Teissier v Chief Executive Officer for Department of Mines, Industry, Regulation and Safety
[2018] WASAT 105
•19 OCTOBER 2018
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)
CITATION: TEISSIER -v- CHIEF EXECUTIVE OFFICER FOR DEPARTMENT OF MINES, INDUSTRY, REGULATION AND SAFETY. [2018] WASAT 105
MEMBER: PRESIDENT, JUSTICE J C CURTHOYS
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 19 OCTOBER 2018
FILE NO/S: VR 130 of 2015
BETWEEN: FRANCK TEISSIER
Applicant
AND
CHIEF EXECUTIVE OFFICER FOR DEPARTMENT OF MINES, INDUSTRY, REGULATION AND SAFETY.
Respondent
Catchwords:
Defalcation - Loss of profit
Legislation:
Real Estate and Business Agents Act 1978 (WA), s 4, s 116, s 117
Securities Industry Act 1975 (NSW)
Settlement Agents Act 1981 (WA), s 93(1), s 95
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Applicant | : | Alan Phillip Rumsley |
| Respondent | : | Kelli King |
Solicitors:
| Applicant | : | Alan Rumsley |
| Respondent | : | Department of Commerce |
Case(s) referred to in decision(s):
Armstrong v Commissioner for Consumer Protection [2014] WASCA 71
Betella v O'Leary [No 2] [2001] WASCA 266
Commissioner for Consumer Protection and The King and I [2016] WASAT 125
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371
Mantova Holdings Pty Ltd and Commissioner for Consumer Protection [2013] WASAT 47
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Re Real Estate and Business Agents Supervisory Board; Ex Parte Cohen [1999] WASCA 47
Real Estate and Business Agents Supervisory Board v Cohen and Ors [2004] WASCA 19
Wentworth v. New South Wales Bar Association [1992] HCA 24; 176 CLR 239
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
The King & I Pty Ltd, was a licensee under the Real Estate and Business Agents Act 1978 (WA) (REBA Act) from 27 August 1993 to 27 August 2014; it was a company controlled by Colin King, which employed his son Mr Paul King, a sales representative under the REBA Act; Commissioner for Consumer Protection and The King and I [2016] WASAT 125 (The King and I) at [2][3].
On 20 October 2016, The King and I was published with a finding that there was proper cause for disciplinary action against Mr Paul King and dismissing the application against the King and I Pty Ltd and Mr Colin King, on the basis the relevant licence had expired by the time proceedings were commenced (The King and I at [316]).
The relevant facts are not in dispute. However, the issue of whether Mr Franck Teissier has suffered pecuniary loss or loss of property by reason of defalcation by a licensee for the purposes of the REBA Act is in dispute.
Mr Teissier lodged a claim of $1,790,000 on the fidelity fund under the REBA Act on 3 August 2012 (Bundle page 1). The amount of $1,790,000 is the difference between what Mr Teissier was paid for his property and what it was immediately onsold for to another buyer.
In essence, the issue that arises in Mr Teissier's application is:
whether there was a 'defalcation' so as to provide the basis for a claim for 'loss' under s 116 of the REBA Act.
The Tribunal finds that Mr Teissier failed to establish a defalcation. Accordingly, his application is dismissed.
Material findings
The material findings in the TheKing and I were summarised by Mr Teissier as follows:
1)Mr Teissier owned Lot 733 Mundijong Road, Baldivis (the Property) and appointed agents to sell the property; The King and I at [150].
2)The King & I Pty Ltd, was a licensee under the REBA Act from 27 August 1993 to 27 August 2014; it was a company controlled by Colin King, which employed his son Mr Paul King, a sales representative under the REBA Act; The King and I at [2][3].
3)Colin King was the licensed director of the King & I and person in bona fide control of the business; The King and I at [51].
4)Colin King knew the Property had subdivision potential and he had Malaysian buyers looking for such properties. He called Mr Teissier's agent and said he had a potential buyer, then negotiated a conjunctional arrangement where the King & I would receive 1% of the commission for selling the Property; The King and I at [152]-[155].
5)On 18 August 2009, Mr Teissier entered into a contract to sell the Property for $3,250,000 to Kwinana Ranges Pty Ltd (KR); The King and Iat [157], a company established by Colin King's son, Michael King, with Mark Palumbo the sole director and secretary; The King and I at [41]. Mr Palumbo was a frontman acting on Michael King's direction; The King and I at [6] and Paul King witnessed Mr Palumbo's signature on the contract; The King and I at [157].
6)On 28 August 2009, KR appointed the King & I to sell the Property. Paul King again witnessed Mr Palumbo's signature; The King and I at [159]. On 2 September 2009, KR entered a contract for the sale of the Property for $5,040,000 to Evernex Holdings Pty Ltd (Evernex); The King and I at [160].
7)Evernex was a company associated with Khing Ping Wong who arranged syndicates of Malaysian investors to purchase land in Western Australia; The King and I at [6]. The King & I and Colin King had an ongoing business relationship with Mr Wong from 2007 or 2008; The King and I at [60][61].
8)On 15 December 2009, both sales of the Property were settled simultaneously; The King and I at [163]. The price differential between the purchase price paid for the Property on 15 December 2009 and the amount of the purchase price paid to Mr Teissier was $1,790,000; The King and I at [164].
9)Mr Teissier knew nothing about Evernex, Mr Wong or the second sale; The King and I at [152][155].
10)The King and I, its sales representative Paul King and the person in bona fide control, Colin King, were presenting offers to sellers in circumstances where they knew the company would immediately onsell and had already identified the ultimate purchaser. Ordinary, decent people would consider this conduct to be both unfair and dishonest; The King and I at [286][287].
11)The conduct was in breach of the Code of Conduct for Agents and Sales Representatives 1993 (Code) and the breaches proved go to the fundamental obligations of a real estate agent to act fairly and honestly; The King and I at [302]. The conduct in facilitating the transactions was at the very upper end of the range of seriousness; The King and I at [14] and resulted in disqualification of Paul King from applying for a real estate licence for 15 years; The King and I at [67].
12)The relevant conduct resulted in a significant loss to Mr Teissier, in that he did not achieve the sale price he should have, had the intermediate sale between him and the ultimate buyers not taken place. He would not have sold his property to KR if he knew there was another purchaser who was willing to pay a significantly higher price; The King and I at [10].
The CEO accepted Mr Teissier's summary of the material findings.
The Tribunal accepts Mr Teissier's summary of the material findings.
Two further material facts which are of critical importance in the resolution of this case are:
a)at no point did Mr Teissier ever receive $1,790,000, the amount of the alleged loss (being in fact, a lost opportunity); and
b)at no point did The King and I Pty Ltd receive into its trust account any of the $1,790,000 from the onsale or on behalf of Mr Teissier.
The relevant provisions of the REBA Act
Section 4 of the REBA Act provides:
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;
Section 116 of the REBA Act provides:
(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.
(2A)For the purposes of a claim against the Fidelity Account, the reference in subsection (1) to any period when the licensee was the holder of a current triennial certificate includes a period when the licensee was not the holder of a current triennial certificate if the chief executive officer considers that it is just and reasonable in the circumstances of the claim[.]
(Tribunal emphasis in bold)
Section 117 of the REBA Act provides:
(1)The chief executive officer may receive and, subject to section 116(2), settle any claim against the Fidelity Account at any time after the defalcation in respect of which the claim arose has occurred, but no person is entitled, without the leave of the chief executive officer, to commence any action in relation to the Fidelity Account, unless the chief executive officer has disallowed his claim and unless and until the claimant has exhausted all relevant rights of action and other legal remedies available against the defaulting licensee or any other person in respect of the loss suffered by the claimant.
(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.
(3)No amount shall be charged or be chargeable to the Fidelity Account as interest on the amount of any judgment obtained or of any claim admitted against the Fidelity Account[.]
The authorities
In Armstrong v Commissioner for Consumer Protection [2014] WASCA 71 (Armstrong) the Court of Appeal considered the equivalent provisions of the Settlement Agents Act 1981 (WA).
Section 116(1) of the REBA Act corresponds to s 93(1) of the Settlement Agents Act 1981 (WA) and s 117 of the REBA Act corresponds to s 95 of the Settlement Agents Act 1981 (WA).
In Armstrong Martin CJ (Newnes JA and Murphy JA agreeing) stated at [30]-[31]:
30The applicants claim an entitlement pursuant to statute. Their entitlement is to be determined by reference to the words of the statute. Particular attention must be given to the precise words used in the statutory provisions relevant to the applicants' claim, given the reliance which the applicants place upon decisions in other jurisdictions under different statutory regimes.
31Analysis of s 93 and s 95 of the Act shows that there are six aspects of the statutory scheme which the applicants must satisfy before they can establish their claims in respect of the interest liabilities which they incurred. They are:
(a)there must have been a defalcation by a licencee during a period when the licencee was the holder of a current licence;
(b)the applicants must have suffered pecuniary loss or loss of property;
(c)the pecuniary loss or loss of property must have been suffered by the applicants 'by reason of' the defalcation;
(d)the applicants' claim must be limited to reimbursement 'only to the extent of the defalcation of the licensee';
(e)the applicants cannot recover from the Fidelity Guarantee Account any amount greater than the balance of the actual loss suffered by them after bringing to account in reduction of that loss the amount or value of all money or other benefits received from any source other than the Account in reduction of the loss;
(f)the applicants are not entitled to interest on the amount of 'any claim admitted against the account'.
What constitutes a 'defalcation'?
The construction of the word 'defalcation' is critical in determining Mr Teissier's claim.
In Mantova Holdings Pty Ltd and Commissioner for Consumer Protection [2013] WASAT 47 (Mantova) at [22]-[26] the Tribunal considered the construction of the word 'defalcation':
22In essence, as we apprehend the applicant's argument, its case in relation to the oral formulation of the alleged defalcation is that:
(i)Landsmart acted in a misleading and deceptive way by its silence in failing to disclose the existence of Mantova's entitlement to commission;
(ii)that conduct amounted to a breach of either or both of cl 5(1) (agent must act fairly and honestly) and cl 5(2) of the Code of Conduct (agent must not knowingly mislead or deceive any parties in negotiations or a transaction);
(iii)those breaches were in turn breaches of s 34 of the REBA Act which requires a licensee to comply with the REBA Act and the Code of Conduct;
(iv)Section 142 of the REBA Act creates an offence of contravening or failing to comply with any provision of the REBA Act, and thus the breaches of the Code of Conduct (and in turn s 34 of the REBA Act) amount to criminal conduct; and
(v)the definition of defalcation includes 'any criminal conduct … in the course of the business of [Landsmart] from which' the applicant suffered loss.
23There is no evidence before the Tribunal of any thing done by Landsmart other than execution of the November Agreement and, at least by inference, its receipt of $400,000 in the guise of commission payable under the November Agreement. There is no evidence of any thing else said to have been done by or on behalf of Landsmart.
24The applicant's case turns on a proposition that any 'criminal or fraudulent conduct' by a licensee, through any of the persons mentioned in the definition of defalcation, which is done in the course of its business and which is a cause of a pecuniary loss or loss of property to any other person is a defalcation for the purposes of s 116 of the REBA Act. Critically, the applicant submits that it is not necessary that the conduct involves some form of misuse of money or property entrusted to an agent. In effect, the applicant contends that the Fidelity Account operates as an indemnifier of last resort in relation to any loss suffered by any person as a result of any criminal or fraudulent conduct (which includes any breach of the REBA Act or the Code of Conduct which might result from any misleading or deceptive conduct) provided the conduct occurs in the course of business of the agent. That is a submission which we do not accept.
[The relevant provisions of s 97 of the Securities Industry Act 1975 are in the following terms:
(1)Subject to this Part, a fidelity fund of a stock exchange shall be held and applied for the purpose of compensating persons who suffer pecuniary loss
…
(b)by reason of a defalcation, or fraudulent misuse of securities or documents of title to securities, or of other property, by a person who, when the loss is suffered is a partner in a member firm, or by an employee or servant of such a firm, in respect of money, securities, documents of title to securities or other property that, in the course of or in connexion with the firm's business of dealing in securities, was entrusted to or received by a partner in the firm or an employee or servant of the firm (whether before or after the commencement of this Act)
(i)for or on behalf of another person; or
(ii)by reason that the firm, or a partner in the firm, was a trustee of the money, securities, documents of title or other property.]
25The meaning of the word 'defalcation' was discussed by Gibbs CJ in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at [380] in the context of whether there was a requirement for dishonesty in order to establish defalcation for the purposes of s 97 of Securities Industry Act 1975 (Cth). In that context, his Honour said:
According to the Oxford English Dictionary, the relevant meaning of 'defalcation' is 'a monetary deficiency through breach of trust by one who has the management or charge of funds; a fraudulent deficiency in money matters'. The Macquarie Dictionary defines the word as 'misappropriation of money, etc., held by a trustee or other fiduciary'. The etymology of the word supports the view that a wrongful diminution or reduction of the amount of the moneys held in trust or in a fiduciary capacity can properly be called a defalcation even if the deficiency was not due to dishonesty. In the United States the word has been held capable of including any failure by a person acting in a fiduciary capacity to account for trust funds: see In re Herbst (42); First Citizens' Bank & Trust Co. v. Parker (43), and see the other cases cited in s. 26A Corpus Juris Secundum, at p. 125. Those cases of course depended on the statutory context in which the word 'defalcation' appeared. The provisions of the Securities Industry Acts which deal with fidelity funds appear to have been intended to afford a relief which the law did not provide and should be given a liberal construction. It would seem consonant with the object of those provisions that a person who had suffered loss as a result of a failure to account for funds entrusted to a firm as trustee should be able to recover from the fund even if the failure was due, e.g., to negligence rather than dishonesty.
26That passage, and the ordinary meaning of the word 'defalcation', are essentially concerned with some misapplication or misuse of money or property entrusted to a person. In our view, the reference, in the definition of defalcation, to the inclusion of 'criminal or fraudulent conduct' by certain persons in the course of the business of the licensee does not extend the meaning to conduct which might be criminal or fraudulent but does not relate to money or property misapplied or misused by the licensee.
In Armstrong Martin CJ stated at [47]:
The legislative provisions which were the subject of the two decisions of the Full Court to which I have referred are in all material respects identical to the legislation at issue in this case, save that in one respect that legislation is more favourable to the present applicants' contentions. Those decisions (Cohen Cases) are authority for the following propositions:
(a)where a claim for reimbursement arises from a defalcation by way of misappropriation or misapplication of trust moneys, because the claim is limited 'to the extent of the defalcation', it is limited to the amount of the trust moneys misapplied or misappropriated, and does not extend to losses consequential upon the misappropriation;
(b)reference to recovery of the loss suffered by the claimant in s 117(2) of the REBA Act (or s 95(2) of the Act), does not provide an entitlement to reimbursement for consequential losses or any losses other than the trust moneys misapplied or misappropriated;
(c)the statutory claim for reimbursement from the Fidelity Guarantee Account is not analogous to a common claim for damages.
In Armstrong Martin CJ stated at [76]-[82]:
76Public Trustee v The Attorney General for the State of South Australia & The Law Society [2000] SASC 184 concerned the proper construction and effect of provisions of the Legal Practitioners' Act 1981 (SA) concerning claims against the Legal Practitioners' Guarantee Fund created by that Act. Section 60 of the Act provided that a person who suffered loss as a result of a fiduciary or professional default could claim compensation, the amount of which was not to exceed 'the actual pecuniary loss suffered by the claimant in consequence of the fiduciary or professional default'.
77It is of the utmost significance to the decision in the case that the expression 'fiduciary or professional default' was defined by s 5(1) as follows:
(a)any defalcation, misappropriation or misapplication of trust money received in the course of legal practice by the legal practitioner or a firm of which the legal practitioner is a member; or
(b)any wrongful or negligent act or omission occurring in the course of practice as a legal practitioner, or a firm of which the legal practitioner is a member,
whether committed by the legal practitioner, an employee of the legal practitioner or any other person.
78This provision is of significance because its effect was to extend the ambit of claims against the fund to include losses suffered not just by reason of misappropriation or misapplication of trust moneys, but so as to include losses suffered as a consequence of 'any wrongful or negligent act or omission'.
79As it happens, the case was concerned with misappropriation of trust funds, and in particular the misappropriation of funds which had been placed by the errant solicitor in interest bearing bank accounts. The claim included the interest that had been earned on those funds prior to their misappropriation, and the interest that would have been earned if the funds had not been misappropriated.
80Gray J (with whom Olsson and Wicks JJ agreed) distinguished the earlier decisions in Schofield, Dobcol, Re Queensland Law Society and Ex parte Cohen on the basis of material differences in the legislative schemes there under consideration. In his Honour's view, the vital distinction was the much broader ambit of the professional misconduct which could give rise to a claim against the fund under the South Australian legislation. In his Honour's view the reasoning in those cases:
[L]oses its force when the extended definition of fiduciary or professional default is considered. The actual pecuniary loss can be in consequence of a wrongful or negligent act or omission. The actual pecuniary loss is not limited to money, the subject of defalcation [33].
81There are two vitally significant differences between the South Australian legislation considered in Public Trustee and the Act. First, claims against the Fidelity Guarantee Account created by the Act do not extend to losses arising from any wrongful act or omission by a licensee, but are significantly more constrained. Second, in the South Australian legislation the only restriction upon the ambit of claim was to be found in the use of the expression 'actual pecuniary loss' - there was no provision limiting reimbursement 'only to the extent of the defalcation of the licensee'. These significant statutory differences were the reason why the South Australian court distinguished the previous Australian decisions.
82When the significance of these statutory differences is appreciated, Public Trustee provides no support for the applicants' contentions.
Armstrong follows the definition of 'defalcation' in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 (Daly).
Mr Teissier's submissions on defalcation
Mr Teissier submitted that:
a)Section 4 of the REBA Act provides an extended meaning of defalcation, by the words 'includes criminal or fraudulent conduct'. In light of the definition accepted in Daly, the meaning of defalcation already includes criminal or fraudulent conduct, so the words are tautologous or superfluous unless they expand the definition of defalcation. Limiting the meaning of the words so they are superfluous is inconsistent with the requirement when construing a statutory provision to give meaning to every word of the provision; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, at [71].
b)As s 116 of the REBA Act makes clear the fidelity fund exists 'for the purpose of reimbursing persons who may suffer pecuniary loss or loss of property by reason of any defalcation', it is a provision 'intended to afford a relief which the law did not provide and should be given a liberal construction'; a liberal construction would construe the words 'includes criminal or fraudulent conduct' to expand the definition of defalcation.
c)Section 116 of the REBA Act, is a provision that is 'fundamentally ... protective of those dealing with real estate and business agents and their sales representatives'; Betella v O'Leary [No 2] [2001] WASCA 266 (Betella), per Burchett AUJ, at [16], Wallwork and Wheeler JJ.
d)A construction of the provision, which gives meaning to every word is that the requirement for statutory defalcation will be satisfied if there is criminal or fraudulent conduct of a licensee in the course of the business of the licensee and from which arises pecuniary loss or loss of property to any other person. There are statements in decision identified below, which are consistent with that construction.
e)The alternative construction, to give the words a restrictive meaning, would be inconsistent with Daly and with the purpose of the provision, constitute an application of the maxim expression unius est exclusion alterius. The maxim, which is concerned with the drawing of a negative inference, can only be applied if the inference is not inconsistent with other provisions of the REBA Act and is otherwise permitted by the ordinary rules of construction; Wentworth v. New South Wales Bar Association [1992] HCA 24; 176 CLR 239, at [11], which the applicant submits, is not the case here.
The CEO's submissions on defalcation
The CEO submitted:
a)Therefore, Mantova preserves the essence of defalcation as a wrongful diminution or reduction of moneys held or managed by a trustee or other fiduciary; Daly at 380. If s 4 of the REBA Act did not retain that fundamental meaning, defalcation under the REBA Act would extend to 'defalcation and [any] criminal or fraudulent conduct' in the course of business that causes loss, a concept so broad it no longer resembles the original notion of defalcation.
b)Indeed, Martin CJ made clear in Armstrong that claims against the Account 'do not extend to losses arising from any wrongful act or omission by a licensee, but are significantly more constrained'; Armstrong at [81].
c)Mr Teissier submitted that pursuant to Mantova, the effect of s 4 of the REBA Act is to include fraudulent or criminal conduct by a licensee, including its servants or agents etc., in relation to money or property entrusted to the licensee. This construction, while retaining the essential meaning of defalcation, gives s 4 work to do by widening the capacity for reimbursement from the Account in at least three ways:
1)It ensures that loss caused by the wrongdoing of a person associated with a licensee is recoverable;
2)It extends the scope of the provision beyond a breach of fiduciary duty as trustee only to capture wrongdoing by a licensee in relation to money or property transferred to the licensee in a capacity other than as trustee; and
3)In specifying both criminal and fraudulent conduct, it makes clear that the element of dishonesty (required for proving fraud but not other criminal conduct) is not necessary in order to establish defalcation under the REBA Act.
d)Mr Teissier also submitted that this construction also fits naturally and consistently with:
19.1.the ordinary meaning of the word 'reimbursement', which concerns the repayment of money that has been expended [pursuant to The Australian Oxford Dictionary, reimburse means 'repay (a person who has expended money); repay (a person's expenses)', expense means 'cost incurred; payment of money'; and
19.2.the Cohen decisions [Re Real Estate and Business Agents Supervisory Board; Ex Parte Cohen [1999] WASCA 47 and Cohen 2 (Cohen 1); Real Estate and Business Agents Supervisory Board v Cohen and Ors [2004] WASCA 19 (Cohen 2)] of the Supreme Court, which identify the various restrictions on recovery from the Account and treat defalcation under the REBA Act as being concerned with refunding or repaying pecuniary loss in the sense of the 'loss arising out of that which has been expended'; Cohen 2 [30];
both of which are considered further in relation to recoverable loss, below.
Analysis of 'defalcation'
In Daly the Chief Justice made it plain that defalcation relates to the misappropriation of trust funds. The point made in Daly was that 'a wrongful diminution or reduction of the amount of the moneys held in trust or in a fiduciary capacity can properly be called a defalcation even if the deficiency was not due to dishonesty'.
A necessary element of a defalcation is that there be a misappropriation of money or property held in trust (see also Armstrong at [47]).
Defalcation looks to the source of the funds or property, that is, it must be trust funds or trust property rather than to the manner in which the funds or property are taken. It is not a necessary element of defalcation for trust money or property to be taken dishonestly.
The Tribunal does not accept that the inclusion of the words 'includes criminal or fraudulent conduct' extends the meaning of defalcation. The essence of defalcation is the taking of trust funds or trust property. Accordingly, the use of the words 'criminal or fraudulent conduct' in the definition of 'defalcation' does not make the use of the words tautologous or superfluous.
As the CEO submitted, to accept Mr Teissier's submissions the concept of defalcation would extend to 'defalcation' and [any] criminal or fraudulent conduct'. Mr Teissier's submissions incorrectly focus on the manner of taking rather than the source of the funds or property, that is, trust funds or trust property.
In Daly, the Chief Justice stated that the provisions of the Securities Industry Act 1975 (NSW) which deal with fidelity funds, were intended to afford a relief which the law did not provide and should be given a liberal construction. Accordingly, the use of the word 'defalcation' already gives a liberal construction. There is no basis to extend the construction any further.
There is nothing in the statement in Betella cited by Mr Tessier which is inconsistent with the Daly interpretation of defalcation. Applying the Daly definition to the REBA Act is still consistent with the provision being fundamentally protective of those dealing with real estate agents.
As the CEO submitted, if any criminal or fraudulent conduct by a licensee in the course of its business could constitute a defalcation, it might be said that Evernex had as much right as Mr Teissier to recover the difference between the sale and the on-sale price, as it represents the amount it overpaid for the Property. That outcome, where both parties on opposite sides of a transaction can claim the same loss, is absurd and precisely why recovery from the Account is limited to 'the sum taken or lost'.
In effect, Mr Teissier's submissions amount to a submission that a defalcation covers any wrongful or negligent act or omission occurring in the course of the conduct of the licence (that is, equivalent to s 5(1) of the Legal Profession Act 2008 (WA)). Armstrong rejects that interpretation.
Both Mantova and Armstrong consider and reject the cases relied on by Mr Teissier as extending the definition of defalcation. It is unnecessary to repeat that analysis here.
The CEO submitted that in Armstrong and Re Real Estate and Business Agents Supervisory Board; Ex Parte Cohen [1999] WASCA 47 and (Cohen 1) and Real Estate and Business Agents Supervisory Board v Cohen and Ors [2004] WASCA 19 (Cohen 2), the Supreme Court highlighted the following limits on recovery from the Account:
30.1.its purpose is to refund or repay pecuniary loss in the sense of the loss arising out of that which has been expended [Cohen 2 [30]];
30.2.due to important words of limitation in s. 116(1) that reimbursement may be 'only to the extent of the defalcation of the licensee', a claim is limited to the amount taken or lost and cannot include loss bv way of interest forgone or other elements of loss of an indirect or consequential kind [Cohen 2 [32];
30.3.in other words, where a claim arises from misappropriation of trust moneys, because the claim is limited 'to the extent of the defalcation', it is limited to the amount of the trust moneys misappropriated and does not extend to losses consequential upon the misappropriation [Armstrong [47] citing the Cohen decisions];
30.4.similarly, s. 117(2) does not provide an entitlement to reimbursement for consequential losses or any losses other than the trust moneys misapplied or misappropriated [Ibid]; and
30.5.the statutory claim for reimbursement from the Account is not analogous to a common claim for damages [Ibid].
The Tribunal accepts the submission as an accurate summary of the relevant law.
'Loss'
Mr Teissier submitted that, as the Tribunal has found that Mr Teissier suffered a loss as a result of the licensees' conduct in breach of the Code, it follows that Mr Teissier is entitled to recover the loss suffered to the extent of the defalcation. That loss would be the differential between the purchase price paid for the Property on 15 December 2009 and the amount of the purchase price paid to Mr Teissier of $1,790,000.36; The King and I at [164].
The Tribunal's decision did not consider whether Mr Teissier's 'loss' constituted a 'defalcation' for the purposes of the REBA Act. It is of no assistance in resolving Mr Teissier's claim against the Fidelity Account.
Conclusion
The Tribunal finds that Mr Teissier did not incur a pecuniary loss of property as a result of any defalcation by the licensees. Accordingly, Mr Teissier's claim is dismissed.
Order
1.The application is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
JUSTICE J CURTHOYS, PRESIDENT
19 OCTOBER 2018
0
9
3