Commissioner for Consumer Affairs v McMurray
[2017] SASCFC 16
•7 March 2017
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 a question of law being the proper construction of the documents evidencing the transactions between the parties. In these circumstances, the Judge did not err by failing to give due weight to the decision being appealed against and the reasons for it and not to depart from it except for cogent reasons as required by section 42E(3) of the District Court Act 1991 (SA) (at [48]-[50]).
2. Observations concerning the construction of section 42E(3) of the District Court Act 1991 (at [44]-[47] per Blue J and [76]-[85] per Hinton J).
3. 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 by way of term deposit (at [69]-[71]).
4. Appeal allowed. Orders by the Judge set aside and in lieu thereof appeal against the Commissioner’s decision dismissed (at [72]).
District Court Act 1991 (SA) s 42A, s 42B, s 42C, s 42E, s 42F; Land Agents Act 1994 (SA) s 3, s 30, s 32, s 35; Workplace Relations Act 1996 (Cth) s 45, referred to.
Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; House v The King (1936) 55 CLR 499; Wigg v Architects Board of South Australia (1984) 36 SASR 111; Registrar of Firearms v Marksman Training Systems Pty Ltd (No 2) [2016] SASCFC 72; Wigg v Architects Board of South Australia (1984) 36 SASR 111, discussed.
Allesch v Maunz (2000) 203 CLR 172; Commissioner for Railways (NSW) v Cavanough (1935) 53 CLR 220, considered.
COMMISSIONER FOR CONSUMER AFFAIRS v MCMURRAY
[2017] SASCFC 16Full Court: Blue, Parker and Hinton JJ
BLUE J: This is an appeal against a judgment of a District Court Judge on appeal[1] against a determination by the Commissioner for Consumer Affairs[2] rejecting a claim for $106,100 compensation from the agents indemnity fund under section 30 of the Land Agents Act 1994 (SA) (the Act).
[1] Under section 35 of the Land Agents Act 1994 (SA).
[2] Under section 32 of the Land Agents Act 1994 (SA).
The Commissioner rejected the claim by the respondent James McMurray on the ground that the money was not received by the putative agent as part of a business of dealing with land on behalf of others but rather was paid as an investment in a term deposit product.
The Judge allowed the appeal on the ground that the money was received by the putative agent in the capacity of land agent.
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.
The Expression of Interest included a box relating to the deposit as follows:
IMPORTANT
I/We hereby authorise Nova Real Estate to direct your deposit under your instructions as follows (please tick):
Non-Interest Bearing Deposit
BSB: 105 074 Account No: 047018840
Bank: Bank SA, Torrensville SA
Account Name: Nova Real Estate Pty Ltd
Nova Real Estate Pty Ltd can deposit the funds on higher level Interest Bearing Deposit terms for the period that they are held by Nova Real Estate Pty Ltd on your behalf with:
BSB: 105 074 Account No: 046799440
Bank: Bank SA, Torrensville SA
Account Name: Lending Solutions International Pty Ltd
NB: Once you authorise Nova Real Estate Pty Ltd to release the funds for the vendor’s solicitor, Interest Bearing Deposit earnings will cease.
NOTE: If the property contract requires the deposit to be paid directly to the vendor’s solicitor, then we will provide you with separate instructions regarding the payment.
The Expression of Interest also contained the following terms:
Terms of Expression of Interest
1. In this Expression of Interest unless the context otherwise requires:
(a) “Contract” means a contract in the form of an REI Contract from the appropriate State and on terms and conditions consistent with the details of this expression of interest and any other conditions imposed by the Seller;
2.By signing this Expression of Interest the Buyer confirms its genuine interest to purchase the Property.
3.As an expression of the Buyer’s genuine intention to purchase the Property, the Buyer tenders the Holding Deposit to be held in the designated account.
4.The Buyer requests that once the Seller is in a position to do so, the Seller prepare and deliver to the Buyer a Disclosure Statement and a Contract.
5.If the Buyer after receiving the Disclosure Statement and Contract wishes to proceed with the purchase of the Property, the Buyer must sign and return the Contract and other related documents to the Seller within fourteen (14) days of receiving them together with the Initial Deposit (if any).
6.The Holding Deposit paid (if any) will become part of or all of the Initial Deposit payable pursuant with the Contract.
7.In the event that the Contract and other related documents (if any) are not returned to the Seller within the fourteen (14) day period, the Seller may assume that the Buyer does not wish to proceed with the purchase of the Property and further may offer the Property to other interested parties.
On 18 July 2013, Mr and Mrs McMurray signed the Expression of Interest on behalf of the Buyer and gave or sent it to Charterhill.
On 23 July 2013, LSI sent by email to the Superannuation Fund a letter (the Deposit Investment Letter) which included the following provisions:
RE: SUPER FUND DEPOSIT INVESTMENT
Further to our letter of 01 March 2013, we take this opportunity to thank you for proceeding with your request for deposit investment, which is made available to you on the following terms –
Amount – $106,100.00
Term – Initial Term of 90 days with an option to renew for a further 90 day terms. However, as funds are required, then 14 days notice is required at any time.
Interest Rate – Fixed Rate for Initial Term at 6.00% Per Annum calculated daily and credited at the end of each month or on a rollout date if earlier.
Security – Redeemable Term Deposit Certificate.
Costs – Establishment and Documentation Fee of $50.00.
Deposit Commencement Date – 23 July 2013
Pre-Conditions – You acknowledge and accept that our company has responded to your unsolicited request for a deposit facility and that this in no way constitutes an offer to the public nor is it in response to any prospectus or other public offer document. The company has never requested any funds from you and outside of the specific securities given takes no responsibility towards such deposited funds. The Company has not performed any financial analysis on your affairs nor provided any opinion or statement of financial advice thereto.
Transfer of funds: Transfer of funds should be made to:
Bank SA (a member of St George Bank)
BSB: 105074
A/C No: 046799440
A/C Name: Lending Solutions International
…
Yours faithfully
LENDING SOLUTIONS INTERNATIONAL PTY LTD
[Signed]
GEORGE J NOWAK
DIRECTOR
No letter dated 1 March 2013 was produced by the McMurrays to the Commissioner. This Court was informed that the McMurrays cannot locate such a letter.
On 23 July 2013, Mr McMurray instructed his bank to transfer $145,000 into the LSI account.
On 23 July 2013, LSI issued to the Superannuation Fund a Certificate of Deposit for $106,100.00 (the Certificate of Deposit). The Certificate provided:
Certificate of Deposit
$106,100.00
------------------------------------------------------------------------------------
One Hundred & Six Thousand One Hundred Australian Dollars
------------------------------------------------------------------------------------
The above amount was deposited with Lending Solutions International Pty Ltd for security purposes
Depositor’s Name The McMurray Superannuation Fund
Depositor’s Address [omitted]
Reference No 1000990
Given under my hand this 23 day of July 2013
This is to certify that the amount indicated above has been deposited with us and this Certificate must be presented by the Depositor to Lending Solutions International Pty Ltd before these funds can be released.
These funds are deposited under the terms of the letter dated 07 March 2013 between Lending Solutions International Pty Ltd and The McMurray Superannuation Fund – a copy of which letter must be attached to this Certificate.
[Signed]
GEORGE J NOWAK
DIRECTOR
No letter dated 7 March 2013 was produced by the McMurrays to the Commissioner. This Court was informed that the McMurrays cannot locate such a letter.
On 23 July 2013, LSI issued to the Superannuation Fund a receipt for $38,900 (the Receipt) which provided:
RECEIPT
DATE
RECEIPT
RECEIVED FROM
AMOUNT
23rd July 2013
00031
The McMurray Superannuation Fund
***$38,900.00
The Sum of: Dollars Thirty Eight Thousand & Nine Hundred & Cents Nil Only
By: EFT
Paying: Deposit – Purchase of property at Griffin, QLD.
(Property: 1 x Townhome, Griffin, QLD.
On 8 August 2013, LSI issued to the McMurrays an interest statement as at 31 July 2013 showing interest of $139.53 accruing on the deposit of $106,100. On 12 August 2013, LSI issued to the McMurrays an interest statement as at 31 July 2013 showing interest accrued of $46.89 on the deposit of $38,900. Thereafter, each month LSI issued separate interest statements in respect of the separate amounts of $106,100 and $38,900.
In August 2013, Mr McMurray flew to Queensland to look at the Griffin property. He was not happy with its size and location. He telephoned Mr Nowak to cancel the purchase of the property.
Two weeks later, Mr Nowak told Mr McMurray that he could purchase an alternative property at Mango Hill in Queensland for the same price as the Griffin property on the basis that the ten per cent deposit of $38,900 would be transferred to the Mango Hill property. The McMurrays agreed to purchase that property.
In October 2013, the McMurrays signed a contract to purchase the Mango Hill property for $395,000 from Villa World Developments Pty Ltd. Settlement never took place on that contract.
An amount of $1,000 was purportedly paid by Charterhill on 26 November 2013 out of the sum of $38,900 to the vendor of the Mango Hill property.
In January 2014, Mr McMurray was informed that Charterhill, including Nova and LSI, had gone into administration, receivership and/or liquidation. The Commissioner accepted that, as a result of Charterhill’s insolvency, the McMurrays were unable to recover their monies.
In February 2014, Mr McMurray made a claim on the agents indemnity fund for $145,000, identifying Nova as the land agent in question. Mr McMurray submitted in support of the claim a witness statement he had given to the Australian Securities and Investments Commission (Mr McMurray’s ASIC statement) together with the documents referred to above.
The McMurrays subsequently wound up the Superannuation Fund and Mr McMurray pursued the claim in his own name. No point was taken by the Commissioner about the identity of the claimant.
In February 2015, the Commissioner wrote to the McMurrays determining the claim. The Commissioner accepted that the trustee of the Superannuation Fund had suffered a pecuniary loss of $38,850 as a result of a fiduciary default of an agent being Nova. This represented the deposit in respect of the Griffin property of $38,900 less $1,000 purportedly transferred to the vendor of the Mango Hill property plus $950 legal expenses. The Commissioner rejected the claim in respect of $106,100 for the following reason:
I am unable to compensate for the term deposit payment because that money was paid as a separate investment and was not received by Nova as part of its business of dealing with land.
The statutory regime
Subsection 6(1) of the Act requires any person who carries on business as a land or business agent to be registered. Subsection 6(2) deprives an unregistered person of any entitlement to commission or other consideration for services as an agent if the person is required to be registered as an agent.
Subsection 4(1) defines an “agent” prima facie as follows:
A person is an agent for the purposes of this Act if the person carries on a business that consists of or involves—
(a)selling or purchasing or otherwise dealing with land or businesses on behalf of others, or conducting negotiations for that purpose; or
(b)selling land or businesses on his or her own behalf, or conducting negotiations for that purpose.
Part 3 Division 2 deals with agent trust accounts. Subsection 13(1) requires an agent to deposit trust money into an approved account at an ADI. Sections 13(3) and 14 prohibit, subject to limited exceptions, withdrawal from a trust account, except for payment to or in accordance with the direction of the person entitled to the money.
Subsection 12(1) defines “trust money” as follows:
trust money, in relation to an agent, means money—
(a)that is received by the agent when acting as an agent; and
(b)to which the agent is not wholly entitled in law and in equity.
Section 15 requires payment of interest on trust accounts to the Commissioner.
Part 3 Division 3 deals with the indemnity fund. Section 29 requires the Commissioner to maintain the indemnity fund. Funding sources are interest earned on agents’ trust accounts; monies recovered by the Commissioner in relation to fiduciary defaults; fines recovered as a result of disciplinary proceedings, and interest earned on the monies in the indemnity fund. The fund is to be used to pay inter alia claims to the extent authorised by Division 3.
Section 30 addresses claims on the indemnity fund. It relevantly provides:
30—Claims on indemnity fund
(1)A person who has suffered a pecuniary loss as a result of a fiduciary default may make a claim for compensation to the Commissioner.
(2) The amount of the claim cannot exceed the sum of—
(a) the actual pecuniary loss suffered by the claimant in consequence of the fiduciary default; and
(b) any reasonable legal expenses incurred in taking action to recover the loss or in making the claim to the Commissioner,
less any amount that the claimant has received or may reasonably be expected to recover (apart from this Division) in reduction of the loss.
Subsection 12(1) defines a fiduciary default to mean:
a defalcation, misappropriation or misapplication of trust money occurring while the money is in the possession or control of—
(a)an agent; or
(b)a firm of which an agent is a member;
By reason of the definition of “fiduciary default”, claims can only be made on the indemnity fund for the misappropriation of “trust money” as defined, namely money received by an agent when acting as an agent, ie relevantly dealing with land on behalf of others, being money to which the agent is not wholly entitled in law and in equity.
The reasons of the Judge
On the appeal to the Judge, Mr McMurray tendered an affidavit affirmed by him in January 2016 (Mr McMurray’s Affidavit). The affidavit covered largely the same ground as Mr McMurray’s ASIC statement although it included some further details. There were some inconsistencies between the details in the two versions. No oral evidence was adduced on appeal. Apart from Mr McMurray’s affidavit, the Judge had regard to the documentary material before the Commissioner.
The Judge summarised the facts and the parties’ contentions. The Judge identified the critical question as whether “Nowak” was acting as a land agent in respect of the sum of $106,100. The Judge accepted the Commissioner’s submission that the answer to that question turned on the relationship or apparent relationship between “Nowak” and the money.
The Judge continued:
I acknowledge the factors identified by Ms Stanley which tend to suggest that Nowak was not acting as a land agent in respect of the larger sum, but was instead acting as a financier or investment adviser. I have set out those facts at [38] above. Those facts are a combination of utterances by Nowak and documents produced by him.
[At paragraph 38, the Judge had said:
Applying that observation to the facts of this case Ms Stanley highlighted facts which suggest that the $106,100 was treated differently from the $38,900. Those facts are as follows:
(a) While there had been earlier discussions between Nowak and the McMurrays about a payment of $145,000 to Charterhill for the Griffin property, comprising a deposit and part-principal components, Nowak specifically suggested on 15 July a “term deposit project” his company was offering.
(b) The EOI which the McMurrays signed on 18 July purported to be a document relating to the “term deposit project” which had been discussed three days earlier.
(c) The business of LSI would appear to be the provision of investment and financial services not the sale and purchase or real estate.
(d) The two sums were receipted separately (HS6 & HS8).
(e) Nowak’s letter of 23 July 2015 (HS7) referred to the larger sum as “super fund deposit investment” and enclosed the so called Certificate of Deposit (HS8).
(f) Periodic statements for each amount were sent separately (HS10).
(g) $1000 purported to be drawn on the “deposit” account and paid to the vendors of the Mango Hill property (HS10).]
But there are other facts which tend to suggest that Nowak was acting as a land agent.
They too are a combination of utterances by Nowak and documents produced by him, in particular the EOI signed by the McMurrays. Nowak assured the McMurrays Nova would hold the money on trust pending settlement. The EOI has about it the appearance of a document dealing with the sale and purchase of land.
Nowak received the whole sum in the LSI account. None of it went into the Nova account. It all purported to earn the same interest. Only $1,000 was ever paid to the vendor towards the deposit on the Mango Hill property. There is nothing to indicate that Nowak dealt with the rest of the McMurrays’ money differently, notwithstanding the separate receipts and statements. That representation by Nowak that Nova would hold the money in trust was made in the context of the McMurrays telling him that the whole sum was to be applied to the purchase of the Mango Hill property.
Thus, while acknowledging the indicia of a purpose other than that as a land agent, there are indicia which suggest that the larger sum was being treated by Nowak in the same way as the smaller sum and that he was dealing with both in his capacity as a land agent.
It is of course necessary that at first instance the appellant bears the onus of proving his case. On appeal the appellant must demonstrate that there are cogent reasons to depart from the Commissioner’s decision.
I am satisfied that, on balance, Nowak was acting as a land agent when the fiduciary default occurred in relation to all of the monies. Accordingly the appellant was entitled to be compensated from the Indemnity Fund.
The need for cogent reasons
The Commissioner contends that the Judge erred in departing from the Commissioner’s decision without giving due weight to it and in the absence of cogent reasons to do so.
Subsection 42E(3) of the District Court Act 1991 (SA) provides:
The Court must, on an appeal, give due weight to the decision being appealed against and the reasons for it and not depart from the decision except for cogent reasons.
In Registrar of Firearms v Marksman Training Systems Pty Ltd (No 2),[3] Stanley J (with whom Gray J agreed) said:
Section 42E(3) is a mandatory provision requiring the Court on appeal to give due weight to the decision being appealed against and the reasons for it, and not to depart from the decision except for cogent reasons. There are two critical features to the operation of s 42E(3). First, the nature of the appeal being conducted by the Court is limited. The Court is not to allow the appeal from the decision appealed against except for cogent reasons. I consider that the purpose of s 42E(3) is to indicate that the appeal, while it is to be conducted in accordance with the terms of s 42E(2), is not an ordinary merits review of the decision the subject of the appeal. The Court on appeal is not to merely substitute its view for that of the original decision-maker. It is only to depart from that decision where cogent reasons exist. “Cogent” means compelling, convincing, powerful. Second, in the context of this appeal, the decision being appealed against is the decision of the Registrar, affirmed by the Committee, to cancel the respondent’s licences, and the Court is required in conducting the appeal from that decision, to give due weight not only to the decision but to the reasons for it. Those reasons include not only the reasons of the Registrar but, for the reasons explained above, the reasons of the Committee.[4]
[3] [2016] SASCFC 72).
[4] At [315]. (Citations omitted).
The deference to be accorded to the underlying decision on an appeal governed by section 42E depends on the nature of the asserted error in the decision and reasons for the decision.
Where the asserted error relates to the exercise of a discretion or the making of an evaluative judgment or policy decision, it will be necessary for the appellant to establish a process or outcome error of the type identified by the High Court in House v The King,[5] and the mere establishment of a process error will not avail the appellant unless the appellant also demonstrates that there should have been a different outcome.
[5] (1936) 55 CLR 499 at 505-506 per Dixon, Evatt and McTiernan JJ.
.
Where the asserted error relates to a finding on an ultimate factual issue determinative of the result, it will not be sufficient for an appellant merely to demonstrate that the judge on appeal would not have made that factual finding. It will ordinarily be necessary for the appellant to demonstrate that the finding made was not open on the material properly before the decision-maker. Particular appellate restraint will need to be exercised when the finding turns on credit. When the asserted error relates to a finding on a primary or intermediate factual issue but not an ultimate issue, but in addition the appellant will also need to demonstrate that the correct factual finding would have led to a different outcome.
Where the asserted error relates to a finding on an ultimate legal issue determinative of the result, the position is different. The appeal judge is required to determine the legal issue and if the judge concludes that the decision-maker wrongly decided the legal issue and it was determinative of the result, the appeal should be allowed. No question of deference to the decision of the decision-maker arises. Where the asserted error is of a primary or intermediate legal issue but not an ultimate issue, the appeal judge is required to determine the legal issue and then the appellant will also need to demonstrate that the correct legal position would have led to a different outcome.
In the present case, no oral evidence was adduced before the Commissioner or the Judge. There were no contentious factual findings made by the Commissioner or the Judge. The entitlement of Mr McMurray to claim in respect of the sum of $106,100 did not turn on any issue of fact or discretion. It turned on the ultimate legal issue whether that sum was received by Nova or LSI when acting as an agent within the meaning of the Act, ie dealing with land on behalf of others. This turned on the construction of the contract(s) between the Superannuation Fund and Nova/LSI. The construction of the contract(s) is a question of law.
If the Judge correctly concluded that the Commissioner erred in law in his construction of the contract(s), the Judge was obliged to allow the appeal. No issue of deference to the decision of the Commissioner arose.
This ground of appeal is not established.
Monies received by recipient acting as land agent
The Commissioner contends that the Judge misconstrued the contract (or contracts) and the transaction(s) between the parties in holding that there was a single transaction involving a single sum of $145,000 received by Nova in its capacity as a land agent as a deposit on a contract for the purchase of land; whereas on their true construction there were two separate transactions: $38,900 was received by Nova in the capacity as a land agent as a deposit on a contract for the purchase of land and $106,100 was received by LSI as a loan by way of term deposit by the Superannuation Fund and not by anyone in the capacity as a land agent.
Mr McMurray contends that the Judge correctly construed the contract and transaction between the parties and that there was a single transaction involving a single sum of $145,000 received by Nova in its capacity as a land agent as a deposit on a contract for the purchase of land.
The contract(s) between the parties were comprised or evidenced by four documents, being the Expression of Interest dated 18 July 2013 and the Deposit Investment Letter, Certificate of Deposit and Receipt dated 23 July 2013. However, because some items were not completed in the Expression of Interest including particularly the amount of the deposit, the writing was supplemented by the conversation between Mr Anderson and Mr McMurray in January 2013 relating to the purchase of the Griffin property and the conversation between Mr Nowak and Mr McMurray on about 15 July 2013.
It is apparent that the McMurrays were misled if not defrauded by Charterhill in entering into the transaction(s) in July 2013. A sophisticated purchaser or investor would not have entered into the transaction(s) in light of the structure and content of the Expression of Interest and of the transaction(s) and the explanations provided by Mr Nowak. In this respect, the McMurrays were naive in entering into the transaction(s). However, it is common ground that the contract(s) between the parties are to be construed at face value on the assumption that the transaction(s) between the parties were genuine.
The Commissioner contends that the Judge erred in considering whether Mr Nowak received the monies in his capacity as a land agent in circumstances in which it was clear that it was either Nova or LSI who received the monies and Mr Nowak was only acting in his capacity as director and agent for those companies. Mr McMurray contends that the references by the Judge to “Mr Nowak” should be understood as a reference to Nova. It is not necessary to resolve these competing contentions because the real issue is whether on the proper construction of the contract(s) between the parties there was a single transaction as contended by Mr McMurray or two separate transactions as contended by the Commissioner. On the one hand, it is clear that Mr Nowak personally was not a party to the contract(s) or a recipient of the monies and the Judge cannot have intended to convey that he was. On the other hand, the Judge’s consistent references to Mr Nowak as opposed to Nova and/or LSI tends to obscure the issue of construction that the Judge was required to decide.
The subject matter of the Expression of Interest is exclusively a land transaction being the purchase by the Superannuation Fund of the unnamed “Property” for the unnamed “Purchase Price”. Having regard to the conversations between Mr Anderson and Mr Nowak and the McMurrays, it is clear and it is common ground that the “Property” referred to in the document is the Griffin property and the Purchase Price is $389,000.
The Expression of Interest refers to a “Holding Deposit” payable at signing of the Expression of Interest but the amount has not been completed on the document. The Commissioner contends that the amount was $38,900; whereas Mr McMurray contends that the amount was $145,000.
In construing the contract, it is important to have regard to clauses 3 and 6 of the Terms of Expression of Interest. They provide:
3.As an expression of the Buyer’s genuine intention to purchase the Property, the Buyer tenders the Holding Deposit to be held in the designated account.
6.The Holding Deposit paid (if any) will become part of or all of the Initial Deposit payable pursuant with the Contract.
It is also important to have regard to the conversation between Mr Anderson and the McMurrays during which Mr Anderson informed the McMurrays that the price of the Griffin property was $389,000 and a ten per cent deposit would be required, being $38,900. In Mr McMurray’s ASIC statement, he said “Anderson told us the cost of the property would be $389,000. He also explained that we would be required to pay a deposit of $38,900” and in Mr McMurray’s affidavit he said that he was told that there was “an upfront holding deposit required by the vendor of $38,900”.
It is clear from these matters that, on the proper construction of the Expression of Interest, the Holding Deposit was $38,900 and not $145,000. The Holding Deposit was the amount required as an expression of the Buyer’s genuine intention to purchase the property and to “hold” the property until the contemplated land sale contract could be prepared and executed. When the land sale contract was executed, the Holding Deposit was to become the Initial Deposit under the land sale contract. This is clear from Mr Anderson’s statement in January 2013 that the Initial Deposit was ten per cent of the purchase price, being $38,900. The amount of $38,900 was that which was required to be paid by the Superannuation Fund as the deposit for the purchase of the Griffin property. This was the amount that was required to be paid as the Holding Deposit under the Expression of Interest.
The sum of $106,100 formed a component of the balance of 90 per cent of the purchase price payable on settlement of the purchase of the Griffin property. Mr Anderson advised the McMurrays that they could borrow most of that balance from the bank but they would need to fund $106,100 from their own resources in addition to the required deposit of $38,900: in total in the fullness of time they would need to fund $145,000 from their own resources. It is clear that the two components making up the total of $145,000 were payable by the McMurrays at two different times: $38,900 as a deposit at the outset and $106,100 only on settlement of the land sale contract. In Mr McMurray’s ASIC statement, he said that he “organised to transfer $145,030, which included the 10% deposit funds of $38,900 from my Westpac account to an account of LSI”.
The payment by the McMurrays of $38,900 was mandatory under the terms of the contract if they wished to secure the holding of the Griffin property for their purchase. By contrast, the investment of $106,100 by the McMurrays with LSI was voluntary as far as the land purchase was concerned. They chose to invest the amount they would ultimately need to pay at settlement because they were to receive a very favourable rate of interest of six per cent per annum. They could have chosen to invest those monies in an alternative investment with a financial institution of their choosing and in a form of their choosing.
The terms of the Deposit Investment Letter are unambiguous. They show that the sum of $106,100 was a deposit investment made by the Superannuation Fund with LSI. The initial term of the deposit was 90 days and the McMurrays then had an option to renew for a further term or to withdraw their monies. The Certificate of Deposit issued by LSI after receipt of the sum of $106,100 relates exclusively to the term deposit transaction and not to a deposit under the contemplated land sale contract.
By contrast, the terms of the Receipt referred to $38,900 as the deposit for the purchase of the Griffin property.
The Judge relied on the fact that Mr McMurray transferred a single sum of $145,000 into the LSI account as an indication that there was a single transaction involving the deposit of $145,000 as the holding deposit for the Griffin property. However, this is of little weight in itself because it is not unusual for a single payment to have two or more components of different characters.
The Judge relied on the fact that the whole sum of $145,000 was paid into the one LSI account, it all purported to earn the same interest and there was nothing to indicate that Charterhill dealt with the rest of the McMurrays’ money differently notwithstanding the separate receipts and statements. However, the mere fact that the same interest rate of six per cent per annum was paid on the two separate components and that LSI mixed the monies together in the same account are incapable of leading to a different construction of the contract(s) in the face of the matters referred to above.
The Judge relied on the fact that Mr Nowak told Mr McMurray that the deposit would be held in trust in a Bank SA account. This was ambiguous as to whether Mr Nowak was referring to the ten per cent deposit payable upfront for the purchase of the Griffin property or to the term deposit. In any event, this statement is incapable of leading to a different construction of the contract(s) in the face of the matters referred to above.
The Judge relied on the fact that Mr Nowak told the McMurrays that the whole sum was to be applied to the purchase of the Mango Hill property. The Judge must have been referring to Mr McMurray’s statement in the ASIC statement that Mr Nowak told him that “the initial 10% deposit of $38,900 would be transferred to the Mango Hill property”. This conversation occurred well after the parties entered into the contract(s) in July 2013 at which point there was already a clear separation between the sum of $38,900 which was the initial ten per cent deposit for the Griffin property and $106,100 which was held on term deposit. In any event, this conversation reinforces the separation of the two components rather than indicating that there was a single sum of $145,000 bearing a single character.
The Judge erred in holding that there was a single transaction involving a single sum of $145,000 received by Nova in its capacity as a land agent as a deposit on a contract for the purchase of land. On the true construction of the contracts between the parties, there were two separate transactions: $38,900 was received by Nova in the capacity as a land agent as a deposit on a contract for the purchase of land and $106,100 was received by LSI as a loan by way of term deposit by the Superannuation Fund.
Mr McMurray does not contend that, if $106,100 was received by LSI as a loan by way of term deposit by the Superannuation Fund, the mere fact that it was contemplated or intended that this sum would ultimately be used by the Superannuation Fund towards payment of the balance of the purchase price at settlement of the purchase of the Griffin property rendered it money received by an agent when acting as an agent, ie dealing with land on behalf of others. Such a contention would in any event be untenable.
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).
Cox J added that it was “not to be supposed … that a statutory appeal procedure will always fit easily into one or other of the three categories discussed above.”[8]
[8] Wigg v Architects Board of SouthAustralia (1984) 36 SASR 111 at 114.
Section 42E of the DCA deals with the conduct of an appeal instituted under Part 6 Division 2 DCA. Such appeals are to the District Court sitting in its Administrative and Disciplinary Division.[9] Significantly the appellate jurisdiction conferred upon the District Court sitting in its Administrative and Disciplinary Division and upon which Part 6 Division 2 operates, is not conferred by the DCA but by another Act referred to in s 42B(1) as the special Act.[10] In this case jurisdiction was conferred by s 35(1) of the Land Agents Act 1994 (SA) (LAA). That section provides:
[9] District Court Act 1991 (SA) s 42A.
[10] District Court Act 1991 (SA) s 42B(1).
35—Appeal against Commissioner's determination
(1) The claimant or the agent or former agent by whom the fiduciary default was committed or to whom the fiduciary default relates may, within three months after receiving notice of the Commissioner's determination, appeal to the Court against the determination.
(2) Where an appeal is not instituted within the time allowed, the claimant's entitlement to compensation is finally determined for the purposes of this Division.
Court is defined in s 3 of the LAA as meaning the Administrative and Disciplinary Division of the District Court of South Australia.
Section 35(1) LAA both confers a right of appeal upon a claimant, agent or former agent, and confers jurisdiction upon the District Court sitting in its Administrative and Disciplinary Division. The LAA says nothing more regarding the nature of the appeal provided for save to provide in s 35(2) that such appeal would be incompetent if it is not instituted in time. Accordingly, there is nothing in the LAA – the special Act for the purposes of Part 6 Division 2 DCA – that has the consequence of dis-applying or modifying the application of Part 6 Division 2 DCA to the exercise of appellate jurisdiction invested by s 35(1) LAA, save s 35(2) LAA which would render the power to extend time in which to appeal contained in s 42C DCA inoperable. It follows that the nature of the appeal provided for by s 35(1) LAA and the powers of the District Court on the appeal are to be located in Part 6 Division 2 DCA with the exception of s 42C DCA. That takes one back to s 42E and 42F DCA. Those sections provide:
42E—Conduct of appeal
(1) The Court must, on an appeal, examine the decision of the original decision-maker on the evidence or material before the original decision-maker but the Court may, as it thinks fit, allow further evidence or material to be presented to it.
(2) The Court, on an appeal—
(a)is not bound by the rules of evidence but may inform itself as it thinks fit; and
(b)must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
(3) The Court must, on an appeal, give due weight to the decision being appealed against and the reasons for it and not depart from the decision except for cogent reasons.
42F—Decision on appeal
The Court may, on an appeal—
(a)affirm the decision appealed against;
(b)rescind the decision and substitute a decision that the Court considers appropriate;
(c)remit matters to the original decision-maker for consideration or further consideration in accordance with any directions or recommendations of the Court.
Section 42E(1) DCA and the power to receive fresh evidence allows one to exclude the appeal provided for as being one strictu sensu. Further, the dispositive powers set out in s 42F DCA allows one to exclude the appeal provided for as being a hearing de novo. In my view, the appeal to which ss 42E and 42F DCA apply is an appeal in the nature of a rehearing. The important question that then arises is whether it is necessary for the appellant to demonstrate error before the District Court may interfere with the decision of the original decision-maker appealed from or whether that Court is free to substitute its own opinion having undertaken an independent assessment of the decision of the original decision-maker on the evidence or material before the original decision-maker (and any fresh evidence received).
In Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission[11] the High Court dealt with the nature of the appeal provided by s 45 of the Workplace Relations Act 1996 (Cth). In the Full Bench of the Industrial Relations Commission all members of the coram accepted that the appeal was in the nature of a rehearing but divided on the question of whether error needed to be shown before the decision at first instance could be interfered with. In the High Court, Gleeson CJ, Gaudron and Hayne JJ, said:[12]
Ordinarily, if there has been no further evidence admitted and if there has been no relevant change in the law, a court or tribunal entertaining an appeal by way of rehearing can exercise its appellate powers only if satisfied that there was error on the part of the primary decision-maker. That is because statutory provisions conferring appellate powers, even in the case of an appeal by way of rehearing, are construed on the basis that, unless there is something to indicate otherwise, the power is to be exercised for the correction of error. However, the conferral of a right of appeal by way of a hearing de novo is construed as a proceeding in which the appellate body is required to exercise its powers whether or not there was error at first instance.
The provision considered in Brideson [No 2] conferred power on the Commission to take further evidence, a provision which is indicative of an appeal by way of rehearing. It also required the Commission to "make such order as it [thought] fit". The latter requirement indicated that the Commission's appellate powers were not constrained by the need to identify error on the part of the primary decision-maker, but, rather, that the Commission was obliged to give its own decision on the evidence before it.
The terms of s 45 of the Act are different from the terms of the provision considered in Brideson [No 2]. Unlike that provision, s 45 does not require a Full Bench of the Commission to "make such order as it thinks fit". Nor is there anything else in the terms of s 45 to suggest that the powers of a Full Bench are exercisable or, as in Brideson [No 2], are required to be exercised in the absence of error on the part of the primary decision-maker.
Because a Full Bench of the Commission has power under s 45(6) of the Act to receive further evidence on appeal, an appeal under that section is properly described as an appeal by way of rehearing. And because there is nothing to suggest otherwise, its powers under sub-s (7) are exercisable only if there is error on the part of the primary decision-maker. And that is so regardless of the different decisions that may be the subject of an appeal under s 45.
(footnotes omitted).
[11] (2000) 203 CLR 194.
[12] Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at [14]-[17] (Gleeson CJ, Gaudron and Hayne JJ).
The language of s 42F DCA permits affirmation, rescission and substitution, or remittal for consideration or further consideration. None of the alternatives permit the District Court to examine the decision of the original decision-maker on the evidence or material before the original decision-maker and simply substitute the decision it thinks appropriate. For these reasons, I agree with Blue J that in an appeal under Part 6 Division 2 DCA, unless a special Act otherwise provides, it is incumbent upon an appellant to demonstrate error before the appellate court may interfere with the decision of the original decision-maker. As Blue J indicates, this conclusion has the consequence that if the decision appealed against is in the nature of a discretion, an error of the type identified in House v The King[13] must be established, if the appeal is against a factual conclusion, it must be demonstrated that it was not open to the original decision maker to make the impugned finding, and if the appeal is on a question of law, it must be demonstrated that the original decision maker wrongly decided that question. In each instance the error must be one determinative of the decision appealed against.
[13] (1936) 55 CLR 499.
However, that is not the end of the matter. Regard must be had to the command contained in s 42E(3) DCA. Relevantly, in Registrar of Firearms v Marksman Training Systems Pty Ltd (No 2) Stanley J, with whom Gray J agreed, said:[14]
Section 42E(3) is a mandatory provision requiring the Court on appeal to give due weight to the decision being appealed against and the reasons for it, and not to depart from the decision except for cogent reasons. There are two critical features to the operation of s 42E(3). First, the nature of the appeal being conducted by the Court is limited. The Court is not to allow the appeal from the decision appealed against except for cogent reasons. I consider that the purpose of s 42E(3) is to indicate that the appeal, while it is to be conducted in accordance with the terms of s 42E(2), is not an ordinary merits review of the decision the subject of the appeal. The Court on appeal is not to merely substitute its view for that of the original decision-maker. It is only to depart from that decision where cogent reasons exist. “Cogent” means compelling, convincing, powerful. Second, in the context of this appeal, the decision being appealed against is the decision of the Registrar, affirmed by the Committee, to cancel the respondent’s licences, and the Court is required in conducting the appeal from that decision, to give due weight not only to the decision but to the reasons for it. Those reasons include not only the reasons of the Registrar but, for the reasons explained above, the reasons of the Committee.
(footnotes omitted).
[14] [2016] SASCFC 72 at [315].
I agree. So doing I also agree with Blue J that the error asserted must demonstrate convincingly that had the original decision maker proceeded correctly it would have arrived at a different conclusion.
One last complexity concerns the definition of original decision-maker contained in s 42B(2) DCA. The original decision-maker for the purposes of s 42E(1) and s 42F(c) is the person or body whose decision is appealed against, and includes, if that person or body made the decision on an appeal against, or review of, a decision made by some other person or body, that other person or body. A difficult question arises as to how an appellate court is to treat the decision of the initial decision maker where the decision appealed against is the decision of a person or body who sat on appeal from, or review of, the initial decision maker, assuming that to be the correct construction of s 42B(2) DCA. That question does not arise in this case and should not be determined in the abstract.
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