Turnbull v McCreath[2017] QCAT 190

REASONS FOR DECISION

1. [1]
   In January 2014 and after making his own enquiries on the internet, Christopher Turnbull discussed investing in real estate in the USA with Alistair McCreath.  Mr Turnbull says Mr McCreath held himself out as the principal of FBC Group Pty Ltd, a real estate agency operating out of Queensland and a company Mr Turnbull had found advertising on the internet.  This company said it provided a comprehensive service for people wanting to purchase property in the Detroit, Michigan area of the USA.
2. [2]
   Mr Turnbull says this company provided a “turnkey” style of service where properties were sourced, purchased and then managed through Mr McCreath, the company and another allied company in the US.
3. [3]
   At the time of these negotiations, the registered office of the FBC Group was a residential address in Maroochydore Queensland.  This was also the residential address of Alistair McCreath and his son Stuart McCreath, the only director and secretary of FBC Group Pty Ltd.
4. [4]
   Mr Turnbull contracted to purchase three US properties through FBC Group Pty Ltd.  On 14 February 2014 and again on 17 February 2104, Mr Turnbull contracted (on the recommendation of Alistair McCreath) to buy two properties in the US described as the Cheyenne property and the Littlefield property.
5. [5]
   As part of these contracts, Mr Turnbull also engaged FBC Group Pty Ltd to facilitate these purchases and to manage the properties post-sale.  However, the property management agreements for these two US properties were with FBC Property Management LLC, an American registered company.
6. [6]
   On 25 February 2014, Mr Turnbull contracted to purchase (under the same conditions described above) a third property described as Memorial Drive.
7. [7]
   There were problems with the purchase of all three properties and eventually, Mr Turnbull was only able to have clear title to one of the properties (Memorial Drive).  A second title is still in dispute (Cheyenne) and the third contract (Littlefield) fell through because Alistair McCreath said the seller had a better offer.  Mr Turnbull was never refunded the deposit monies he paid for the failed Littlefield contract. 
8. [8]
   Mr Turnbull also says that FBC Group Pty Ltd and or Alistair McCreath failed to remit rental income received by FBC Group Pty Ltd from the US arm of the business to him in May and June 2014.
9. [9]
   On 5 February 2014 and again on 14 February 2014 Alistair McCreath met Mr Turnbull in person in Sydney New South Wales to discuss the purchases of the Cheyenne and Littlefield.  Mr Turnbull resides in Sydney.  Alistair McCreath travelled to Sydney to meet him. 
10. [10]
    The purchase contracts for Cheyenne and Littlefield show Mr Turnbull as the purchaser and Alistair McCreath as the seller.  There is no reference to FBC Group Pty Ltd or Alistair McCreath as agent.
11. [11]
    On 16 July 2014 the Federal Court of Australia placed FBC Group Pty Ltd into liquidation.
12. [12]
    On 2 June 2015, Mr Turnbull lodged a claim against the fund established under the Agents Financial Administration Act 2014 (Qld) for the Littlefield deposit not repaid and outstanding rental monies owing from the US properties.
13. [13]
    The Chief Executive, Department of Justice and Attorney-General may refer a claim to this Tribunal if it considers that this Tribunal can more effectively or conveniently decide the claim or it would be more appropriate to do so.^[1]  As the events occurred before 1 December 2014, the claim is determined under the then legislation, the Property Agents and Motor Dealers Act 2000 (Qld) (PAMDA) under transitional provisions.^[2]
14. [14]
    The Chief Executive submitted this Tribunal could decide Mr Turnbull’s  claim more effectively and efficiently and in a more appropriate venue because the jurisdictional limits of the Fund are in issue, the claim concerns conduct allegedly occurring outside Queensland and because the claim concerns allegations of false or misleading statements.^[3]
15. [15]
    The claim can be allowed wholly or partly, or rejected.^[4] The Tribunal may allow the claim only if satisfied on the balance of probabilities that an event happened and the Mr Turnbull suffered financial loss because of the happening of the event.^[5]
16. [16]
    Mr Turnbull’s claim is made because he alleges an event under section 82 of the Agents Financial Administration Act, 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. 

The basis of the hearing

17. [17]
    By agreement with Mr Turnbull, the hearing conducted on this day dealt with the question of the jurisdiction of this Tribunal to decide Mr Turnbull’s claim against the Fund and the elements of his claim.  If he is successful in this hearing, the question of the quantum of his claim will be addressed at a later hearing, potentially to be held on the papers.

The Question of Jurisdiction

18. [18]
    The Chief Executive relied on the case of Goodchild v Ferrantino.^[6]  There an agent in Queensland negotiated for the sale of real property in New South Wales and misappropriated the buyer’s deposit in Queensland.
19. [19]
    The Tribunal found that the claim could proceed even though the property was not in Queensland because:

1. The legislative provisions governing the Fund apply to the conduct of the agent rather than the location of the property;
2. The negotiations for the sale of the land occurred in Queensland; and
3. The impugned conduct, being the misappropriation of the deposit, also occurred in Queensland.

Submissions of the Chief Executive

20. [20]
    The Chief Executive submitted that Mr Turnbull’s material suggests that the impugned conduct did not occur in Queensland, and therefore the Tribunal lacks jurisdiction to determine the claim because:

1. The statements that were false and misleading alleged to have occurred in Sydney, New South Wales;
2. There is no evidence to suggest that the rental income from (Cheyenne, Littlefield and Memorial) were stolen, misappropriated or misapplied in Queensland;
3. The funds were collected by FBC Property Management LLC, in Michigan USA, whom Mr Turnbull appointed as his property manager;
4. There is no evidence to show either FBC Realty or Alistair McCreath were acting as Mr Turnbull’s agent.

Submissions of Mr Turnbull

21. [21]
    Mr Turnbull says he first came across the FBC Group in internet searches around 16 January 2014.  He then contacted FBC and spoke to Alistair McCreath.^[7]
22. [22]
    Mr Turnbull alleges that the primary constituent contract steps (offer, acceptance, consideration, and key representations) for Littlefield, Cheyenne and Memorial properties occurred while Alistair McCreath was representing himself to be an agent of FBC Group and while he was in Queensland.^[8]
23. [23]
    The original offers, description and representations for all 3 properties were made via telephone and/or email by Alistair McCreath from his office in Queensland as Mr Turnbull lives in Sydney. Acceptance of offers and consideration for the contracts was made via EFT Payment to Queensland to FBC Group Bank Account in a Queensland Bank.^[9]
24. [24]
    The only new information and representations that were provided in Sydney meetings were in relation to the renovations and tax reduction for the Cheyenne property and how the Littlefield property would be transferred from another client to him.^[10]
25. [25]
    Mr Turnbull says the Sydney meetings were about Mr McCreath trying to collect signatures and build relationship. Prior to the first meeting in Sydney he had been liaising with Mr McCreath by phone and emails on many occasions in the last few weeks of January 2014^[11] and;

    1. Mr McCreath represented himself by telephone from Queensland as the principal agent for FBC Group that had real estate operations headquarters in Queensland at the Maroochydore office; 
    2. He said the Queensland FBC Group had 100% control over the subsidiary real estate company operating in Detroit;
    3. He represented himself to be the single point of contact for all dealings and monies through the FBC Group headquarters in Queensland;
    4. When Mr Turnbull showed interest in Littlefield and Cheyenne properties, Mr McCreath flew to Sydney to close the deal.
26. [26]
    This seemed consistent to Mr Turnbull with FBC’s website that had pictures of properties like any other realtor.  
27. [27]
    After the first Sydney meeting, McCreath lowered the original offer for the Cheyenne property by $USD 9,200, through an email dated 7^th Feb 2014, and sent from Queensland.^[12]
28. [28]
    After the reduction in the price for Cheyenne, Mr Turnbull says he was still dissatisfied with that property but after much negotiations and convincing by McCreath, Mr Turnbull says accepted the offer. He says Mr McCreath insisted on flying down to Sydney to collect the signature in person on 14^th Feb 2014 although Mr McCreath did not countersign the agreement at this meeting.
29. [29]
    Mr Turnbull says that McCreath countersigned the document on 15^th February from his FBC office in Queensland after an agreement was reached in relation to tax reduction and renovation works.^[13]
30. [30]
    Concerning Mr McCreath as the contract seller of the properties, Mr Turnbull says:

    1. This reflects Mr McCreath’s shoddy document practices rather than the facts of the matter;
    2. Mr McCreath consistently represented himself as an agent of FBC – also implied by his role in the transaction, his signature block next to FBC logos and his persona on all FBC marketing materials;^[14]
    3. The titles on both the Cheyenne and Littlefield properties make no reference to Mr McCreath and in the case of Littlefield, Mr McCreath represented that he would arrange to transfer the title from the previous owner to Mr Turnbull’s American company;
    4. Mr McCreath never claimed to own the properties directly;
    5. Mr McCreath continuously stressed he was the single point of contract for all transactions;
    6. The Littlefield property was actually owned by another client of Mr McCreath who wished to sell it.  Complexities arose when the proper owner of the property tried to sell it in the US because of an alleged falsified “quit document” Mr McCreath had provided transferring the Littlefield property to Mr Turnbull’s American company without permission of the real owner.
31. [31]
    In conclusion, Mr Turnbull says Mr McCreath’s narrative was consistent and at a high level from the outset.  He depicted himself as a principle agent for the FBC Group and defacto controller of everything going on in the group of companies that were primarily licensed real estate agents with a specialty around high yielding investment properties.  He claimed to Mr Turnbull his group of companies, under the umbrella of the Queensland FBC Group, specialised in sourcing international properties for potential Australian buyers and was appropriately licensed to do so in Australia and the US.
32. [32]
    Mr Turnbull submits that Mr McCreath told him the Queensland FBC head office via himself as principal agent with his son, would act as a single contact point for all sales and post-sales activities.   All rent would be paid out of the FBC Queensland office into individual client’s bank accounts.
33. [33]
    Mr Turnbull freely admits in oral evidence to this Tribunal that he has been deceived and he believes himself to be the victim of an elaborate scam from someone he describes as a “master con man”.  He says he is not the only one, having had contact with other clients of FBC.
34. [34]
    In his oral evidence he says he has now had the US properties independently valued and it appears he paid Mr McCreath at least 300% more that the value of each of the properties if he had purchased at that time directly on the US open market.
35. [35]
    I found Mr Turnbull to be an open honest credible witness but one who made some very unwise decisions.
36. [36]
    I accept the events as described by Mr Turnbull in relation to the negotiations between him and Mr McCreath prior to the Sydney meetings.

Findings of Fact

37. [37]
    I make the following findings of fact:

    1. The original offers, description and representations for all 3 properties were made via telephone and/or email by Alistair McCreath from his office in Queensland as Mr Turnbull lives in Sydney;
    2. Acceptance of offers and consideration for the contracts was made via EFT Payment to Queensland to FBC Group Bank Account in a Queensland Bank.
    3. The only new information and representations that were provided in Sydney were in relation to the renovations and tax reduction for the Cheyenne property;
    4. Mr McCreath by telephone from Queensland represented himself as the principal agent for FBC Group that had real estate operations headquarters in Queensland at the Maroochydore office; 
    5. Mr McCreath told Mr Turnbull the Queensland FBC Group had 100% control over the subsidiary real estate company operating in Detroit;
    6. Mr McCreath never owned the Littlefield property and was never able to transfer clear title to Mr Turnbull;
    7. A third party, another client of Mr McCreath, owned the Littlefield property.

Jurisdiction

38. [38]
    In Goodchild v Ferrantino^[15] an agent in Queensland negotiated for the sale of real property in New South Wales and misappropriated the buyer’s deposit in Queensland.  The Tribunal found that the claim could proceed even though the property was not in Queensland.  This was because the legislative provisions governing the Fund apply to the conduct of the agent rather than the location of the property, the negotiations for the sale of the land occurred in Queensland and the impugned conduct, being the misappropriation of the deposit, also occurred in Queensland.
39. [39]
    The decision in Goodchild v Ferrantino was applied by this Tribunal in Ryan v Ferrantino^[16] where the learned member adopted the reasoning in the Goodchild decision on the basis that the respondent resided in and carried on business in Queensland; acted as the vendor’s agent in Queensland; negotiated with the applicants in Queensland and elsewhere; the deposit was paid to the respondent in Queensland and the deposit was banked into a bank account in Queensland.
40. [40]
    I am satisfied that because negotiations for the sale of land were carried out in Queensland and the impugned conduct on the part of Mr McCreath occurred in Queensland, Mr Turnbull is entitled to make a claim against the fund even though the relevant transaction involves land outside Queensland.
41. [41]
    I am satisfied in all the circumstances that the Tribunal has jurisdiction to hear and determine this application.

Mr Turnbull’s claim

42. [42]
    Mr McCreath has been before this Tribunal on a previous occasion.  In the decision of Mann & Mann v McCreath ^[17] the Fund claim by the Manns was rejected because the learned member found Mr McCreath was selling his own real property or shares in a company which owned the property to the Manns and that they were aware they were dealing with Mr McCreath directly.  The learned member found

“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.”^[18]

43. [43]
    Mr Turnbull never held that belief.  At all times he considered Mr McCreath to be his agent, acting on his behalf is the pre and post property transactions.  I do not place any weight on the contract detail showing Mr McCreath as the seller.  As I have found, Mr McCreath never owned the Littlefield property and was never able to transfer clear title to Mr Turnbull. 
44. [44]
    Mr Turnbull was certainly naïve in his dealing with Mr McCreath and even when he had some doubts, influenced by the profit he thought he would make.  But overall, I am satisfied on the balance of probabilities, that he was the victim of an elaborate and systematic fraud which Mr McCreath had been perfecting since at least 2010 when Mr and Mrs Mann first dealt with him.
45. [45]
    Mr Turnbull’s claim against the fund may be sustained if it is established that the respondents are "relevant persons", and that there has been a misapplication of deposit monies and rental, which has resulted in financial loss being suffered by him.^[19]
46. [46]
    The term “relevant person” is defined in section 469 of the PAMDA. That section provides that a “relevant person” includes (a) a licensee; or (b) a licensee’s employee or agent, or a person carrying on business with the licensee; or (c) a person having charge or control, or apparent charge or control of licensee’s registered office or business.
47. [47]
    A licensee is also defined under section to include a person who is not licensed. Neither Mr McCreath nor the FBC Group ever held a license in Queensland.
48. [48]
    Mr McCreath insisted that Mr Turnbull deal only through him.  By his words and actions and in his web pages and document logos, Mr McCreath represented himself as the principal agent for FBC Group. Mr McCreath misappropriated monies by retaining the deposit on the Littlefield property and he failed to remit rental income received by FBC Group Pty Ltd from the US arm of the business to Mr Turnbull in May and June 2014.  Although Alistair McCreath was not licensed, he acted as a licensee in his dealings with Mr Turnbull and FBC allowed that representation. 
49. [49]
    The company held Mr Turnbull’s Littlefield deposit and rental monies received from the US.  These monies were not refunded or paid.
50. [50]
    I am satisfied that Alistair McCreath and FBC Group Pty Ltd are relevant persons.
51. [51]
    The Agents Financial Administration Act^[20] requires the Tribunal in allowing a claim, to name the person who is liable for Mr Turnbull’s loss.
52. [52]
    The Agents Financial Administration Act^[21] further provides that a person is liable to re-imburse the Fund if the person is the responsible person.  If the responsilbe person is a corporation, each person who is an executive officer when the relevant event occurred.   
53. [53]
    As previously stated, Mr McCreath and the FBC Group misappropriated monies by retaining the deposit on the Littlefield property and failing to remit rental income received by FBC Group Pty Ltd from the US arm of the business to Mr Turnbull in May and June 2014.  Mr McCreath played a significant role in the business of the FBC Group here and in the US.  He held himself out as being in control of the business in all aspects. 
54. [54]
    I am satisfied that Mr McCreath and FBC Group Pty Ltd are responsible persons for the purposes of section 116(4) of the Agents Financial Administration Act 2014 (Qld).  Mr McCreath and FBC Group Pty Ltd are liable for Mr Turnbull’s financial loss and liable to reimburse the Fund for any monies paid to him. 
55. [55]
    This Tribunal has previously found that where a company is a responsible person, its directors, as executive officers, must also be responsible persons irrespective of their involvement in the company affairs.^[22]
56. [56]
    At the time of the relevant events in early 2104, Stuart McCreath was the director and secretary of FBC Group Pty Ltd.^[23]  Accordingly, Stuart Felix McCreath is also a responsible person and liable to reimburse the Fund for any monies paid to Mr Turnbull.
57. [57]
    Orders are made about Mr Turnbull’s claim and liability to reimburse the Fund.  Further directions will be made for an on the papers hearing to determine the quantum of that liability unless otherwise requested.  Copies of these orders and reasons for them are to be provided to the Chief Executive who is able to make submissions on the issue of quantum.