CITATION: Valuers Registration Board of Queensland v Mr

Phillip Peterson t/a Peterson Valuation Services [2014] QCAT 565

PARTIES: Valuers Registration Board of Queensland

(Applicant) v Mr Phillip Peterson t/a Peterson Valuation

Services (Respondent)

APPLICATION NUMBER: OCR083-12 MATTER TYPE: Occupational regulation matters HEARING DATE: 12 May 2014 and 13 May 2014 HEARD AT: Brisbane DECISION OF: Member Paratz DELIVERED ON: 6 November 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. Mr Phillip Peterson’s registration is

cancelled for a period of six months. 2. Mr Phillip Peterson will pay the costs of

the Board of and incidental to the proceeding in a sum to be agreed or assessed on the District Court Scale on a standard basis.

3. The Valuers Registration Board of Queensland will deliver to Mr Phillip Peterson a realistic estimate of the costs claimed, including an explanation of the basis of the estimate, sufficiently detailed to facilitate some broad examination of its reasonableness, having regard to the District Court Scale of costs.

4. If the Valuers Registration Board of Queensland and Mr Phillip Peterson are unable to agree on an amount of the costs within 21 days of the delivery of the estimate of costs, the costs shall be assessed by an assessor to be agreed by the parties within 7 days thereafter,

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or failing agreement, by an assessor nominated by the Principal Registrar.

5. Mr Phillip Peterson will pay the costs of the Valuers Registration Board of Queensland (as agreed or assessed) within 30 days of such agreement or assessment.

CATCHWORDS: DISCIPLINARY PROCEEDINGS – VALUER –

Where the Valuers Registration Board brought disciplinary proceedings against a valuer – where the valuer relied on erroneous advice from the client – where the client was involved in an alleged fraud – where the valuation was used for mortgage security purposes - where the valuer did not have proper regard to comparable sales – where the valuer based the valuation on an assumption that property could be subdivided – where the valuer was held to be incompetent and negligent Valuers Registration Act 1992 (Qld) s 59 Schwede v QBSA, Kennedy [2009] QCCTB 157 Allison v General Council of Medical Education and Registration [1884] 1 QB 750 Kennedy v Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 Board of Professional Engineers v Bartilomo (2006) CCT ED008-05 Board of Professional Engineers v Matiukevitich [2006] CCT K002-05 Board of Professional Engineers v Brown [2005] CCT K001-04 Board of Professional Engineers v Jutte [2004] CCT K005-03 Chiropractic Board of Australia v Zaphir [2014] QCAT 307

APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr Mark Healy of Counsel instructed by the

Valuers Registration Board RESPONDENT: Mr Phillip Peterson in person

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REASONS FOR DECISION

[1] Mr Peterson is a Valuer. An application was filed by the Valuers Registration Board (the Board) in the Tribunal on 11 July 2013 to conduct a proceeding to decide whether a disciplinary ground is established against Mr Peterson pursuant to the Valuers Registration Act 1992. The Application has 13 pages of particulars attached to it.

[2] The essence of the complaints against Mr Peterson is that he valued properties at Tallai, Queensland (on the Gold Coast hinterland) in or about March and April 2005 at figures far in excess of the market value in valuing for mortgage security purposes1.

[3] The hearing was conducted on 12 May 2014 and 13 May 2014. At the conclusion of the hearing, directions were given for submissions as to merits, penalty and costs. Extensions of time were later given for various reasons. The Board filed submissions on 25 June 2014. Mr Peterson filed submissions on 11 August 2014. The Board was then asked to provide details of the actual costs of the investigations and legal costs that it was seeking, and a further submission as to these was filed on 7 October 2014.

[4] Mr Peterson conducted valuations of seven properties in Red Oak Drive. Five of the valuations were conducted at the request, and on the instructions of, John Hastings Carew-Reid. He valued those properties as follows:-

(a) 81 Red Oak Drive, Tallai - $2,800,000

(b) 104 Red Oak Drive, Tallai - $2,950,000

(c) 38 Red Oak Drive, Tallai - $2,400,000

(d) 97 Red Oak Drive, Tallai - $2,900,000

(e) 109 Red Oak Drive, Tallai - $2,150,000

[5] One of the valuations was conducted at the request, and on the instructions of, Mr Carew-Reid on behalf of Koala Newspapers Pty Ltd. He valued that property as:

(f) 105 Red Oak Drive, Tallai - $1,950,000

[6] The other valuation was conducted at the request, and on the instructions of, Angela Lawson of Dolphin Finance. He valued that property as:-

(g) 12 Red Oak Drive, Tallai - $1,900,000

1 Letter Valuers Registration Board to Kelly & Agerholm 19 May 2008.

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[7] Allegations were made2 that Mr John Carew-Reid, either in his own name or through one of his companies, was purchasing property in Red Oak Drive, Tallai at prices significantly above market value. The contract prices included a cash payment together with the promise of shares in a soon to be listed company. Borrowings were obtained against the properties. It was alleged that all the properties were valued by Mr Peterson at figures far in excess of the market value in valuing for mortgage security purposes.

[8] The Board met on 15 December 2008 and considered the complaints, and appointed Mr Marcus Johnson to carry out an investigation on its behalf. Mr Johnson, a registered Valuer and a Solicitor, conducted an investigation and prepared a report dated 18 August 2010.

[9] Mr Johnson concluded that3:-

On the bases of:

my enquiries;

a record of interview;

kerbside inspections of the sales evidence and the subject properties;

reading the reports and files of the respondents, and

discussions with the property owner and an estate agent I find that Philip Roy Peterson has failed to comply with Section 7 of the Valuers Registration Regulations 2003

I consider that prima facie evidence exists to establish that the Respondent has engaged in professional misconduct and performed work in a manner which constitutes incompetence and/or negligence in his performance as a valuer within the meaning of section 50(1)(a) and(b) of the Act.

[10] The board alleges that Mr Peterson has engaged in:-

(a) professional misconduct; and

(b) incompetence or negligence in his performance as a valuer

[11] Generally Mr Peterson argues that his valuations are based on the potential of the properties to support multiple detached dwellings on the basis of group title subdivision. The Board argues that this basis was unfounded.

[12] Mr Peterson also submits that he was unaware of machinations being undertaken by Mr Carew-Reid, and that he was an unwitting pawn in alleged frauds committed by Mr Carew-Reid and which are the subject of police investigation.

[13] The Board argues that Mr Peterson failed to apply the “Spencer Test” to the sales which he chose as comparable sales, on a Market Value Basis

2 Letter API to Board 30 January 2006.

3 Report of Mr Johnson dated 5 August 2010 para 13 p 49.

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in order to value the seven properties, but used a “direct comparison” method of valuation.

[14] The Market Value Basis for Valuation is described as follows4:-

Market valuations are generally based on information regarding comparable properties. The Valuation Process requires a Valuer to conduct adequate and relevant research, to perform competent analyses, and to draw informed and supportable judgments. In this process, Valuers do not accept data without question but should consider all pertinent market evidence, trends, comparable transactions, and other information. Where market data are limited, or essentially non-existent (as for example with certain specialised properties), the Valuer must make proper disclosure of the situation and must state whether the estimate is in any way limited by the inadequacy of data. All valuations require exercise of a Valuer’s judgment, but reports should disclose whether the Valuer bases the Market Value estimate on market evidence, or whether the estimate is more heavily based upon the Valuer’s judgment because of the nature of the property and lack of comparable market data.

[15] The Act provides disciplinary grounds as follows:-

50 Disciplinary proceedings

(1) This section applies if, after considering an investigator’s report, the board reasonably considers that a valuer has engaged in –

(a) professional misconduct; or

(b) incompetence or negligence in the person’s performance as a valuer.

(2) The board may, as it considers appropriate in the circumstances –

(a) refer the matter to QCAT to decide; or

(b) if it considers the matter does not warrant referral to QCAT –

(i) take disciplinary action against the valuer under section 51; or

(ii) take no further action.

(3) A referral under subsection (2)(a) must be made as provided under the QCAT Act.

[16] Section 59 of the Act sets out the powers of QCAT if it finds that a registered valuer has engaged in professional misconduct, incompetence or negligence. QCAT may admonish or reprimand the valuer; order an undertaking to abstain from a specified conduct; order a penalty to be paid to the board; or suspend or cancel the valuer’s registration. As well as a penalty, QCAT may order costs as to the investigation and the proceeding.

[17] The Board relied on evidence from:-

(a) Julia French – Secretary to the Board

(b) Mr Johnson – the investigator appointed by the Board

4 API and NZPI Professional Practice 2004 para 6.4 (MJG21.2).

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(c) Mr Lawrence John Hamilton – a Certified Practicing Valuer with Taylor Byrne Valuers

[18] Mr Peterson relied on evidence from:-

(a) Himself

(b) Mr Roy Somerville – a Surveyor

(c) Mr Craig Ehlers – a Registered Valuer

[19] An Experts Conclave was held on 26 July 2013 with Mr Hamilton and Mr Ehlers participating, and a Joint Report was filed on 27 July 2013. That report is very significant, and it is quite concise, such that I will include the full text of it here:-

The valuers agree to the following:

Having considered the evidence available, the API Rules of Conduct and the API Code of Professional Conduct, we agree that Mr Peterson has breached those rules and code and has been negligent in that he relied upon critical information supplied by a client without appropriate qualification or conformation from other sources, and did not ascertain and verify such relevant facts and information as a prudent valuer would have ascertained or verified in order to provide a professional valuation of a property. We consider Mr Peterson could not have drawn an informed and supportable judgment that resulted in the valuation reached by Mr Peterson, relating to:

12 Red Oak Drive

38 Red Oak Drive

105 Red Oak Drive

109 Red Oak Drive

The reasons we have reached this conclusion include:

Previous prices at which the properties were listed for sale in 2003 or 2004

Earlier sales in 2003 or 2004

Comparable sales relied on not sold to Carew-Reid

Evidence relating to other comparable sales required for this investigation into the sale prices of the Carew-Reid properties other than the heavy reliance that was placed on them.

Potential for sub-divisions such that it grounded a premium price for the properties was not adequately investigated or documented.

Consideration of market trends at the time do not support the level of increase reflected in the valuations of 38 Red Oak Drive and 109 Red Oak Drive which was purchased shortly before the valuation date by Mr Carew-Reid. A sale price lower than the valuations.

Having considered the statement of Mr Peterson we accept that his initial investigations were adequate however he failed to verify some factual data – namely the circumstances of previous sales to Mr Carew-Reid and the realistic potential for sub-division and failed to properly analyse the information gathered.

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[20] A second Joint Report was filed on 25 March 2014. It was more extensive and was 19 pages. It indicated specific matters on which the experts agreed and disagreed.

[21] Both experts agreed that Mr Peterson over-valued each of the seven subject properties5.

[22] The experts were asked “In respect of the potential for subdivision what would a competent valuer have done?”. Their response was6:-

A competent valuer would have investigated:

1. Current zoning

2. Minimum lot size permitted under the zoning.

3. Other constraints such as slope on block, waste water disposal.

4. Bush fire risk.

5. Does a subdivision add value to the property?

6. Is there a second home site available when looking at the location of the existing home or would it be commercially viable to demolish the existing home for the purpose of building multiple homes.

7. Investigate with a local Town Planner the prospects for a subdivision approval and likely development conditions that would be applied.

[23] The issue is whether Mr Peterson breached the required professional standard in his valuations.

The Expert Evidence

[24] The hearing proceeded over two days. Oral evidence was given by each of the witnesses relied upon. The evidence of the experts was given by concurrent evidence (known as “hot-tubbing”).

[25] Mr Johnson said that he supported his report. He said that he looked at the totality of Mr Peterson’s files. He considered there was a glaring lack of detail shown in the files provided by Mr Peterson.

[26] Mr Johnson referred to the surrounding circumstances as being very unusual and noted that Mr Carew-Reid was spending $7 million in one day, which was striking for one person and that he would be interested to see if there was a swap of property involved. He pointed to unusual features such as the Contract to purchase 105 Red Oak Drive7, Tallai where the purchase price was $2,340.000 and a deposit of $1,030,000 was stated, which was a very high deposit, and the deposit was to be held by the seller, not by a third party.

[27] Ms French said that, to her knowledge, no complaint was made about any other valuer as to Red Oak Drive.

5 Joint Experts Report 25 March 2014 para 5 p 17.

6 Joint Experts Report 25 March 2014 para (d) p 19.

7 Annexure MGJ17.7 to the Affidavit of Mr Johnson filed 26 July 2013.

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[28] Mr Ehlers agreed that the question to be determined in assessing whether group title was the “highest and best use”, was as to the likelihood of the application for group title being approved.

[29] Mr Hamilton said that there was no evidence to suggest that any of the owners had made a serious attempt to subdivide their properties. He expected that the Council would oppose such an application strongly, as they were steepish blocks, there were bushfire dangers, and it would have to be shown how waste water could be disposed of.

[30] He thought there were very poor prospects of the Council supporting a subdivision, and that the market would not pay a premium for them. He described Red Oak Drive as “one of the least likely places” in the Hinterland that the Council would approve for subdivision.

[31] He described the valuations as based on the critical assumption that it could be subdivided, but that assumption is so wild that it is meaningless and should be given no credibility.

[32] Mr Hamilton strongly disagreed with the proposition that a valuer would consider group title as the “highest and best use”.

[33] Overall, Mr Hamilton considered that Mr Peterson placed an “awful lot of reliance” on documents which were provided by Mr Carew-Reid or his associates, and that the valuations accorded with the contract prices which were out of line with the market. He said this indicates an enormous amount of weight was given to the contract prices rather than sales evidence which he described as contrary to proper practice.

[34] Mr Ehlers agreed that there were no comparable sales at those valuations.

[35] Mr Hamilton said that features of the contracts would cause him concern as to whether the contracts were “at arms-length”. Those features were:-

(a) the majority of the contracts had a lack of conditions, and no finance conditions

(b) they were not subject to pest inspection, which he would consider essential having regard to termites in the area and the age of the buildings

(c) there were no provisions for due diligence

(d) the parties were not represented by solicitors and were self-acting which was unusual

(e) there were hand written notations

[36] He described Hinterland land as hard to value as there was no uniformity of access, were different views, and a wide variety of homes which tended to be unique. He said he would make enquiries as to where the market

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was at. He said there was no evidence that Mr Peterson made proper inquiries, particularly when he was unfamiliar with the area, or that he contacted agents or other valuers to make inquiries as to the area.

[37] He said that comparisons have to be done on a careful basis in the Hinterland as it is a more difficult valuation than in an urban environment with comparable sales. Buyers had a broader variety of motivations, and might be seeking to use the land for horse riding, cattle or views. He said enquiries should be made with the selling agent as to the positive attributes, and he would find out as much about the sale as he could.

[38] Mr Ehlers agreed generally as to the difficulty of valuation in that area, but did not consider it would be normal practice to interview the parties.

[39] The experts were asked about notes. Mr Hamilton said that notes should be made and have details of the construction; number of rooms; a sketch plan setting out dimensions of the main residence; and a sketch showing how the floor plan is laid out. In hinterland properties, fencing, driveways, carport arrangements, swimming pool, tennis court, landscaping were to be noted; a minimum of 5 photos be taken to allow for reference later; and noting whether the property was classified as comparable, inferior or superior. He said he would expect to see those notes on a valuer’s file.

[40] Mr Ehlers said that he keeps notes for 7 years, but not necessarily a breakdown of the property as well as improvements.

[41] Overall, Mr Hamilton said that comparisons to The Panorama were not valid. That street had the premiere views in the area, and that nothing in Red Oak Drive remotely compares, and it is certainly the ‘poor cousin”. He said there was no justification for any of the properties to be valued at over $1 million. He concluded that there had been an over-valuation in excess of 100% in most instances.

[42] Mr Hamilton said that the valuations are so contrary to the sales evidence that nothing in the sales evidence supports the valuations, and that there is no reasonable series of steps that could lead a valuer to conclude as Mr Peterson concluded. He said there was no evidence of an attempt to compare other properties properly.

Mr Peterson’s evidence

[43] Mr Peterson gave evidence. He recalled that Mr Carew-Reid said he was an investment adviser, and that he relied on the advice that Mr Carew-Reid gave him, and thought he was independent and straight-forward. He said he had not been involved before with someone who was involved in a fraud.

[44] He said that he had valued 2 or 3 properties in that area before, but wasn’t familiar with Real Estate Agents in the area. He said he made himself familiar with the area.

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[45] Mr Peterson said that he used a group sub-division as the basis of his valuation after discussions with a Town Planner from the Gold Coast City Council; and with Mr Cary-Reid; and based on two previous settled sales.

[46] He could not remember who the town planner was, and can’t recall if it was a single telephone call, but recalled that there was one lengthy conversation.

[47] He said that he did not give a more comprehensive description of the property he used as a comparative sale at The Panorama as, having done expert witness work, he had formed the opinion that a short accurate statement is preferable.

[48] He was asked if he was surprised about his dealings with Mr Carew-Reid. He said that he thought Mr Carew-Reid was a big player with a lot of investors in tow. He said that Mr Carew-Reid was not previously a significant client of his at the time. He was not paid for the valuations conducted by himself.

[49] He was asked why Dolphin Finance used him, and he said that he had done several valuations for them, but didn’t recall any valuations in Red Oak Drive. He said he was based in Brisbane in 2005, but did valuation work on the Gold Coast and Sunshine Coast.

[50] A strong indicator as to what was in Mr Peterson’s mind when he conducted the valuations appears from the evidence he gave in an interview with Mr Johnson on 20 May 2010, which has been transcribed. In that interview he makes it clear that he thought there was a new rising market in that street based upon the advice he got from Mr Carew-Reid, and that he accepted that advice and acted upon it8:-

See we are working off a premise that has no bases in truth. We need to get that out in the recording early…I was provided with evidence of future transactions, which I believed at the time to be the market. There were one sale there was the property that I was valuing, but there were also four or five other contracts demonstrating an increased value for the blocks in Red Oak Drive.

Its that premise that was not correct, and that was the subject of a fraud investigation by the police. The police were ready to charge Mr Carew-Reid with fraud and the reason is that he aah..he misdirected me to believe that those transactions were real transactions made wholly in Australian dollars. I asked for copies of contracts and was provided with conditions, blank conditions, the conditions of the sale with shares was not disclosed to me, and therefore I was looking at a building market in Red Oak Drive and I have been taught to follow the market, not go against what the markets are doing, to follow the market, so I believed I was following a building market in Red Oak Drive.

That was not correct because Carew-Reid had inflated the prices by including shares in the consideration and the stamp duties declarations did not disclose those shares, nor did the information provided to the Department of Lands. The records still show on those transactions that they were normal transactions. So any one searching those sales currently would come to the same conclusion I came to, and that these were arms length transactions.

8 Transcript interview with Mr Johnson p 6.

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[51] In his opening submissions, Mr Peterson said that it was Mr Carew-Reid who advised of the ability to subdivide the properties9:-

John Carew-Reid had discovered that an additional lot could be cut from each property in Red Oak Drive (this land had extensive coastal and/or unrestricted rural views over the Hinze dam). John Carew-Reid told Peterson that this ability to subdivide had become “recently available” and that it was John Carew-Reid’s belief that most of the market was unaware of this fact.

[52] Mr Peterson submitted that his search for recorded sales had included 2 sales in the same street which were both purchases of Mr Carew-Reid who advised they were normal sales10:-

I asked if there were any special circumstances and he did not disclose that shares were included in the purchase price. Since these properties did not adjoin and were in the same street as the subject properties they were considered good evidence of value. My discussions with regard to these and other purchases of John Carew-Reid with real estate agent David Harrison did not disclose the inclusion of shares as part of the consideration. As was normal practice I did not include any of the parties to the sales in my reports.

Discussion

[53] This matter concerns the behaviour of Mr Peterson in conducting the valuations. It is not alleged that he acted dishonestly or in an improper way to obtain personal gain. It is alleged that he was incompetent or negligent.

[54] Mr Peterson is an experienced valuer. He was first registered on 17 September 1975 and was admitted to the Australian Institute of Valuers the same year. He says that his past experience includes 20 years as a real estate agent and practicing valuer, and 17 years of experience lecturing at TAFE in real estate11. He says that he has extensive experience as an expert witness in litigation valuations including in the Family Law Court, Land Court and the Supreme Court.

[55] None of the terms “professional misconduct” or incompetence or negligence are defined in the Act. The Board submits the terms are either very well known in the law or, as in the case of incompetence, are terms which are readily understood and to be readily applied in context12.

[56] There is a specific definition of the term “professional misconduct” in the Building Act 1975 which applies to building certifiers, and which may be seen as an indicator of how that term may be seen. The nature of professional misconduct by a private certifier was discussed in Schwede v QBSA, Kennedy13. The member commented at paragraph 65 that:-

9 Written Opening Submissions by Mr Peterson p 1 para 5.

10 Written Opening Submissions by Mr Peterson p 2 para 3.

11 Statement Mr Peterson filed 8 April 2013.

12 Submissions of the Board 24 June 2014 para 1.

13 [2009] QCCTB 157.

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Plainly, professional misconduct is a very serious matter: it is conduct that shows serious incompetence, lack of knowledge, judgement, integrity, diligence or care; it is conduct that compromises the safety of persons using buildings, the amenity of a property or significantly conflicts with local planning laws; it is unlawful conduct – in the sense of conduct contrary to the Acts regulating the functions of private certifiers; it is corruption in the sense of seeking or taking benefits in return for breaching the regulating Act or seeking to corrupt other private certifiers in the same way; it is defiance of the orders of the tribunal or the BSA; it is fraud, dishonesty, unethical and improper conduct.

[57] Mr Johnson refers in his report to the definition of “professional misconduct” as originating in the English decision of Allison v General Council of Medical Education and Registration14. In that decision Lopes LJ defined professional misconduct as where a professional:-

in the pursuit of his profession, has done something with regard to it which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency

[58] Mr Johnson notes15 that this definition was adopted and elaborated upon in the High Court in Kennedy v Council of the Incorporated Law Institute of New South Wales16 by Rich,J:-

… a charge of misconduct as relating to a solicitor need not fail within any legal definition of a wrong doing. It need not amount to an offence under the law. It was enough that it amounted to grave impropriety affecting his professional character and was indicative of a failure either to understand or to practise with the precepts of honesty or fair dealing in relation to the courts, his clients, or the public

[59] Professional standards for registered valuers are set out by the Australian Property Institute in their rules of conduct.

[60] Mr Johnson provides a definition of competence17 as:-

A competent registered valuer exercising proper knowledge, skill, judgment and care would have obtained and verified factual data, performed competent analyses and drawn informed and supportable judgments

[61] Negligence was discussed in Mutual Life & Citizens' Assurance Co Ltd v Evatt18 where Barwick CJ said:-

It seems to me, therefore, that whenever a person gives information or advice to another, whether that information is actively sought or merely accepted by that other upon a serious matter, and particularly a matter of business, and the relationship of the parties arising out of the circumstances is such that on the one hand the speaker realizes or ought to realize that he is being trusted, particularly if he is thought by the other to have, or to have particular access to, information or to have a capacity or opportunity to exercise judgment or both as to the matter in hand, to give

14

[1884] 1 QB 750. 15

Report Mr Johnson para 7.2.3. 16

(1939) 13 ALJ 563. 17

REPORT Mr Johnson para 14.2. 18

(1968) 122 CLR 556 para 32.

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the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to seek or accept and in either case to act upon that information and advice the speaker, choosing to give the information or advice in such circumstances, comes under a duty of care both to utilize with reasonable care the information and sources of information at his disposal and to employ with reasonable care what capacity he has for judgment in relation to the matter and to exercise reasonable care in the expression of what he is prepared to convey by way of information or advice.

[62] The clear conclusion of the experts, and it is not disputed by Mr Peterson, is that these valuations were significantly wrong at the time of their making.

[63] Mr Peterson says that he was lured into giving valuations that were too high because he relied on advice given to him by his client Mr Carew-Reid, and by a Gold Coast City council town planner, and that he acted properly in making the valuations.

[64] Mr Peterson takes issue with many of the specific allegations made against him. He contends that he did inspect the properties; that it is not normal practice to include the parties to transactions in a mortgage security valuation; that his reports contained a sufficient degree of detail; and that changes to the Gold Coast City Plan substantiated the statements made in his valuations.

[65] The Board say that Mr Peterson failed in many ways to perform to the standard required of a reasonably prudent professional valuer. They point to his failure to properly investigate other comparative sales, to his reliance on a proposition that multiple dwellings would be allowed which was without any proper foundation, that he failed to keep proper notes of his inquiries.

[66] The crucial basis of Mr Peterson’s valuations is that a second dwelling could be constructed on these properties as part of a Group Title19. That belief was unfounded. Mr Peterson did not take reasonable steps to establish such a crucial point. It is fundamental to the valuations. He knew it was a novel concept, because Mr Carew-Reid said the market was not aware. He did not consult an independent town planner to confirm this advice. The inquiry he says he made to the Gold Coast City council is blatantly insufficient – he cannot identify who he spoke to, or indicate how senior or knowledgeable that person was.

[67] Mr Hamilton was scathing of the proposition that these properties could be readily sub-divided, if at all. I accept Mr Hamilton’s views in that respect.

19

See for example, Valuation of 12 Red Oak Drive p 13.

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[68] Mr Peterson provided a statement from Mr Somerville in relation to the ability to sub-divide the properties. He is a surveyor and not a town planner. His conclusion is less than compelling in saying that20:-

4. At the time of the valuation it appeared reasonable to assume that the subject land may have been approved by Council to be subdivided by conventional or Community Title Scheme.

[69] Mr Somerville concludes that:-

13. There are no prohibitions under the Gold Coast City Council Planning Scheme or State planning legislation that prevents the intensification of housing in Red Oak Drive. Potential developments are governed by the merits of the application.

[70] These assessments of Mr Somerville that it could be “assumed” that the Council “may” approve subdivision, and that there was “no prohibition” against doing so, falls far short of the absolute reliance that Mr Peterson placed on the positive prospect of subdivision.

[71] I consider Mr Somerville’s evidence to be unconvincing, and place no weight upon it.

[72] Mr Peterson got these valuations very wrong. He did not just come to an arguable view that could be seen as well-meaning experts differing – his valuations fall well below being reasonable or defensible.

[73] It was recognised in the industry at the time that something very strange was going on in this street. This is evidenced by the extraordinary warning notice that the Australian Property Institute sent out in June 2005 to all API members valuing in the Tallai area21:-

Warning

Valuers beware

The institute has been advised that there appear to be some very “unusual” sales occurring in the Tallai area of the Gold Coast.

All valuers practising in this area should ensure that they thoroughly research the market, speak to a number of real estate agents and other valuers to ensure they are satisfied with the sale of the subject property as well as the comparative sales which may be considered.

Valuers who do not normally operate on the Gold Coast need to be extra cautious in undertaking assignments in this area.

The Institute’s Code of Ethics and Rules of Conduct should be paramount when members consider instructions from clients.

If any Member wishes to discuss the above please contact me on (07) 3832 3139.

A.L.McNamara

Executive Officer

20

Statement of Roy Somerville filed 8 April 2013. 21

Affidavit of Ms French - Exh JF-3.

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[74] The suggestion arises that Mr Peterson was simply swept up in the excitement of having a new major client in Mr Carew-Reid, who appeared to be a significant player on the Gold Coast property market, and who presumably could direct further important work to Mr Peterson which would have been exciting and lucrative for him.

[75] It seems that Mr Peterson overlooked the careful practices that he says he cultivated over a lifetime as a professional valuer. He accepted what Mr Carew-Reid told him at face value, and relied upon it. He produced valuations that supported the contracts that Mr Carew-Reid had in most instances. In doing so, he allowed himself to be used by Mr Carew-Reid as part of an elaborate fraud.

[76] The irony is that Mr Peterson gained no personal benefit for himself at all as it turned out. He got no more work from Mr Carew-Reid and he was not even paid for these valuations. He has ended up facing these disciplinary proceedings which will have caused him significant upset and expense.

[77] Mr Peterson however does not seem to fully appreciate that his actions could be seen as improper. He defended himself in these proceedings and took issue with criticism of the way he conducted his valuations. In his submissions he refers to having to “defend his reputation in a tribunal hearing”22.

[78] I do consider that Mr Peterson has been foolhardy, and reckless in making his valuations. He has not followed the usual steps of careful investigation of the subject site and comparable sites and comparable sales, or obtained advice from real estate agents or valuers who have specific knowledge of the area, or properly analysed the comparable sales he relied on, and has accepted a premise as to subdivision that was unfounded.

[79] However, I do not consider that Mr Petersons conduct can properly be seen as “disgraceful or dishonourable”23, or was indicative of failing to understand or practise with honesty or fair dealing24. There is no suggestion of any element of fraud or dishonesty in Mr Peterson’s conduct.

[80] Mr Peterson failed to attain the standard of a reasonably prudent valuer, and acted rashly, but did not act in a deliberate way to deceive the public.

[81] I therefore do not consider that professional misconduct is made out.

[82] I accept Mr Johnson’s definition of competence of a valuer. I am satisfied that Mr Peterson did fail to obtain and verify factual data that may have affected the valuations, and failed to conduct adequate and relevant research, to perform competent analyses, and to draw informed and supportable judgments in his valuations. The consequence is that Mr

22

Peterson submissions para 5.2. 23

As referred to in Allison. 24

As referred to in Kennedy.

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Peterson is properly seen as having been incompetent in making these valuations.

[83] Mr Peterson was giving professional advice and had a duty of care to use reasonable care to assess the information and sources of information at his disposal, and to use reasonable care in his judgment and in expressing what he said by way of advice25. A failure to do so would constitute professional negligence.

[84] I consider that Mr Peterson failed to use reasonable care in conducting and making the valuations. His conduct constitutes negligence.

[85] I am satisfied that Mr Peterson has been incompetent and negligent in his conduct as a valuer, and that a disciplinary ground is established.

Penalty

[86] Section 59 of the Act provides as to penalty that:-

59 QCAT may order cancellation of registration etc.

(1) If QCAT finds a registered valuer has engaged in professional misconduct, incompetence or negligence, QCAT may do one or more of the following –

(a) admonish or reprimand the valuer;

(b) order the valuer to give an undertaking to abstain from specified conduct;

(c) order the valuer to pay to the board a penalty of an amount equal to not more than 100 penalty units;

(d) order that the valuer’s registration be suspended for up to 12 months;

(e) order that the valuer’s registration be cancelled

[87] In the Application, the Board seeks the following orders:-

(1) That Mr Peterson’s registration be cancelled or suspended for a minimum period of 12 months;

(2) That Mr Peterson pay to the Board a penalty of 100 penalty units; and

(3) That Mr Peterson pay the Boards costs of and incidental to the proceeding, including the costs of the investigation that led to the proceedings

[88] The Board submits that prior to the creation of QCAT, disciplinary proceedings against valuers in Queensland were dealt with by a committee of the Board. They submit that there are no comparable decisions which would assist the tribunal in this case, that there are few authorities in other jurisdictions with respect to disciplinary proceedings involving valuers, and that this is the first application which has proceeded

25

As referred to in MLC v Evatt.

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to a contested application in QCAT and that in that sense it will set an initial benchmark or tariff for such a proceeding26.

[89] No other complaint has been received by the Board against Mr Peterson. The Board notes that Mr Peterson gave evidence that he had performed no mortgage valuation work of the kind which is the subject of this proceeding since at or about the time he performed that work in 2005.

[90] The Board submits that having regard to the facts and the grounds, that a penalty closer to the higher end of the range is appropriate. It submits that it is “content to leave to the tribunal the question of whether Mr Peterson’s registration ought to be suspended or cancelled”27.

[91] These matters all occurred a long time. It has now been nearly 9 years since Mr Peterson made his valuations. This matter has been hanging over his head for all that time. I take into account the detriment he will have already suffered over that time in distress, worry and uncertainty.

[92] A relevant matter as to penalty will be the effect that the actions of the valuer have had, and the extent of harm caused to third persons. No evidence was led on this question, but Mr Peterson asserts that28:-

No, the point that I would make is, is Mr McNamara an aggrieved person? If no valuation was addressed for his use, um, no person suffered injury as a result of the valuations that I did, as far as I was advised by Queensland Police, no one in fact relied on any valuation I did on Red Oak Drive in any matter of finance….

[93] Mr Peterson submits that the penalties sought by the Board are excessive and do not consider any mitigating circumstance. He submits that if any penalty is to be applied that it ought to be restricted exclusively to the lower end of the points allowed for the maximum penalty. He says that29:-

Peterson earns his living as a valuer in private practice and supports his wife and two sons. He and his wife lost their family home as a result of the Global Financial Crisis. If costs are awarded against him it is unlikely that he will be able to pay these costs.

[94] The monetary amount of the costs of the board and the impost on Mr Peterson is very high, and this is a factor I take into account in considering a fine. Considering Mr Peterson’s financial position, he will have great difficulty paying those costs alone. I do not consider, in the circumstances, that a further fine is warranted.

[95] It is necessary that breaches of professional standards be recognised. A period of suspension is a public demonstration of that, as well as imposing a penalty by way of loss of income.

26

Submissions of the Board 24 June 2014 paras 39 – 43. 27

Submissions of the Board 24 June 2014 para 45. 28

Interview with Mr Johnson p 12. 29

Submissions Mr Peterson 11 August 2014.

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[96] The reality is that Mr Peterson is most probably coming to the end of his long career as a valuer. He has practised for 40 years. One of the greatest imposts to Mr Peterson will be the harm to his reputation. He has defended this matter to the end to protect his reputation.

[97] These valuations arose from a unique set of circumstances. It is highly unlikely that such a situation would recur, or that Mr Peterson would become involved again. I consider that there is not a substantial risk of his reoffending such that the public need to be protected by his being disqualified absolutely.

[98] I therefore consider that a period of suspension is the appropriate option. The maximum period of suspension provided in the Act is 12 months, which appears short compared to that provided in other legislation for other occupations, such as Real Estate Agents.

[99] Whilst I consider it is arguable that a 12 month period of suspension would be appropriate, having regard to periods applied to other professions, I bear in mind that the Board points out that this case will set a bench mark.

[100] I do not consider that Mr Peterson’s one-off behaviour should be seen as being at the maximum end of a scale of breaches. If it was, then this would leave no room for more serious or continuing or repeat breaches to be more heavily sanctioned. I therefore do not consider that the maximum of 12 months should apply to him. A mid-range figure of 6 months will achieve the intent of indicating reprobation, and I will apply that figure.

Costs

[101] In the course of submissions I asked the Board to provide particulars as to the costs they were seeking. The Board provided particulars on 7 October 2014.

[102] The Board is seeking an order in respect of costs in either of the following terms30:-

(a) In a sum to be fixed by the Tribunal pursuant to section 107(1) of the QCAT Act: or

(b) Costs to be assessed by an assessor appointed by the Tribunal on the District Court scale.

[103] The particulars attach a sheet detailing costs of the Board as at 1 September 2014. Those costs total $128,674.30. They are comprised of components summarised as follows:-

Crown Law $ 8,864.35

Mr Johnson (Investigation and Hearing) $ 24,663.95

30

Particulars filed by the Board para 8.

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Mr Hamilton (Expert – Report and hearing) $ 8,166.00

Mr Healy (Counsel – Preparation and hearing) $ 87,010.00

[104] The Board submit that generally where a professional is being disciplined in his professional capacity, the disciplinary body will usually receive a costs order31. It submits that Mr Peterson did not take steps to resolve the matter at a compulsory conference; or after receipt of the first experts report in August 2013, or after receipt of the second experts report produced two months before the hearing, which it says confirmed the allegations.

[105] Whilst the basic rule of the tribunal is that each party bears their own costs, the tribunal has power to order costs where the interests of justice require under s 100(1). The tribunal does regularly award costs in professional disciplinary matters as the Board submits.

[106] Mr Peterson has defended his position throughout quite lengthy and thorough proceedings. The weight of evidence against him is overwhelming. He has not recognised what really was an inevitable outcome, despite his own expert concurring in seriously adverse findings. He has put the Board to considerable expense in fulfilling its statutory obligations.

[107] The considerations as to cost in a matter of this type can be seen in a matter in the Tribunal involving the Chiropractic Board of Australia32, where the Deputy President, Judge Horneman-Wren SC, commented as follows:-

[43] The Board has sought an order that Dr Zaphir pay its costs of and incidental to these proceedings in a sum to be agreed or assessed. The Tribunal has observed on a number of other occasions that in disciplinary proceedings such as these where the Board, funded as it is by the registration fees of members of the profession, those members of good standing should not carry the burden of disciplining a member of the profession who has transgressed in their professional responsibilities. For those reasons, I am of the view that the Board should have its costs in this case.

[44] In ordering that Dr Zaphir pay the Board’s costs, I would also observe that this matter has had a long history in the Tribunal, much of which has been occasioned by Dr Zaphir seeking adjournments so that he could challenge the convictions in the Magistrates Court which would then, of course, have changed the complexion of the case being brought by the Board. As a consequence of those matters, the Board has had to prepare this case on the footing that Dr Zaphir was challenging the convictions in the Magistrates Court and that it would

31

Board of Professional Engineers v Bartilomo (2006) CCT ED008-05; Board of Professional Engineers v Matiukevitich [2006] CCT K002-05; Board of Professional Engineers v Brown [2005] CCT K001-04; Board of professional engineers v Jutte [2004] CCT K005-03

32 Chiropractic Board of Australia v Zaphir [2014] QCAT 307

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therefore have to prove all of the substantive facts and allegations which went to the matters which might otherwise have been proved by the certificates of conviction. The Board has, accordingly, prepared a detailed and comprehensive case, much of which, of course, has been now unnecessary because of the fact of the convictions not having been upset. However, that has occasioned great cost, one suspects, in the preparation of this case. In my view, it is entirely appropriate that Dr Zaphir should have to pay the costs which have been brought about, in large part, as a consequence of his own conduct of his case, which was a matter for him.

[108] In that matter, costs were ordered to be agreed or assessed on the District Court scale.

[109] Similar considerations apply in this matter, and I consider that in the circumstances it is appropriate that the Board be awarded its costs of the investigation, and of the proceeding. I accept that the District Court scale is appropriate as submitted by the Board, and as is usual on occupational regulation matters.

[110] The Order in that respect will be that Mr Peterson must pay the costs of the Board of and incidental to the proceeding in a sum to be agreed or assessed on the District Court Scale on a standard basis.

[111] Having regard to the significant amount of costs involved, they should be scrutinised out of fairness to Mr Peterson. The usual way to do so is by having the costs assessed. In order to avoid further costs if possible, the parties should first attempt to agree on the costs.

[112] In order to minimise costs, and to avoid the necessity for the full preparation of a costs statement in compliance with the Uniform Civil Procedure Rules, if possible, I shall adopt the procedure envisaged in District Court of Queensland Practice Direction Number 3 of 2007 for agreed or fixed costs, to first provide for provision of a realistic estimate of costs, and I will allow a time period of 21 days for that to happen.

Orders

[113] The orders are as follows:-

(1) Mr Phillip Peterson’s registration is cancelled for a period of six months.

(2) Mr Phillip Peterson will pay the costs of the Board of and incidental to the proceeding in a sum to be agreed or assessed on the District Court Scale on a standard basis.

(3) The Valuers Registration Board of Queensland will deliver to Mr Phillip Peterson a realistic estimate of the costs claimed, including an explanation of the basis of the estimate, sufficiently detailed to facilitate some broad examination of its reasonableness, having regard to the District Court Scale of costs.

(4) If the Valuers Registration Board of Queensland and Mr Phillip Peterson are unable to agree on an amount of the costs within 21

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days of the delivery of the estimate of costs, the costs shall be assessed by an assessor to be agreed by the parties within 7 days thereafter, or failing agreement, by an assessor nominated by the Principal Registrar.

(5) Mr Phillip Peterson will pay the costs of the Valuers Registration Board of Queensland (as agreed or assessed) within 30 days of such agreement or assessment.