Mann v McCreath[2016] QCAT 477

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).

REASONS FOR DECISION

1. [1]
   This is an unfortunate case where the Applicants, Ian James Mann and Pamela Louisa Mann, lost $320,000 which they wished to invest in property in the United States of America.
2. [2]
   They gave the money to the Respondent Alistair Frank McCreath, who at the time held a real estate licence and who traded as FBC Realty.  They were expecting then to become owners of five properties in the USA.
3. [3]
   The purchase did not proceed, and Mr McCreath failed to repay the money.     The Applicants now claim against the Claim Fund operated by the Office of Fair Trading, which pays compensation for financial loss arising from certain dealings with agents.
4. [4]
   The matter turns on whether the claim comes within one of the grounds under which the Applicants are entitled to compensation from the fund.  The Chief Executive has made submissions that the claim does not come within any of the grounds.  In particular, it is said that it appears that Mr McCreath was selling the properties in the USA to the Applicants personally, and not on behalf of anyone else, and he was not acting as the Applicants’ agent either, so that no claim can arise.

Jurisdiction, and progression of the claim

5. [5]
   Prior to 1 December 2014, there was a different claim fund under the Property Agents and Motor Dealers Act 2000 (Qld) (PAMDA).  This was replaced on that date by a claim fund established under the Agents Financial Administration Act 2014 (Qld). 
6. [6]
   There were transitional provisions in the 2014 Act to ensure that existing claims can continue against the new fund.^[1]   These provisions apply to this claim because the claim was made on 9 September 2011.  The claim continues against the new fund.
7. [7]
   Section 155(1) of the 2014 Act provides that the rights and liabilities of the claim fund under the former claim fund are taken to be the rights and liabilities of the new claim fund.  This means that the matter has to be determined under the legislation which applied to the former claim fund, that is PAMDA.  It was also the view of Member Lumb in Rees v Mighty Enterprises Pty Ltd & Ors [2015] QCAT 312 that existing claims should be dealt with under the law which applied at the time.^[2]
8. [8]
   The claim against the fund was referred to the Tribunal pursuant to section 476 of PAMDA because it was not a “minor claim”.  Section 488 prescribes how the Tribunal should deal with the claim.  The Tribunal may allow the claim, wholly or partly, or reject the claim.  The Tribunal may allow the claim only if satisfied on the balance of probabilities that an event mentioned in section 470(1) happened and the claimant suffered financial loss because of the happening of the event.
9. [9]
   There were various delays in processing the claim.  Latterly this was because criminal proceedings were being taken against Mr McCreath.  The Chief Executive suggested that the matter should be adjourned until after their conclusion, and the Applicants agreed.  However, the criminal proceedings did not proceed because Mr McCreath was out of the country, and so the claim against the fund proceeded in the Tribunal.

When claims can be brought against the fund

10. [10]
    In order to be able properly to bring a claim against the fund, a person must have suffered financial loss because of the happening of an event listed in section 470(1) of PAMDA. 
11. [11]
    Only two of the events listed in section 470(1) could possibly apply here:-

    1. An event under section 470(1)(e), that is 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.
    2. A contravention of Chapter 12 Part 1 of PAMDA, which requires licensees to operate trust accounts with certain specified requirements, to pay certain monies received into the account and only to withdraw certain permitted amounts from the account.
12. [12]
    Central to the consideration of this matter is the nature of the respective legal obligations of the Applicants and Mr McCreath and also the basis on which the $320,000 was paid to him and accepted by him.  I need to concentrate on these things and then come back to consider (a) and (b) above.

The factual background

13. [13]
    The situation is complicated by the fact that there were two separate sets of prospective contracts.  The second set of prospective contracts followed when the first set was not proceeded with.  The $320,000 was paid after the first set of contracts had been received by the Applicants, and before the second set was received by them.  I describe them as prospective contracts because there is nothing to suggest that the documents concerned were in fact signed by both parties.  The Applicants signed the first set of prospective contracts but not the second set; in the documents available to the Tribunal neither set was signed by anyone else.
14. [14]
    The first set of prospective contracts concerned five identified properties in the USA.  The Applicants disposed of all but one of these sets of prospective contracts so only one is available.  This covers a property in Detroit.^[3]   One matter of importance is who appeared on the face of the documents to be vendor of this property.
15. [15]
    One document in the set of prospective contracts was entitled “Sales Contract”.  It was on the headed paper of FBC Realty and it had been provided to the Applicants by Mr McCreath.  At the time, FBC Realty was a trading name for Mr McCreath.^[4]  This document gave the address of a property in Detroit as the property which was the subject of the sale and purchase, and gave the Applicants as the purchasers.  It stated: “This sales contract is for the transfer of the ownership of” (the property) and it gave a purchase price of $54,000 in US funds.  It provided for the sale to be “closed” “within 10 days after all necessary documents are ready and the transaction has been fully funded”. 
16. [16]
    This document was signed by both Applicants on 6 August 2010.  There is no corresponding document signed by anyone else and the version in the papers has an empty space where the signature of the vendor would go.  The vendor is not named in the document.
17. [17]
    There was a second contract in the set of documents for this property in Detroit which was also signed by the Applicants.  This was also on FBC Realty headed paper and was entitled “Offer to Purchase” and it had “General Conditions” printed on it.  This again identified the property and set out the purchase price and said that the vendor was to “give occupancy” within 3 days of settlement.   
18. [18]
    The Offer to Purchase provided for settlement of the purchase within a number of days “after all necessary documents are received”.  However the number of days was left blank.  It also provided for three possible methods for the settlement monies to be paid, with boxes for the choice of method to be chosen by a tick.  However, none were ticked.  The document was not signed by a vendor.  It did not identify the vendor.  The document stated that it constituted the entire agreement between purchaser and vendor and superseded all prior understandings and agreements whether written or oral.
19. [19]
    Despite the obvious legal problems which could have arisen from the inconsistencies between these documents, a reasonable person in the position of the Applicants would take it that the vendor either owned the property at the time this set of documents was provided or would do so in order to be able to complete the sale when that time came.  Also, I think, a reasonable person in the position of the Applicants would assume from the documents that the vendor was FBC Realty.  This is because the documents came from FBC Realty and this is the only entity named in the documents other than FBC Realty USA LLC which is referred to as able to direct who shall act as manager of the property.  And from the ABN lookup it would be apparent that FBC Realty was in fact the trading name of Mr McCreath.  Hence it would appear to a reasonable purchaser in the position of the Applicants that the vendor of this property was Mr McCreath.
20. [20]
    The documents were accompanied by a photograph of the property and an estimated market value of the property supported by a comparative valuation of similar properties.
21. [21]
    It is likely that the contract which is in evidence and which is considered above, was in the same form as the documents for the other four properties.
22. [22]
    The reasonable conclusion from the documents that the vendor of the properties was Mr McCreath himself is not inconsistent with what Mr McCreath said at the time.  This comes from the evidence of Mr Mann, the first Applicant, where he says that he assumed from discussions with Mr McCreath that he purchased the properties, refurbished them and then sold them, so that he was the owner of the properties.^[5]  This belief held by Mr Mann is important when considering whether he (on behalf of himself and Mrs Mann) gave Mr McCreath actual authority to act as their agent for any purpose relevant to this matter.  In passing, I would add that the reasonable conclusion from the documents that the vendor was Mr McCreath himself also accords with what Mr McCreath himself says when explaining why he did not pay the $320,000 into his trust account.  He said it was because “Mr Mann was purchasing the properties from me”.^[6]
23. [23]
    The purchase of the five properties agreed in the manner described above did not proceed.  The Applicants’ explanation why this was so and what happened afterwards is given slightly differently at various times.  The earliest version of events is a file note in the Applicants’ documents attached to their claim made on the claim fund.  This appears to be instructions to the Applicants’ solicitors when things first went wrong, and formed the basis of a letter of demand written by the solicitors on 12 April 2011.  Then there is a Statement of Claim in District Court proceedings brought by the Applicants against Mr McCreath.  These three documents are likely to be the most accurate version of events, and are most consistent with the other evidence and contemporaneous documents. 
24. [24]
    From these three documents and the other evidence available I make the following further findings of fact.
25. [25]
    The Applicants could not get finance for the purchase of the first batch of properties.  It was then agreed between the Applicants and Mr McCreath that the purchase of the first batch of properties would not proceed.
26. [26]
    Then the finance broker in FBC Realty told the Applicants that other properties could be found for them.  The Applicants were content with this. The Applicants did manage to get finance and soon after they transferred $320,000 to Mr McCreath.  This money was transferred by the Applicants into Mr McCreath’s business account and it remained there and was not transferred into a trust account.  The Applicants attended the offices of FBC Realty and chose five different properties. 
27. [27]
    It is clear from the above, that the payment of $320,000 was not for the purchase of the first batch of properties.^[7]
28. [28]
    It can be noted that the sum of $320,000 may have been the correct cost of the first batch of properties but it is also the correct cost of the second batch of properties.^[8]
29. [29]
    Mr McCreath provided a set of sale and purchase documents for the second batch of properties.  These were quite different from the first set of documents.  In this second set of documents the vendor is shown as “FBC Realty”, in other words Mr McCreath who was the legal entity trading in that name.  They also show that it was not the properties themselves that were to be purchased.  Instead, the purchase was of shares in Limited Liability Companies which owned the properties.  A reasonable person in the position of the Applicants would consider that Mr McCreath trading as FBC Realty had agreed to sell his holding of shares of the LLCs which owned the properties concerned.  It can be seen that this type of transaction actually occurred with respect to these properties when they were sold later to other purchasers: a new LLC was incorporated for each property and used as a vehicle for the sale of each property.^[9]
30. [30]
    The second set of documents was sent to the Applicants on 21 October 2010 by post and arrived on 25 October 2010.  This was one month after the Applicants had given Mr McCreath $320,000.  The Applicants were unhappy with the documents and refused to sign them.
31. [31]
    It is significant that at no time was there any documentary material which would indicate to the Applicants that Mr McCreath was doing anything or was going to do anything other than selling the properties (or shares of companies which owned the properties) personally to the Applicants.  The Applicants do not suggest there was any third party involved, other than a company which was to manage the properties.
32. [32]
    The payment of the $320,000 was clearly intended as an advance payment of the purchase price to Mr McCreath of properties which were to be agreed between the parties, and which once identified, became the second batch of properties.
33. [33]
    I return to (a) and (b) above, the two ways in which this claim can properly be brought against the fund.

Can the claim be brought against the fund relying on section 470(1)(e)?

34. [34]
    The first way is under section 470(1)(e) of PAMDA.  Under this provision the Applicants would need to show that there was 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

35. [35]
    “Relevant person” is defined in section 469 and includes a licensee, a former licensee and a person who is not licensed but who acts as a licensee.  Mr McCreath is clearly a relevant person for this provision.  The property entrusted to Mr McCreath was the $320,000.  A difficulty arises with the requirement that the money must have been “entrusted to the person as agent for someone else in the person’s capacity as a relevant person”.  This means that the money must have been entrusted to Mr McCreath as agent for someone else in his capacity as licensee (as a real estate agent) or as a person who is not licensed but who acts as a licensee.
36. [36]
    There are two possibilities in this case for the “someone else”.   It could be:-

    1. the person who would receive the money if the sale proceeded; or
    2. the person entrusting the money (in this case the Applicants as purchasers).
37. [37]
    As for (a), the difficulty is that as I have found above, the person who would receive the money if the sale proceeded was Mr McCreath himself.  He, as an individual, was the legal entity who traded as FBC Realty.  It is not possible in law, for someone to be an agent for themselves.  Under (a) there can be no agency involved. 
38. [38]
    As for (b), this would be the scenario if the Applicants entrusted the money to Mr McCreath as their agent in his capacity as real estate agent or in some other way where he was acting as a licensee but did not have a licence. 
39. [39]
    In order to see when such an agency might arise and for what purpose, it is necessary to look to the statutory definition of real estate agent rather than the common law meaning of “agent” because the statutory provisions need to be read in their statutory context.  The authority of a licensed real estate agent appears from section 128 which is as follows:-

128 What a real estate agent’s licence authorises

1. (1)
   A real estate agent’s licence authorises the holder of the licence (real estate agent) to perform the following activities as an agent for others for reward—

1. (a)
   to buy, sell, exchange, or let places of residence or land or interests in places of residence or land;

2. (b)
   to buy, sell, exchange, or let businesses or interests in businesses;

3. (c)
   to collect rents;

4. (d)
   to buy, sell or exchange livestock or an interest in livestock;

5. (e)
   to negotiate for the buying, selling, exchanging, or letting of something mentioned in paragraph (a) or (b);

6. (f)
   to negotiate for the buying, selling or exchanging of something mentioned in paragraph (d).

2. (2)
   A real estate agent may perform the activities in the carrying on of a business, either alone or with others, or as an employee of someone else.

40. [40]
    Section 128 needs to be read with section 160 which makes it an offence to perform an activity that may be done under the authority of a real estate agent’s licence as an agent for someone else for reward, without holding a real estate agent’s licence authorising that activity.
41. [41]
    The difficulty is in fitting what actually happened here to these statutory provisions.  What actually happened here was that the money was given by the Applicants to Mr McCreath as the vendor of properties.  Mr McCreath had no obligation to the Applicants to deal with the money any further at all. And as I have found above, Mr Mann believed that Mr McCreath was selling the properties himself: so he could not give Mr McCreath any authority of the sort which would be given to an agent, to deal with the money on his behalf and that of Mrs Mann.  The money had already reached its correct destination.  Mr McCreath did have a contractual obligation to transfer to the Applicants the properties (or shares in companies which owned those properties).  But that was a separate obligation and did not come within section 128 either. 
42. [42]
    Hence it is clear that the Applicants did not entrust the money to Mr McCreath as their agent.
43. [43]
    It follows that the claim cannot be brought against the fund relying on section 470(1)(e).

Can the claim be brought against the fund relying on Chapter 12, Part 1?

44. [44]
    Chapter 12, Part 1 of PAMDA requires licensees to operate trust accounts with certain specified requirements, to pay certain monies received into a trust account and only to withdraw certain permitted amounts from the account.  In particular, sections 378 and 379 require a licensee to pay an amount received for a transaction into a trust account.
45. [45]
    By section 378(2) an amount received by a licensee for a transaction includes deposit and purchase monies for the transaction.
46. [46]
    Section 385 describes permitted drawings from trust accounts and one of them is an amount to which a person is entitled when the transaction is finalised.  The licensee is also entitled to draw the licensee’s transaction fee. 
47. [47]
    On the face of it, the statutory provisions in Chapter 12, Part 1 are wide enough to cover what has happened here.  Mr McCreath received $320,000 as money received for a “transaction” and this was purchase monies for the transaction.  Since Mr McCreath was a licensee, he was required to pay the money into a trust account and not to use the money for an unauthorised purpose.
48. [48]
    The question arises however, whether this is the proper construction of these provisions.  It seems odd that a vendor who is not a licensee under PAMDA would not need to pay purchase moneys received in advance into a trust account, and a vendor who was a licensee under PAMDA would need to do so.  To avoid this result it would be necessary to say that the statutory provisions only bite if the transaction was one in which the licensee was acting as licensee under PAMDA.  Read in that way, when a licensee received advanced purchase monies when selling their own property they would not have to pay it into a trust account.
49. [49]
    The question was considered in Queensland in a slightly different context by R. V. Hanson QC sitting in the Queensland Commercial and Consumer Tribunal.  In Express Commission Pty Ltd and The Chief Executive, Office of Fair Trading v Venture Spirit Pty Ltd and Smith, S.M. [2008] QCCTPAMD 21 there was a claim against the fund by commercial factors who had paid a licensee some $40,000 odd for advance commission but who were unpaid by the licensee.  The factors’ case was that the licensee was in breach of the requirements of Chapter 12 Part 1 in the way it had handled the money received from the factors.  But R.V. Hanson QC thought otherwise, saying:-

10. The first difficulty for the applicant, to my mind, is that the relationship between the applicant and the respondents was not that of licensee and client. In other words, when the agent dealt with the applicant, the agent was not acting as a licensee. The fact that the agent held licences under the Act was merely incidental. In those circumstances, it would be surprising if the provisions of the Act designed to protect the members of the public who use the services of licensees had application to the business dealings of licensees which do not involve a transaction for which a licence is necessary. In the conduct of a real estate agent’s business, there will be many transactions incidental to the running of the business where the Act has no application. A few that come to mind are - entering into a rental agreement for the agent’s business premises, agreements to purchase or lease motor vehicles, and an overdraft facility with a bank. Persons who suffer financial loss in one of those dealings with an agent would have no recourse to the fund because, in doing business in those circumstances, the agent is not acting as a licensee, and the Act has no application to the transaction.

11. Here, the factoring of the agent’s debtors book is an incident of running the business to which the Act has no application. The circumstance that the factoring agreement deals with money that sits, or may sit, in the agent’s trust account does not, in my opinion, automatically convert the transaction to one to which the Act applies. If it did, the agent’s banker could also say that the dealings between the agent and the bank with money in the accounts kept with that banker were controlled by the Act. To my mind, something more than the mere fact that the factoring agreement speaks of money in the trust account is needed before it can be said that the Act applies to the agent’s conduct. I would want to be persuaded that the relationship between the agent and the factor went beyond that of trader and financier, and invoked, for the factor’s benefit and protection, the provisions of the Act designed to protect those doing business with the agent when the latter acts as licensee, rather than as a trader or merchant.

50. [50]
    As can be seen from paragraph 10 of this passage above, R.V. Hanson QC identified a number of unexpected practical consequences if the statutory provisions applied to the licensee’s own business dealings. 
51. [51]
    It is notable that all States and Territories in Australia have laws covering the licensing of real estate agents and requiring them to pay monies received for transactions into a trust account.  The wording of the legislation differs considerably, however.  All jurisdictions have wording which make it clear that the obligation to pay into a trust account only arises if the transaction is one in which the licensee is acting as licensee under the real estate agents provisions or where the money is received on behalf of another person.^[10]  It is more likely than otherwise, that the legislature in Queensland intended to make provisions similar to those in the other States and Territories.
52. [52]
    It is also significant that under section 379 of PAMDA a licensee commits a criminal offence if monies received for a transaction are not paid into a trust account.  The maximum penalty is 200 penalty points or 3 years imprisonment.  It is a rule of statutory interpretation that where statutory wording creating a criminal offence is unclear, the doubt should not be resolved by extending any penal category.^[11]  Following this rule would mean that no criminal offence would be committed under section 379 by a licensee vendor who did not pay the monies into a trust account.  Equally it would mean that the civil law did not require such monies to be paid into a trust account either.
53. [53]
    Perhaps going the other way is section 573 of PAMDA, which creates the criminal offence of conversion by a licensee of money belonging to someone else.  This section makes it clear that the offence is only committed if the money is received by the licensee “in the performance of the activities of a licensee”.  It would not apply therefore, to a licensee who received purchased monies in advance as a vendor of property.  It could be argued that since the legislature applied a restriction to the scope of this offence in section 573 but omitted to do so in Chapter 12, Part 1, that this was an intentional omission.  This argument would be based on the maxim expressio unius est exclusio alterius.   However, the application of the maxim is by no means prescriptive and may be ignored if the result is curious^[12], inconsistent or unjust.^[13]
54. [54]
    There is also some assistance from section 387 of PAMDA.  That provides that a party to a transaction can notify the licensee that the ownership of the money held in the trust account for a transaction is in dispute.  If this happens, the licensee is unable to deal with the money unless all parties to the transaction agree in writing, or legal proceedings are started to decide who is entitled to the money (in which case the money should be paid into court).  If neither of these things happen within 30 days of a notice of dispute, section 390 permits the licensee to give 30 days notice that the money will be paid to a person stated in the notice.  These provisions are only appropriate when the money is held by the licensee on trust in a transaction in which the licensee is not the vendor.  In a case where a licensee were a vendor, they would interfere with the licensee’s right to the purchase price. 
55. [55]
    In my view, the weight of the considerations above show overwhelmingly that the objective intention of the legislature was that Chapter 12 Part 1 of PAMDA would not apply to the licensees own business dealings.  It does not apply here, where Mr McCreath was selling his own real property or shares in a company which owned the property.  It follows that the second possible route for the Applicants to claim against the fund does not succeed.
56. [56]
    The only order I can make in the circumstances is that the claim against the fund is rejected.