Lumsden v the Auctioneers & Agents Committee - [1998] QSC 160

IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No.2464 of 1998

Before the Hon. Mr Justice Shepherdson

[Lumsden v The Auctioneers & Agents Committee]

BETWEEN:
  ROGAN GRAHAM LUMSDEN
  Applicant
AND:
  THE AUCTIONEERS AND AGENTS COMMITTEE
  Respondent

CATCHWORDS: Application for statutory order for review of respondent’s decision to reject applicant’s claim against Auctioneers and Agents Fidelity Guarantee Fund - claim based on estate agent having misappropriated or stolen deposits paid by applicant.

Respondent’s rejection based on s.119(4) of the Auctioneers and Agents Act 1971 - whether s.104(1)(b) of Auctioneers & Agents Act applied - meaning of s.104(1)(b) considered - especially sub-s.104(1)(b)(iii) - “money is received with a direction that they (sic) be invested”.

Counsel:Mr J.S. Douglas QC with N.J. Thompson for the applicant
Mr Hinson for the respondent

Solicitors: Lehns for the applicant

Crown Law for the respondent

Hearing date: 6 August 1998

JUDGMENT - SHEPHERDSON J.
Judgment delivered 20 August 1998

The above named applicant has applied for a statutory order for review of a decision by the above named respondent to disallow the applicant’s claim for $11,582 against the Auctioneers and Agents Fidelity Guarantee Fund established under the Auctioneers and Agents Act 1971.
The application is opposed by the respondent which is an incorporated body (s.8 Auctioneers and Agents Act 1971).
The circumstances giving rise to the claim against the fidelity fund are not in dispute. I now set them out.
On 19 May 1995 the applicant entered into a sales agreement with Golden Beach Properties Pty Ltd as vendor to purchase proposed lot 53 in a unit development consisting of 117 lots to be known as “Golden Beach Resort”. On the same day it entered into a further sales agreement in respect of proposed lot 66 in the same development.
The applicant paid $10,000 to Liomas Holdings Pty Ltd (ACN083 845 056) a company incorporated and carrying on business at Caloundra under the name of Richardson and Wrench Caloundra. A photocopy of the trust account receipt H703890 (dated 17/5/95) confirms the payment “being initial deposit” and the receipt shows after the printed word “ACCOUNT” handwriting as follows - “Liomas Holdings Trust A/C”.
I mention the receipt is actually for $15,000. The further $5,000 relates to the purchase of another unit by a friend of the applicant, and does not relate to the present application.
In each sale agreement Liomas Holdings Pty Ltd trading as Richardson and Wrench Caloundra was nominated as the trustee pursuant to the Land Sales Act. Each agreement stated that Richardson and Wrench was the vendor’s agent.
Clause 2.3(a) of each of the two contracts read:-
“2.3 The deposit and all other moneys payable hereunder by the Purchaser shall:
(a)Whilst as at the date hereof the Building Units Plan has not been registered by the Registrar of Titles Brisbane be paid to the Trustee named in the Third Schedule (hereinafter in this clause called “the Trustee”) to be held by the Trustee in a trust account maintained by it and dealt with by it in accordance with the provisions of part III of the Land Sales Act 1984 and the law governing the operation of its Trust Account. The Trustee is hereby empowered by the Vendor and the Purchaser to invest such deposit and other moneys payable hereunder in accordance with section 24 of the Land Sales Act 1984 with an Australian Trading Bank on a twenty-four (24) hour call basis or a monthly basis. The Vendor and Purchaser specifically authorise the investment of such moneys. Neither the Vendor nor the Trustee will be responsible for the refund of the deposit and liable for any loss arising as a result of the investment of the deposit and other moneys with an Australian Trading Bank if the trustee is unable to obtain repayment of the moneys so lodged unless the Vendor or the Trustee shall have been guilty of negligence or fraud.”
This clause assumed importance when the respondent decided to refuse the applicant’s claim against it.
Mr MacCallum the solicitor acting for the applicant has sworn that he believes that the deposits were never invested in accordance with clause 2.3(a) and that the applicant’s deposit under each contract has been misappropriated from the trust account of Liomas Holdings Pty Ltd. He has exhibited to his affidavit a true copy of a receivers’ report to which I now turn. The receivers’ report which I have is a photocopy of a document styled “REPORT TO THE SECRETARY AUCTIONEERS & AGENTS COMMITTEE”. It is a photocopy of an unsigned document emanating from Kurvink & Coombs of Maroochydore. In argument before me the parties have been content to accept the document before me as accurate.
The report is given by receivers over the trust property of Liomas Holdings Pty Ltd formerly trading as Richardson and Wrench Caloundra and relates to a trust account held at the National Australia Bank, 16 Bulcock Street, Caloundra. The name of the account is “Liomas Holdings Pty Ltd trading as Richardson and Wrench Caloundra Sales Trust Account”. The report refers to this account as “the trust account”.
As the report says “The licensee to which this report relates is Liomas Holdings Pty Ltd ACN003 845 056". The business to which the licence relates is Richardson and Wrench Caloundra, a “business operated by Liomas Holdings Pty Ltd (Real Estate Corporation) and Erick (sic) J Berges (working director)”.
The report sets out the background and I now read it:-
“Our appointment as receivers has arisen from an application ... in accordance with s.130 of the Auctioneers and Agents Act 1971. The application is brought about as the committee ought to be of the opinion that stealing, embezzlement, omitting to account fraudulent misappropriation or misapplication of or in relation to money has been or have been committed in relation to the trust account of Liomas Holdings Pty Ltd.

Under our appointment as receivers we have established the trust creditors of the account. We have prepared a claim report for each trust creditor in which we identify and document the specific breach/(s) (sic) of the Auctioneers and Agents Act 1971. These individual reports include the specific amount of creditor entitlement Appendix 1 summarises the claim reports by Report Number, Name and Quantum. The claims received all relate to dealings Liomas Holdings Pty Ltd had with Golden Beach Properties Pty Ltd. Golden Beach Properties Pty Ltd (GBP) is a developer of high rise units in Caloundra. Richardson and Wrench Caloundra - hereafter “the agency” was able to negotiate a number of contracts in a development to be constructed by GBP. A number of contracts were entered into and deposit moneys paid into the trust account of Richardson and Wrench.

The funds remaining in the trust account at the time we were appointed as receivers amounted to $19,325.39 ...”

The report set out what are called “investigation findings” resulting from the receivers’ investigations. The receivers have grouped their findings into ledger group A and ledger group B. It is not necessary to refer to ledger group A. Ledger group B refers to a number of claims one of which is by the present applicant. The receivers’ report shows the amount of the claim to be $10,000 and under the column “LEDGER DETAILS” appears the words and figures “Page 68". Exactly what appears on p.68 is not disclosed but it is tolerably clear that the Richardson and Wrench Caloundra trust account did have a ledger p.68 of which showed that Lumsden the applicant, had paid $10,000 into that trust account.
In discussing ledger group B the receivers have focused first on two amounts received by Liomas Holdings Pty Ltd as trustee for deposits on long term contract from Lunardson Family Trust and from C Scott and C Lunardson, the amounts received being $12,000 and $16,950 “on two separate contracts”. The report said:-
“The amounts were initially placed on term deposit on 13/2/95 to mature on 13/8/95. However the amounts were withdrawn on 17/2/95 and paid to National Australia Bank account - Richardson and Wrench general account ... When these long term contracts finally settled the amounts to be repaid to Lunardson Family Trust and C Scott and C Lunardson were withdrawn from the trust account.”

Details were then given of two cheques each dated 27/2/1996 for $12,984.28 and $18,340.33 respectively payable to Lunardson Family Trust and C Scott and C Lunardson respectively.
The receivers correctly pointed out:-

“As the investors funds had already been disbursed from the trust account to be placed on term deposit the trust account will be deficient by these amounts.”

The receivers’ report went on to refer to three other cases “where moneys had been withdrawn in breach of the Act” and “paid to the General Account to reduce the overdraft in that account”. They then detailed three cheques for amounts totalling $26,475 the cheques being drawn on 13 February 1996, 27 February 1996 and 29 February 1996.
The receivers report said:-
“According to the Trust Account Reconciliation the balance in the trust account should be $77,125 (excluding the amounts listed in ledger group A). The closing balance was $19,125.39. The difference being $57,991.61. (sic)”

[The correct figure is $57,799.61]

The report pointed out the total amount of the five above cheques (each drawn by Berges) was $57,799.61. The deficiency in the trust account of $57,799.61 was and is, as the receivers pointed out, represented by the amounts which Liomas Holdings Pty Ltd and Berges withdrew as set out above.
The receivers then detailed the names of 12 claimants and 6 other account holders where no claim had been made. The total of these claims and other account holders was $77,125.
The receivers proceeded to make recommendations to the secretary of the respondent committee, but it is unnecessary to refer to those recommendations in light of the attitude taken by the respondent.
In accordance with the provisions of the Auctioneers and Agents Act the applicant lodged a claim against the Auctioneers and Agents Fidelity Guarantee Fund in respect of misappropriated moneys.
On 4 March 1998 the committee resolved to disallow the applicant’s claim and a one page document dealing with that claim, and the respondent’s resolution is before me. This document shows that the committee had before it a recommendation that it resolve to disallow the claim. It also had the:-
“Receivers’ correspondence and report dated 10 September 1997 (and attachments to that correspondence and report) prepared by Kurvink & Coombs receivers appointed to the trust account of Liomas Holdings Pty Ltd; correspondence from Crown Law dated 8 December 1997 and advice from Lorenzo Boccabella, Barrister at Law dated 27 November 1997.

Part of the recommendation included the following findings:-
Findings
On 17 May 1995 Rogan Graham Lumsden paid a holding deposit of $10,000 to Richardson and Wrench Caloundra (the business conducted by Liomas Holdings Pty Ltd) with Erik J. Borges (sic) as working director) for the purchase of a unit (sic) in development by Golden Beach Properties Pty Ltd; a contract was subsequently signed by the claimant; clause 2.3(a) of the contract specifically authorised deposit of money at interest; there is no evidence these moneys were invested in this fashion; Liomas Holdings Pty Ltd and Erik J. Borges (sic) were licensed as real estate agents at the relevant time; the trust accounting records show a shortfall of trust funds as other cheques were drawn inappropriately from the trust account to (or on behalf of) Richardson and Wrench Caloundra.
The recommendation included the following reasons:-
Reasons
Despite evidence of moneys being misappropriated the deposit was paid in respect of a contract specifically authorising the investment of moneys. Section 119(4) of the Auctioneers and Agents Act indicates that “no claim lies against the fund in respect of ... moneys to which section 104(1)(b) applies;” that section refers to moneys received with a direction that they be invested. The claim is precluded through the construction of the legislation.
No details of any debate are shown and under “COMMITTEE RESOLUTION” appear the words “as recommended”. The applicant contends that the reasons which I have set out above disclose an error of law made by the respondent and that the respondent’s view of the legislation is erroneous. The applicant argues that s.104(1)(b) applies only to moneys actually invested under a direction to invest under a contract and in the case of the applicant’s deposit moneys they were never so invested. His counsel further argues that the respondent has misconstrued the words “of money to which s.104(1)(b) applies” appearing in s.119(4) of the Auctioneers and Agents Act.
I refer now to the relevant legislation. Section 119 of the Auctioneers and Agents Act 1971 appears in a division headed “Auctioneers and Agents Fidelity Guarantee Fund”. Section 119 is headed “Application of Fund” and for purposes of the present case the parties focused on sub-s.119(4) which reads:-
“(4) No claim lies against the fund in respect of the stealing or fraudulent misappropriation or misapplication of money to which section 104(1)(b) applies.”

One then turns to s.104 which is headed “Application of trust money”and appears in part 7 and more particularly “Division 1 - Trust accounts”.
Sub-sections 104(1)(a) and (b) read:-
“104(1) Subject to section 107, an auctioneer, a real estate agent, a commercial agent or a motor dealer who receives money in respect of a sale or other transaction must, immediately on receiving the money -

(a)if paragraph (b) does not apply - pay the money into a general trust account with an approved financial instruction; or

(b) if -

(i)the money is received in respect of a sale; and

(ii)the sale is to be completed on a day (whether specified in the contract or otherwise ascertainable at the date of the contract) that is more than 60 days after receipt of the money; and
(iii)the money is received with a direction that they be invested;

pay the money in accordance with the direction into -

(iv)a special trust account operated with a financial institution for the investment of such money; or
(v)a separate trust account, opened and maintained with a financial institution solely for the purpose of complying with the direction to invest the money.”

Mr J S Douglas QC who appeared for the applicant has argued that sub-s.104(1)(b) has no application and that what has occurred shows that sub-s.104(1)(a) applied.
There is no doubt that the two deposits each of $5,000 were paid into the general trust account of Richardson and Wrench Caloundra, and prima facie it can fairly be said that the facts accord with sub-s.104(1)(a) having been applied by the real estate agent.
However, before a real estate agent who receives money in respect of a sale proposes to act pursuant to sub-s.104(1)(a), he must first be satisfied that sub-s.104(1)(b) does not apply. I say this in the light of the opening words of sub-s.104(1)(a) - “if paragraph (b) does not apply”.
The question then is whether sub-s.104(1)(b) did apply in the present case.
This sub-section shows that there are three initial conditions each of which must be met before the real estate agent “must ... pay the money in accordance with the direction” into one or other of the trust accounts referred to in sub-ss.(iv) and (v).
The requirements of sub-ss.104(1)(b)(i) and (ii) appear to have been met, although it may be debated that on the date on which Richardson and Wrench Caloundra received the $10,000 and issued its trust account receipt there was not a sale - merely a proposed sale. However, because of the way the argument before me proceeded my reasons proceed on the basis that there has been compliance with those two particular sub-sections. The argument then focused on whether or not the requirements of sub-s.104(1)(b)(iii) had been met.
Mr Hinson, counsel for the respondent argued that:-

(a)the legislative intention underlying s.119(4) is to exclude recourse to the auctioneers and agents fidelity guarantee fund in respect of money intended to be dealt with in a manner which involved the investment of that money earning interest which is applied for the benefit of a party to the sale, rather than earning interest which is applied to the benefit of the fund.
(b)the expression “money to which s.104(1)(b) applies” appearing in s.119(4) is apt to describe the money referred to in sub-s.104(1)(b) regardless of whether or not the money is actually invested in accordance with a direction to invest.
(c)on its proper construction cl.2.3(a) of the sale agreement -
(i)required the deposit money to be paid to the real estate agent and “held in a trust account”.
(ii)empowered the real estate agent to invest the deposit money in accordance with s.24 of the Land Sales Act with an Australian Trading Bank.
(iii)specifically authorised the investment of the deposit money.
(the emphasis is Mr Hinson’s)

(d)cl.2.3(a) constituted a direction that the deposit money be invested within the meaning of sub-s.104(1)(b)(iii).

To support his first submission Mr Hinson relies on statements made by the then Minister for Justice and Corrective Services on 22 May 1991 during the second reading of a Bill in the Legislative Assembly in which he said:-
“As honourable members would note also, the Bill will continue to allow persons to direct that their moneys be paid into interest-bearing trust accounts. However, unlike previous arrangements that were overly bureaucratic and involved much red tape and inconvenience for real estate agents, in the future, a person who directs that his money is placed in such an account will have the whole of the money invested. No proportion of the money will be set aside for the Fidelity Guarantee Fund. The ability of persons to be able to direct that moneys be placed in an interest-bearing trust account will be limited by the requirements -

(1)that the moneys are received in respect of a sale;

(2)that the sale is not to be completed within 60 days of receipt of the moneys;
and

(3)that the moneys are received with a direction that they be invested in an interest-bearing trust account.

In addition, as persons who have moneys invested in interest-bearing trust accounts will not contribute to the Auctioneers and Agents Fidelity Guarantee Fund, the Bill provided that such persons will not be able to make a claim against the fund in respect of the stealing, fraudulent misappropriation of moneys be a licensed person.”

I start with the actual words of the statute. Sub-section 104(1)(b)(iii) requires that “the money is received with a direction that they (sic) be invested”.
The evidence discloses that in this case the money i.e. the $10,000 was received by the real estate agent on 17 May 1997 and that the contract was dated 19 May 1997. In my view cl.2.3(a) could not begin to operate until the written contract came into existence and this event did not occur until after the real estate agent had received the money.
In my view mere receipt by a real estate agent of moneys in respect of a sale or other transaction does not of itself cause sub-s.104(1)(b)(iii) to operate. That sub-section (iii) requires that the money be received “with a direction” that the money be invested.
Mr Hinson contends that “direction” means an order or a command and he cites the Macquarie Dictionary (second ed.). Mr Douglas QC does not dissent from that meaning. This meaning is substantially but not as strongly confirmed by Shorter Oxford English dictionary (third ed.) where meanings of “direction” there given are “the act of instruction” and “instruction”. In the circumstances of this case I prefer the meaning in SOED.
However, the phrase used in the statute is “with a direction” and in my view the word “with” is an important word in deciding the proper construction of the phrase “the money is received with a direction that they (sic) be invested”.

In my view “with” here means “expressing simultaneous occurrence and association” see Shorter Oxford English dictionary (third ed) where an illustration is given “At the same time as”.
Such a view, is I find, confirmed by the opening words in s.104(1) which, leaving aside s.107, says that “a real estate agent ... who receives money in respect of a sale ... must, immediately on receiving the money” pay the money in accordance with sub-s.104(1)(b) if that sub-section applies and if it does not, then in accordance with sub-s.104(1)(a).
What has happened in the present case is that there was no direction accompanying receipt of the money at the same time as the agent received the money. In my view, before it could be said that sub-s.(iii) had been complied with, a direction that the money be reinvested must have been given at the same time as the money was received by the real estate agent.
Assuming that cl.2.3(a) of the sale agreement contained a “direction” that the moneys be invested, that direction did not come until 2 days later when the contract was created.
The evidence is silent as to what operated on the real estate agent’s mind at the time it received the $10,000 on 17 May 1997. We do know from the receivers’ report that the money was paid into a general trust account with the National Australia Bank - I infer that that bank was an approved financial institution. It thus appears that the agent paid the money into a general trust account pursuant to sub-s.104(1)(a).
I note by analogy that when a solicitor receives trust money to which the Trust Accounts Act 1973 applies he must pursuant to sub-s.7(3) of that Act pay moneys to which s.7 applies into a trust account “daily save where it is not reasonably practicable so to do in which case they shall be so paid as soon as reasonably practicable”.
I note that the Auctioneers and Agents Act continues to exhibit the legislative intent in that moneys received by an estate agent pursuant to s.104(1) be paid into a trust account promptly. The Auctioneers and Agents Act does not contain a provision identical to sub-s.7(3) of the Trust Accounts Act but as I have pointed out the effect of s.104(1) is to make it mandatory for the real estate agent to pay the money to one of the types of trust accounts specified in sub-s.104(1) “immediately on receiving the money”.
I would interpret “immediately” where it appears in this sub-section as meaning on the same day as the day on which the real estate agent receives the money.
I do not find it necessary to consider whether the provisions of cl.2.3(a) of the contract amount to a “direction” that the $10,000 be invested. As I have already said, assuming that those provisions did amount to a direction that the moneys be invested, then for the reasons which I have already given sub-s.104(1)(b)(iii) has not been complied with and thus sub-s.104(1)(b) did not apply in the present case. That being so, sub-s.104(1)(a) applied and was complied with by Richardson and Wrench Caloundra.
Although as I said it is not necessary for me to do so, I shall deal with argument that the second sentence in cl.2.3(a) amounted to a direction by the vendor and purchaser to invest, that that direction applied to the “moneys” viz the $10,000 received on 17 May and therefore the $10,000 was moneys to which s.104(1)(b) applied.
The provisions of the written contract, created 2 days after the $10,000 was received do not in my view constitute the $10,000 being moneys received on 17 May 1997 with a direction that they be invested.
I add that on 19 May Richardson and Wrench Caloundra became trustee pursuant to cl.2.3(a) and were then required to act pursuant to the first sentence of cl.2.3(a). I do not consider the second sentence in cl.2.3(a) can be construed as a direction - it “empowers” - it does not command, order or instruct.
However, Mr Hinson has advanced a further argument in which he submits that the focus in sub-s.119(4) is on “money to which s.104(1)(b) applies”. He argues that if the money in question should have been dealt with under s.104(1)(b) but was incorrectly dealt with under s.104(1)(a) then any stealing or fraudulent misappropriation or misapplication of that money cannot be the subject of a claim against the fidelity guarantee fund.
In the circumstances of this case I reject that argument. My reasons are those already expressed. Sub-s.104(1)(b)(iii) was never complied with and on the material before me, in my view never could be complied with and consequently sub-s.104(1)(b) did not apply.
I would add that refusal of the claim in the circumstances of this case is unacceptable when one considers the relevant statutory provisions concerning application of the auctioneers and agents fidelity guarantee fund. Section 119(1) of the Auctioneers and Agents Act which deals with applications of the fund relevantly reads:-
“Subject to this Act, the fund shall be held and applied for the purpose of reimbursing persons who may suffer pecuniary loss because of -
..................
(d) the stealing or fraudulent misappropriation or misapplication by a prescribed person of money ... entrusted to the prescribed person in the course of the business of a licensee as ... real estate agent... .”

In the case before me $10,000 was entrusted to Liomas Holdings Pty Ltd trading as Richardson and Wrench Caloundra in the course of its business as real estate agent, and there is no dispute that all or a substantial part of that money was stolen or fraudulently misappropriated. The receipt given to the applicant shows the money was for the account of Liomas Holdings Trust Account. It was to that account that the money went. This appears tolerably clear from the receivers’ report despite there not being before me the ledger p.68 to show the date on which the money was paid into the applicant’s account with Richardson and Wrench Caloundra’s Trust Account. The receipt itself shows no suggestion that the $10,000 was to be paid into either the special trust account or the separate trust account referred to in sub.s.104(1)(b)(iv) and (v).
It is I think fair to say that 2 days after receipt of the $10,000 cl.2.3(a) of the contract, if given effect by Richardson and Wrench Caloundra, cast on that company (who was identified and described in the contract as “the trustee”) the duty of holding the deposit “in a trust account maintained by it and dealt with by it in accordance with the provisions of part III of the Land Sales Act 1984 and the law governing the operation of its trust account”.
Section 23 of The Land Sales Act 1984 relevantly reads:-
“23(1) Where an instrument, that is intended to bind a person (absolutely or conditionally) to purchase a proposed lot, provides for the payment of money in respect to the purchase, all moneys the payment whereof the purchaser is bound to make in terms of the instrument, whether by way of deposit or otherwise, without becoming entitled in terms of the instrument to receive a registerable instrument of transfer in exchange therefor shall be paid directly to the public trustee constituted under the Public Trustee Act 1978 unless the parties to the instrument agree that such money shall be paid directly to -

(a)a solicitor whose name is on the Roll of Solicitors of the Supreme Court and who practises as a solicitor in Queensland; or

(aa)a firm of solicitors practising in Queensland; or

(b)a real estate agent duly licensed under the Auctioneers and Agents Act 1971; or

(c) a real estate agency in which a real estate agent carries on business ;

specified in the instrument.”

In the present case it is fair to say that cl.2.3(a) of the sales agreement is designed to avoid the requirement to pay to the Public Trustee the deposit and other moneys payable under the contract. One then turns to s.24 of the Land Sales Act which relevantly says:-
“24(1) A person, firm or agency who receives money as a trustee in accordance with section 23(1) shall retain the money in the person’s, firm’s or agency’s trust account until the purchaser or vendor becomes entitled, in accordance with this part or otherwise according to law, to a refund or payment of the money whereupon the trustee shall dispose of the money in accordance with the law governing the operation of the person’s, firm’s or agency’s trust account.”

In the case before me the parties agreed in writing on 19 May 1997 that the deposit “and all moneys payable hereunder by the purchasers” be paid to the trustee named in the contract namely Liomas Holdings Pty Ltd trading as Richardson and Wrench Caloundra.
I should add that pursuant to s.23(1A) of the Land Sales Act moneys paid under s.23(1) if paid “to a firm or agency” must be held by that firm or agency in a trust account kept for the Land Sales Act by the firm or agency.
Whether the general trust account into which the $10,000 was paid was kept for the Land Sales Act by Liomas Holdings Pty Ltd trading as Richardson and Wrench Caloundra is not known. The answer to this question is in my view irrelevant because the duty on Richardson and Wrench Caloundra arising under cl.2.3(a) did not come into existence until 19 May 1997 and this was 2 days after the $10,000 was received. Another way of putting this is to say that the trust created by clause 2.3(a) did not arise until 19 May and s.104(1)(b) could not apply. There is no evidence that Richardson and Wrench performed the duty cast on it by the first sentence in cl.2.3(a) but I do not consider this matter relevant.
The legislature’s general intention is to ensure that persons suffering loss through stealing, misappropriation or misapplication by a licensed real estate agent of money entrusted to that agent in the course of his business be reimbursed from the fund. But s.119(4) places a limit on fulfilment of that general intention.
In my view the provisions of the Auctioneers and Agents Act dealing with the Auctioneers and agents fidelity guarantee fund are remedial and are to be construed accordingly. Section 104 (1)(b) in my view focuses on the situation as it exists at the time when the real estate agent receives the money in respect of a sale or other transaction. He must follow one of the two courses specified in s.104(1) “immediately on receiving the money”. He must first decide whether s.104(1)(b) applies and if it does not he must comply with s.104(1)(a).
Whichever path the real estate agent follows by paying the moneys received into one of the three types of trust account that payment must be immediate which I construe to be on the day the money is received. In the present case the moneys were paid into the general trust account and this could only have been done under s.104(1)(a).
If it is the legislative intention that s.104(1)(b) is to operate in a situation such as the present where both vendor and purchaser agreed, 2 days after the real estate agent received the money, that the real estate agent became a trustee and was to hold the moneys in a trust account in accordance with the Land Sales Act 1984 then the legislature should clearly say so. In my view s.104(1)(b) had no effect on those moneys.
Before concluding this judgment I return to the comments of the then Minister for Justice and Corrective Services made during the second reading speech on 22 May 1991 and which I have earlier set out.
Provisions such as cl.2.3(a) may well appear in contracts where completion of sales is not to occur within 60 days. The object of such a clause is to avoid a situation where a substantial sum of money may sit in an agents general trust account for a considerable length of time without earning interest. Understandably then the parties to the contract may agree that the money paid be invested in a special interest bearing trust account with say a bank.
When such a situation arises and moneys are paid into such a trust account, and the real estate agent who is a trustee of the moneys steals or misappropriates some or all of the moneys the persons entitled to the moneys in the trust account (usually a vendor or a purchaser) may be very surprised to know that, according to the Auctioneers and Agents Committee’s interpretation, the statute law excludes such person from making a successful claim against the Auctioneers and Agents Fidelity Guarantee Fund for the loss suffered.
By way of contrast, where moneys are paid into a real estate agent’s general trust account pursuant to s.104(1)(a) and the real estate agent steals or misappropriates or misapplies the moneys or any part thereof the person suffering the loss is not excluded from making a successful claim against the fund for the loss sustained.
The reason for the distinction between the two classes of claimant is, as the Minister said because “persons who have moneys invested in interest bearing trust accounts will not contribute to the Auctioneers and Agents Fidelity Guarantee Fund”.
This appears to be the reason why s.119(4) was inserted into the Auctioneers and Agents Act.
I can well understand s.119(4) operating in the manner for which the present respondent has contended if moneys were paid into one of the two types of trust account referred to in sub-s.104(1)(b)(iv) and (v) and if the moneys were in a trust account over which the real estate agent had no control. However, s.104 in my view assumes that a general trust account referred to in sub-s.104(1)(a) and the two types of trust account referred to in s.104(i)(b) are in the name or names or under the control of the real estate agent.
One wonders the extent to which the public is aware of the limitation in sub-s.119(4) on claims against the fund.
In my view the present application must succeed and I would therefore order that the decision of the respondent of 4 March 1998 whereby it disallowed the claim of the above named applicant for $11,582 be set aside. I would further order that the matter by remitted to the respondent committee to be dealt with according to law.
The claim includes an interest component. In argument before me the parties agreed that if the matter were to go back to the committee then the matter of interest can best be dealt with by the committee.
In the result then the orders are:-
Decision of the respondent of 4 March 1998 set aside.
That the applicant’s claim be remitted to the respondent to be dealt with according to law.
That the respondent pay the applicant’s costs of and incidental to the application to be taxed.