| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : VOCATIONAL REGULATION ACT : REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA) CITATION : MORTIMER and COMMISSIONER FOR CONSUMER PROTECTION [2013] WASAT 126 MEMBER : JUSTICE J A CHANEY (PRESIDENT) MS R BROWN (SESSIONAL MEMBER)
MR G CHURCH (SESSIONAL MEMBER)
HEARD : 12 JUNE 2013 DELIVERED : 14 AUGUST 2013 FILE NO/S : VR 26 of 2013 BETWEEN : SHANE JUSTIN MORTIMER Applicant
AND
COMMISSIONER FOR CONSUMER PROTECTION
Respondent
Catchwords: Real estate agents Claim against Fidelity Account Fraudulent conduct Whether conduct in course of business as a real estate agent Whether claim should be reduced by amount of unsatisfied payment Whether unsatisfied judgment treated as amount receivable
(Page 2)
Legislation: Real Estate and Business Agents Act 1978 (WA), s 4, s 4(2), s 4(3), s 41, s 41(2), s 107, s 112, s 116(1), s 117(1), s 117(2) Result: Commissioner's decision set aside and claim allowed.
Summary of Tribunal's decision: The applicant sought a review of a decision to disallow his claim against the Real Estate and Business Agents Fidelity Account. It was not in issue that the applicant had suffered a loss by reason of fraudulent conduct of a licensed real estate agent who was the person in bona fide control of a company carrying on a business as a licensed real estate agent. Nor was it in issue that the funds lost were paid to the licensed company and disbursed by the company as part of the fraudulent conduct. The issue before the Tribunal was whether the money was received by the company in the course of its business as a real estate agent, that being a necessary element of the definition of defalcation, and therefore of an entitlement to reimbursement from the Fidelity Account.
The Tribunal examined the transaction and determined that the answer to the question posed by the parties lay in s 4(3) of the Real Estate and Business Agents Act 1978 (WA), and in any event the transaction was in the course of the company's business as a real estate agent. Accordingly, the decision to disallow the claim was set aside and the claim allowed.
Category: B
Representation: Counsel:
Applicant : Mr AP Rumsley
Respondent : Mr JL Derby and Ms TC Loo
Solicitors:
Applicant : Alan Rumsley Commercial Disputes Lawyer
Respondent : Department of Commerce
(Page 3)
<SolicitorList Name1="Alan Rumsley Commercial Disputes Lawyer", Type1="Applicant", Name2="Department of Commerce", Type2="Respondent",>
<CounselList Name1="Mr AP Rumsley", Type1="Applicant", Name2="Mr JL Derby and Ms TC Loo", Type2="Respondent",>
Case(s) referred to in decision(s):
Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303
Hellier v Hinton (unreported, WASC, Library No 980712, 14 December 1998)
(Page 4)
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction 1 On 17 January 2013, the respondent, Commissioner for Consumer Protection (Commissioner) disallowed a claim by the applicant, Mr Shane Justin Mortimer (applicant) for reimbursement from the Real Estate and Business Agents Fidelity Account (Fidelity Account). Mr Mortimer claimed that he suffered his loss by reason of the defalcation of a real estate agent, Denville Holdings Pty Ltd (Denville). Mr Mortimer applied for a review by the Tribunal of the decision rejecting his claim. 2 No relevant facts were in issue. In particular, it was not in issue that Denville held a real estate and business agents licence at the relevant time, and that it carried on business as a real estate agent under the business name 'The Lifestyle Urban Property Group'. Nor was it in issue that Denville received the sum of $175,000 paid by Mr Mortimer in relation to a real estate transaction, that that transaction was fraudulent, that the monies were dispersed and lost to Mr Mortimer (save for $25,000 which he subsequently recovered). His claim is therefore for reimbursement in the sum of $150,000. 3 The issues in contention in the proceedings were whether Denville received and dealt with the money in the course of its business as a real estate agent, and if so, whether any amount is receivable by Mr Mortimer in reduction of his loss pursuant to a judgment which he obtained against both Denville, and one of its directors, Mr Andrew John King (Mr King). 4 To understand the issues, it is first necessary to consider the relevant statutory provisions.
Relevant provisions of the REBA Act 5 The Fidelity Account is established by s 107 of the Real Estate and Business Agents Act 1978 (WA) (REBA Act). It is administered by the chief executive officer REBA Act s 112. 6 Section 116(1) of the REBA Act provides: Purpose of account; making claims against account
(1) Subject to this Act, the Fidelity Account shall be held and applied for the purpose of reimbursing persons who may suffer pecuniary loss or loss of property by reason of any defalcation by a licensee during any period when he was the holder of a current triennial certificate, but reimbursing only to the extent of the defalcation of the licensee. (Page 5)
7 Section 117(2) of the REBA Act provides: (2) A person is not entitled to recover from the Fidelity Account an amount greater than the balance of the loss suffered by him after deducting from the total amount of his loss, the amount or value of all money or other benefits received or receivable by him from any source other than the Fidelity Account in reduction of his loss, including any benefits received by reason of services rendered or payments made by the defaulting licensee. 8 Pursuant to s 116(1), the Fidelity Account is to be applied for reimbursement of pecuniary loss suffered 'by reason of any defalcation by a licensee'. The expression 'defalcation by a licensee' is defined in s 4 of the REBA Act as follows: … defalcation by a licensee includes criminal or fraudulent conduct (a) of a licensee; or (b) of any one or more of the servants or agents of the licensee; or (c) of a person who is a partner in the business of the licensee; or (d) where the licensee is a firm and a body corporate is a partner in the firm or where the licensee is a body corporate, of any one or more of the directors, officers, servants, or agents of the body corporate, in the course of the business of the licensee and from which arises pecuniary loss or loss of property to any other person; … 9 As already noted, it is not in issue in these proceedings that Mr Mortimer suffered a loss as a result of fraudulent conduct by a servant or agent of Denville, the contentious issue being whether the relevant conduct was 'in the course of the business of the licensee'. 10 'Business' is defined in s 4 of the REBA Act to mean 'the business of an agent … and does not mean the business of a developer'. 11 Real estate agent is defined as follows: real estate agent means a person whose business either alone or as part of or in connection with any other business, is to act as agent for consideration in money or money's worth, as commission, reward or remuneration, in respect of a real estate transaction as defined by this (Page 6)
section but does not include a person whose business is to so act by reason that (a) he is appointed by a court as a receiver or receiver and manager of the business of another person; or (b) he is an official receiver or trustee within the meaning of the Bankruptcy Act 1966 of the Commonwealth or any Act in amendment or substitution of that Act; 12 Real estate transaction is relevantly defined as: real estate transaction - (a) means a sale, exchange, or other disposal and a purchase, exchange, or other acquisition of real estate and any exclusive right whether deriving from the ownership of a share or interest in a body corporate or partnership, or otherwise, to the use or occupation of real estate including the leasing, and letting, and the acquisition under lease or letting of tenancy or occupation of real estate; and … (ba) includes the collection of rents or other payments for use or occupation; and … 13 Section 4(3) of the REBA Act contains an important deeming provision. It provides: (3) The collection by an agent for or on behalf of another person of moneys in respect of (a) the consideration; or (b) any terms payments; or (c) any rent or other payment for use or occupation; or (d) any payments under a mortgage or other security, relating to a transaction is deemed to be a service rendered by the agent in his capacity as an agent, and those moneys are deemed to be moneys received by the agent, in the course of his business, for and on behalf of the other person in respect of the transaction, irrespective of whether or not the agent negotiated the transaction or participated in the negotiation thereof. (Page 7)
(3a) For the purposes of this Act, moneys collected by an agent for or on behalf of a strata company are deemed to be moneys collected by the agent in respect of a real estate transaction. 14 'Transaction' is defined relevantly to mean a real estate transaction. 15 The applicant contends that the relevant transaction in this case was carried out in the course of Denville's business as a real estate agent, but that any doubt as to that position is resolved by the application of s 4(3) of the REBA act. 16 Against that statutory framework, we turn to the facts of the case.
The facts 17 As already mentioned, Denville held a real estate and business agents licence and a triennial certificate, and carried on business at the relevant time. Mr King also held a real estate and business agents licence and triennial certificate and was the licensee and person in bona fide control of Denville. Denville had one other director, Mr King's wife, Ms Tracey Ann King. They were also the only shareholders of Denville. 18 In September 2004, Mr King executed two contracts for the sale of a property by one Mr Brian Thomas Robinson (Mr Robinson) as trustee of a trust to Mr King as trustee of the King Family Trust. The property was situated at 20 28 Wheatcroft Street, Scarborough (the property). Those contracts did not progress to settlement and were terminated by Mr Robinson in April 2005. 19 In April 2005, Mr King wrote to a director of a company known as Roving Properties Pty Ltd (Roving Properties) proposing a joint venture between Denville and Roving Properties for the purpose of development of the property, to be known as 'Fusion Resort'. On 13 April 2005, Denville as trustee for the UL Property Trust and Roving Properties as trustee for the Roving Property Trust made a joint offer to purchase the property from Mr Robinson. A contract was concluded with Mr Robinson (April 2005 contract). 20 Despite an extension of time for settlement of the April 2005 contract, settlement did not occur. 21 On 10 June 2005, Roving Properties advised Mr King that Roving Properties had been induced by Mr King's false representations to enter into the April 2005 contract and did not regard itself as bound to continue any proposal regarding the development of the property. (Page 8)
22 On 1 June 2005, Mr Robinson issued a default notice to Denville and Roving Properties. In response, on 10 June 2005, Roving Properties advised Mr Robinson that Roving Properties did not wish to be involved with Mr King or his company, and proposed a fresh contract for the purchase of the property by Roving Properties alone. Mr Robinson subsequently issued a notice of termination of the April 2005 contract, having by then entered into a fresh contract to sell the land to Roving Properties. On 30 June 2005, title of the property was transferred to Roving Properties, the separate titles were amalgamated and a new Certificate of Title issued. 23 In December 2006 and again on 9 January 2007, Denville made offers to purchase the property from Roving Properties by sending copies of Offer and Acceptance documents executed by Denville. The first offer described the buyer as 'Denville Holdings Pty Ltd … as trustee for the Fusion Trust'. The second described the buyer as 'Denville Holdings Pty Ltd as trustee for the Wheatcroft Street Trust'. Roving Properties did not accept those offers. 24 As can be seen, at no time did Mr King, or any company associated with him obtain any title to the property. 25 In about midJune 2006, Mr King approached Mr Mortimer, a cousin of Mrs King, and discussed two investment property opportunities in Scarborough, one of which was an off the plan strata development called 'Fusion Resort' located at the property. 26 Some time around 15 November 2006, Mr Mortimer received a brochure for the Fusion Resort. A letter accompanying the brochure was on the letterhead of 'Lifestyle Urban Property Group', the trading name of Denville's real estate business. We note that s 41(2) of the REBA Act requires that on all correspondence prepared in the course of business of a licensee, the licensee must be identified as a real estate agent and the registered office of the business must be shown. The letter of 15 November 2006 did not meet that statutory requirement. 27 The details set out in that letter included the following statements: • This deal at this figure is only being offered to family at this late stage of the development. • Previously we have had family members and close friends invest. • You need to have $175,000 available. (Page 9)
• This was the figure I originally quoted you. • The new investors are now paying $250,000. • That debt can't be secured against the property until completed. • You need to use other property as security or have the cash sitting in the bank doing nothing. So get it out and make it work for you. • At settlement you end up owning a unit with a value of at least $300,000. This gives you a return of approximately 70% and that's on the lower end. … • You enter into an Offer and Acceptance and then deposit the money into our Denville Holdings Account. … • If you choose to keep the units then you will enter into a management agreement with Denville Holdings Pty Ltd to manage the units for you. 28 The letter otherwise extols the virtues of the investment. The accompanying brochure described the proposed investment in some detail, but concluded with a disclaimer which read: Although every effort is made to ensure the relevance, accuracy and timeliness of content, the Lifestyle Urban Property Group accepts no responsibility whatsoever for the accuracy or otherwise of any information published herewith. Some information may not be available and this must be taken into account when accessing this information. This is particularly important should you wish to use any information for any legal purpose. 29 The significance of that rather odd disclaimer is the reference to the trading name of Denville's real estate business. 30 On 19 December 2006, Mr Mortimer signed a contract for sale of land for a lot in the proposed subdivision of the property (Mortimer contract). The Mortimer contract provided: i) the seller was 'Andrew John King as trustee for the King Family Trust, PO Box 621, Scarborough WA 6922'; ii) the purchase price was $175,000; and iii) a deposit of $50,000 was payable in accordance with Annexure A. (Page 10)
31 Annexure A included the following (Emphasis added): Proposed fee simple ('green title') resubdivision Pt Lots 180, 181 and Lots 182, 183 (HN's 20 28) Wheatcroft Street, Scarborough 6019. CITY OF STIRLING (as per attached plan 3670 sheet 2 'Attachment A'). The said contract only relates to the highlighted area of Attachment A plan 3670 sheet 2. The Buyer agrees to enter into a new contract within 14 days of written verification of approval of the development application from the City of Stirling. Upon signing of the said contract the buyer hereby releases the nominated amount of $50,000 to the Stakeholders Andrew John King and Tracey Ann King of Denville Holdings Pty Ltd as Trustee for The UL Property Trust or nominee. The additiona[l] $125,000 is due and payable within 21 days upon signing of the said contract. The Buyer is aware that no interest is payable on any of the monies regardless of cancellation or termination of the said contract. In the event or cancellation or termination of the said contract of sale through default of either party in which event the whole of the deposit monies shall be payable to the non defaulting party. If Seller or Buyer rejects the claim that they are in default, such party shall seek legal representation. The Buyer is aware that this offer is subject to the City of Stirling granting written approval to the stakeholder known as Andrew John King and Tracey Ann King to begin construction and/or renovate the dwellings on the aforementioned land by no later than the 31st December, 2007. Settlement to be effected within 21 days of the issue of the separate Certificate of Title. The Buyer acknowledges that on signing of the new contract they will receive a copy of the following: (various documents related to the strata plan and management were then listed.) 32 The Mortimer contract was provided by Mr King to Mr Mortimer under cover of a letter which bore the date of 13 December 2006, but appears to have been transmitted with the Mortimer contract by facsimile on 19 December 2006. The covering letter confirmed acceptance of the applicant's offer. It continued: A deposit of $50,000 is due and payable with the balance of deposit due by 31st December2006. Cheques should be made payable to Denville Holdings Pty Ltd. (Page 11)
33 The letter was on the letterhead of 'Lifestyle Urban Property Group', although it did not comply with the requirements of s 41 of the REBA Act. 34 On 22 December 2006, Mr Mortimer deposited $175,000 into the general account of Denville Holdings Pty Ltd as trustee for the UL Trust trading as the Lifestyle Urban Property Group. The payments were made by way of two bank cheques drawn in the sum of $125,000 and $50,000 respectively. The Mortimer contract never proceeded to settlement as obviously it could not, given that the vendor at no time had any interest in the property (other than his interest under the contracts with Mr Robinson in September 2004 which had been extinguished 19 months before the Mortimer contract was made). 35 After various requests for repayment of the funds, Mr Mortimer ultimately caused a writ to be issued in December 2009 against Mr King and Denville. Those proceedings were settled on the basis that judgment was to be entered by consent in the sum of $168,990.55 against Mr King, both personally and in his capacity as trustee of the King Family Trust, and against Denville. The Deed of Settlement contained the following releases: 3.1 Upon and from the date of payment in full by King of the Settlement Sum and interest referred to in clause 2 herein to Mortimer … Mortimer releases and discharges King from all actions, suits, causes of action, claims, demands, damages and costs whatsoever (whether at common law, inequity or under any statute) past, present and future and howsoever arising which Mortimer may have had, may now have or but for the execution of this Deed may have at any future time in respect of or in connection with the Claim. 4.1 Upon and from the date of payment in full by King of the Settlement Sum and interest referred to in clause 2 herein to Mortimer … this deed may be pleaded as a bar to any claims, actions, suits or proceedings, now or in the future commenced by or on behalf of Mortimer or any party claiming through him against King in respect of or in connection with the Claim. 36 On 19 November 2010, judgment was ordered by consent in accordance with the terms of the settlement deed. 37 Mr Mortimer has received no payment from any party towards the judgment. Mr Mortimer caused inquiries to be made by his solicitor as to the availability of assets to satisfy the judgment, and it would appear that the only asset identified by Mr Mortimer's solicitors was a property which (Page 12)
had been subject of a mortgagee's sale which did not realise sufficient funds to cover the debt owed to the first mortgagee of that property.
Was the defalcation in the course of Denville’s business? 38 The starting point in addressing this question is whether the deeming provision in s 4(3) of the REBA Act is applicable. 39 What is not in issue is: • Denville was at the relevant time an agent; • Denville received the payment of $175,000 from Mr Mortimer; • the monies paid were received by Denville on behalf of Mr King as trustee for the King Family Trust; and • the payment was the consideration relating to a real estate transaction, namely the Mortimer contract. 40 Those non-contentious issues would appear to satisfy the requirements of s 4(3) of the REBA Act. The Commissioner argues that the deeming provision does not apply unless the monies are received by the real estate agent because it is a real estate agent, and not where monies are received for some other reason. Counsel for the Commissioner gave the example of a real estate transaction between brothers who decided to deposit funds with their father, who happens to be a real estate agent, because they trust him as their father, but not because he is a real estate agent. The Commissioner argues that, in that example, the fact that the father is an agent is merely incidental and s 4(3) would have no application because it cannot be said that the funds were 'collected by an agent'. In this case, the Commissioner argues that Denville was simply used by Mr King as a convenient vehicle for his fraud, or as his 'alter ego' and not because it was a real estate agent. 41 We do not accept the Commissioner's contention. First, there is no reason why the gloss suggested should be put on the plain words of s 4(3). That section is plainly designed to ensure that the regulatory requirements in relation to the handling of money connected with real estate transactions apply to all funds held by real estate agents in relation to real estate transactions. (Page 13)
42 Secondly, although there is no evidence before the Tribunal going directly to Mr Mortimer's belief as to the role which Denville was playing, there is evidence that it had involvement in the transaction of a type normally associated with a real estate business. Proposals for the purchase of the unit by Mr Mortimer were presented under the letterhead of the business name utilised in the real estate business. While it is true that the letterhead does not meet the requirements of s 41 of the REBA Act, that non-compliance does not lead to the conclusion that the communication was not made in the course of Denville's business. The Commissioner did not contend otherwise. The disclaimer on the brochure provided in November 2006 under the real estate business trading name is consistent with a role as a real estate agent in relation to the proposal. The letter of 15 November 2006 contemplated the entry into a management agreement with Denville for the management of the units following completion. Management, consisting of collection of rents and other payments for use occupation, is a real estate transaction which only licensed real estate agents may perform. The transaction ultimately entered into was a transaction by Mr King in his capacity as trustee of a trust, and was not a transaction by Denville. Given that the purported vendor was Mr King, there is no reason that monies should have been paid to Denville (at least on any objective view of the transaction) other than that it was an entity appropriate to take control of the funds in order that they should be dealt with in accordance with the requirements of the Mortimer contract. It was appropriate because it was a licensed real estate agent subject to the usual finance controls. 43 Thirdly, the proposition that Mr King was simply using Denville as a vehicle for his fraud provides little support for the Commissioner's contention. If the proposition is accepted, it begs the question as to why Denville might be a 'convenient vehicle'. The most obvious answer to that question is that the involvement of a real estate business, subject as it is to regulation in relation to financial dealings, gave the transaction a cloak of legitimacy. Viewed objectively, the payment of the consideration to an account of a real estate business would be safer than a payment direct to the vendor. 44 As we understand the Commissioner’s arguments, she contends that on a proper construction of annexure A to the Mortimer contract, the monies were in fact payable to Mr and Mrs King as stakeholders rather than Denville. The Commissioner argues that the express reference to the payment of the deposit to a stakeholder shows that the intention of the parties was that only the deposit would be 'held in stake' and that the (Page 14)
balance of the purchase price was simply payable to the purported vendor, that is, to Mr King. 45 To say that annexure A is no masterpiece of drafting would be an understatement. To attribute a conclusion as to the intention of the parties from its construction, or at least any common intention as to the role of Denville, is probably impossible. 46 Counsel for the applicant argued that in fact no money was capable of being released to Mr and Mrs King pursuant to annexure A because it was only releasable 'upon signing of the said contract', which must necessarily, he argued, be a reference to the 'new contract'referred to in the immediately preceding sentence of annexure A. The problem with that argument is that the words 'said contract'also appear in the opening paragraph of annexure A, where they appear to most sensibly refer to the Mortimer contract itself. The same can be said of the use of the words 'said contract'where they appear later in annexure A. By contrast, the provision relating to receipt of documents concerning the strata plan referred to the signing of the 'new contract'. There is a reasonably compelling argument that the expression'said contract'wherever used in annexure A is a reference to the Mortimer contract, and not to the new contract contemplated to be made following approval of the development application. 47 It might be accepted that, on the proper construction of annexure A, the $50,000 deposit was to be released to the vendor (although even that is uncertain given that the release was to be 'stakeholders Andrew John King and Tracey Ann King of Denville Holdings Pty Ltd as trustee for The UL Property Trust or nominee' and not to Mr King as trustee for the King Family Trust). However, on no construction of annexure A can it be said that the balance of $125,000 was to be released at any time prior to settlement. It follows that we do not accept the premise upon which the Commissioner's argument appears to be based, namely that the balance of the purchase price was payable to the purported vendor prior to settlement. The use of the word 'stakeholder' does no more than illustrate the confused thinking of the draftsman of annexure A, presumably Mr King. 48 In our view, s 4(3) of the REBA Act put it beyond doubt that the receipt of the sum of $175,000, which we consider can properly be described as the 'collection' of that money by Denville on behalf of Mr King in his capacity or as trustee of the King Family Trust, is taken to be a service rendered by Denville in the course of its business as a real (Page 15)
estate agent. Denville must be taken to have known, through its director Mr King, that the transaction was fraudulent. It follows that the defalcation by Denville by improperly disbursing those funds thereby causing a loss to Mr Mortimer gives rise to a liability for the Fidelity Account to reimburse that loss. 49 Even absent s 4(3), we would be inclined to the view that the collection of the money was made in the course of business of Denville. That conclusion is based primarily on the matters dealt with in [42] and [43] above. 50 The Commissioner argued against that conclusion on the basis that it was contended that Denville was not acting as agent for Mr King. That argument is based on the proposition that the conduct could only be in the course that Denville's business as a licensee, if Denvile was acting: • as agent for Mr King; • the consideration in money or money’s worth, as commission, reward or remuneration; and • in respect of a real estate transaction. 51 That contention is based on an analysis of the various definitions found in s 4 of the REBA Act. That is, 'business' means the 'business of an agent', an agent is a 'real estate agent', a 'real estate agent' means a person whose business is 'to act as agent' for consideration in money or money’s worth in respect of a real estate transaction. 52 We do not accept, however, that a real estate agent who acts in relation to a real estate transaction but, for some particular reason, does not charge a fee or other consideration for so acting, is necessarily not acting in the course of its business as a real estate agent. What determines whether a person is a real estate agent is whether, either solely or as part of its business, it acts as agent for consideration in respect to real estate transactions. In the course of carrying on a business of that nature, an agent may act as agent in some transaction for which no fee is charged. To suggest that, in relation to those transactions, the protective provisions of the REBA Act have no application would be potentially to expose consumers to risks which cannot have been the intention of the legislature. 53 We do accept that (but for the deeming provision in s 4(3) of the REBA Act) it would be necessary to find that the licensee was acting 'as agent' for a party to a particular transaction, in order to conclude that the (Page 16)
agent was acting in the course of its business. The Commissioner argues that that was not the case in this matter because there was not sufficient independence as between Denville and Mr King for an agency relationship to exist. In support of that contention, the Commissioner relies on the decision in Hellier v Hinton (unreported, WASC, Library No 980712, 14 December 1998) (Hellier) 54 Hellier concerned an appeal against the dismissal of charges that Mr Hinton carried on business as a real estate agent while not licensed. Mr Hinton had been engaged by a number of property owners to manage the leases in relation to a number of properties in the Perth central business district, in consideration for which he received a commission based on a percentage of the rental collected. The primary question in issue was whether Mr Hinton was a real estate agent which involved the question of whether he was a person whose business was to act as agent for consideration in respect of real estate transactions. Miller J had regard to the terms of Mr Hinton's engagement, including the level of control exercised by the property owners over his activities, and concluded that it could not be said that he was a real estate agent in the sense of a person whose business was to act as agent for consideration in respect of real estate transactions. His Honour said: The central question was what 'business' it was that the respondent carried on. That business was the business of a property manager who, by the terms of his letter of appointment, performed a role which was circumscribed by conditions of appointment, including those which made him subject to the express directions of the owners; required him to ensure that he carried on no work which would interfere with the management of the estates; and stipulated that he would provide such information as might be required from time to time by various owners or their representatives in relation to their affairs. 55 In reaching that conclusion, his Honour accepted that: … independence of office, and 'the conduct of a business as agent for consideration ... as commission reward or remuneration in respect of real estate transaction' is the essential aspect of being a real estate agent. 56 The Commissioner relied on that observation to suggest that there was a lack of independence of office between Mr King and Denville in relation to the Mortimer contract such that it could not be said Denville was acting as agent for Mr King in relation to that contract, and thus the contract was not made in the course of Denville's business as a real estate agent. (Page 17)
57 In our view, Hellier does not support that conclusion. The question in Hellier was whether Mr Hinton was a real estate agent. That required a consideration of the details of his engagement as well as the transactions in which he engaged on behalf of the owners. The conclusion was that he was not 'carrying on a business' in the sense required by the REBA Act. In this case, it is an accepted fact that Denville was at the relevant time, a real estate agent. It carried on the business of a real estate agent. In the course of that business it (presumably) acted in relation to real estate transactions, and it was licensed for that very purpose. Even if it might be said, applying the rationale of Hellier, that if Denville were not licensed, doing what it did in relation to the Mortimer contract might not involve a contravention of the REBA Act, it does not follow that the course of its business as a real estate agent could not include participating in transactions in the way that it participated in the Mortimer transaction. 58 Nor is it material that Mr King was the person in bona fide control of Denville’s real estate business and its controlling mind. The Commissioner points out that, as Lindgren J said in Colbron v St Bees Island Pty Ltd (1995) 56 FCR 303 (Colbron), the expression 'real estate agent, as it is commonly understood' is a reference to 'a person who is authorised by a landowner to introduce prospective purchasers, who does so and who then participates in the process by which the landowner and the prospective purchaser come to terms by conveying offers and counter offers'. So much can be accepted. From that proposition, the Commissioner argues that Denville, controlled either entirely or to a substantial degree by Mr King, was not capable of acting as an agent in the sense of introducing Mr King, as purported vendor, to prospective purchasers and facilitating their entry into a contract for the sale of land. Denville would, the Commissioner argues, at all times have to act through Mr King and so, in effect, Mr King would be locating and introducing himself to purchasers. 59 That argument ignores the fact that Denville is a separate legal entity. Certainly it was controlled by Mr King (although Mr King was not the only director), but when Mr King acted in his capacity as a director of Denville, or as the person in bona fide control of Denville's business, his actions were the actions of the company. Denville was not the purported owner of the land subject of the Mortimer contract. The purported owner was Mr King in his capacity as a trustee. The actions of Denville in providing marketing material and the proposed contract to Mr Mortimer in relation to land which it did not own (or purport to own) were actions of the character described by Lindgren J in Colbron. (Page 18)
60 For those reasons, had s 4(3) of the REBA Act not been determinative of the issue (as we have found it to be), we would have found that the receipt of funds from Mr Mortimer was conduct by Denville in the course of its business as a real estate agent.
Should reimbursement be reduced by any amount receivable by Mr Mortimer? 61 As mentioned above, Mr Mortimer obtained a judgment by consent against Mr King and Denville in the sum of $168,990.55. The Commissioner argues that the amount of that judgment is an amount receivable by Mr Mortimer such that s 117(2) of the REBA Act precludes recovery of any amount, Mr Mortimer's claim against the Fidelity Account being in the sum of $150,000. In part, that submission was based on the proposition that Mr Mortimer had failed to adduce evidence that he was unable to recover on the judgment. 62 There is no merit in that submission. It is quite apparent that Mr Mortimer took steps to recover his losses from Mr King and Denville by issuing a writ and obtaining a judgment for his loss. Although Mr Mortimer adduced quite scant evidence on the point, we are prepared to accept that he caused enquiries to be made by his solicitor as to what assets might be available to satisfy the judgment, and that those enquiries led to advice that the only asset which could be identified had been sold by mortgagee which had failed to recover the full amount of its debt. There is no reason to believe that, if there were any reasonable prospect of recovery against Denville or Mr King, steps to obtain recovery would not have been taken. That inference can be drawn from the fact that Mr Mortimer engaged solicitors, issued a writ, and obtained judgment in an attempt to recover his loss. There is no reason to believe that, having gone to that trouble and expense, Mr Mortimer would have stopped short of taking any action to enforce his judgment that might have been reasonably available. 63 On that basis, there is no amount receivable from any other source which reduces Mr Mortimer's loss. 64 In any event, the State is subrogated to all rights which Mr Mortimer might have under the judgment which he has obtained. There was some suggestion during the course of argument that the release contained in the settlement deed between Mr Mortimer and Mr King and Denville might defeat that right of subrogation or somehow otherwise disentitle Mr Mortimer from any payment from the Fidelity Account. There is no merit in that submission. Section 117(1) of the REBA Act contemplates that a claimant may be required to exhaust all relevant rights of action and (Page 19)
legal remedies available against the defaulting licensee and any other person in respect of the loss suffered before commencing any action in relation to the Fidelity Account. That is precisely what occurred in this case. Upon payment to Mr Mortimer from the Fidelity Account, the State is subrogated to his rights under the judgment he has obtained. The releases contained in the settlement deed were obtained on the basis that a consent judgment was entered for the full amount of the debt, and in any event only came into operation 'upon payment in full' of the judgment sum. The releases obviously do not bar enforcement of the judgment.
Conclusion 65 For those reasons, we are of the view that the decision made on 17 January 2013 by the Commissioner for Consumer Protection disallowing the applicant's claim should be set aside and the claim should be allowed in the sum of $150,000.
Orders |