Bateman v The Real Estate and Business Agents Supervisory Board
[2003] WASCA 186
•21 AUGUST 2003
BATEMAN -v- THE REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD [2003] WASCA 186
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASCA 186 | |
| THE FULL COURT (WA) | 21/08/2003 | ||
| Case No: | FUL:20/2002 | 15 APRIL 2003 | |
| Coram: | ANDERSON J TEMPLEMAN J MCLURE J | 15/04/03 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | MALCOLM JAMES BATEMAN THE REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD |
Catchwords: | Real estate agent Claim against Fidelity Fund for pecuniary loss Whether "defalcation by a licensee" Whether in the course of the business of the licensee Turns on own facts |
Legislation: | Real Estate and Business Agents Act 1978 (WA), s 4, s 23(1), s 26, s 107, s 113(1), s 116(1) |
Case References: | Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : BATEMAN -v- THE REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD [2003] WASCA 186 CORAM : ANDERSON J
- TEMPLEMAN J
MCLURE J
- Appellant
AND
THE REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD
Respondent
Catchwords:
Real estate agent - Claim against Fidelity Fund for pecuniary loss - Whether "defalcation by a licensee" - Whether in the course of the business of the licensee - Turns on own facts
(Page 2)
Legislation:
Real Estate and Business Agents Act 1978 (WA), s 4, s 23(1), s 26, s 107, s 113(1), s 116(1)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr P R Eaton
Respondent : Mr A R Beech
Solicitors:
Appellant : Batemans
Respondent : Tottle Christensen
Case(s) referred to in judgment(s):
Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158
Case(s) also cited:
Nil
(Page 3)
1 ANDERSON J: My reasons for joining in the decision to dismiss this appeal are fully set out in the judgment of McLure J which I have read. There is nothing I can usefully add.
2 TEMPLEMAN J: I have read in draft the reasons to be published by McLure J. I agree with those reasons. There is nothing I wish to add.
MCLURE J:
Introduction
3 The appellant appealed from the decision of Groves DCJ dismissing the appellant's appeal pursuant to s 23(1) of the Real Estate and Business Agents Act 1978 (WA) ("the Act"). The District Court appeal, involving a hearing de novo, was from a decision of the Real Estate and Business Agents Supervisory Board ("the Board"). The Board had dismissed the appellant's claims against the Fidelity Fund established under s 107 of the Act.
4 At the conclusion of the hearing the Full Court dismissed the appeal. These are my reasons for dismissing the appeal.
5 The question for determination in the appeal was whether the appellant suffered pecuniary loss or loss of property by reason of any defalcation by Mr Graeme Grubb during any period when he was the holder of a current triennial certificate under the Act.
Background
6 The appellant did not take issue with any of the facts on which the learned Judge relied in reaching his decision. Those facts are as follows.
7 On 9 July 1998 Ms Angelica Bateman attended at 77 Mill Point Road, South Perth, being the offices of a number of businesses but collectively described as "Grubb Real Estate & Finance Centre". She went there on behalf of her husband the appellant.
8 She met David Coxon described on his business card as a Senior Mortgage Originator. The business card had the logo of Grubb Finance, beneath which was written "Rowena Nominees Pty Ltd (ACN 008 818 273)" and beneath which was printed "Graeme Grubb Finance Broker".
(Page 4)
9 Rowena Nominees Pty Ltd was the holder of a finance broker's licence under the Finance Brokers Control Act 1975 (WA) and was authorised to carry on business under the name "Graeme Grubb Finance Broker".
10 Ms Bateman paid to Mr Coxon the sum of $163,000 for the purpose of investment in first mortgages. She had selected four investment properties after having been shown a range of first mortgage investments by Mr Coxon. A receipt number 6581 dated 9 July 1998 recorded receipt from the appellant of $163,000 broken down into four separate amounts and has the words "Graeme Grubb Finance Broker Trust Account" printed thereon.
11 Two of the amounts were the subject of the appellant's claim, identified as being advanced to Sandgate Corporation Pty Ltd (as to $27,000) and Rowena Nominees Pty Ltd (as to $30,000). The sum of $163,000 was debited to the appellant's account with United Credit Union and credited to the Graeme Grubb Finance Broker Trust Account with St George Bank Limited.
12 On 10 July 1998 the appellant signed Deeds appointing Graeme Grubb Finance Broker as his agent and attorney in relation to the enforcement of the appellant's rights in relation to the loans to Sandgate Corporation Pty Ltd and Rowena Nominees Pty Ltd.
13 By a statement dated 28 July 1998 Rowena Nominees Pty Ltd trading as Graeme Grubb Finance Broker having its head office at "Grubb Real Estate & Finance Centre" at 77 Mill Point Road, South Perth, accounted to the appellant for the investment of $163,000 and interest earned thereon. There was no evidence of the precise nature and extent of Graeme Grubb's association with Rowena Nominees Pty Ltd. However, it can be inferred that it was a close association.
14 The business of "Graeme Grubb Real Estate" was also conducted at the Grubb Real Estate and Finance Centre at 77 Mill Point Road, South Perth. It was common ground that Graeme Grubb was a licensed real estate agent who traded under the name Graeme Grubb Real Estate and at the material times held a triennial certificate under the Act.
15 The business of Grubb Barrister & Solicitor, apparently that of Graeme Grubb's son, Bruce Grubb, was conducted from the same address as Graeme Grubb Finance Broker and Graeme Grubb Real Estate.
(Page 5)
16 The facts surrounding the fate of the investments are described by the Judge as follows:
"As events transpired there was no first mortgage security from Rowena Nominees Pty Ltd for the sum of $30,000 and there was no mortgage security at all from Sandgate Corporation Pty Ltd in respect of the sum of $27,000. It is a matter of history that the invested funds were lost. The precise circumstances of the defalcation are not known. It is nevertheless common ground that the defalcation of the funds was effected by Graeme Grubb."
17 The Judge dismissed the appellant's claim on the ground that he had failed to prove that the loss was by reason of any defalcation by Graeme Grubb in the course of his business as a licensed real estate agent.
The Scheme of the Act
18 The purpose of the Fidelity Fund is described in s 116(1) of the Act which provides:
"Subject to this Act, the Fidelity Fund shall be held and applied for the purposes of reimbursing persons who may suffer pecuniary loss or loss of property by reason of any defalcation by a licensee during any period when he was the holder of a current triennial certificate, but reimbursing only to the extent of the defalcation of the licensee."
19 The term "defalcation by a licensee" is defined to include:
"criminal or fraudulent conduct -
(a) of a licensee;
(b) of any one or more of the servants or agents of the licensee;
(c) of a person who is a partner in the business of the licensee; or
(d) …
in the course of the business of the licensee and from which arises pecuniary loss or loss of property to any other person."
(Page 6)
20 Under s 26 of the Act, a person shall not carry on business as a real estate agent unless licensed as such under the Act and is the holder of a current triennial certificate in respect of the licence.
Grounds of Appeal
21 It is said the learned District Court Judge erred:
(1) in finding that the appellant's loss was not one which "occurred in the course of the business of a licensee" under the Act;
(2) in holding that the appellant was required to prove that the moneys the subject of the defalcation were received and held by the licensee Graeme Grubb as distinct from Rowena Nominees Pty Ltd;
(3) in having regard to irrelevant considerations, namely the purpose for which the funds were received and the entity which received the funds;
(4) in holding that the appellant had suffered pecuniary loss "by reason of the failure of a finance broking business", having accepted that the defalcation had been effected by Graeme Grubb who was at the time of the defalcation a licensed real estate agent under the Act;
(5) in holding that the fact that Graeme Grubb at the time of the defalcation conducted a composite finance broking and real estate business from premises described as "Grubb Real Estate & Finance Centre" was of no relevance.
The Appeal
22 A common underlying theme can be discerned from the first four grounds of appeal which reveals itself, in part, in the last ground of appeal which misstates the facts. The appellant's case is to the effect that:
(a) at the time of the defalcation Graeme Grubb conducted a composite finance broking and real estate business from premises described as "Grubb Real Estate & Finance Centre";
(b) the Fidelity Fund covers losses arising from criminal or fraudulent conduct by Mr Grubb in the course of him
(Page 7)
- carrying on any aspect of the composite business whether it be that of real estate agent or finance broker.
23 The appellant fails on both limbs of his case. The first limb concerns questions of fact dealt with by the Judge which are not the subject of any ground of appeal. Rowena Nominees Pty Ltd was the holder of a finance broker's licence and carried on the business of Graeme Grubb Finance Broker. Graeme Grubb was the holder of a real estate agent's licence and carried on the business of Graeme Grubb Real Estate. The legal practice carried on at the South Perth address was the business of someone other than Graeme Grubb. The trial Judge concluded, correctly in my view, that they were not a composite business but separate and distinct businesses carried on by different entities from the same address.
24 The second limb of the appellant's submission relates to the proper construction of the phrase "defalcation by a licensee". The Judge concluded, correctly in my view, that for there to be defalcation by a licensee there must be relevant conduct in the course of the business of the licensee for which he was licensed that is, in the course of Graeme Grubb's business as a licensed real estate agent. It does not refer to a pecuniary loss from any other business in which the licensee may have an interest.
25 The proposition put on behalf of the appellant is that it is sufficient that the pecuniary loss arise from a business if a real estate business is carried on as part of, or in connection with that business.
26 For that conclusion the appellant relies on the definitions of "business" "agent" and "real estate agent" in s 4 of the Act. Business is defined as the business of an agent. Agent means a person who is, inter alia, a real estate agent and real estate agent is defined to mean:
"a person whose business either alone or as part of or in connection with any other business, is to act as agent for consideration in money or money's worth, as commission, reward or remuneration, in respect of a real estate transaction as defined …"
27 However, the definition of real estate agent does not expand the notion of business. It simply connotes that a person can carry on a business as a real estate agent even if it is part of or connected with another business. In any event, in the context of the definition of "defalcation by a licensee", the relevant business is that of the licensee.
(Page 8)
28 The Judge's construction of the phrase defalcation by a licensee, which limits access to the Fidelity Fund to criminal or fraudulent conduct in the course of a person's business as a licensed real estate agent, is also consistent with the scheme of the Act. In particular, under s 113(1) of the Act, each agent on making application for a licence or for renewal of a triennial certificate is required to pay the sum of $150 (or such other sum as the Board approves) to be credited by the Board to the Fidelity Fund. It would be an odd result for licensed agents to fund compensation for defalcations not connected with the business the subject of the licence under the Act.
29 Dealing specifically with the second ground of appeal, the Judge held that:
"The onus in a matter such as this is on the appellant to satisfy the Board and the court on appeal that the defalcation was effected in the course of the business of the licensee."
30 In my view, that was the correct approach, given the Judge's finding that Mr Grubb did not conduct a composite real estate and finance broking business. It was therefore relevant to consider whether the parties to the investment transactions were the appellant and Mr Grubb in his capacity as a licensed real estate agent or the appellant and Rowena Nominees Pty Ltd in its capacity as a licensed finance broker. It was also relevant to consider the purpose for which the funds were received. That is because a mortgage finance broking transaction may also be a real estate transaction under the Act: Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158.
31 Although the purpose for which the funds were received, and by whom they were received are relevant, those considerations will not necessarily be determinative in all cases. However, on the evidence in this case the fact that the funds were received by Rowena Nominees Pty Ltd acting as a licensed finance broker is determinative.
32 In the absence of any evidence about the way the funds were dealt with after receipt by Rowena Nominees Pty Ltd, or as to the circumstances of the defalcation, the appellant failed to prove that Mr Grubb's criminal or fraudulent conduct was in the course of his business as a licensed real estate agent. Accordingly, the appellant's claim against the Fidelity Fund failed.
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