qualification because the company’s trust receipts in relation to the College House Management Pty Ltd - UniLodge on Lonsdale/Realty (Sales) trust account did not show the name of the person who issued the receipt.
  2. After the company received the 2015 Audit Report the company took steps to ensure that Accounts Regulation 13(2)(i) was complied with.
  3. In the 14 January 2016 Notice, CAV staff asked the company what steps the company had taken to rectify the breach of Accounts Regulation 13(2)(i).
  4. By its solicitors’ letter dated 16 February 2016, the company informed CAV staff that after the company received the 2015 Audit Report the company took steps to ensure that Accounts Regulation 13(2)(i) was complied with and provided evidence to the CAV staff.
Accounts Regulation 17(1)
  1. In the 2015 Audit Report the auditor made a qualification because the company failed to keep a register of trust cheques in respect of the trust accounts it operated.
  2. After receipt of the 2015 Audit Report the company established registers of trust cheques for each of the trust accounts it operated and has maintained them since.
  3. In the 14 January 2016 Notice, CAV staff asked the company what steps the company had taken to rectify the breach of Accounts Regulation 17(1).
  4. By its solicitors’ letter dated 16 February 2016, the company informed CAV staff that after receipt of the 2015 Audit Report the company established registers of trust cheques for each of the trust accounts and has maintained them since and provided evidence to the CAV staff.
Accounts Regulations 18(4) and 19(3)
  1. Between 1 July 2014 and 13 July 2015, Daniel Mark ROBERSON (“MrRoberson”) was the company’s OIEC.
  2. On and from 13 July 2015, Christopher SIDIROPOULOS (“MrSidiropoulos”) was appointed and remains appointed as the company’s OIEC.
  3. During their investigation CAV staff identified that the company had been making payments from the trust account in relation to the property (the “A’Beckett trust account”):

a)by cheques which were not signed by the OIEC but by people with “authorise rights”;

b)by electronic funds transfer which were not made under the direction of or with the authority of the OIEC.

  1. The 14 January 2016 Notice asked questions of the company about the matters in the preceding paragraph.
  2. By its solicitors’ letter dated 16 February 2016 the company:

a)admitted the facts in paragraph55;

b)explained that for prudential reasons the company had established the procedure of having payments from the A’Beckett trust account signed or authorised by its most senior officers;

c)informed CAV staff that the company had already remedied the matters identified by them.

  1. The highest level of access granted by the company in relation to the A’Beckett trust account was and is to persons given “authorise rights”, with such persons being able to authorise payments from the A’Beckett trust account.
  2. Between 13 July 2015 and 8 February 2016, Mr Sidiropoulos did not have “authorise rights”.
  3. Mr Roberson was never a signatory of the A’Beckett trust account whilst he was the company’s OIEC.
  4. Since 9 February 2016, Mr Sidiropoulos has had “authorise rights”.
  5. Between 13 July 2015 and 8 February 2016, Mr Sidiropoulos was not a signatory for the A’Beckett trust account despite being the company’s OEIC.
  6. Mr Roberson never had “authorise rights” whilst he was the company’s OIEC.
  7. On 9 February 2016, Mr Sidiropoulos became a cheque signatory of the A’Beckett trust account.
Accounts Regulation 23(1)
  1. In the 2015 Audit Report the auditor made a qualification because the company failed to keep a separate identifiable trust ledger account in respect of the College House Management Pty Ltd - UniLodge on Lonsdale/Realty (Sales) trust account for each vendor client in respect of premises sold.
  2. After receipt of the 2015 Audit Report the company established a separate identifiable trust ledger account in respect of the College House Management Pty Ltd - UniLodge on Lonsdale/Realty (Sales) trust accountfor each vendor client in respect of premises sold.
  3. In the 14 January 2016 Notice, CAV staff asked the company what steps the company had taken to rectify the contraventions of Accounts Regulation 23(1).
  4. By its solicitors’ letter dated 16 February 2016, the company informed CAV staff that the company established a separate identifiable trust ledger account in respect of the College House Management Pty Ltd - UniLodge on Lonsdale/Realty (Sales) trust account for each vendor client in respect of premises sold and provided evidence to the CAV staff.

Conduct Regulation 13(1) – UMA

  1. In the 2015 Audit Report the auditor made a qualification because there were three (3) trust account cheques with a total value of $582.77 which had been written by the company but not presented by the payee within one year (“the 2015 unpresented cheques”) in respect of which the amounts had not been paid to the Registrar in accordance with the UMA.
  2. The 14 January 2016 Notice asked questions of the company about the matters in the preceding paragraph.
  3. By its solicitors’ letter dated 16 February 2016 the company informed CAV staff that the company was in the process of dealing with all of the unpresented cheques and provided evidence of the steps taken by that date.
  4. In the 2016 Audit Report the auditor made a qualification because there was one trust account cheque with a total value of $274.92 which had been written by the company but not presented by the payee within one year (“the 2016 unpresented cheque”) in respect of which the amounts had not been paid to the Registrar in accordance with the UMA.
  5. The company has since dealt with the 2015 and 2016 unpresented cheques in accordance with the UMA.

CONTRAVENTIONS OF THE LEGISLATION