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Directors Report
Introduction

In the past two years, the Fund has been inundated with calls for assistance from consumers.

We receive everything from general inquiries about tenancy matters to pleas from those whose life savings are in jeopardy.

The property-buying wave sweeping the nation has provided tempting opportunities for real estate rogues. Two-tier marketeers, "discount" property sellers, get-rich-quick seminar gurus and developers selling over-priced apartments, all created a stream of victims.

In July 2003, Real Estate Consumer Association (RECA) president Denise Brailey moved from her base in Perth to help the Fund. Ms Brailey is now based in Sydney. The Fund agreed to contribute an annual sum of $90,000 to RECA for an interim period of two years.

Ms Brailey’s experience in consumer protection is vast. She was the major force behind exposing the Finance Broking Scandal in Western Australia in which thousands of consumers lost tens of millions of dollars. A Royal Commission was held and about 500 charges were laid against various property players. Her story was featured on ABC television’s Australian Story which was titled, Saviour on a Shoestring.

Since arriving in Sydney, Ms Brailey has been researching the activities of several property identities and companies. She is convinced that the scandals revealed so far are just a fraction of what is to come. "What is happening nationally is far worse than the horrors I uncovered in Perth," she says. "The property boom has been the key to unlocking monstrous activities."

The seminar spruikers in particular appeared to operate with impunity, avoiding the constraints affecting others who provide financial products and advice. It was not until late in 2003 that effective action was taken by federal authorities to curtail some of their practices. The Henry Kaye operation appears to have been closed down. Much remains to be done.

In the interim, the Fund was contacted by thousands of people caught on the dark side of the investment market. Many consumers came to the Fund after receiving unhelpful responses from state government departments or federal agencies.

Complaints and inquiries came via email from the Jenman Group website, phone calls to Fund personnel, direct from estate agencies or via consumer contact with RECA.

Denise Brailey believes team-work from Fund personnel and RECA members has uncovered fraud on a scale not seen before in this country. "Our investigations have revealed substantial consumer losses, in millions of dollars, revealing the potential for considerable fallout in the property sector," she says.

Despite pressure on Fund resources, many consumers achieve favourable outcomes. Some complaints are resolved quickly with a phone call, email or letter. More serious issues require investigation, legal input, negotiation and/or court action. Some matters are assisted by media coverage initiated by Fund personnel.

Denise speaks of "the spirit of caring" evident within the Fund and its supporters, providing consumers with "a complaint-handling mechanism" they would otherwise lack.


Dealing with consumer demand


Demand from consumers has stretched Fund resources. It has forced the Fund to adopt an almost military-style approach to handling those hurt by property scams.

Neil Jenman explains: "There were so many wounded in World War I that medical staff couldn’t cope. So they split the injured into three categories - those mortally wounded; those not seriously wounded; and those seriously hurt who could be saved provided they received immediate care. The medics focussed on the third group.

"Because of the volume of victims from the property industry, we have had to tailor our responses in a similar way."

Some victims have lost money and will never recover it - people who paid too much for property or who are victims of scams run by companies which no longer exist. In such cases the Fund often can do little more than warn about the dangers or alert the public when an identified offender re-surfaces.

Others have been hurt but not severely - such as those who wasted money pursuing a property outside their price range after being under-quoted by an agent.

The third category comprises consumers who have lost large sums and have some prospects of recovering their money, if they receive assistance - or those who are about to lose money but can be saved if the Fund intervenes.

Due to its limited and stretched resources, the Fund has been forced to concentrate on this third category of consumer.

Fund employee David Reardon says the volume of consumer inquiry demands each matter be assessed in terms of:

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the Fund’s objectives,
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the reliability of the complainant,
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the chances of achieving a favourable outcome, and
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the general benefit to real estate consumers from any action.

The Fund’s financial resources are stretched and more revenue is needed to cope with the volume of work. The Fund’s income comes primarily from contributions from agents accredited by The Jenman Group. Initially, it was anticipated that agents would contribute two average selling fees each year. As can be seen from the Financial Reports, contributions have been far below this figure. It is not easy to ask agents to contribute to a cause that does not lead to profits for them and so we have not placed heavy demands upon them. We are thankful for any assistance. We may ask for more contributions in the future.

The Team

Fund work in 2003 and 2004 has consumed the time of six key people: Neil Jenman, Craig Lean, Jeff Dalrymple, David Reardon, Denise Brailey and Reiden Jenman.

In addition to sponsoring RECA (which provides the services of Denise Brailey), the Fund employed Craig Lean and Jeff Dalrymple, paid 75% of David Reardon’s wages and 50% of Neil Jenman’s wages.
The Fund paid a 5% management fee to the Jenman Group.

  • Denise Brailey and RECA

  • Denise Brailey works mostly alone in her capacity as RECA President, but keeps in regular contact with Neil Jenman and Fund staff and members.

    In the last three months of 2003, Denise reported that RECA received over 4,000 inquiries from real estate consumers. "These people live in every state and territory," Denise says. "We are uncovering massive fraud in Australia on a scale never experienced in this country."

    Her objective is to see consumer protection become "a major agenda" for all state and federal governments. "Until that day arrives, many more innocent people will lose millions of dollars between them to property spruikers and their professional cohorts," Denise says.
    "There are thousands of victims who have yet to discover they are victims of fraud.

    "The collapse of these massive conspirators will assuredly occur. The fact that we are there at the cutting edge, exposing them, while assisting aggrieved consumers, is the best use of the Fund. My commitment to this agenda is evidenced by my move to Sydney."

  • Craig Lean

  • Craig Lean, a former policeman who worked as an investigator and researcher for the Fund, has fielded inquiries from hundreds of consumers and has conducted scores of investigations.

    His work has encompassed cases of two-tier marketing, victims of misleading and deceptive conduct and assisting consumers to obtain refunds from get-rich-quick seminar operations.

    His role has changed from mostly investigative work to a research role. This has included attending numerous seminars run by get-rich-quick spruikers.

    In June 2004, Craig ceased employment with the Fund and is now a contracted researcher.

    Many of Craig’s cases involved victims of Henry Kaye, the National Investment Institute (NII) and Australian Finance Direct (AFD). Craig has helped many Kaye course participants secure release from repayment obligations to NII and AFD.

    He has assisted the Fund’s research into Kaye by preparing flow charts depicting the web of inter-connected companies in the Kaye empire.

    Craig has also mapped other organisations and has prepared detailed flow charts on the activities of scores of spruikers and their companies. His skill in this area is first-class.

    Craig has provided vast input to journalists working on stories about property fraud. His research work over several months was a major contribution into many of the leading property stories, especially those concerning the now defunct Kaye empire.

  • David Reardon

  • David Reardon, a former estate agent, is often the first point of contact for consumers who approach the Fund. He handles hundreds of inquiries each month.
    Inquiries fall into four broad categories:
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    sellers seeking general advice
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    sellers having problems with agents
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    buyers seeking general advice.
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    consumers inquiring about wealth creation seminars or property investment deals
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    Investors who feel they have been the victims of deceit.

    Many matters can be handled quickly with a phone call or email. "Many consumers comment favourably on the rapid response time," David says.

    Some matters, however, require investigation and information gathering. David often speaks directly to the offending company or person to encourage "an amicable outcome".

    When complaints involved what appeared to be a serious breach of
    the law, David conferred with the Fund’s legal counsel Jeff Dalrymple to determine whether there was a realistic chance of success through legal action.

  • Jeff Dalrymple

  • As the Fund’s legal counsel, Jeff Dalrymple was involved in the management of numerous consumer complaints. These covered the full spectrum of real estate agency operations, including over-quoting to sellers, under-quoting in advertising, marketing expense claims, commission claims, disputes over the agency authority, under-selling property and wraps contracts.

    Action has often involved direct legal assistance and advice, with positive outcomes for many consumers. Some have escaped the need to pay advertising expenses claimed by the agency or have had a disputed agency agreement dissolved following negotiation.

    Some issues have involved allegations of two-tier marketing. Consumers have sometimes opted to join one of a number of test cases in the Brisbane District Court. Over 700 consumers are currently involved in such cases via law firms in Brisbane and Melbourne.

    Jeff’s focus since mid 2003 has been consumers who have lost money to property investment courses and get-rich-quick schemes.

    He says of the year’s work: "Most complainants are extremely grateful for the assistance provided by the Fund team. Most consent to the publication of their individual stories to benefit others."

    In June 2004, Jeffrey Dalrymple ceased to be employed by the
    Fund. Legal work is now handled by law firms in Sydney, Melbourne and Brisbane.

    Influence on improved consumer protection laws
    Most state governments are rewriting their real estate laws. The combined resources of the Fund and its supporters has made a contribution to these changes.

    The Jenman website, the "Inside Secrets" events and media appearances by Neil Jenman and Denise Brailey have raised awareness of many consumer issues. Neil has communicated with ministers and regulators to lobby for changes and has written several formal submissions which seem to have influenced the framing of new laws.

    The Property Stock and Business Agents Act became law in New South Wales in September 2003. Neil’s recommendations were presented in two meetings with the (then) Minister for Fair Trading, John Watkins, and in a formal submission before the laws were drafted. Many of his recommendations, including changes to auction laws, appear to have been included.

    There were similar outcomes in Victoria, where amendments to the Estate Agents Act and the Sale of Land Act took effect in February 2004. Neil Jenman met the (then) Minister for Consumer Affairs, Christine Campbell, and provided a formal submission which helped draft laws banning kickbacks, price mis-quotes and some of the most notorious auction practices.

    The State Government in South Australia has signalled plans to bring in new real estate laws in 2004, following an inquiry instigated by MP John Rau. Neil Jenman has spoken several times to Mr Rau and submitted written recommendations, which are now reflected in the draft laws.

    Queensland, which implemented the Property Agents and Motor Dealers Act in 2001, has since reviewed the new laws. Neil has sent two formal submissions to the Queensland regulatory authorities.

    More recently, the State Government in Tasmania announced it will change its real estate legislation. Fund personnel have communicated with Tasmania’s Director of Consumer Affairs and Fair Trading, Roy Ormerod, to comment on the new laws. The Auctioneers and Real Estate Agents Bill was expected to become law in June 2004. For some reason it has now been delayed until at least 2005.

    Media support
    While the Fund has been a critic of many real estate practices, much of the credit for raising public awareness goes to journalists who pursued several issues.

    Tina Perinotto of the Australian Financial Review first wrote about Henry Kaye in 2001 and has written numerous articles since. Maurice Dunlevy at The Australian and John Garnaut of the Sydney Morning Herald have also reported on many of the key issues.

    Channel 7 has included many real estate segments on Today Tonight while ABC-TV’s Four Corners created considerable national impact in April 2003 with its "Tall Stories" program, which focussed attention on a number of major property suspects, most of whom have since been the focus of regulatory attention.

    In April 2004, after weeks of intensive research and investigation, Channel Nine’s 60 Minutes aired a story called The Sting. Reporter Liz Hayes introduced the program with these words, "It's the biggest property scam ever and you're about to see exactly how it works, a con so clever yet so simple, it trapped 250,000 Australians — average Australians, ordinary mums and dads. For them, there was no boom, just the bust. Their only mistake — they were too trusting. And all along the line, that trust was betrayed, often by the very people who should have been on their side — the home lenders, the lawyers and the banks. The appalling thing is, they all kept quiet, then simply pocketed their share of the proceeds — hundreds of millions of dollars."

    Following the 60 Minutes story, Neil Jenman received more than 800 emails, many from consumers who needed urgent assistance. Hundreds of people also telephoned with stories of how they, too, had been caught in a property scam. One of the property rogues featured in the 60 Minutes story was a convicted felon. Threats were received from this man prior to the airing of the story – and they continue to this day (late 2004).

    In October 2004, the Fund was contacted by a family who had unknowingly bought a home in which a multiple murder had taken place. The family stood to lose at least $80,000 – being their ten per cent deposit – as they did not wish to proceed with the purchase. Despite complaining to the agent who sold them the home and to the regulatory authorities, the family was unable to obtain help. The basic message was, "Too bad, you have signed and there has been no law broken as agents are not obligated to reveal the history of a home."

    Neil Jenman wrote an article about the plight of this family. Their story then made national headlines. It was on the front page of The Sydney Morning Herald (October 5) and the second story in the nightly news bulletins as well as being the lead story on Channel Seven’s Today Tonight program. After two weeks of intense publicity, the family was compensated for their lost deposit of $80,000 and indemnified against any future claims by the vendors. The NSW Government announced it was considering changing the disclosure laws to prevent other families being caught in a similar manner.

    On October 28, the family sent the following message to Reiden Jenman.

    Dear Reiden

    I am so happy with the ending. I remember when we first discovered the history of the house, we asked for help from everywhere, even Fair Trading, but the answer was very negative. We felt so fearful, and hopeless, When a friend gave us Neil's number and website two weeks after, honestly we were not sure that we could trust Neil. Why would he help a stranger without any conditions? Will we fall into a even bigger trap? But after met you, I know you are really above-board people. You helped us from your heart without any thought of payment. You really cared about us and shared our worries.

    My parents are very grateful for what you did and they want to contribute some money to the Homesellers & Homebuyers Protection Fund Limited, We are hoping this can help even more people when they feel hopeless. Thank you once more.

    Without the assistance and support of the media, this family had almost no chance of being released from their nightmare purchase.

    "We shouldn’t have to do this."
    The Fund has filled a gap in consumer protection. It’s a gap which should not exist.

    Journalist John Garnaut wrote in The Sydney Morning Herald on September 13, 2003: "The get-rich-quick industry is thriving in the absence of effective regulation, with no institution assigned specifically to cover it. Industry regulation hit its low point in August when state and federal consumer ministers met to blame each other for the regulatory black hole."

    While the authorities appeared to pass the buck, the property rogues make mega-bucks.

    Neil Jenman, interviewed on the ABC television program Lateline about the Fund’s assistance to get-rich-quick victims, said: "We shouldn’t have to do this."

    The activities of two-tier marketers, get-rich-quick spruikers and others who prey on real estate consumers have been in the public domain for many years. Con artists have prospered in the absence of an effective response from the state government departments and federal authorities whose job it is to protect consumers.

    Many aggrieved consumers have approached the appropriate government agencies and been rebuffed.

    David Reardon says: "Consumers are commonly ‘fobbed off’ unless there appears to be a serious case of illegality which would lead to a conviction. Some government officers unashamedly advise complainants that owing to budgetary constraints only grave misbehaviour can be investigated."

    Many consumers approach the Fund because of government inaction. Some consumers have been referred to the Fund by persons who work in the government departments. While this is flattering, it is also somewhat farcical.

    Neil Jenman says: "The enormity of the work being placed on the Fund is more than we can cope with. At times, it makes me despair."

    Fund personnel are in regular contact with people working within government authorities, many of whom seem frustrated at their inability to respond effectively to consumer inquiries.

    Neil Jenman says: "Many consumers tell us that the staff at state Fair Trading departments and ASIC and the ACCC have been sympathetic on a personal level. However, the regulatory staff often say they don’t have the resources available nor are they receiving the necessary direction from their superiors." The Fund has fewer resources.

    "The Consumer Credit Legal Centre in Victoria has done some outstanding work. So, too, has Consumer Affairs Victoria – and, more recently, the ACCC has taken a strong interest in the real estate industry. This gives me encouragement."

    Clearly, the main responsibility for consumer protection belongs to senior government officials and politicians, some of whom seem more interested in protecting themselves than protecting consumers. With the growing realisation that property consumers are being ripped off on a massive scale – and with the fall-out from the property boom growing daily – the ensuing scandals will be too big for even the most wily politicians to ignore.

    New laws are definitely required – especially in the provision of financial and investment advice from so-called "property experts". But lack of new legislation does not excuse the lack of enforcement of existing laws – from misleading and deceptive conduct to fraud.

    Until federal and state governments take a greater interest in protecting property consumers and until more offenders are prosecuted, an increasing number of consumers are likely to contact the Fund for help.

    Where we stand at the start of 2005

    The Fund is over-worked and under-funded, but not under-committed. Neil Jenman now devotes the majority of his time to consumer protection issues. Neil is able to support consumers thanks to the commitment of the staff at The Jenman Group who continue to offer training, advice and support to the real estate industry.

    While Neil will continue to offer suggestions to the real estate industry – and to give talks to those within the industry who support his stance on ethics and client care – his real estate training company is being ably-handled by Gary Pittard and his team at The Jenman Group.

    The loyalty and support of agents who continue to use the services of The Jenman Group is greatly appreciated. Without their assistance, the Fund could not exist.

    The Homesellers and Homebuyers Protection Fund team is now made up of Neil Jenman, Reiden Jenman and David Reardon. Regular assistance is sought from Craig Lean for research. Legal advice is provided by Champion Legal in Sydney, Slater & Gordon in Melbourne and O’Dwyer & Bradley in Brisbane. Denise Brailey and RECA provide assistance in handling consumer issues.

    Further funding is required in order to engage the services of more secretarial and research staff. It is hoped that funding will increase in the year ahead.

    The Directors of the Fund thank all those who support our efforts to protect property consumers.



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