Wehbe & Partners Pty Ltd v Harmony Group Developments Pty Limited
[2013] QCAT 340
•14 June 2013
| CITATION: | Wehbe & Partners Pty Ltd v Harmony Group Developments Pty Limited [2013] QCAT 340 |
| PARTIES: | Robert Wehbe & Partners Pty Ltd (First Applicant) |
| Ellestra Pty Limited (Second Applicant) | |
| v | |
| Harmony Group Developments Pty Limited (deregistered) t/as Sue Farmakis Realty (Second Respondent) |
| APPLICATION NUMBER: | OCL106-11 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 20 and 21 August 2012 |
| HEARD AT: | Brisbane |
| DECISION OF: | Fiona FitzPatrick, Member |
| DELIVERED ON: | 14 June 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. Robert Wehbe & Partners Pty Ltd’s claim against the fund is rejected; 2. No amount is recoverable from the fund in relation to the claim by Ellestra Pty Ltd. |
| CATCHWORDS: | CLAIM FUND - Claim against the claim fund established - when is a licensee “acting in their capacity as a real estate licensee” - misapplication and conversion of trust money- the amount, including the value of all benefits - the tribunal considers the claimant might reasonably have received or recovered if not for the claimant’s neglect or default. Property Agents and Motor Dealers Act 2000, ss 128(1), 160, 161, 378, 379,411,469, 470A(1)(e), 471(2)(h),488(2), 488(3)(a), 492; 573(2)(a); 573A; 573B(1); 573C(1)&(3); 574(3); R v Allard [1988] 2 Qd R 269; Secure Funding Pty Ltd v Mascotbury Pty Ltd t/a Brisbane Auto Centre & Bazvand (No 1) [2010] QCAT 655. |
APPEARANCES and REPRESENTATION (if any):
| FIRST APPLICANT: | Mr Noel Dona |
| SECOND APPLICANT: | Mr Pieter Timmer (Director) |
| RESPONDENT: | Mr Garlick of Counsel instructed by Delaneys Lawyers. |
REASONS FOR DECISION
Claimants making a claim against the Property Agents and Motor Dealers 2000 (“PAMDA”) Claim Fund must satisfy the Tribunal that one of the triggering “events” set out in the Act has occurred and that the event caused them financial loss.
In determining the amount of any claim against the fund, the Tribunal must consider whether the claimants might reasonably have recovered some of their loss if not for their own neglect or default.[1]
[1] Property Agents and Motor Dealers Act 2000 (PAMDA) ss 488(2), 488(3)(a).
One of the events giving rise to a claim against the fund occurs when a real estate agent steals, misappropriates or misapplies property entrusted to them as “agent for someone else”.[2]
[2] Ibid s 470(1)(e).
The applicants claim that Harmony Group Developments Pty Limited trading as Sue Farmakis Realty and its principal licensee Ms Susan Farmakis, have misapplied $250,000 which was entrusted to them. They say that the respondents were entrusted with the money as a bond or deposit for the purchase of residential property on the Gold Coast, in their capacity as real estate licensees.
They say that Ms Farmakis misapplied the money when she disbursed most of it the day after it arrived in her account, at the direction of her client, who had borrowed the money. They say she continued to misapply the money for a further four and a half months, until the loan had been disbursed in full.
The applicants say that these facts constitute an “event” which has caused them financial loss, as Mr Taylor has not repaid the loan.
The claimants have reduced their claim to $200,000 to bring it within the statutory limit imposed by s 492(2) of PAMDA.
The respondents say that there has not been an event giving rise to a claim against the fund, as they:
a) were not acting as real estate agents at the time the money was paid into Harmony’s general account;
b) believed the money belonged to their client and had not been advised that it was a loan;
c) had not given their general account number to the solicitors who transferred the money;
d) disbursed the money in accordance with their client’s directions.
Pieter Timmer is a director of Ellestra Pty Ltd. He lives in New South Wales and the company’s registered office is in New South Wales. Although Ellestra’s core business is accounting and book keeping services, by late 2009 it was assisting clients with home and commercial loans through a licensed broker, Gattcorp Holdings Pty Ltd and its director Mr Steve Gatto.
In November 2009 Mr Timmer received an email from Mr Gatto, following up on an earlier conversation about Gold Coast property. Mr Gatto wrote that an unidentified client wanted to purchase 9 recently completed apartments on Hope Island at the Gold Coast, but required investor funds to cover the $250,000 “bond”.
Mr Gatto’s email stipulated that the bond would stay in a Ray White Real Estate Trust account for 4-6 weeks to enable the borrower to purchase the apartments by way of a put and call option. The borrower would keep 5 of the apartments and sell 4. On settlement the lender would be repaid the principal sum, plus $100,000, which, as Mr Gatto pointed out, was equivalent to a 40% return on the loan.
Under the heading “security”, Mr Gatto advised that “the bond cannot be released without the authority or consent of the investor. Document can specify that security bond is returned to the investor if settlement is not completed.” He concluded “Let me know if you have someone”, and added that if Mr Timmer could find an investor, he would split his $20,000 commission with Mr Timmer “50/50”. “Client is ready to go”.
Rather than proposing another investor, Mr Timmer expressed interest in the proposal on behalf of Ellestra Pty Ltd, despite the fact that the identity of the borrower and particulars of the property transaction had not been disclosed.
In the meantime, Robert Wehbe & Partners Pty Ltd, solicitors, had been acting for the prospective borrower, Mr Anthony James (Tony) Taylor. Noel Dona, General Manager of Robert Wehbe, worked out of the Paramatta office in Sydney. Although he has some legal training he is not a solicitor. Mr Dona’s evidence was that his firm was not acting for Mr Taylor in relation to the property acquisition, but only in relation to the loan from Ellestra.
Mr Dona had been exchanging emails with Ms Susan Patricia Farmakis, a real estate agent from Broadbeach on the Gold Coast, since at least 26 October 2009. He says that he believed that Ms Farmakis was a vendor’s agent.
According to the search of the Licensing Register generated by the Department responsible for licensing real estate agents in Queensland, Ms Farmakis was licensed as a “real estate principal” on 3 August 2007.
The licensing register also identifies Ms Farmakis as “person in charge” of Harmony Group Developments Pty Ltd, a licensed real estate corporation, which was registered on 18 June 2007 and deregistered on 7 November 2010. Ms Farmakis was the sole director and secretary of the company, which traded under the registered business name of “Sue Farmakis Realty”. This business name was deregistered on 8 November 2010.
Ms Farmakis says that she does not maintain a trust account. She says that she meets her trust account obligations as a licensed real estate agent in Queensland by paying trust money into a solicitor’s trust account under an ongoing arrangement. She says that this arrangement has been sanctioned by the Department.
On 26 October 2009 Ms Farmakis sent Mr Dona an email about the proposed conditions governing the Hope Island sale. Those terms included a 60 day settlement and “10% deposit held in trust”. $10,000 “contribution to legal costs” was payable on the acceptance of those terms, “refundable on exchange”…“vals come in at $900 each bank should lend about 80%. Good deal - past non distressed sales were between 680 and 1,100mill.”
There was a further email exchange between Ms Farmakis and Mr Dona on 16 November, 2009. Mr Dona emailed that he was expecting the money for the “deposit” and $10,000 in legal fees to be paid into his trust account in the near future and he asked for “the sale contracts as soon as possible”. Ms Farmakis responded on the same day saying that she had forwarded his requests and was “awaiting feedback”.
On 20 November Mr Gatto emailed Mr Timmer providing him with a definition of a “put and call option” and advising that “the $250K is NOT a deposit, it is a bond only, if the contracts do not exchange, then no money is exchanged.”
On 23 November 2009 Mr Timmer emailed Mr Dona asking for Robert Wehbe’s trust account details so that Ellestra could transfer $250,000 into trust that day. It is unclear why the money was transferred to the borrower’s solicitor before a loan agreement had been signed. Nevertheless, Mr Timmer specified in his email that the money would “remain in your trust account on behalf of Ellestra Pty Ltd until further notice from Mr Pieter Timmer, director of Ellestra Pty Ltd”.
On 24 November 2009 Mr Dona emailed Ms Farmakis. “Dear Sue, please find attached confirmation that we have received $250,000 into our trust account. Please arrange for the sale contracts to be forwarded to my office ASAP.”
Ms Farmakis replied that the Hope Island properties were no longer available. However, later that day she emailed Mr Dona to let him know that she was “sourcing alternative properties” for Mr Taylor.
On 27 November 2009 there was some discussion about refunding the loan to Ellestra, however Mr Gatto intervened, insisting that the deal was still on foot. Later that day Mr Dona emailed Mr Timmer confirming that “the deal is still on foot” and attaching a loan agreement which he said had been signed by Mr Taylor.
The terms of the loan were that Mr Taylor agreed to repay the principal sum of “$250,000, together with an additional $100,000, a total of $350,000, 60 days from the date of the agreement”
Mr Timmer was aware that Mr Dona’s firm was acting for the borrower and that it had drafted the loan agreement, yet he did not seek independent legal advice about the agreement.
On 7 December 2009 Mr Timmer received an email from Mr Dona seeking permission to transfer “your the (sic) money held in trust. Mr Timmer replied later that afternoon, referring to an earlier discussion with Mr Dona and confirming his request for two amendments to the loan agreement. These were to:
a) include the “up to date address of the purchase of property in QLD”, and;
b) obtain a personal guarantee from Mr Taylor.
“On completion of the above, I authorise you to release the deposit to the trust account of the vendor’s real estate agent only, and send Ellestra a copy of the transfer.”
The loan agreement filed in the Tribunal appears to be dated 2 December 2009, however I am satisfied that it was not finalised until on or after 8 December, as it includes the amendments Mr Timmer asked for on 7 December 2009, namely:
a) the “address” of the property which had superseded the Hope Island property (although this is limited to the uninformative “property acquisition at Surfers Paradise”);
b) Mr Taylor’s personal guarantee.
The “2” December 2009 date on the agreement appears to be an “8”, which has been, accidentally or intentionally, reproduced in the photocopy to look like a “2”.
In other words, at the earliest, the loan agreement and related personal guarantee were not signed until the day on which the funds were paid into Ms Farmakis’ account, which was more than 2 weeks after Mr Timmer deposited the loan into the borrower’s solicitors’ trust account.
Mr Timmer signed the amended loan agreement on behalf of Ellestra. Mr Taylor signed as trustee for the borrower, the Anthony Taylor Investment Trust and as guarantor in his personal capacity. Mr Taylor’s signature is witnessed by Mr Dona.
Apart from Mr Taylor’s guarantee and indemnity, there is no security for the loan. Mr Taylor merely agrees “not to seek the release of the principal sum from the trust account of Robert Wehbe and Partners, solicitors, unless it is for the purpose of acquiring the property by way of a security bond”. The parties also acknowledge “Only the investor can authorise the release of the principal sum from the trust account of Robert Wehbe and partners”.
It is surprising that an experienced businessman like Mr Timmer would lend $250,000 on the strength of such a flimsy agreement, even if he did have an expectation that the money would be safe in a trust account.
Mr Dona transferred $250,000 from the Lakemba branch of the NAB into Harmony Developments’ account on 8 December 2009. Wehbe and Ellestra point to a photocopied “RTGS Request Form” dated 8 December, which purports to be the bank transfer giving effect to Mr Timmer’s instructions to transfer the money. The form directs the bank to transfer $250,000 into a specified account number in the name of “Sue Farmakis Realty Trust Account”.
While the money was paid to the nominated account number on 8 December 2009, the account was not a trust account in the name of “Sue Farmakis Realty Trust Account.” Instead it was a “business classic” account in the name of “Harmony Group Developments Pty Ltd.”
There was some dispute between the parties as to whether a bank would pay money into a general account when the name of the account made it clear that it was intended for a trust account, without first checking with the transferor, Robert Wehbe solicitors. However neither party called any evidence about bank practices in this regard.
Ms Farmakis said that Mr Dona did not notify her before the money was to be transferred into the Harmony account. She said that she was expecting to receive money on Mr Taylor’s behalf, so he would be in a position to buy Gold Coast property when it came up, however she didn’t know that the money was a loan.
The respondents tendered a photocopy of an undated, unwitnessed, handwritten piece of paper purporting to be Mr Taylor’s directions to her as to how his funds should be disbursed when they arrived in her account. She said she was handed this document during one of her first meetings with Mr Taylor.
The note gives “permission” for Harmony to transfer $250,000 to a specified account in the name of “Tony Adams” (sic). “These monies are to be used for acquisition of properties in regards to the Taylor Family Investment Trust.” It is signed for and on behalf of the Taylor Family Investment Trust by “Anthony James Taylor, as trustee”. Ms Farmakis said that she did not notice that the money was to be paid to “Tony Adams”. Although Ms Farmakis says that this authority was superseded by Mr Taylor’s verbal instructions, it is evidence that Ms Farmakis was expecting trust money.
Ms Farmakis says that on the morning of 9 December 2009, she received a phone call from Mr Taylor, advising her that the money had been transferred into the Harmony account the previous afternoon. She said that she had not been aware it was in the account. He told her that he was on the Gold Coast, having flown up from NSW that morning, and that he had abandoned his plans to buy Gold Coast property. Mr Taylor asked her to meet him at the Broadbeach branch of the ANZ bank to withdraw money from the account. Ms Farmakis says that she went straight to the bank and disbursed the bulk of the money as directed by Mr Taylor.
The respondents tendered copies of Harmony’s bank statements, which she had annotated with brief handwritten explanations of the payments she made from the account that morning:
Withdrawals on 9 December 2009
$3000 “card entry at Broadbeach branch”. The handwritten notation indicates that this money was paid to “Tony Taylor”
$10,000 “Internet banking funds transfer.” The handwritten notation indicates that this money was paid to an unspecified entity for “Legals etc”
$50,028 was transferred to “Robert Grasso”. Ms Farmakis provided a copy of the Domestic Telegraphic Transfer Receipt, which notes the beneficiary as Robert Grasso and where she identifies the reason for this transfer as a “Refund on deposit on investment property.”
$167,028 was transferred to “Tony Adams”. Ms Farmakis says that she has since discovered that Tony Taylor uses the alias Tony Adams. Ms Farmakis provided the Tribunal a copy of related Domestic Telegraphic Transfer Receipt, which notes the beneficiary as Tony Adams and where she identifies the reason for this transfer as a “Refund on deposit on investment property.”
These four withdrawals total $230,056, being the bulk of the $250,000 deposit.
It was not until 11 December 2009 that Ms Farmakis emailed Mr Dona with the subject line “Regarding deposit of $250,000”. “Noel, can you forward me a brief email just stating that you forwarded the above amount into my account on behalf of Mr Anthony Taylor of disbursement under instruction please.”
Ms Farmakis says that her email does not reflect any uncertainty about the owner of the money. Instead she says she needed evidence to show the tax office that the deposit was not part of her income. What it does demonstrate is that she knew where the money had come from. Whatever her purpose, it is peculiar that the email refers to a “disbursement under instruction” a vague phrase which is also ironic as it suggests that she was taking some direction from Mr Dona’s firm about how the money should be disbursed, when there was very little left.
The brevity of Ms Farmakis’ email is surprising, as she and Mr Dona had been discussing a property deal for Mr Taylor over a four week period, with Mr Taylor’s full knowledge and authority, although there had been no communication between them for two weeks after that. Inexplicably, she did not advise Mr Dona that Mr Taylor had suddenly decided not to buy property on the coast. She did not tell Mr Dona that $230,056 of the $250,000 he had deposited had been in Harmony Developments’ account for less than 24 hours. She did not mention that Mr Taylor had flown up to the Gold Coast from NSW to personally supervise the withdrawals.
Mr Dona responded with the same subject line and wrote “Dear Sue, I write to confirm that we act for Anthony Taylor. Pursuant to put and call option to purchase units 3 and 6/1 Northcliffe Terrace, Surfers Paradise, we deposited $250,000 into your trust account on 9 December 2009”.
Ms Farmakis replied, “Many thanks Noel, have a great Christmas and all the best for 2010”.
Ms Farmakis’ casual response to this email was also incongruous, given that, on the face of his email, Mr Dona seemed to be labouring under several significant misconceptions, namely he:
a) expected the money to be in a trust account when it was not;
b) was not aware that most of the $250,000 had already been disbursed, with only $19,944 remaining;
c) believed that the Surfers’ Paradise deal was still on foot, when Ms Farmakis knew that it would not proceed as she had disbursed most of what she had identified on the bank transfer as the “deposit on an investment property”.
Over the next four and a half months Ms Farmakis continued to withdraw money from the account. She filed additional annotated bank statements which purport to show that the remains of the $250,000 deposit were disbursed as follows:
Withdrawals on 18 December 2009
$6000 “card entry at Broadbeach branch”. A handwritten notation indicates that this money was paid to “Tony Taylor”
Withdrawals on 22 December 2009
$2500 “card entry at West Burleigh branch”. A handwritten notation indicates that this money was paid to “Tony Taylor”
Withdrawals on 5 February 2010
$10,000 “Internet banking funds transfer…to Tony Ada (sic).” A handwritten notation indicates that this money was paid to “Tony Taylor”
Withdrawals on 20 April 2010
$1500 “card entry at Broadbeach branch”. A handwritten notation indicates that this money was paid to “Tony Taylor”
Withdrawals on 27 April 2010
$3000 “card entry at Broadbeach branch”. A handwritten notation indicates that this money was paid to “Tony Taylor
These withdrawals total $23,000, notwithstanding that there was only $19,944 of the loan funds still remaining in the Harmony account. In other words, Ms Farmakis claims to have paid $3056 of her own funds at Mr Taylor’s direction. In total she claims to have disbursed $253,056 out of the Harmony account in 9 transactions over four and a half months, $3056 more than the amount Mr Dona deposited into the account. She put this overpayment down to her poor book keeping skills.
The facts of this case make it difficult to discount the possibility that what appears to be an elaborate scam engineered by Mr Taylor was in fact an elaborate play against the fund, with or without the involvement of Mr Taylor. However, in the absence of concrete evidence in this regard, I have accepted the parties’ version of events as the basis for reaching my conclusions about whether, on the balance of probabilities, “events” took place giving rise to a claim against the fund have occurred.
Claim by Robert Wehbe and Partners
The first applicant’s claim does not meet one of the threshold requirements for a successful claim. Robert Wehbe and Partners have not produced any evidence of financial loss[3].
[3] Section 470 PAMDA.
Claim by Ellestra Pty Ltd
The respondents say that the loan had been advanced to Mr Taylor when the money was paid into the Harmony account, so Mr Taylor was the only person who could claim against the fund in the event of any loss. It argued that Ellestra could only pursue its rights against Mr Taylor.
Ellestra’s argument is that the money was not to be advanced until it had been paid out of the agent’s “trust account” in accordance with Mr Timmer’s instructions.
Section 470(1)(e) is drafted in broad terms. It states that a triggering event for a claim against the fund is the misapplication of trust money. It does not matter whether the money belonged to Mr Taylor or Ellestra. If someone suffers loss as a result of the misapplication of trust money they have standing to make a claim against the fund.
When Ms Farmakis disbursed money in accordance with Mr Taylor’s directions, she described it on the transfer form as a refund of “deposit on investment property.” Although she ascribed this purpose to the payment after it was deposited and not before, Ms Farmakis’ description acknowledges that there was only one plausible or legitimate reason for Mr Dona or Mr Taylor to transfer the money into the Harmony account.
Regardless of whether the money was entrusted to the respondents by Ellestra or Mr Taylor, PAMDA required them to treat it as trust money.
Was the $250,000 entrusted to the respondents in their “capacity” as a “relevant person?”
The Act defines “relevant person” to include both a licensee and a person having charge or control, or apparent charge or control, of a licensee’s registered office or business.[4] Ms Farmakis is a relevant person both in her own capacity and as the personal representative of Harmony. Harmony is a “relevant person” in its own capacity.
[4] Section 469 PAMDA.
The word “capacity” is not defined in the Act. It is a word with different meanings in different contexts, but in this context the dictionary definition includes words like “role, position, function and office.”
The threshold question for this claim against the fund is the money was entrusted to Harmony and Ms Farmakis because of their “role, position, function or office” of a real estate agent as opposed to some other “role, position, function or office”.
The Respondents argue that Harmony did not receive the money in its capacity as a licensee, as when the money was transferred into the Harmony account no appointment to act had been signed.
The effect of this argument is that where money is stolen, misappropriated or misapplied by a licensee, a claim against the fund can only succeed where the agent has been formally appointed. The words of the Act do not support this interpretation. Firstly, PAMDA recognises that someone can purport to “act as a real estate agent” even if they are unlicensed, let alone unappointed.[5]
[5] Sections 160 and 161 PAMDA.
Secondly, and more significantly, PAMDA uses different words when making a formal appointment a precondition for “acting as a real estate agent”, when compared to the words it uses when it talks about the misapplication of property entrusted to a person “in the person’s capacity as a relevant person”. The latter concept is broader than the former.
The respondents’ second argument is that the money was for a deposit on the Surfers’ Paradise property and Ms Farmakis had not been involved in those negotiations. Again, this puts an unduly restrictive interpretation on when a person receives money “in the licensee’s capacity as a licensee”
I accept that on 24 November 2009 Ms Farmakis emailed Mr Dona saying that the Hope Island deal was off. However later that day she emailed Mr Dona to let him know that she was “sourcing equal properties to substitute the previous deal”. There is no evidence that she ever told Mr Dona that she was no longer acting as a real estate agent.
Ms Farmakis own evidence leads to the conclusion that from at least late October to late November 2009 she had been actively “negotiating for the buying of places of residence in Queensland”[6] on behalf of Mr Taylor.
[6] Section 128 PAMDA.
Although her emails to Mr Dona were from her personal email address, signed only “Sue,” and did not include any letterhead or signature block identifying her as an agent, the subject matter included things like the proposed conditions of sale, advice on the property valuations, the fact that she thought the bank would lend 80% of the purchase price, and confirmation that she had passed on Mr Dona’s request for contracts to the vendors. The Act lists these negotiations as one of the activities which can only be performed by a licensed real estate agent.
To put it another way up until 2 weeks before the transfer of the money:
a)Ms Farmakis dealt with Mr Dona as real estate agent, at least in relation to the Hope Island property; and
b)he recognised and dealt with her in this capacity.
c)she did nothing to indicate to Mr Dona that she had ceased acting in that capacity.
If the money was entrusted to her by Mr Taylor, when she was acting as his agent, the conclusion would be the same.
I am satisfied that the money would not have been paid into the Harmony account if Ms Farmakis had not assumed the “role, position, function or office” of a real estate agent. $250,000 was entrusted to Ms Farmakis both in her capacity as a licensee and/or in her capacity as a person having charge or control, or apparent charge or control, of Harmony’s registered office or business.[7]
Did Ms Farmakis misapply the money when she paid it out in accordance with Mr Taylor’s instructions?
[7] Section 469 PAMDA.
Given that the respondents received the money in their capacity as real estate licensees, they are obliged to comply with their trust account obligations.“Trust money” includes an amount that was, or ought, under this Act, to have been, deposited into a licensees trust account.”[8] This deposit was trust money, despite the fact that it had been paid into a general account.
[8] Section 411 PAMDA.
Ms Farmakis says that she was not given the opportunity to comply with her trust account obligations because she was not notified or consulted before the money was paid into Harmony’s business account. Taking this on face value, it does not excuse her from complying with her obligations once she discovered that it was there.
The money was paid into the Harmony account for a transaction[9], so Ms Farmakis had an obligation to pay it into a trust account as soon as she became aware of it.[10] PAMDA provides an example of a licensee’s obligations under this part of the Act, namely that an agent who collects an amount of rent for a property owner must pay the amount to the licensee’s trust account before the money can be paid to the owner. The same principle applies here.
[9] Section 378 PAMDA.
[10] Section 379 PAMDA.
A licensee may misapply money without intent or dishonesty. Ms Farmakis misapplied the money when she paid it out at Mr Taylor’s direction, without first paying it into a trust account. This is an event giving rise to a claim against the fund.
Did Ellestra suffer loss because the $250,000 was misapplied by Ms Farmakis?
A person may make a claim against the fund if the person suffers financial loss because an agent misapplies money entrusted to them “as agent for someone else”. The effect of the respondents’ argument in this regard is, again, that they received the money as Mr Taylor’s agent, and that he was the only party with standing to make a claim against the fund in the event that he suffered financial loss.
Section 470(1)(e) does not stipulate that the person suffering the loss must be the person entrusting the money to the agent. Regardless of whether the money was entrusted to the respondents by Wehbe or Taylor, it was misapplied and Ellestra lost $250,000 as a result of the respondents’ failure to properly deal with trust money.
Had Ms Farmakis’ paid the money into a solicitors’ trust account in accordance with her ongoing arrangements with them, I am satisfied that the loan money would not have been paid to Mr Taylor. I am satisfied that the solicitors would have checked the identity of the transferor and sought instructions from them, and those instructions would have been that the money was to stay in trust until it was required as a bond.
I am satisfied, on the balance of probabilities, that:
(a) an event mentioned in section 470(1)(e) happened; and
(b) Ellestra lost up to $250,000 because of the happening of the event.Ellestra alleged that there were further “events” giving rise to a claim against the fund.
At the start of the hearing I dismissed the claims based on breaches of the marketeering provisions of PAMDA, as this case did not involve “non-investment residential property”[11]. I also dismissed Ellestra’s claim based on s. 11 of the Land Sales Act, as no contract for the sale or purchase of a proposed allotment had ever been signed.
[11] Section 471(2)(h)PAMDA- persons who cannot claim.
The remaining claim is that the respondents contravened section 573 of PAMDA, which is activated when a licensee, in the performance of the activities of a licensee, receives an amount belonging to someone else.
I adopt my reasons above in concluding from at least late October to late November 2009 Ms Farmakis had been actively ”negotiating for the buying of places of residence in Queensland” which is one of the activities which can only be performed by a licensed real estate agent in Queensland.[12] Although the Hope Island deal had fallen through, she was still “sourcing alternative properties” for Mr Taylor.
[12] Section 128 PAMDA.
Section 573 is breached when a licensee:
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.
A licensee commits the tort of conversion when they deal with money not belonging to them in a manner which is inconsistent with the rights of the person entitled to it. Section 573 imposes the additional requirement that the money must be converted dishonestly.
While this is not a prosecution, in determining on the balance of probabilities whether this section has been breached in order to establish an “event” giving rise to a claim against the fund, it is appropriate to have regard to the evidentiary aid in section 573.
“It is enough for the prosecution to prove that the licensee dishonestly converted an amount belonging to someone else to the licensee’s own use or someone else’s use without having to prove that the amount belonged to a particular person.”[13]
[13] Section 573(3) PAMDA.
The facts of this case are oddly similar to those in another case deciding a claim against the fund, although those facts concerned a motor dealer. The learned member concluded:
“I am also satisfied that Mr Oldman converted that money dishonestly. On both occasions when money was paid into the Tuff Toys account, Metleg appeared on Mr Oldman’s doorstep the next day, accompanied Mr Oldman to his bank and directed the disbursement of funds. Metleg appeared to “collect” the Advance money before Mr Oldman knew that it had been deposited to the account. That fact alone must have made Mr Oldman suspicious. Mr Oldman … described the people involved in this transaction as “rogues”. Considering his situation objectively, and adopting the standards of ordinary, decent people[14], Mr Oldman should have known that Conrad Black was not entitled to receive payment for the car twice. He must have known, or reasonably suspected, that his dealings with the money were dishonest.[15]
[14] R v Allard [1988] 2 Qd R 269 at 276.
[15] Advance Business Finance Pty Ltd v Tuff Toys Qld Pty Ltd & Ors [2010] QCAT 525.
I adopt this reasoning in this case.
An experienced agent like Ms Farmakis had many cues to alert her to the fact that Mr Taylor was not acting in good faith. Considered together, the following evidence built a compelling picture:
a) before the money was paid into the account Tony Taylor had provided her with an “authority” directing that money be paid to “Tony Adams”. Ms Farmakis says that she did not notice the variations of name on that occasion, and at that stage I accept that the variation may not have appeared obvious;
b) together with her colleague, James Dickson, decided to have nothing further to do with Mr Taylor, after she learned that one of his associates, Arlo Selby, was in fear of his life as he owed money;
c) less than 24 hours after the money arrived in the account, Mr Taylor had flown from NSW to the Gold Coast and wanted her to meet him at the bank, where he “sat away from her”;
d) Ms Farmakis transferred most of the money to “Tony Adams” and in the above context, this should have begun to raise at least a bare suspicion;
e) in her response to Mr Dona’s email of 11 December Ms Farmakis did not advise him of the significant news that the account was not a trust account, or that the Surfer’s deal was off or that only $19,944 remained in the Harmony account, although she had authority to discuss Mr Taylor’s affairs with Mr Dona.
f) For four and a half months after the initial transfers, Ms Farmakis continued to withdraw money from the account. The annotated Harmony bank statements purport to show that between 18 December and 27 April 2010, $10,000 was transferred by “Internet banking funds transfer…to Tony Ada (sic).” A handwritten notation indicates that this money was paid to “Tony Taylor”.
g) In the same period there were four “card entries” withdrawing cash amounts ranging from $1,500 to $6,000. Ms Farmakis gave evidence that on each occasion she handed the money to Mr Taylor personally. This is an implausible scenario. It is improbable that, having managed to fraudulently spirit away most of the $250,000, Mr Taylor would fly back to the “scene of the crime” from NSW on four occasions to withdraw cash from the Harmony account. While giving evidence Ms Farmakis seemed unperturbed that Mr Taylor had used the Harmony account as his personal account and that she had been at his beck and call until all the money had been disbursed. She did not seek or receive any reward for her efforts, apart from a small payment of $80 for bank fees. Ms Farmakis did not tender any receipts from Mr Taylor for these payments. It is difficult to understand why Mr Taylor would travel interstate to obtain small cash payments when Ms Farmakis was willing to transfer the money to any account he nominated.
h) In total Ms Farmakis claimed to have disbursed $253,056 out of the Harmony account in 9 transactions over four and a half months, $3056 more than the amount Mr Dona deposited into the account. Again, Ms Farmakis appeared unperturbed that she had bankrolled Mr Taylor when giving this evidence. She put the error down to her poor book keeping skills.
i) On 3 August 2010, 3 months after all of the money had been disbursed, Ms Farmakis emailed Mr Dona outlining the two major withdrawals on 8 December. She continues “Cash refund on request minus bills to Lawyer and Valuers. ($10,000 for legals as per your email). ALL RECEIPTS AVAILABLE. Retained $80 for bank fees”. She does not mention that there is no money left. If the respondents believed the money had been properly dealt with in accordance with Mr Taylor’s directions, why did they offer a “cash refund”? Why was $10,000 in legal fees payable when no option was entered into or exercised? Finally, despite the reference to receipts, none were provided to the Tribunal.
On the other side of the ledger it should be acknowledged that Ms Farmakis freely admitted to Mr Timmer when he asked her in June 2009 that the money had never been in a trust account and provided details of how the bulk of the money had been disbursed. Nevertheless, this straight forward behaviour after the event does not dispel the negative implications which a reasonable licensee would draw from paragraphs a) to i) above.
Where the contravention of a statutory provision may result in an offence being committed, a respondent should be afforded the defences in Chapter 5 of the Criminal Code of Queensland.[16]
[16]To v Department of Tourism, Fair Trading and Wine Industry Development [2006] QDC 381.
Although the respondents did not make any submissions in relation to defences that might be available to them, I am satisfied that, there is nothing in the respondents’ evidence to indicate that any of these defences could have been made out.
The respondents portrayed Ms Farmakis has been as an unwitting victim of Mr Taylor’s deceit, but, behind all the smoke and mirrors, her behaviour leads to the conclusion that ,on the balance of probabilities, Ms Farmakis:
a) dishonestly converted $250,000 to her own and/or someone else’s use; and
b) dishonestly rendered an account of the money knowing it to be false in a material particular, at least in relation to the cash withdrawals which took place after 9 December 2009.
Both of these constitute a breach of section 573 and are both “events” enabling a claim against the fund.
Ellestra lost up to $250,000 because of the happening of this and/or the event under section 470(1)(e).
In determining the amount that should be paid from the fund the Tribunal must consider the following question:
Is it reasonable to conclude that Ellestra would have received or recovered part of the $250,000 if not for its own neglect or default?
Mr Timmer’s cavalier approach, as Ellestra’s director, to a loan of $250,000 was astounding. He did not: conduct any “due diligence” investigations before Ellestra agreed to lend money to Mr Taylor. He did not:
a) enquire into Mr Taylor’s financial position or his capacity to repay the loan ,so the personal guarantee was meaningless;
b) ask for any security over the loan;
c) enquire into the bona fides of either property deal before entering into the loan agreement or make enquiries into whether or not the deal was likely to be profitable;
d) seek independent legal advice as the lender in relation to the adequacy of a $250,000 loan agreement prepared by the solicitor for the borrower.
Mr Timmer’s relaxed approach to the loan continued after it was due. According to the loan agreement signed on 2 December 2009, the loan and interest were to be repaid within 60 days, or by early February, 2010. However Mr Timmer’s evidence is that it was not until early March 2010 that he demanded that Mr Dona arrange for the loan be repaid.
Mr Timmer did not seek legal advice or commence recovery action against Mr Taylor. He had ample opportunity to serve Mr Taylor with court documents during several meetings he says he had with Mr Dona, Mr Gatto and Mr Taylor between March and July 2010. He says that the final outcome of those meetings was that Mr Taylor blamed Ms Farmakis for “not honouring commitments”. Mr Taylor made “many promises” to repay the money but “none came to fruition”.
It was not until the end of June 2010, four months after the loan was due, that Mr Timmer contacted Mr Dona and asked for the details of the real estate agent who received the loan money. When he contacted Ms Farmakis, she advised him that she had transferred “$217,000” to third parties on 9 December 2009. Mr Timmer did not report the matter to police or seek legal advice about his recovery options. The evidence was that his solicitor’s first letter of demand was to Wehbe in September and that no written demand went to Mr Taylor.
On 21 September 2010 Mr Timmer’s solicitors sent a letter of demand to Robert Wehbe & Partners Pty Ltd requesting that the loan be repaid and foreshadowing a law cover claim it was not repaid.
On 26 September 2010 Mr Timmer made a formal request to Robert Wehbe and Partners for their client (Mr Taylor) to repay the money.
On 18 January 2011, nearly 12 months from the date on which the loan was due to be repaid, the Department received this claim against the fund.
Ellestra’s feeble efforts to have the loan repaid could be attributed to an acceptance that the money was already lost. However its failure to act decisively means that this could not be tested.
Ellestra might reasonably have recovered most of the $250,000 if not for its own neglect or default.[17] It was negligent because a prudent lender would have sought independent legal advice about the loan agreement and would have ensured that the loan was properly secured. With adequate security, it is reasonable to conclude that Ellestra would have recovered most of the money. In fact, had it demanded security for the loan, it is unlikely that this “scam” would have proceeded any further.
[17] Section 488(2), Section 488(3)(a) PAMDA.
It was negligent in not enquiring into the identity of the borrower. The respondents produced a number of cases which had been decided prior to December 2009 in which a person by the name of “Anthony James Taylor” had been convicted of fraud offences and disqualified as a company director. They say they located these cases by entering Mr Taylor’s name into an online search engine.
Ellestra took unnecessary risks in order to secure returns which were far in excess of commercial rates. A prudent lender would have assessed the loan in line with the old adage “if it looks too good to be true, it probably is”.
The following observations are relevant here:
“The presence of the statutory fund is no reason for financiers of motor vehicles to be complacent. There is no reason to think that the fund will be available to cover a finance company’s losses if it fails in its due diligence, does not take appropriate action to secure its loans or fails to mitigate its loss. … While it is true that the Tribunal is required to deal with matters in a way that is informal and quick the fact remains that the tribunal is dealing with public money. ….[18]
[18]Secure Funding Pty Ltd v Mascotbury Pty Ltd t/a Brisbane Auto Centre & Bazvand (No 1) [2010] QCAT 655.
Claimants are entitled to expect that where they entrust money to a PAMDA licensee, the licensee will meet their trust account obligations. However they cannot claim against the fund when they have been the authors of their own loss.
I am satisfied that Ellestra Pty Ltd has proven its claim to the extent required by section 488 of the Act. I allow the claim because I am satisfied on the balance of probabilities, that—
a) events mentioned in section 470(1) happened; and
b) the claimant suffered financial loss of $250,00 because of the happening of the events.
The maximum amount that can be paid from the fund is $200,000. I must deduct any amount the claimant might reasonably have received or recovered if not for the claimant’s neglect or default[19]. I deduct $200,000 from the claim for the reasons outlined above.
[19] Section 492 PAMDA.
As no amount is payable from the fund it is not necessary for the Tribunal to name the person who is liable for the loss.
Orders:
- Robert Wehbe & Partners Pty Ltd’s claim against the fund is rejected;
- No amount is recoverable from the fund in relation to the claim by Ellestra Pty Ltd.[20]
[20] Section 530 PAMDA.
0