Commissioner for Consumer Affairs v McMurray - [2017] SASCFC 16

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
COMMISSIONER FOR CONSUMER AFFAIRS v MCMURRAY
[2017] SASCFC 16
Judgment of The Full Court
(The Honourable Justice Blue, The Honourable Justice Parker and The Honourable Justice Hinton)
7 March 2017
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION
PROFESSIONS AND TRADES - AUCTIONEERS AND AGENTS - CONSTRUCTION OF STATUTORY PROVISIONS - SOUTH AUSTRALIA - CONTROL OF MONEY
Appeal against District Court judgment on appeal reversing determination by the Commissioner for Consumer Affairs.
The respondent and his wife dealt with the Charterhill Group of Companies which established a company and trust for them to act as a self-managed superannuation fund. Charterhill introduced to them a property in Queensland available for purchase by their superannuation fund for $389,000 for which payment of a 10% deposit of $38,900 was required. Charterhill advised them that they could borrow from a bank to fund the majority of the purchase price but would have to fund $145,000 (including the 10% deposit) out of their own resources.
Charterhill told the respondent and his wife that it offered a term deposit product that paid interest of 6% per annum. They on behalf of their superannuation fund decided to proceed to purchase the Queensland property and to invest the $38,900 deposit together with a further $106,100 with Charterhill pending settlement.
The superannuation fund executed an Expression of Interest in pro forma form. It contained provisions for insertion of details of the property, purchase price and holding deposit but those details were not completed. It contained provisions dealing with the holding deposit. By the Expression of Interest the superannuation fund authorised deposit of the funds with Lending Solutions International Pty Ltd (LSI), a company in the Charterhill Group.
LSI sent to the respondent a Deposit Investment Letter referring to a deposit investment of $106,100 for an initial term of 90 days and thereafter with options to renew. The respondent transferred $145,000 into LSI’s bank account. LSI issued a Certificate of Deposit for $106,100 and separate Receipt for $38,900.
Purchase of the Queensland property was never completed and the superannuation fund lost its funds of $145,000. The respondent made a claim on the agents indemnity fund under section 30 of the Land Agents Act 1999.
The Commissioner accepted that the sum of $38,900 represented trust money received by a land agent when acting as an agent and that the superannuation fund was entitled to compensation for its loss. However, the Commissioner rejected the claim in respect of the sum of $106,100.
The respondent appealed to the District Court. A District Court Judge upheld the appeal and set aside the Commissioner’s rejection of the claim for $106,100.
The Commissioner appeals by permission against the Judge’s allowance of the appeal.
Held by Blue J (Parker and Hinton JJ agreeing) (allowing the appeal):
1. The determination of the respondent’s claim for compensation turned on…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] SASCFC 16
Decision Date: 7 March 2017

CaseChat Overview and Summary

The Commissioner for Consumer Affairs appealed to the Full Court of the Supreme Court of South Australia against a District Court decision concerning the handling of funds by Mr McMurray. The dispute arose from Mr McMurray's involvement with the Charterhill Group of Companies, which offered investment opportunities, including property purchases through self-managed superannuation funds. The Commissioner alleged that Mr McMurray, through his company, had engaged in fiduciary default by misapplying trust money.

The primary legal issues before the Full Court were whether the District Court Judge had given sufficient weight to the original decision being appealed, as required by section 42E(3) of the District Court Act 1991 (SA), and whether the Judge had erred in classifying a sum of $106,100 as trust money. The Commissioner contended that this sum should have been considered as an investment received by Mr McMurray in his capacity as a financial services provider, rather than trust money subject to fiduciary obligations.

The Full Court allowed the appeal, finding that the District Court Judge had erred in concluding that the $106,100 was received by an agent acting as such, and therefore that there had been a fiduciary default. The Court clarified that appeals under section 42E of the District Court Act 1991 (SA) are generally appeals by way of rehearing, requiring the appellate court to determine whether the decision below was correct on the material before it, rather than a full rehearing de novo. The Court determined that the sum in question was not trust money in the context of the alleged fiduciary default. Consequently, the appeal was allowed, and the orders of the District Court were set aside and replaced with an order dismissing the appeal against the Commissioner's decision.

Orders

Orders of the court

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Background

Background to the litigation

The Commissioner appeals by permission essentially on two grounds:1.the Judge failed to give due weight to the decision being appealed against and the reasons for it and not depart from it except for cogent reasons as required by section 42E(3) of the District Court Act 1991 (SA);2.the Judge erred in finding that the sum of $106,100 was trust money and ought to have held that it was received as an investment in the course of the recipient acting as a financial services provider.Background In 2012-2013, George Nowak was the owner and director of companies in the Charterhill Group of Companies (Charterhill), which included Nova Real Estate Pty Ltd (Nova) and Lending Solutions International Pty Ltd (LSI). In 2012-2013, Mr McMurray was employed by JB Hi-Fi. He had approximately $165,000 in superannuation. Between November 2012 and January 2013, Greg Anderson of Charterhill met several times with Mr and Mrs McMurray. Mr Anderson said that Charterhill could set up a self-managed superannuation fund for them, provide a selection of properties for their fund to purchase and manage the property for them. In January 2013, Charterhill arranged the incorporation of J & C McMurray Investments Pty Ltd as trustee for the McMurray Holding Trust and the incorporation of J & C McMurray Investments 2 Pty Ltd as trustee for the McMurray Superannuation Fund (the Superannuation Fund). Mr McMurray transferred his existing superannuation of $165,000 into the new Superannuation Fund. In January 2013, Mr Anderson introduced the McMurrays to Mr Nowak as the owner and director of Charterhill. Mr Anderson showed to the McMurrays property brochures including one for a house property in Griffin, Queensland (the Griffin property). Mr Anderson said that the price of the Griffin property was $389,000 and a ten per cent deposit would be required, being $38,900. Mr Anderson said that the superannuation fund could borrow from a bank the majority of the purchase price but in due course it would be required to pay from its own resources a total of $145,000 (including the $38,900 deposit). In July 2013, the McMurrays decided to proceed with the purchase of the Griffin property for $389,000 and to pay the required ten per cent deposit of $38,900. On about 15 July 2013, Mr Nowak met with the McMurrays. He told them about a term deposit product that Charterhill was offering, which paid interest of six per cent per annum. Mr McMurray enquired how Charterhill could pay a rate higher than a bank. Mr Nowak told Mr McMurray that Charterhill had millions of dollars on deposit and could negotiate a better rate with the bank. Mr McMurray asked if the money would be safe. Mr Nowak said that the deposit would be held in trust in a Bank SA account. Mr Nowak gave Mr McMurray the option of another product that paid interest of eight per cent per annum but said that it was a more risky product. Mr McMurray considered that the six per cent term deposit sounded safer. Mr Nowak produced to Mr McMurray a document on Charterhill letterhead entitled “Expression of Interest” (the Expression of Interest). The document was a pro forma form which contained provision for insertion of details of the Buyer, Buyer’s Solicitor, Property, Purchase Price and Holding Deposit. Curiously, the form did not contain provision for insertion of details of the Seller, nor did it provide for execution by any party other than the Buyer. The Buyer was shown as “J & C McMurray Investments Pty Ltd atf The McMurray Holding Trust for the beneficial ownership of J & C McMurray Investments 2 Pty Ltd atf The McMurray Superannuation Fund” and a Brisbane conveyancing firm was shown as the Buyer’s Solicitor. Curiously, no details were inserted for the Property, Purchase Price or Holding Deposit.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GEORGE J GEORGE J

This ground of appeal is established. The Judge erred in concluding that the sum of $106,100 was received by an agent acting as an agent and hence that there was a fiduciary default in respect of that sum.Conclusion The appeal should be allowed. The orders by the Judge should be set aside and in lieu thereof the appeal against the Commissioner’s decision should be dismissed. PARKER J: I agree with the reasons of Blue J and the orders he proposes. I also agree with the observations made by Hinton J. HINTON J: I agree with Blue J for the reasons he has given that the appeal should be allowed. I wish to comment on the construction of s 42E(3) of the District Court Act 1991 (SA) (DCA) and the nature of the appeal to which ss 42E and 42F apply absent any contrary indication in a special Act, as is the case here. Appeals are creatures of statute.[6] They can then take on whatever form that the Legislature considers appropriate subject to any constitutional limitation constraining the functions that may be conferred on a court that comprises an integer in the integrated Australian judicial system. That said, generally the nature of an appeal falls within one of three categories. In Wigg v Architects Board of South Australia Cox J said:[7]The word “appeal” is itself a word of flexible meaning (McCullin v. Crawford). In Builders Licensing Board v. Spurway Constructions (Syd.) Pty. Ltd. Mason J. described the different kinds of appeal that may be created by a legislature with respect to the decisions of judicial and administrative tribunals. See also Victorian Stevedoring and General Contracting Co. Pty. Ltd. v. Dignan and Ex parte Australian Sporting Car Club; Re Dash. The first kind is an appeal strictly so called. Here the question is simply whether the judgment complained of was right when given: Ponamma v. Arumogam. There is no question of introducing fresh evidence in the appeal court. All that will be decided is whether the court below came to the right decision on the material that was before it. Dignan's case, which dealt with an appeal to the High Court under s. 39 of the Judiciary Act against a conviction recorded by a Magistrate for a Commonwealth offence, is an example of this sort of appeal. Next, there is the appeal by way of rehearing, of which the appeal to the Court of Appeal in England, modelled on the old Chancery appeal, is typical. See the Supreme Court Practice, 1979, vol. I, pp. 876-877. This is a rehearing on the documents, but with a special power to receive further evidence on the appeal. The latter power is necessary, because the question on a rehearing of this kind is whether the order of the court below ought to be affirmed or overturned in the light of the material before the appeal court at the time it hears the appeal. Cf. the appeal in this State from the decision of a Master under 0.54, r. 22: In re Flinders Trading Co. Pty. Ltd. Thirdly, there may be an appeal de novo in which the appeal court hears the matter afresh. Mason J. gives as an example of a hearing de novo the appeal from a court of summary jurisdiction to Quarter Sessions under the Justices Act of New South Wales. There, even if it be the defendant who appeals, the informant or complainant starts again and has to call his witnesses and make out his case. Cf. Sweeney v. Fitzhardinge. The appeal in England from a magistrate's court to the Crown Court is evidently an appeal of this kind (Supreme Court Practice, loc. cit.). See also McCullin v. Crawford; Phillips v. The Commonwealth. … Which type of appeal is given by a particular Act will depend upon its construction. The use of the word “rehearing” will not be decisive, because that is a word to which different meanings have been given. Powell v. Streatham Manor Nursing Home; Builders Licensing Board v. Sperway Constructions (Syd.) Pty. Ltd. It will be a matter of discerning Parliament's intention from an examination of the legislation as a whole. In the Builders Licensing Board case the High Court held that the appeal created by the New South Wales Act in question was an appeal de novo, notwithstanding the description of it in the legislation as an appeal “by way of rehearing.”(footnotes omitted).[6] Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220 at 225 (Rich, Dixon, Evatt and McTiernan JJ).[7] (1984) 36 SASR 111 at 112-4; see also Allesch vMaunz (2000) 203 CLR 172 at [23]-[24] (Gaudron, McHugh, Gummow and Hayne JJ); Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at [12]-[13] (Gleeson CJ, Gaudron and Hayne JJ).

Ratio Decidendi

Legal Principle Established

Established by: GEORGE J, GEORGE J

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