Sutton v Tomkins
[2015] QCAT 411
•7 October 2015
| CITATION: | Sutton v Tomkins [2015] QCAT 411 |
| PARTIES: | Sandra Joanne Sutton David John Sutton (Applicants) |
| v | |
| Cecil Thomas John Tomkins (Respondent) |
| APPLICATION NUMBER: | OCR170-14 |
| MATTER TYPE: | Occupational regulation matters |
| HEARING DATE: | On the Papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Paratz |
| DELIVERED ON: | 7 October 2015 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The claim made against the Fund maintained under the Property Agents and Motor Dealers Act 2000 (and the Agents Financial Administration Act 2014) by Sandra Joanne Sutton and David John Sutton on 19 March 2012 is rejected. |
| CATCHWORDS: | CLAIM AGAINST FUND – REAL ESTATE AGENT – Where a claim was made against the Fund maintained under the Property Agents and Motor Dealers Act 2000 (and the Agents Financial Administration Act 2014)– where it was alleged that a real estate agent made misrepresentations and mishandled funds – where the claimants entered into a Contract of Sale for purchase of a home unit off the plan - where the deposit was forfeited by the Vendor- whether a claim against the Fund arises under the Act Property Agents and Motor Dealers Act 2000 (Qld), s 470(1)(e), s 488, s 573, s 573A, s 573B, s 573C, s 574 |
APPEARANCES:
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REPRESENTATIVES:
| APPLICANT: | Represented by Australasian Lawyers and Consultants |
RESPONDENT: SUBMISSION: | No appearance on behalf of Cecil Thomas John Tomkins Submissions were made by the Chief Executive, Department of Justice and Attorney-General, pursuant to Section 512 Property Agents and Motor Dealers Act (Qld) 2000 and Section 123 Agents Financial Administration Act (Qld) 2014[1] |
[1] Representation details amended as per Tribunal Order dated 22 October 2015.
REASONS FOR DECISION
Sandra Joanne Sutton and David John Sutton (‘the Suttons’) made a claim on 19 March 2012 in relation to their dealings with Prime Real Estate Australia Pty Ltd (Deregistered) and Cecil Thomas John Tomkins (‘the Agent’) against the Claim Fund which is established under the provisions of the Property Agents and Motor Dealers Act 2000 (Qld) (‘the Act’), and subsequently maintained under the provisions of the Agents Financial Administration Act 2014 (Qld) (‘AFAA’).
The claim by the Suttons was for amounts as follows:[2]
(1)$4,845.00 in favour of S. Sutton for the Deposit Bond fee paid 31 January 2008 plus interest to the date of repayment and the costs of the NSW proceedings and this matter on an indemnity basis;
(2)$47,340.00 in favour of QBE Insurance (Australia) Limited for the amount paid out pursuant to the Bond on 14 December 2010 plus interest to the date of repayment and the costs of the NSW proceedings and this matter on an indemnity basis; and
(3)In favour of Deposit Access Pty Ltd the costs of the NSW proceedings and this matter on an indemnity basis.
[2]Letter Synergy Group Legal Pty Ltd to OFT, 31 January 2012.
There is a similar file involving a claim by Damien Edward Cahill.[3] Sandra Sutton is the mother of Damien Cahill. The circumstances and considerations in both claims are effectively identical. I will deliver separate Reasons and Decisions on each claim, which will be also effectively identical, only with necessary identification and detail modifications.
[3]OCR176-14.
Course of the Proceedings
I gave a decision[4] on 21 March 2014 in a previous application by the Suttons for an extension of time to file a claim against the Fund, and made the following Orders:
(1)The time for the filing of a claim against the claim Fund by Sandra Joanne Sutton and David Sutton is extended to the date upon which they lodged their claim, being 19 March 2012, pursuant to section 511 of the Property Agents and Motor Dealers Act 2000.
(2)I refer the claim to the Chief Executive for processing.
[4]Sutton & Anor v Cecil Tomkins t/as Prime real Estate [2014] QCAT 111.
The claim was referred to the Tribunal for determination under Chapter 14 of the Act on 4 August 2014 by the Chief Executive, Department of Justice and Attorney-General, (the ‘Chief Executive’).
In an accompanying submission, the Chief Executive sought directions that the Suttons provide a properly articulated claim, making reference to the specific provisions of the Property Agents and Motor Dealers Act 2000 (‘the Act’), and related Acts, which they relied on.
I gave Directions on 11 August 2014 that the Suttons were to file such an “Outline of Claim” by 17 October 2014, and that the Chief Executive, could make further submissions by 19 December 2014.
The Outline of Claim was received from the Suttons as directed, and further submissions were received from the Chief Executive as directed.
I gave further Directions on 20 February 2015 that the Suttons were to deliver a response by 6 March 2015, with which they complied.
I then gave further Directions on 27 March 2015 that the proceeding would be determined by a Member of the Tribunal on the basis of the documents filed without an oral hearing.
This is the ‘on the papers’ decision in the proceeding.
Facts giving rise to the Claim
Mr Tomkins was a Real Estate Agent. He was involved in transactions whereby Sandra Sutton and Mr Cahill signed contracts to purchase lots ‘off the plan’ in 2008 in a residential unit development on the Gold Coast known as ‘Elston’ at the corner of Hamilton Avenue and Surfers Paradise Boulevard. They allege that actions of Mr Tomkins, and loss suffered by them, give rise to their entitlement to claim on the Fund.
Sandra Sutton entered into a contract to buy a unit on Level 3 - Lot 24 for $469,000. The contract was entered into on 23 January 2008. Arrangements were made for the 10% deposit of $46,900 to be provided by means of a Deposit Bond provided by QBE Insurance (Australia) Limited by its authorised agent Deposit Access Pty Ltd. The application for the deposit bond was signed on 29 February 2008 and it was issued on 4 March 2008.
QBE Insurance (Australia) Limited (‘QBE’) paid the lot 24 Deposit Bond premium of $4,845 to Deposit Access Pty Ltd on 4 March 2008.
The Contract was due to settle on 14 August 2009. The Suttons failed to complete the contract. On 14 October 2009, Ramsden Bow Lawyers, acting for the Vendor, wrote to the Solicitors for the Suttons advising them that the Seller terminated the contract and had directed that the deposit bond be called on immediately.
On 14 December 2010 QBE paid the amount of $46,900 to the Vendor under the lot 24 bond.
QBE instituted proceedings against Sandra Joanne Sutton and David John Sutton in the Local Court of NSW. An amended Statement of Claim was dated 20 July 2011. The claim was for a total of $50,770.16 being $47,340 for claim plus interest and fees and costs. The basis of the claim against David Sutton was under a Guarantee written and contained in the deposit bond application dated 29 February 2008.
The Suttons filed an amended defence to the action on 5 August 2011. It alleged that Sandra Sutton was induced to request the bond on the basis of misrepresentations of Mr Tomkins made for himself and on behalf of the vendor and QBE, and that the conduct of Mr Tomkins and his principals was deceptive and misleading and otherwise unconscionable and unfair.
The Suttons were represented in those proceedings by Synergy Group Legal Pty Ltd. They alleged that the misrepresentations were to the effect that:-[5]
(a) the deposit bond was a requirement to facilitate the transaction;
(b) the transaction was an option to purchase which Cecil Tomkins undertook to novate prior to completion;
(c) the only monies which the Defendant had to pay was the fee accompanying the bond (which was duly paid by the Defendant);
(d) Cecil Tomkins had done this many times successfully for the plaintiff and developers of real property under construction benefiting himself and other clients;
(e) In this development, Cecil Tomkins was doing this with at least 3 other Buyers;
(f) Cecil Tomkins was experienced and knowledgeable in such matters and the defendant did not need independent legal or financial advice; and
(g) In any event, the legal liability of the defendant was limited to the deposit bond fee paid by the defendant.
[5]Amended Defence 18 July 2011, para [2].
An application was apparently to be made to join Cecil Tomkins and Deposit Access Pty Limited to the proceedings on 25 October 2011, but the application in respect of Deposit Access Pty Ltd was not proceeded with, and a Cross-Claim against Mr Tomkins by the Suttons was filed on 17 November 2011. It is unclear what happened to that application and cross-claim.
Judgment was given for QBE against Sandra Sutton and David Sutton on 29 February 2012 as per a Consent Order for the amount of $103,243.14. The judgment was entered on 3 April 2012.
It appears that the units were resold by the Vendor at a higher price, so no claim was made against the Suttons by the Vendor in that respect.
Basis of the Claim
The Solicitors for the Suttons and Mr Cahill have argued that their clients were caught in a ‘scheme’ that was orchestrated by Mr Tomkins. The proposition was put forward in a letter[6] from them to the Chief Executive of 31 January 2012:-
The circumstances are set out in detail in the material indexed and attached. However, in summary, our clients (and others who corroborate their version of events) were induced to enter into contracts for building units under construction on false bases and have as consequence suffered significant damage and loss for which compensation from the Fund is sought.
In our submission, there can be no doubt that the Agent acted according to the following scheme. When interviewed on 17 November 2011 by a representative of our office about the process, he admitted that had we referred another client who proposed to purchase 1 apartment with a $50,000.00 cash deposit, he would have sold him 10 apartments using Deposit Bonds at $5,000.00 each.
The basic sales pitch was that a unit could be taken off the market and held for the duration of construction for the cost of a deposit bond… a little under $5,000.00 being 1% of the purchase price of approximately $500,000.00 for each property. Mr Cahill had $10,000.00 to spare at the time, so could not afford to buy two (2) Gold Coast apartments. Mr Tomkins advised him to buy two (2).
The idea presented by Mr Tomkins was that the Suttons and Mr Cahill would never complete the purchase of the Unit (had they done so, they would definitely have needed finance and the contract was not made conditional in any respect); and Mr Tomkins dissuaded our clients from taking independent legal or financial advice.
Mr Tomkins told our clients he would resell the Unit prior to completion; and apparently, knowingly mislead our clients and others about the foreign Investment Review Board (‘FIRB’) requirements in this regard.
He misadvised our clients that there would be no stamp duty or taxation ramifications and that they would be entitled to a significant return on their investment of the $5,000.00 approximately, for each property paid as the deposit Bond premium. This was the only amount requested and he said words to the effect that, if anything did go wrong ‘the Insurance Company takes care of the rest’, ie our clients believed from his words and actions that this was the limit of their liability in the unlikely event that things did not go just as he said.
Mr Tomkins clearly intended our clients to believe, and may have believed himself, that their liability was in any event limited to the cost of the Bond ($4,845.00 in the case of the Suttons, and $9,690.00 in the case of Cahill) but that was untrue. He did not explain any of the indemnity and charging provisions of the Deposit Bond and in addition to paying for something that they did not receive (and would not have entered into and paid for, had they known the truth) the parties have had to defend action taken in New South Wales by QBE for payments made to the Seller pursuant to the Bond ($47,340.00 in the case of Sutton and $93,000.00 in the case of Cahill) and they have incurred interest and costs themselves plus costs of QBE and Deposit Bonds Access Pty Ltd.
The Agent claimed that he was a representative of these two companies, but they dispute this and although he was able to produce 3 deposit Bonds, they were not all as represented. They were, however, sufficient for Mr Tomkins to obtain payment from the Developer of half of the commission upfront with balance on completion.
In our submission, the Agent has acted according to a scheme whereby the nature and effect of the agreements they were to lead into was deleterious to them and their position was prejudiced in order for the Agent to get his commission. Our clients have suffered loss and damage, and in our respectful submission, deserve compassion from the Fund accordingly.
[6]Letter Synergy Group Legal Pty Ltd to Office of Fair Trading, 31 January 2012.
The facts of the matter are not in dispute, and there is no apparent challenge to the allegations of the Suttons as to what was said to them.
No Statements of Evidence have been filed, but the various correspondence from the Suttons and their solicitors sets out their allegations as to what was said, and as to what occurred.
The Real Estate Agent, Mr Tomkins, has not provided evidence, and he has not responded to Directions sent to him.
The claim is therefore to be assessed on the material provided, and on a consideration of the relevant law.
Legal basis of the Claim
The Suttons claim compensation from the Fund pursuant to sections 470 and 488 of the Act.[7]
[7]Outline of Claim filed 17 October 2014, para [19].
Section 470 lists the events which give a person an entitlement to make a claim against the Fund, if the person suffers financial loss. Section 470(1)(a) lists the provisions of the Act which if contravened, are an event. Section 470(d) lists the provisions of the Land Sales Act 1984, which if contravened, are an event.
The Chief Executive has identified the events alleged by the Suttons as falling into three groups:[8]
1)Deposit Bond Event
Dealing with the initial deposit and the deposit bond paid by the Suttons in a manner that contravened s82(1)(b) of the Agents Financial Administration Act 2014 (‘AFAA’) and s206 of the Property Occupations Act 2014 (‘POA’) (formerly PAMDA s 470(1)(e) and s573) and s23 and s24 of the Land Sales Act 1984 (‘LSA’).
2)Misrepresentation Event
Making false or misleading representations about proposed Lot 24 Elston Grandsurf Resort within the meaning of POA s212 (formerly s574 PAMDA).
3)Marketeering Event
Engaging in a course of conduct that breached s207, s208 and/or s209 (formerly s573A, 573B and/or s573C PAMDA).
[8]Outline of Submissions on behalf of the Chief Executive, filed 19 December 2014, para [4].
The submission of the Suttons categorise the claim as being made up of two components:[9]
The conduct complained of by (the Agent) is one event we say, but has broadly speaking two (2) components as follows:
(a)The conduct of the (Agent) as particularised and overall was such that it wrongfully mislead (the Suttons) to purchase this property and they suffered loss as a consequence; and
(b)(the Agent) handled property (including monies and negotiable instruments, we submit) inappropriately, such that the loss was caused.
[9]Submission in Response on behalf of the claimants, filed 6 March 2015, para [8].
The PAMDA Act was replaced by several other Acts. There are broad transitional provisions that have the effect of making PAMDA still applicable where a claim has been lodged before the replacement 2014 Acts came into force.
I will consider each of the alleged events in turn.
The Deposit Bond Event
Section 470(1)(e) of PAMDA {s82(1)(b) AFAA} provides :
(e) a stealing, misappropriation or misapplication by a relevant person of property entrusted to the person as agent for someone else in the person’s capacity as a relevant person.
Section 573 of PAMDA {s206 POA} provides:
(1)This section applies if a licensee, in the performance of the activities of a licensee, receives an amount belonging to someone else.
(2)A licensee who –
(3)(a) dishonestly converts the amount to the licensee’s own or someone else’s use; or
(b) dishonestly renders an account of the amount knowing it to be false in a material particular;
commits a crime
Section 23(1) and s 23(2) LSA (Reprint 5D effective 15 February 2012) provide:
23 Contractual requirement re holding of money
(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 of 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, whether by way of deposit or otherwise, without becoming entitled in terms of the instrument to receive a registrable 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 moneys shall be paid directly to –
(2)(a) a law practice at its office in Queensland; or
(b)A real estate agent duly licensed under the Property Agents and Motor dealers Act 2000; or
(c)A real estate agency in which a real estate agent carries on business;
specified in the instrument
Section 24 of the LSA (Reprint 5D effective 15 February 2012) provides:
24(1) An entity that receives money as a trustee in accordance with section 23(1) shall retain the money in the entity’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 entity’s trust account.
The Solicitors for the Suttons allege that Mr Tomkins took an initial deposit of 1% of the purchase price from the Suttons, and directed that to QBE Insurance Ltd for provision of the Deposit Bond.[10] They allege that the initial deposit was applied in breach[11] of s 470(e) PAMDA; s 573 PAMDA; and/or s 23 LSA. Further that the Agent received and held the Deposit Bond until after the intended completion and termination by the Applicants;[12] and in breach of s470(e)PAMDA. Further that the Agent then released the deposit Bond to the seller[13] adverse to the interests of the Suttons, and converting Funds for the benefit of the seller, in breach of s 470(e) PAMDA, s 573 PAMDA, s 23 LSA and s 24 LSA.
[10]Applicants Outline of Claim filed 17 October 2014, para [13].
[11]Applicants Outline of Claim filed 17 October 2014, para [14].
[12]Applicants Outline of Claim filed 17 October 2014, para [15].
[13]Ibid, para [16].
The submissions of the solicitors for the Suttons provide the following basis for the allegations of mis-handling of the Deposit Bond:[14]
12. It is a theft, misappropriation or misapplication in proper analysis because the Funds; and the Deposit Bond “instrument” (which in our submission, requires application of the same provisions of things held in trust; no less so than Title Deeds, “or Bearer” cheques and other negotiable instruments). The Bond was capable of being discounted as instrument payable on demand for monies worth…a bill of exchange in historical parlance). The Agent used that document and the monies paid by the Applicant to obtain an advance payment of commission to which he was not entitled; and at the Applicant’s expense.
13. It was a fraud; and there is no doubt that the Respondent did this intentionally and multiple times. Unfortunately the Applicants were unable to mitigate the loss.
[14]Response to Submissions by the Chief Executive, filed 6 March 2015, para [12] and [13].
The Chief Executive says that the Suttons (at paragraphs 10 to 16 of their Outline of Claim) allege[15] that the Agent committed the Deposit Bond Event by:
a) Taking the Suttons payment of $4,845.00 being the fee charged by QBE to provide the Deposit Bond (Initial Deposit) and then directing QBE to issue the Deposit Bond; and
b) Receiving and holding the Deposit Bond until after the contract of sale for the Property was at an end, and then releasing it to the vendor.
[15]Outline of submissions on behalf of Chief Executive, filed 19 December 2014, para [12].
The Chief Executive submits that even if the Suttons can establish that the Agent has dealt with the initial deposit and the deposit bond as alleged, that it would not constitute a breach of either s 23 or s 24 of the LSA:[16]
a) The Chief Executive submits that the deposit bond was not a purchase instrument as defined by s 23(1) LSA because it did not bind either of the Suttons to purchase the property:[17]
b) It submits that the deposit bond is not captured by s 23(2) LSA because it did not provide for the Suttons to pay money without becoming entitled to receive a registrable transfer in accordance with the contract for sale.[18]
c) It submits that s 24 LSA does not apply because the contract for the sale of the property nominated the Vendor’s solicitors as the entity to hold any deposit payable, and not the agent; no moneys were actually paid to the Agent under the Deposit Bond; and moneys were paid to the Vendor’s solicitors under the Deposit Bond after the Suttons entitlement to receive the registrable instrument of transfer for the property under the contract was extinguished.
[16]Ibid, para [16].
[17]Ibid, para [19].
[18]Outline of submissions on behalf of Chief Executive, filed 19 December 2014, para [22].
The Chief Executive submits that s 82(1)(b) AFAA and s 206 POA (as to dishonestly converting, stealing or misapplying property, do not apply as :
a) The Agent remitted the Initial Deposit to the appropriate entity for the appropriate purpose.
b) Holding the Deposit Bond and then releasing it to the Vendor after the contract of sale was at an end cannot constitute an event within the meaning of s 470 PAMDA because the Suttons were not, in fact, entitled to the deposit after the contract was at an end and, it follows, had no entitlement to call upon the Deposit Bond.[19]
[19]Ibid, para [29].
I accept the submissions of the Chief Executive in these respects.
The Agent dealt with the Initial Deposit in a manner as anticipated, it was forwarded to QBE, and a Deposit Bond was issued by QBE accordingly. There is no mishandling of the Initial Deposit moneys in terms of the LSA or the AFAA.
QBE in turn provided a Deposit Bond, and then paid it to the Vendor when called upon. Those events were not controlled by the Agent. The Suttons subsequently consented to a judgment being entered against them in favour of QBE, which indicates that they conceded a liability by them to QBE. That sequence of events does not show any mishandling of the Deposit Bond by the Agent.
The Solicitors for the Suttons submit that the agent used the Deposit Bond instrument to obtain a benefit for himself by way of an advance payment of commission ‘to which he was not entitled.’[20]
[20]Submission in Response on behalf of the claimants, filed 6 March 2015, para [12].
It has not been shown however that the Agent was not entitled to the Commission – that is a question between the Vendor and the Agent. It would appear that the Vendor agreed to pay commission before a sale settled – presumably that was an inducement to agents to obtain sales, and not to have to wait until the settlement date, which may be several years in time ahead in an ‘off the plan’ sale such as this. The Agent may well have been entitled to payment of the commission once a Contract was entered into, and a Deposit was provided by way of a Bond.
The mere payment of commission to the Agent has not been shown to be a breach of any of the relevant Acts, and does not of itself give rise to claim against the Fund.
No basis is therefore shown for a claim against the Fund in respect of the Deposit Event.
The Misrepresentation Event
The misrepresentations are described in the outline of Claim:[21]
4. The Agent made representations (‘the Representations’) about the property, to the effect that:
(a) the property for sale was unique and should be purchased by the Applicants for reasons including the following;
(b) the acquisition of the property could be achieved with a payment of only 1% of the purchase price;
(c) the Agent would look after the applicant’s interests as paramount in relation to the purchase;
(d) the Applicants would not be obliged to do or contribute anything further towards the completion of the purchase of the property (because the Agent would take care of everything for them); and
(e) the liability of the Applicants in any event was limited to the Applicants’ upfront payment of 1% of the purchase price.
[21]Outline of Claim filed 17 October 2014, para 4
The Solicitors for the Suttons submit that this conduct of the Agent was deceptive and misleading, and designed to mislead the Suttons into purchasing the property.
The Chief Executive submits that these claims are inadequately particularised, and that it cannot properly respond to this part of the Suttons claim.[22] Further it says that even were the Suttons able to adequately particularise the alleged representations, that the claim ought nonetheless to fail for the reasons related to considerations of ‘financial loss’.
[22]Outline of submissions on behalf of Chief Executive, filed 19 December 2014, para [39].
S 212 POA provides:
(1)A licensee or real estate salesperson must not represent to someone else anything that is false or misleading relating to the letting, exchange or sale of property.
The Chief Executive argued that the representations would not pass the common law test of representations:[23]
The other provision that your clients rely on is s 574 being false representations about property. Your clients allege in the letter dated 29 June 2009 that the licensee made false representations regarding the valuation of the property on completion, the ready availability of finance and the ability to resell the property prior to completion on the basis that the selling agent would arrange…a deposit bond that your clients would not in fact have to contribute any money towards settlement. With respect none of these assertions appear to be false and some do not even fall into the category of past or present facts being capable of being falsely represented at the time the representations were made. I note that future promises are not facts capable of being misrepresented and do not ordinarily pass the common law test of representations.
[23]Letter OFT to Synergy Group 22 Oct 2012.
The basic representations as to the ‘sale’ of the property were correct – the description of the lot, the selling price, and the required deposit, are not in contention.
The property was able to be secured by a payment equal to 1% of the purchase price, as the Contract called for a deposit of 10%, which could be provided by a Deposit Bond (which in turn was obtainable for a fee of 1% of the purchase price). That is what occurred.
The difficulties arose when the time came for the Suttons to settle the purchase, and the Vendor required, and forfeited, the full 10% deposit. The circumstances as to why the Suttons were unable to on-sell the unit before the settlement date, and avoid this consequence, are unclear – the Vendor was apparently able to sell the unit without loss, and it is unexplained as to why the Suttons could not, or did not, do so similarly.
The misrepresentations that the Suttons complain of are the representations that led them to agree to enter into the arrangements.
The claim for misrepresentation arises under the Act, which has an element of Consumer Protection. The Act provides that the main object of it is to provide a system that achieves an appropriate balance between the need to regulate for the protection of consumers and the need to promote freedom of enterprise in the market place.[24] It further provides that another significant object is to provide a way of protecting consumers against particular undesirable practices associated with the promotion of residential property.[25]
[24]PAMDA s 10(1).
[25]PAMDA s 10(2).
Misrepresentation under the Act is subject to the provisions of the Act, and principles as to misrepresentation in Contract will not necessarily provide a test, but similar considerations will be relevant, to the extent they are not modified by specific provisions of the Act.
A misrepresentation in Contract has been described in a leading text[26] as ‘a representation that is not true, or, more broadly, that leads the representee into error’.
[26]Seddon and Elklinghaus, Cheshire and Fifoot’s Law of Contract Ninth Australian Edition, LexisNexis Butterworths, Melbourne, 2008, para [11.10].
Representations that may be relied upon in Contract are distinguished from ‘puffs’. The authors note that:[27]
Flamboyant or alluring statements about the quality of the subject-matter of the contract which would not be understood to be literally true are not actionable. It would be unfortunate (and destructive of many a salesperson’s livelihood) if legal consequences were to attach to such statements as that a car was a ‘prestige auto’ or that a book was one which the reader ‘could not put down’. Even so, what appears to be mere sales talk has sometimes given rise to a remedy. Under the misleading conduct legislation the courts may be less forgiving of what might be regarded as mere sales talk. It is necessary therefore to distinguish between an actionable misrepresentation and hyperbole. The essence of misrepresentation is that it led the representee into error. This must be tested objectively – would a reasonable person in the position of the representee have been led into error by the statement?
[27]Op cit, para [11.11].
The representations by the agent that the sale was unique, and that he would ‘look after the Suttons interests as paramount’ may be seen as sales talk or ‘puffs’.
There is nothing to indicate that there was anything unique about this property, or that a reasonable person would believe that there was.
The Agent was the agent for the Vendor. His primary duty was to obtain a sale at the best possible price for the Vendor. If considered in any depth, it is apparent that the Agent would have the interests of the Vendor as paramount, as he would be required to act in his client’s interests, not in the Suttons’ interests. A reasonable person would be unlikely to accept such a statement as truthful on its face, and rely upon such a proposition.
The Suttons reliance is also clouded by representations that they made, or which were made on their behalf, in obtaining the Deposit Bond. The application to ‘Deposit Access’ (issued by QBE Insurance (Australia) Limited) was signed by Sandra Sutton on 31 January 2008. On 6 February 2008 a letter was sent by their accountant,[28] apparently in support of the application. The Deposit Bond itself was issued on 4 March 2008.
[28]Letter Glenis Mapp to Deposit Access Underwriting, 6 February 2008.
The letter from their accountant said:
Re: Sandra Sutton – Traaval Pty Ltd, trading as Cooroy Travel
I advise that I act as accountant for the above client and confirm that they have been self employed for a period of ten years.
The individual/business is liquid and able to meet its current commitments. Based on my client’s current financial position, it would appear that the proposed commitment for Lot 24, Elston, Surfers Paradise, 4217, of $469,000, will not create undue hardship.
However, I am unable to guarantee the future performance of my client and their financial capacity at the time of the property settlement.
The sending of the letter from their accountant, and the reference to their business background suggests that:
a) the Suttons did seek advice from their accountant before the Deposit Bond was issued, and that they did not rely solely on the representations of the agent, and
b) the Suttons were business people of ten years standing, involved in a regulated industry as travel agents, so may be presumed to have a level of financial sophistication, and be able to assess the reasonableness of the representations made to them.
It is therefore not established that:
a) The statements of the agent as to the basics of the sale were misrepresentations
b) The Suttons relied on the statements of the agent
c) A reasonable person would have been led into error by the statements of the Agent.
The Suttons have not established that the representations that induced them to enter into the Contract were misrepresentations that were false, and on which they reasonably relied.
I am not satisfied that the misrepresentation ground is made out such as to afford recourse to the Act under S 212 POA, and consequently to a claim against the Fund.
The Marketeering Event
Section 207 POA {s 573A PAMDA} provides:
207 Misleading conduct
A marketeer must not, in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of residential property in Queensland, engage in conduct that is misleading or is likely to mislead.
Section 208 POA {s 573B PAMDA} provides:
208 Unconscionable conduct
(1)A marketeer must not, in connection with the sale, or for promoting the sale, or for providing a service in connection with the sale, of residential property in Queensland, engage in conduct that is, in all the circumstances, unconscionable.
Section 209 POA {s 573C PAMDA} provides as to false representations and other misleading conduct relating to residential property by a marketeer.
The ability to claim against the Fund for a marketeering contravention is subject to the provisions of AFAA. Section 80 AFAA defines ‘marketeering contravention’ as:
Marketeering contravention means a contravention of any of the following by a relevant person –
(a)The Property Occupations Act 2014, section 207, 208 or 209
(b)Section 573A, 573B or 573C of the repealed Act.
Section 82(2) AFAA provides:
(2) A person may make a claim against the Fund for financial loss relating to a non-investment residential property purchased by the person because of, or arising out of, a marketeering contravention only to the extent the loss is capital loss.
The expression ‘non-investment residential property’ is defined by section 81 AFAA:
A person purchases a non-investment residential property only if –
(a)The property is a residential property; and (either of the following has been assessed for the purchase –
(b)(i) a concession under the Duties Act 2001, chapter 2, part 9, for transfer duty;
(ii) a concession, under the repealed Stamp Act 1894, section 55A, for stamp duty
The concessions that are referred to relate to:[29]
Purpose of pt 9
The purpose of this part is to provide for concessions for transfer duty for a dutiable transaction that is –
(a)The transfer, or agreement for the transfer, of a home or first home or of vacant land on which a first home is to be constructed
[29]Duties Act 2001 (Qld), chapter 2, part 9.
Section 84(2) AFAA provides that the persons who cannot make a claim against the fund includes:
(g) a person who suffers financial loss because of, or arising out of, a marketeering contravention relating to the purchase by the person of a residential property, other than a non-investment residential property
The effect of the above provisions is that a claim cannot be made for a marketeering contravention where the purchase is for an investment residential purpose.
There is nothing in the material put forward by the Suttons that suggests that they were intending to live in the units as a home, or first home. The purchase seems clearly to have been for investment purposes.
In these circumstances, no claim can arise by the Suttons against the Fund for a marketeering contravention in respect of the marketeering event.
Conclusion
The Solicitors for the Suttons strongly argue that the Agent has acted in a deliberate and unconscionable way to benefit himself, and that the Suttons were innocent parties who acted upon what the Agent told them, and have suffered significant financial loss as a result.
They submit that the object of the legislation is clearly made out in Section 6 AAFA to provide compensation in such cases,[30] and that the Agent should be ‘brought to account.’[31]
[30]Submission in Response on behalf of the claimants, filed 6 March 2015, para [7].
[31]Ibid, para [11].
The Suttons entered into the purchase with the intention of achieving a profit. They accepted what the agent told them. There is a common cited expression as to consumer protection that ‘if something looks too good to be true, it probably is.’
Here, the agent was telling this family that they could essentially make substantial money for almost nothing. All they had to do was sign up to purchase a unit, but they did not have to outlay any substantial money at any point (only an initial application fee of $4,845.00), and the unit would be resold at a presumably substantial profit, which they would get to keep, and there was no risk, except perhaps for the initial application fee of $4,845.00.
Common sense would surely alert a reasonably prudent person that if making money out of this unit development was so simple, and had no drawbacks, that everybody would be doing it, and there would be a queue of people on the Gold Coast eager to seize this opportunity.
At the end of the day, the Suttons have to accept some responsibility for the situation they placed themselves in - they committed to a very large financial commitment without seeking legal or financial advice. In their evident enthusiasm to take part in this property scheme, they did not exercise basic prudence.
Sympathy nevertheless has to be had with the predicament the family has found itself in. They were taken advantage of, by an evidently glib and persuasive agent, and have ended up with a significant financial loss.
If the agent acted deceitfully or improperly, then he exposes himself to charges for breaches of the relevant Acts, and possible criminal charges.
In that situation, the buyers may have recourse against the Agent in a civil claim for fraud or misrepresentation, or perhaps a claim for restitution in, or as a result of, criminal proceedings.
In this matter, it appears that the Agent has proved elusive, and there is a suggestion that he has no Funds. No criminal charges, or breaches of an Act, have been referred to in these proceedings. The possibility of the Suttons recovering anything from the Agent in either civil or criminal proceedings, therefore appears unlikely. It is understandable why the Suttons would look for recourse to the Fund in those circumstances.
The Fund is established to reimburse the public from breaches of the Act by agents who act deceitfully or wrongly in terms of the Act. The Fund however is not established to reimburse the public from a ‘bad deal’, or to stand in the place of normal prudence and care.
In this matter, the Suttons have not been able to point to a specific provision of the Act that gives rise to a valid claim against the Fund by them.
Many of the submissions made on behalf of the Suttons refer to principles of fairness. However, there is no overriding provision in the Act of ‘compassion’ or ‘hardship’ or ‘fairness’, that gives the Chief Executive the ability to make a discretionary payment from the Fund, or make what amounts to an ‘ex-gratia’ payment from the Fund.
The consequence is that, despite the unfortunate situation that the Suttons have found themselves in, their claim does not fall within the provisions of the Act as to the Fund. Consequently, the claim must be rejected.
I order that the claim against the Fund made on 19 March 2012 by the Suttons is rejected.
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