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Kine v Key to Australia Pty Ltd[2024] QCAT 215

Kine v Key to Australia Pty Ltd[2024] QCAT 215

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Kine v Key to Australia Pty Ltd and Anor [2024] QCAT 215

PARTIES:

Isaako Kuttiolo Kine

(applicant)

v

KEY TO AUSTRALIA PTY LTD (deregistered)

(First respondent)

graham mark scarrott (a bankrupt)

(Second respondent)

APPLICATION NO/S:

OCL068-21

MATTER TYPE:

Other civil dispute matters

DELIVERED ON:

16 May 2024

HEARING DATES:

14 June 2023 and 8 March 2024

HEARD AT:

Brisbane

DECISION OF:

Member Poteri

ORDERS:

  1. Pursuant to section 105 of the Agents Financial Administration Act 2014 (Qld), the claim is allowed and the amount of $200,000 should be paid to the Applicant from the Claim Fund at the expiration of the appeal period as outlined in section 143 of Queensland Civil and Administrative Act 2009 (Qld).
  2. The First Respondent and Second Respondent are jointly and severally liable for the losses of the Applicant.
  3. Pursuant to sections 105(3) and 116(3) of the Agents Financial Administration Act 2014 (Qld), the First Respondent and the Second Respondent are jointly and severally liable to reimburse the Claim Fund in the amount of $200,000.

CATCHWORDS:

ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – Where residents of New Zealand have invested in real estate in Australia – where the residents were induced to make this investment because of the false and or misleading representations of an Australian registered real estate agent – where the real estate agent is alleged to have disbursed funds without authorisation from the real estate agent’s trust account – where the scheme has failed – where the residents have made a claim against the Claim Fund under the provisions of the Agents Financial Administration Act 2014 (Qld) – where the claim has been referred to the Tribunal for a determination.

Agents Financial Administration Act 2014 (Qld), s 6, s 8, s 21, s 22, s 33, s 77, s 80, s 82, s 84, s 85, s 95, s 105, s 113, s 116

Criminal Code Act 1899 (Qld), sch 1

Criminal Code (Qld), s 24

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 19, s 20, s 143

Planning Act 2016 (Qld), s 43

Property Occupations Act 2014 (Qld), s 12, s 26, s 97, s 115, s 154, s 155, s 206, s 207, s 208, s 209 , s 212

Airstrike Industrial Pty Ltd v Robertson [2014] QCATA 43

Dunn v Chief Executive, Department of Justice and Attorney-General [2012] QCAT 476

Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418

Goodchild v Ferrantino [2007] QCCTPAMD 2

To v Chief Executive, Department of Tourism [2006] QDC 381

APPEARANCES & REPRESENTATION:

Applicant:

Self-represented

Respondent:

Key to Australia Pty Ltd No appearance

Second Respondent:

Graham Mark Scarrott No appearance

Office of Fair Trading

Mr A Tan, Legal Officer of the Office of Fair Trading

GENERAL OVERVIEW

  1. [1]
    This is an overview of 17 claims made under the provisions of the Agents Financial Administration Act 2014 (Qld) (‘AFAA’) regarding the activities of the First Respondent, Key to Australia Pty Ltd (‘Key’), and the Second Respondent, Graham Mark Scarrott (‘Scarrott’).
  2. [2]
    Except for one claimant, I have consent of all the other claimants to refer to the evidence and details of each of the various claims in considering the individual claims.
  3. [3]
    The consideration of the claims should be viewed as a whole because all of the claims refer to the proposed purchase of some 20 lots at Pimpama, Queensland. The lots were the subject of put and call option agreements (‘P&C’) with Eagle Street Finance Pty Ltd (‘Vendor’).
  4. [4]
    In all Scarrott and Key were paid the total of approximately $2,380,000 by the claimants. Scarrott paid approximately $603,000 to the Vendor for deposits under the P&Cs. Approximately $72,000 was paid to the Gold Coast City Council (‘the Council’) for application fees and approximately $33,000 was paid to the town planners, Zone Planning Group (‘ZPG’). The Tribunal has not been informed of any other amounts that Scarrott may have paid to other consultants or contractors.
  5. [5]
    Scarrott and Key had at their disposal approximately $1,690,000. It is not clear to me how Scarrott and Key used these funds. However, most of these funds were used without the implied or express authority of the claimants on personal expenses, company expenses and keeping the whole scheme going. The funds were dishonestly used by Scarrott and Key.
  6. [6]
    Scarrott and Key were charged and convicted of breaches of the Australian Consumer Law (‘ACL’) regarding their marketing of land at Pimpama. There were 18 complainants. Scarrott and Key pleaded guilty to the charges. Scarrott participated in voluntary records of interview with officers of the Office of Fair Trading (‘OFT’) in 2020. The admissions were summarised and read to the Court during the criminal proceedings. The admissions are set out in Annexure 3 attached to the Form 4 – Complaint in the Supplementary Document Bundle filed by OFT on 17 March 2023. In summary, the admissions show:[1]
    1. Scarrott and Key fraudulently converted approximately between $1,600,000 and $1,700,000 to his own account or to pay another person’s use.
    2. Scarrott forged ANZ finance approval letters to buy time.
    3. Scarrott started marketing the lots in late 2018.
    4. Scarrott had no assurances from the Council that it would approve the subdivision of the lots. This was confirmed by advice from ZPG dated 23 April 2019.
    5. Scarrott arranged for ZPG to lodge six applications with the Council on 26 August 2019. Post lodgement of the applications, Scarrott had meetings with the Council from September 2019 onwards and he was aware that the Council raised concerns with the applications. Scarrott continued to market the lots at Pimpama.
    6. The complainants’ funds were paid into the bank account known as the Key To Australia Pty Ltd As Trustees For The Scarrott Family Trust. Scarrott told the complainants that he and Key were licenced agents and this bank account was a “trust account”.
    7. The returns that Scarrott was promising to the complainants were not supported by any analytical evidence.
    8. Scarrott and Key trading losses were between $75,000 and $120,000 per month. This is the reason why he was signing up new investors and trying to expedite the process. Scarrott was running out of time.
    9. Scarrott estimated that he only spent on average approximately $4,100 of each complainant’s funds in prosecuting the subdivision approval for the lots.
  7. [7]
    The Tribunal has no investigation powers. These powers are exercised by the Chief Executive of OFT under the AFAA.
  8. [8]
    The consideration of each claim was difficult and complicated because Scarrott and Key did not appear at the hearing. Scarrott did provide an unsworn statement which is very general in nature, self-serving and is not corroborated.
  9. [9]
    The claimants were ordinary everyday New Zealanders (except for one Australian claim) who trusted Scarrott. Generally, I found the claimants to be entirely credible and honest. Also, I found them to be extremely courteous and at times somewhat embarrassed by the way they were convinced by Scarrott to trust him.
  10. [10]
    In almost all cases there is no question that Scarrott did not provide the claimants with full details of his proposal. He did not inform them of the possible shortcomings, disadvantages, and obstacles to overcome. Scarrott certainly exaggerated the time to obtain Council approval, subdivide the lots, build on the subdivided lots and on sell the subdivided lots. Further, Scarrott invariably told the claimants about the expected profit and gave them certainty.
  11. [11]
    Scarrott’s plan was for the parties to enter P&Cs with the Vendor and pay a deposit to secure the purchase of a lot (or lots). Other monies were paid to Scarrott by the claimants so that Scarrott could obtain approval from the Council to subdivide the lot into three individual lots and obtain approval to erect three townhouses on the individual subdivided lots.
  12. [12]
    Scarrott arranged for ZPG to lodge applications with the Council to subdivide lots 280, 281, 282, 333, 334 and 335 in April 2019. No applications were lodged with the Council to subdivide any other lots.
  13. [13]
    I presume the plan was to either on sell the subdivided lots with approved plans or to erect the townhouses on the subdivided lots and to on sell these subdivided improved lots. However, Scarrott did promise the claimants that they would not have to invest any further funds in the scheme or would not have to become purchasers of the individual lots. It is not clear to me how this would work in practice from a legal or timing perspective.
  14. [14]
    Bridging finance may have been required because the Council took more than the expected three to four months (as advised by ZPG) to assess the applications. One of the claimants stated that at one stage Scarrott did discuss the necessity to obtain bridging finance. Scarrott has admitted forging ANZ approval letters to buy time during this period.
  15. [15]
    It was all a question of timing and the Council approving the subdivision of the individual lots without the necessary setbacks and relaxation of on street parking. In the end the Council took 10 months to assess and reject Scarrott’s application, financing became more difficult and the COVID epidemic made all commercial activities more complicated.
  16. [16]
    It is difficult to ascertain when Scarrott started using the funds for his personal and Key’s expenses and other financing expenses to keep the whole scheme going. However, the Vendor became impatient and in 2020 the Vendor called upon the claimants to perform their obligations under the P&Cs and to pay the balance of the purchase prices under the P&Cs. Many of the claimants could not complete the purchases so their deposits were forfeited to the Vendor.
  17. [17]
    Ironically two claimants who had the resources to complete the purchase a lot and retain the lot have seen a substantial increase in the value of their lot and thus they have not suffered a financial loss.

REASONS FOR DECISION

LEGISLATION

  1. [18]
    For reference, I outline the relevant legislative provisions of the AFAA and the Property Occupations Act 2014 (‘POA’):

Sections 6, 8, 21, 22, 33, 77, 80, 82, 84, 85, 95, 105, 113 and 116 of the AFAA.

Sections 12, 26, 97, 115, 154, 155, 206, 207, 208, 209, and 212 of the POA.

CLAIM

  1. [19]
    Pursuant to section 82 of the AFAA, Kine lodged a claim (‘Claim’) on 23 July 2020 against the Claim Fund which is administered by the OFT. The Claim was made within the time stipulated in section 85 of AFAA.
  2. [20]
    Pursuant to section 95 of AFAA the Claim was referred (‘the Referral’) to the Tribunal on 31 August 2021 for determination.

REFERRAL

  1. [21]
    In the Referral, OFT has raised several issues that should be considered by the Tribunal.
  2. [22]
    The issues are:
    1. Jurisdiction.
      1. (i)
        The AFAA is legislation enacted in Queensland. There is no specific provision in the AFAA which restricts claims to Queensland. However, for a claim to be successful, a claimant must demonstrate that there is a sufficient nexus to Queensland.
    2. Section 80 of the AFAA outlines the definition of a “relevant person” as being current and former licensed real estate agents. At the relevant time, OFT admit that Key and Scarrott held valid licenses.
    3. OFT point out that Scarrott and Key may have been providing property development advice rather than acting as a real estate agent when Kine entered the arrangements.
    4. A claim may be made under section 82 of AFAA if the claimant suffers financial loss because of a contravention of sections 21 and 22 of the AFAA. Section 82(1)(a) and (b) of the AFAA relate to payment of monies or permitted drawings from a trust account. In these proceedings, Kine paid payments totalling $240,800 into the trust account of Key. These monies were to be distributed by payment of $26,600 and $29,700 for deposits to the Vendor for securing lots 480 and 487 and the balance to Key to prosecute the scheme.
    5. Section 82(1)(g) of the AFAA states that a claimant may make a claim if there has been a contravention of section 212 of POA by a relevant person. Section 212 of the POA provides that in making a sale of real property, the relevant person must not make representations to someone that are false or misleading. This issue relates to whether Key had the ability to subdivide lots at Pimpama and/or whether Kine would not be required to pay for the balance of the purchase price of the Land to the Vendor.
    6. Scarrott also made an offer to Kine that he could purchase lot 486. However, no P&C was ever produced.
    7. Scarrott also made promises to Kine that he would be able to subdivide and build on the lots in approximately 16 weeks. 

EVIDENCE

Kine

  1. [23]
    Kine provided a statement (‘Kine’s Statement’) dated 27 August 2020 to OFT which is exhibited on pages 6 to 11 of the Document Bundle attached to the Referral. Kine’s Statement also annexes other relevant material. Kine also gave evidence at the Tribunal Hearings by Microsoft Teams and remote conferencing.
  2. [24]
    Kine says, that in 2016, he contacted a man that he now knows as Scarrott.
  3. [25]
    In or around 23 April 2019, Kine was approached by a John Glover (‘Glover’). He understood that Glover was an employee or consultant with Key. He was shown an email which appears to have originated from Key in Australia. See exhibits IK1 and IK2 to Kine’s Statement.[2] This email contains some figures and a feasibility study on the scheme that Glover was recommending to Kine.
  4. [26]
    Kine says that he discussed the proposal with Scarrott and Glover and he was advised that he could subdivide lot 480 into four lots, lot 487 into three lots and another unnamed lot into three lots. They advised Kine that in creating the 10 subdivided lots he would earn a return of $1,000,000 less costs of $328,800. This would leave a net profit for Kine of approximately $670.000.
  5. [27]
    I believe that Scarrott was in his Queensland offices during the initial negotiations because Glover was onforwarding emails to Kine. This is the case with the expression of interest sent to Kine on 24 April 2019. See exhibits IK3 and IK4 exhibited to Kine’s Statement.[3] Kine executed the expression of interest and on 4 May 2019, Kine transferred the sum of $1,000 to the bank account of Key.[4]
  6. [28]
    After further discussions with Glover and Scarrott, Kine had some reservations about the proposal so Scarrott sent a letter dated 10 May 2019 to Kine.[5] This letter which was forwarded to Kine on 10 May 2019 appears to emanate from Scarrott in Australia. The letter refers to the ability to subdivide lot 480 into three lots (not four) and gives Kine the choice to either settle or receive a refund two months before the expiry of the P&C. See exhibits IK6 and IK7 to Kine’s Statement.[6] Kine did not see Scarrott in New Zealand until he met Scarrott with Duncan Garner at a property investment seminar.
  7. [29]
    During the period, 4 May 2019 to 29 June 2019, Kine paid a total $175,200 into Key’s account. This was to secure the purchase of lots 480 and lot 486. When the P&Cs arrived for Kine to execute, lot 486 was substituted with lot 487 in one of the P&Cs. Kine says that the P&Cs for lots 480 and 487 were executed in front of Scarrott as a witness at two separate addresses in Auckland on two different dates. See the P&Cs which are on pages 27 to 187 of the Referral Document Bundle dated 24 May 2019 for the P&C for lot 480 and pages 188 to 346 of the Referral Document Bundle for the P&C dated 3 July 2019 for lot 487.
  8. [30]
    The deposits payable under the P&Cs was $26,600 for the lot 480 P&C and $29,700 for the lot 487 P&C.
  9. [31]
    During the discussions leading up to the execution the P&Cs Scarrott offered to waive his management fee of $44,000 for the proposal to purchase and subdivide lot 480. Accordingly, Kine says in his Statement at paragraphs 31, 32, 33 and 34 of his Statement, that because of this saving on or about September 2019 Kine decided to purchase lot 486.[7] No P&C was produced and executed by Kine. Further, Kine transferred the sum of $64,000 into the Key account for the purchase of lot 486.
  10. [32]
    Prior to and during the time of execution of the P&Cs and up to the transferring of funds to Key for the purchase of lot 486 in September 2019 Scarrott and/or Glover made the following representations to Kine:
    1. Any money paid by Key would be paid into and held in a “trust account”.
    2. Scarrott and Key were licenced real estate agents. Scarrott never described himself as a development consultant.
    3. The whole process of subdivision, building and sale of the townhouses on the subdivided lots would be 16 weeks.
    4. The lots that were being purchased have all been approved to be subdivided into three or four townhouse residences.
    5. Scarrott/Key promised the refund option referred to in the letter from Key/Scarrott dated 10 May 2019. See page 17 of the Referral.
    6. In September 2019, Scarrott reassured Kine that he could develop three new sections on lot 486 as he had already been given the Council approval to build multiple dwellings on the lot.
    7. Scarrott assured Kine that he should not worry and to just sign the P&Cs as he would never have to settle on the lots as he would develop the land and on sell to third parties well before settlement date.
    8. The lots that Kine was purchasing had approval from the Council to subdivide the lots.
    9. Kine would receive his money back by Christmas 2019. This did not occur. Scarrott advised Kine that the reason for the delay was that “GCCC (the Council) did not approve the designs”. Scarrott then promised Kine that he would receive his money back in February 2020. This did not occur. At this point, Scarrott blamed the COVID lockdowns. In July 2020, he again blamed the delay in payment on the “GCCC declined the whole development designs”.
  11. [33]
    In June 2020, Kine was contacted by Ms Sharney Rowe of JMV Law, lawyers. Ms Rowe was acting for Kine after Scarrott had referred the Kine P&Cs to her. Ms Rowe advised Kine that the development was not going ahead, and legal proceedings were under way against Scarrott as Scarrott may have fraudulently taken money from buyers.
  12. [34]
    Ms Rowe also advised me that no P&C for the purchase of lot 486 was presented to the Vendor for execution by the Vendor.
  13. [35]
    During the period, when Scarrott had contact with Kine, Scarrott kept making further promises and asking Kine to trust him. Kine was informed about possible Vendor finance during this period. In the end, Kine did not have approved finance to proceed with the purchase of any of the lots from the Vendor. The deposits paid under the P&Cs were forfeited to the Vendor.
  14. [36]
    Kine has received no compensation or any refund of monies from Key or Scarrott.

ADMISSIONS BY SCARROTT

  1. [37]
    A claim was made against the Claim Fund by a Simon Alan Wilson (‘Wilson’) in the Queensland Civil and Administrative Tribunal file OCL067-21. Wilson had similar dealings with Scarrott and Key regarding the subdivision of a lot at Pimpama, Queensland. In sworn testimony given to the Tribunal, Wilson stated that Scarrott had made admissions to him that he had used the money that he collected from the New Zealand on personal expenses, paying for settlements, paying deposits, Key’s expenses and other New Zealand purchasers.
  2. [38]
    Further, I refer to the admissions made by Scarrott in interviews regarding his criminal prosecution referred to earlier in these Reasons. See Annexure 3 attached to the Form 4 – Complaint in the Supplementary Document Bundle filed by OFT on 17 March 2023.

SCARROTT AND KEY

  1. [39]
    Scarrott did not attend the hearings to give evidence and/or to be cross examined. He provided an unsworn statement (‘Scarrott’s Statement’).[8]
  2. [40]
    Key was not represented at the Tribunal Hearings and no material was filed by Key in these proceedings. Key has now been deregistered as a corporation.
  3. [41]
    Details of Scarrott’s activities are outlined on pages 1 to 26 in the Supplementary Document Bundle attached to OFT’s submissions filed in the Tribunal on 17 March 2023. From this material, Scarrott was convicted of offences under the ACL. Scarrott was not charged with or convicted of any offences under the POA.
  4. [42]
    Scarrott was not subjected to any cross-examination to test his evidence. Therefore, I have reservations about accepting the accuracy or veracity of Scarrott’s Statement. Scarrott does not outline the admissions made by Scarrott in his interviews with officers of OFT in 2020 or the summary of the admissions read to the Court in the criminal proceedings when Scarrott pleaded guilty.
  5. [43]
    I make the following findings in relation to Scarrott and Key:
    1. The Respondents and the Vendor appear to have no formal arrangements for any of the Respondents to market the Vendor’s land at Pimpama.
    2. The Respondents appear to have never formally acted or represented the Vendor. The Respondents did not have any authority from the Vendor to negotiate with any buyers of the Vendor’s land at Pimpama on behalf of the Vendor. See the comments relating to the “Developer” of page 12 of the Supplementary Document Bundle filed by OFT on 17 March 2023.
    3. Notwithstanding there were no formal arrangements for Scarrott to market lots of land at Pimpama for the Vendor, it is almost certain that the Vendor was aware of Scarrott’s activities and there would have been numerous interactions between Scarrott and the Vendor’s representatives in 2019 and 2020. After all, Scarrott had achieved the sale of approximately 20 lots of land for the Vendor.
    4. Scarrott had been marketing residential housing lots in the Gold Coast region and at Pimpama prior to 2018.
    5. All funds were paid to the business account of Key To Australia Pty Ltd As Trustee For The Scarrott Family Trust. Scarrott informed clients that this was a “trust account”. Kine always believed and Scarrott gave them the impression that his funds were being paid into a real estate agent’s trust account and held in this trust account pending payment of the deposit under the P&C and payment of the expenses to facilitate the subdivision of the Land.
    6. Scarrott arranged for ZPG to lodge a development application relating to lots 280, 281, 282, 333, 334 and 335 at Pimpama with the Council on 26 August 2019. See letter from ZPG to Mayor Tom Tate and Councillor Hammel dated 23 April 2020.[9]
    7. Scarrott admitted that he had meetings with the Council officers from September 2019 onwards where the officers raised 12 concerns with the applications and advised Scarrott that the applications may have to be amended.
    8. Notwithstanding the advice from the Council in September 2019, Scarrott continued to market lots at Pimpama on the basis that the Council approval to subdivide was just a formality.
    9. No applications for subdivision of lots 480, 486 and 487 were lodged with the Council.
    10. In the criminal prosecution of Scarrott there were approximately 18 affected parties.
    11. Scarrott admitted to forging letters from the ANZ bank to buy time.
    12. Scarrott attempted to obtain finance with Latrobe Financial Ltd, but the valuations of the land fell short of the valuations required by the financer.
    13. Scarrott always described himself as a sales consultant or a licensed real estate agent not as a development consultant.
    14. Scarrott initially expected the subdivision approval process with the Council to take three to four months. This process took much longer than expected and eventually the Council rejected Scarrott’s application. This process took much longer than expected and eventually the Council rejected/approved Scarrott’s application with certain conditions which Scarrott/Key were not able to satisfy. Ransom describes the response from the Council as a “refusal”. The more accurate way of describing the actual situation is that the Council delayed in processing the application for subdivision and the approval was subject to certain conditions.
    15. At one stage, Scarrott approached the Vendor for Vendor finance to complete the contracts. The Vendor would agree to providing 50% Vendor finance with the balance to be provided from the funds to come from New Zealand. This was not practical.
    16. Admissions were made by Scarrott that he expended the funds by paying for the deposits of various New Zealand investors for the purchase of the land under other P&Cs, Key’s expenses, expenses relating to the Council application process and personal expenses.
    17. Scarrott admitted that Key’s business was running at losses of between $75,000 and $120,000 per month. He was desperate for further sales so investors would provide him with funds to keep the scheme going. That is buying time.
    18. Ultimately, the Council process took too long, the Council rejected/approved the application with conditions, bank lending requirements became tighter, introduction of a foreign buyer’s surcharge was introduced into New Zealand, the COVID pandemic struck and New Zealand banking institutions were.

DAVID RANSOM AND ZONE PLANNING GROUP

  1. [44]
    David Ransom (‘Ransom’) is a director of Zone Planning Group (ZPG) which is a business specialising in town planning.
  2. [45]
    Ransom has provided a sworn statement executed on 24 August 2020 on pages 358 to 498 in the Document Bundle of the Referral. Ransom has an urban and town planning degree from the University of New England. Annexed to his statement are:
    1. a fee proposal;
    2. terms of engagement; and
    3. some attached correspondence with the Council.
  3. [46]
    ZPG was engaged by Scarrott to assist him in obtaining planning approval for his development application. On 23 April 2019, ZPG provided advice to Scarrott regarding the proposed development approval. See Annexure marked ZP1 of Ransom’s statement.[10]
  4. [47]
    Scarrott accepted the fee proposal and terms of engagement of ZPG and commenced work on the development application. The application to the Council was lodged with the Council on 26 August 2019. See page 2 of the letter from ZPG to Tom Tate, the Mayor of the Gold Coast Council, making complaints about the time taken to process the development application. See page 369 of the Referral Document Bundle.
  5. [48]
    In the letter from ZPG to Key dated 23 April 2019 there is no mention of lots 480, 486 and 487 in the letter.[11] Lots 480, 486 and 487 are not included in the application to the Council lodged on 26 August 2019. Scarrott says that this was the case because he wanted to save costs and ZPG advised him that once the initial applications were approved then the other applications would be approved “as of right.” When giving oral evidence, Ransom says that this is not correct and that he never gave this advice to Scarrott. Ransom says that if any lot was to be subdivided then an application to the Council was required. Such applications would be assessed by the Council in the normal matter.
  6. [49]
    The planning scheme that applies to the Land and the properties that were purchased by other New Zealand purchasers at Pimpama is the Gold Coast 2016 City Plan VS. See page 361 of the Referral.
  7. [50]
    I note the advice, given to Key and Scarrott in the letter from ZPG dated 23 April 2019 stated:[12]

The proposed Dwelling Houses are also Code Assessable as they do not strictly conform with the Acceptable Outcomes of the Pimpama Village Residential Code… More specifically the dwellings will need to seek alternative outcomes in relation to boundary setbacks, site cover and communal open space.

Typically, applications of this nature will take Council in the order of 3 – 4 months to assess and decide…

  1. [51]
    From Ransom’s statement he says that the Council assessment took much longer than anticipated and ultimately the application was “refused” (approval with conditions unsatisfactory to Key/Scarrott) by the Council on 11 June 2020. According to Ransom this delay and refusal/approval with conditions was “completely wrong”.
  2. [52]
    Ransom says that ZPG has no knowledge of the details of Scarrott’s New Zealand sales scheme.
  3. [53]
    The Tribunal called Ransom to give oral evidence on 7 March 2024. His evidence was:
    1. “Pre-approval” refers to preliminary approval in section 43 of the Planning Act 2016 (Qld). The preliminary approval refers to the approval in the material change of use Council reference MCU201500641 for Pimpama Village development area approved by the Council on 14 November 2016. See page 361 of the Referral Document Bundle.
    2. Lots 280, 281, 282, 333, 334 and 335 are part of the Pimpama Village development area.
    3. If an owner intends to subdivide a lot and build on the subdivided lot in the Pimpama Village development area and the proposed subdivision and buildings do not strictly comply with the Pimpama Village Planning Scheme (as contained in MCU201500641) then an application to the Council to seek relaxation of the conditions under the preliminary approval is required.
    4. This is what occurred in respect to the applications to the Council for lots 280, 281, 282, 333, 334 and 335. There was no preliminary approval (pre-approval) for these lots or any of the other lots in Pimpama being marketed by Scarrott.
    5. The applications to the Council are usually straight forward because they do not require advertising and no third party has rights to object.
    6. Ransom never had a pre-lodgement meeting or any discussions with any the Council officers before the actual application was lodged.
    7. Ransom was confident that the applications would succeed as there were similar developments at Southport and Varsity Lakes on the Gold Coast where the Council approved the developments with relaxed setbacks and parking requirements.
    8. Ransom acknowledged that there is no certainty of outcomes when making such applications with the Council.
    9. Ransom also acknowledged that if the subdivision of any other lots at Pimpama was required then further applications to the Council were required to be lodged and assessed by the Council. There is no “as of right” procedure available whereby the other lots would be automatically approved (with relaxed setbacks and parking) if the applications for lots 280, 281, 282, 333, 334 and 335 were approved. Ransom denied given any “as of right” advice to Scarrott.
    10. Ransom did discuss other consultants and contractors with Scarrott, but he had no direct dealings with these consultants and contractors and he is not aware how much Scarrott paid them.
    11. He provided payment details to the Tribunal after giving evidence. ZPG were paid a total of $33,000 by Scarrott.

JURISDICTION

  1. [54]
    OFT has raised the issue of jurisdiction of the AFAA in these matters. There are no specific provisions in the AFAA which expressly limits the operations of the legislation to activities that take place in Queensland. Therefore, I must look to the caselaw to decide this issue.
  2. [55]
    The High Court decision of Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 CLR 418 (‘Freehold’) is instructive. Freehold involved a claim for commission where negotiations for a contract for the sale of land occurred inside and outside of Queensland. The court in Freehold examined the provisions for the Auctioneers, Real Estate Agents, Debt Collectors and Motor Dealers Act 1922 to 1961 (QLD). This legislation is similar to the legislation in the AFAA.
  3. [56]
    In Freehold, the Court held that the activities occurred in Queensland. However, the Court stated:[13]

The Act clearly enough is not concerned with what is done outside Queensland, even if it be done in accordance with a contract the proper law of which is the law of Queensland. On the other hand, whatever may be the proper law of an agency contract, the Act applies to a person who acts as, or carries on the business, of a real estate agent in Queensland and a Queensland court would give effect to it. It is not, therefore, possible to support the conclusion which his Honour reached on the ground upon which his Honour based it.

The critical question is rather, did the claimant, in doing what it did pursuant to its agency contract with the owner, act as, or carry on the business of a real estate agent in Queensland? The circumstances here are such that unless the claimant acted as a real estate agent in Queensland in the transaction with which we are concerned it did not carry on business as a real estate agent in Queensland, so that the question can be narrowed down to whether or not, in the course of the negotiation of the sale from Queensland Estates Pty. Ltd. to Golden Acres Ltd., it acted as a real estate agent in Queensland.

  1. [57]
    The matter of Goodchild v Ferrantino,[14] involved a claim under the Property Agents and Motor Dealers Act 2000 (Qld) (‘PAMD Act’) for certain fraudulent activities that occurred in Queensland. In Goodchild, even though the land was situated in New South Wales, all the activities occurred in Queensland then the claim was allowed, notwithstanding the fact that the land was outside of Queensland. In Goodchild, the Tribunal noted that one of the objects of the PAMD Act was for the protection of consumers. The main object of the AFAA is “to protect consumers from financial loss in dealing with agents”. The analysis of the law in Goodchild is relevant to the facts and circumstances in these proceedings.
  2. [58]
    I conclude that the protection given to claimants under the provisions of the AFAA is restricted to cases where the activities take place in or predominantly in Queensland.
  3. [59]
    In these proceedings, the following facts apply:
    1. The Land is in Queensland.
    2. Scarrott and Key are licenced and were based in Queensland.
    3. The Vendor is in Queensland.
    4. Kine paid monies into the bank account of Key which is situated in Queensland.
    5. There was communication between Kine and Glover (in New Zealand) and Scarrott (in Queensland) in April and May 2019 in which details of Scarrott’s proposal, expression of interest and the refund letter were on forwarded by Glover to Kine. Further, Kine communicated with Scarrott/Key and JMV Law in Queensland in 2019 and 2020 after the P&Cs were executed.
  4. [60]
    By taking the above facts into account, I find that the activities of Scarrott/Key took place predominantly in Queensland and the provisions of AFAA apply to the Claim as far as the issue of jurisdiction is concerned the Claim is valid.

REPRESENTATIONS OF SCARROTT

  1. [61]
    OFT have outlined a number of “representations” made by Scarrott to Kine in April and May 2019 in OFT’s submissions filed on 17 March 2023. OFT have submitted that these representations are central to the Claim and the answers to these representations were the subject of cross-examination by Mr Tan of OFT. I will now comment on these representations.
  2. [62]
    Representations 1, 2, 3 and 4 can be examined together and I outline these alleged representations. They are:
    1. Representation 1 – The Respondents discovered land parcels in Pimpama Village, Queensland that can be configured into smaller lots.
    2. Representation 2 – land parcels in Pimpama Village have already been Gold Coast Council approved to be configured into smaller lots with townhouses to be built on each smaller lot.
    3. Representation 3 – The Respondents planned to reconfigure this land parcels into smaller Lots to generate substantial profit for investors.
    4. Representation 4 – The Applicant could participate in this scheme by:
      1. (i)
        Securing an option to purchase Pimpama Village land by signing put and call option agreements; and
      1. (ii)
        Investing funds with the Respondents to bring the Scheme to fruition.
  3. [63]
    When being cross-examined by Mt Tan of OFT at the Tribunal Hearing, Kine agreed that Scarrott had made these representations.
  4. [64]
    There is sufficient evidence for me to find that, prima facie, Representation 1, 2, 3 and 4 are true. However, Scarrott was not telling the full story when he was selling the scheme and lots 480, 486 and 487 to Kine. When these representations were made Scarrott must have known about the full details of his plans regarding the proposed subdivision of lots 480, 486 and 487 and to seek on-street parking and setback relaxations from the Council and that any such application was subject to the Council’s procedures and timelines to assess the applications and the applications may or not be successful.
  5. [65]
    Kine says that Scarrott advised him that the subdivisions and build could happen very quickly and Scarrott said that the whole process only took 16 weeks. Scarrott advised Kine that “the six lots in Pimpama Village have all been approved by the Council to be subdivided into three townhouse residences” and that the Council approval to subdivide was just a formality and it was certain to happen.
  6. [66]
    Scarrott also advised Kine that he would not have settle on any of the lots because the subdivided lots would be on sold to buyers before Kine had to complete the P&Cs.
  7. [67]
    It should also be noted that in September 2019, Scarrott agreed with Kine that he would forego his management fee of $44,000. Accordingly, Kine agreed that he would invest $64,600 as a deposit to purchase lot 486. On 19 September 2019, Kine paid the sum of $64,600 into the account of Key as a deposit for the purchase of lot 486. No P&C was produced by Scarrott or the Vendor for the purchase of lot 486. 
  8. [68]
    Between April and September 2019, Scarrott had the benefit of Ransom’s advice, and he would have received indications from the Council that they may have some concerns with the applications to subdivide lots 280, 281, 282, 333, 334 and 335. From this information and his own experience as a real estate agent, Scarrott would have known that the application process was far from being a formality or a certainty, and not just a case of paperwork and that approval may be difficult to achieve.
  9. [69]
    Further, Scarrott always spoke in generalities when selling the lots. Scarrott did not disclose the status of the above applications before the Council. He was wildly optimistic about times and outcomes. For example, Kine was advised by Scarrott that the whole process of Council approval of the subdivision of lots 480, 486 and 487 into three or four lots, the development (erection of townhouses) on the subdivided lots and the on sales to third parties would take 16 weeks. This was impossible from a timing and outcome perspective. The current applications before the Council were lodged in August 2019 and there were still problems with approval of these applications. Ultimately, the current applications were refused by the Council in June 2020. That is some 10 months after lodgement. When Kine executed the P&Cs for lots 480 and 487, the applications for subdivision for these lots had not even been lodged with the Council. Further, there was no evidence before me that building plans (and ancillary documentation) had been prepared for this application.
  10. [70]
    Even if the application to subdivide lots 480 and 487 had been approved, the application and planning process would have taken a minimum three to four months, according to Ransom. It would be at this stage that building could have commenced on the subdivided lots. It is my view that the promise of approval and development taking 16 weeks was impossible to achieve.
  11. [71]
    In any event, it is my view that by September 2019 Scarrott must had doubts about the outcome of any applications for subdivision currently before the Council. Additionally, he must have had doubts that that approval by the Council to subdivide lots 480 and 486 with the building plans (i.e. relaxation of setbacks and parking) was ever going to happen.
  12. [72]
    What corroborates Scarrott’s dishonest and fraudulent behaviour in making these false and/or misleading representations to Kine is the fact that Kine transferred funds to Key to secure the purchase of lot 486 and Scarrott did not produce or arrange for the P&C for lot 486 to be drafted and sent to Kine. By this stage, Scarrott was only interested in gathering as much money that he could get his hands on and buying time.
  13. [73]
    Scarrott knew about all the above problems, obstacles and time constraints to subdivide lots 480, 486 and 487 and develop them according to Scarrott’s proposals. Scarrott never disclosed any of this critical information to Kine. To do so would have meant that Kine would not have invested funds and executed the P&Cs. In September 2019, Scarrott was able to convince Kine to purchase another lot by waiving his management fee of $44,000.  At this point, with Key’s outgoings running at $75,000 to $120,000 per month, Scarrott was desperate and making any promise to get more money into the Key account. It is clear he was buying time.
  14. [74]
    In April 2019, Scarrott provided a development proposal to Kine. This is exhibit IK2 annexed to Kine’s Statement (page 13 of the Referral’s Document Bundle). The proposal discloses that a development application and material change of use (‘MCU’) was required.  Scarrott never elaborated on this process and what obstacles had to be overcome to have the development application approved by the Council. These obstacles were that the pre-approval only applied to the Pimpama Village development area, the Council would need to approve relaxation of setbacks and parking and time was of the essence. Scarrott always gave Kine the impression and led him to believe that everything would happen according to plan and Scarrott would take care of the whole process. He gave Kine a sense of security and certainty when that was not the case in any respect.
  15. [75]
    Additionally, Scarrott gave Kine the impression that everything would happen without difficulty and that the sales of the subdivided lots would happen without any delays, and the proceeds of these sales would cover the initial purchase price, less the deposit and other costs, of the purchase of lots 480, 486 and 487.
  16. [76]
    I also refer to the admissions of Scarrott, read to the Court in the criminal proceedings, that his feasibility study (Development Proposal) was not based on any evidence.
  17. [77]
    Accordingly, I find that Representations 1, 2, 3 and 4 were prima facie true. However, I find that when Scarrott made these Representations he was purposely being vague, and he failed to properly explain or disclose the underlying issues and problems involved. He failed to disclose the advice that he had received from Ransom and the Council’s concerns.
  18. [78]
    A representation that is false and/or misleading can be either an expressed representation or can be in the form of silence or non-disclosure of a very relevant fact or what was within the knowledge of Scarrott. This principle was discussed in the matter of Airstrike Industrial Pty Ltd v Robertson.[15]  At paragraph 30, of the decision the Learned Members refer to a misrepresentation by silence. They say:[16] 

For there to be a misrepresentation by a silence the representee must establish that there was some relevant fact or matter within the knowledge of the representor and the representor chooses not to disclose the fact or matter to create a false impression.

  1. [79]
    If Scarrott had fully explained and been truthful about the processes required for Council approval, any concerns raised by the Council with the six (6) applications currently before the Council and that the whole scheme very much depended on timing, then Kine would not have committed to the purchase of the lots and transfer of funds to Key. Therefore, I find Representations 1, 2, 3 and 4 were false or misleading.
  2. [80]
    I will now comment on Representation 5 which is referred to as the Refund Option for lot 480 in the submissions of OFT filed in the Tribunal on 17 March 2023.
    1. Representation 5
      1. (i)
        if the Respondents are unable to deliver the scheme, they would refund the Applicant’s initial investment for lot 480; and
      1. (ii)
        “two months before the term is up”, the Applicant could settle on lot 480 after it was configured, or the Respondents would return their investment and take ownership of lot 480.
  3. [81]
    Kine accepts that this enticement or inducement was made by Scarrott to Kine in the negotiations leading to Kine executing the P&C for lot 480.
  4. [82]
    Representation 5 is connected with Representations 1, 2, 3 and 4. Some of the above commentary is applicable to Representation 5.
  5. [83]
    Scarrott always gave Kine the impression that he had everything in place to undertake the subdivision. He gave Kine the impression that there would be no problems, and everything was ready to go. Scarrott did not disclose the full story to Kine. He gave him certainty when there was no certainty. There were no approvals in place, the “pre-approval” only related to the Pimpama Village development area and not lot 480, there was no certainty that the Council would approve the application with the requested relaxations and the success of Scarrott’s proposal depended on timing.
  6. [84]
    Scarrott did not disclose the caveat in Ransom’s advice of April 2019, and he did not disclose the concerns that the Council officers raised with him at their meetings from September 2019 onwards.
  7. [85]
    For Scarrott to bring the scheme to fruition he would have required the Council to approve the application to subdivide Lot 480, and if necessary, build townhouses on the subdivided Lots. There was no prospect of this happening because of the time that would have been required to achieve these milestones. Scarrott was having problems with the current applications before the Council, and he had not even started the Council approval process for Lot 480.
  8. [86]
    Further, what corroborates the false, misleading and deceptive behaviour of Scarrott in making all five (5) Representations is the fact that Kine had very little contact with Scarrott after Kine deposited all the funds (i.e. $240,800) into Key’s account. Further Scarrott did not satisfy his obligations under Representation 5 and Scarrott failed to refund any funds to Kine even when the dates to comply with the refund arrangement was extended to February 2020 and July 2020.
  9. [87]
    Again, Scarrott was not telling the whole story and not making full disclosure when he was making Representation 5.
  10. [88]
    I do not accept that Scarrott could ever have delivered on this refund/penalty promise because:
    1. Scarrott’s commitment is worthless because he did not have the resources or finance to purchase lot 480. This is corroborated by Scarrott’s admissions about his use of the various claimants’ funds fraudulently and his failed attempts to obtain bridging finance from ANZ and Latrobe Financial. Scarrott has admitted that Key’s business was running at a monthly loss of between $75,000 and $120,000 per month and forging ANZ bank approval letters to buy time. There was no possibility of Scarrott or Key honouring the commitment to purchase lot 480 unless they fraudulently converted other investors’ funds.
    2. Scarrott was making similar refund or buy back promises to other New Zealand claimants as an enticement to their committing to the purchase of a lot or lots at Pimpama. Scarrott had no prospect of fulfilling any of these promises.
    3. By this point, in April/May 2019, when Scarrott made this promise, he must have been under some pressure because there were concerns and time delays regarding the applications to the Council. It appears that at the same time he was trying to buy time by arranging bridging or Vendor finance.
  11. [89]
    Accordingly, I find Representation 5 taken as a whole, including the non-disclosure issues, was false or misleading.
  12. [90]
    In summary, I find that Scarrott/Key made the following representations to Kine to induce him to enter into the P&Cs for lots 480 and 487 and to commit to purchasing lot 486 were false and/or misleading:
    1. Scarrott if required, would refund the initial funding paid to secure lot 480 back to Kine.
    2. The proposal to subdivide lots 480, 487 and 486 into three or four lots with approved plans to build townhouses would happen smoothly and was a certainty with the Council. This approval was a sure thing.
    3. Scarrott could complete the whole process of Council approval, building the townhouses on the subdivide lots and on sold in 16 weeks.
    4. The funds paid by Kine to Key would be paid into a trust account and held there and only paid out for the deposit under the P&C and payment of other expenses to prosecute the subdivision of the lots.
    5. Kine would not have to purchase any of the lots (i.e. provide the balance of purchase monies on the completion of the P&Cs) because the proceeds of the on sales of the improved subdivided land would cover this balance.
  13. [91]
    As a matter of clarification when I refer to representations made by Scarrott in my findings, the same findings also apply to Key as Scarrott was the director, secretary and controller of Key.
  14. [92]
    Further, I find that at all relevant times when the representations were made to Kine by either Scarrott or Glover, Glover was an employee or a consultant for Key. Therefore, Key is responsible for any false or misleading representations that Glover has made Kine.
  15. [93]
    A general observation of Kine and the other New Zealand investors who made claims is that Scarrott gained their trust, and it is clear from the evidence that Scarrott played on this trust and their lack of knowledge of Queensland legal processes relating to the purchase and subdivision of real property. He was always vague and gave them certainty when this was not the case. This is corroborated by his subsequent actions, lying or being deceptive when Kine and other claimants asked for updates.

Section 24 Criminal Code (Qld)

  1. [94]
    In this matter and other claims OFT have raised the issue of section 24 of the Criminal Code (Qld) (‘Criminal Code’) which may be available to Key and Scarrott if either was charged with a criminal offence under the POA or other legislation. OFT have cited the decisions of To v Chief Executive, Department of Tourism [2006] QDC 381 at paragraphs 40 to 45 and Dunn v Chief Executive, Department of Justice and Attorney-General [2012] QCAT 476 at paragraph 11 as precedents for their submissions.
  2. [95]
    I accept OFT’s submission on the application of section 24 of the Criminal Code. However, the defence, Mistake of fact, must be “an honest and reasonable, but mistaken belief in the existence of any state of things”.  In these proceedings, this mistaken belief may have related to the “pre-approval” by the Council for the subdivision of Lot 480, 486 and 487 into three (3) or four (4) lots and the construction of three (3) townhouses (with relaxed setbacks, site coverage and communal open space) on those subdivided lots. Scarrott relied on the advice of ZPG/Ransom and his own enquiries that the Council approval was code assessable, and a material change of use application would result in an approval in three (3) to four (4) months.
  3. [96]
    Scarrott always knew or should have known that the pre-approval for the lots only referred to the Code for the Pimpama Village development area as a whole. The pre-approval only applied where there was strict compliance with the Code regarding the lots that he was marketing.
  4. [97]
    At this stage, notwithstanding Ransom’s confidence, no reasonable person could honestly describe this as an approval or a certainty to be approved. This was the impression and representation that he was conveying to Kine and the other New Zealand claimants.
  5. [98]
    Further, in September 2019 when Kine committed to the purchase of lot 486 and transmitted $64,600 into Key’s account, Scarrott would have received some feedback that the Council had concerns with the current applications (i.e. for Lots 280, 281, 282, 333, 334 & 335). This indication should have or must have alerted Scarrott that there would be obstacles to overcome if he was to lodge applications for Kine or any of the other claimants.
  6. [99]
    The section 24 defence could not apply to the making of any of the Representations because Scarrott was not being truthful and not making full disclosure when making any of the Representations to Kine. I refer to Scarrott’s admissions about the parlous state of his and Key’s financial position.
  7. [100]
    Therefore, section 24 of the Criminal Code would not be a defence if Key or Scarrott were charged with any criminal offence.

CLAIM AGAINST FUND

  1. [101]
    To succeed in his claim, Kine must satisfy the provisions of section 82 of the AAFA. The provisions that may apply to the Claim are sections 82 (1) (a) (b) and (g). In section 80 there is a definition of “relevant person”. At all relevant times Scarrott was an “agent”.
  2. [102]
    What is an “agent”. The relevant sections are sections 8, 33, 41 and 80 of the AFAA. Pursuant to these provisions Scarrott was as “agent” regarding the relevant provisions of the AFAA.
  3. [103]
    Section 16 of POA outlines who is a “real estate agent” and there is a reference to section 26 of POA which outlines the activities that the holder of a real estate agent is authorised to undertake as an agent for others. OFT have raised the issue that Scarrott may not have been carrying out the activities of a real estate agent when he was prosecuting his scheme, and instead he was acting as a property developer or giving advice as a property developer.
  4. [104]
    Section 26 of the POA states:
  1. (1)
    A real estate licence authorises the holder of the licence to perform the following activities an agent for others for reward –
  1. (a)
    To buy, sell (other than by auction), exchange or let real estate property or interests in real estate:
  1. (b)
    …….
  1. (c)
    To negotiate for the buying, selling, exchanging or letting of something mentioned in paragraph (a) or (b);
  1. (d)
    …..
  1. [105]
    I find that the activities that Scarrott was undertaking for all the parties that have made claims against the Claim Fund falls squarely in the activities that are outlined in section 26 (1) (a) and (c) of the POA.
  2. [106]
    Has Scarrott complied with section 82 (1) (a) and (b) of AAFA? Notwithstanding the issue of any false and misleading representations made by Scarrott, I am of the view that only part of the monies paid to Key was disbursed in accordance with the parties understanding of how the scheme was to operate. The deposits under the P&Cs for lot 480 and 487 were certainly paid in accordance with Kine’s express authority. Kine gave evidence that a management fee of $44,000 for the purchase of lot 480 as noted in the development proposal (page 13 of the Referral Document Bundle) was to be waived. The date the payment of the management fee was to be paid was not mentioned or discussed in any meeting with Scarrott. There may be some question whether Scarrott was to receive the management fee for lot 487 up front or when the subdivided lots were sold. However, the other funds were to be used to prosecute the application to the Council to subdivide the Property and Scarrott has admitted using the funds deposited in the Key account to pay deposits for other NZ investors and for personal and Key’s expenses.
  3. [107]
    I also note that Kine paid $64,600 into the Key bank account on 19 September 2019 to secure the purchase of lot 486. No P&C was signed by Kine or the Vendor for lot 486. These funds should have been returned to Kine when the P&C did not proceed. There was no reason for these funds to be held in Key’s bank account. There was certainly no implied or express authority from Kine to disburse the funds for any other reason.
  4. [108]
    Kine gave evidence that Scarrott told him that he and Key were licenced real estate agents and that the funds paid to Key were to be held in a separate trust account and only dispersed to prosecute the subdivision of the lots that Kine would purchase. This did not occur.
  5. [109]
    No actual applications were lodged by Scarrott or ZPG to obtain approval to subdivide lots 480, 486 or 487. The applications lodged by ZPG were for a material change of use and to reconfigure lots 260, 261, 262, 333, 334 and 335. I am of the view that there was no implied authority for Scarrott to disperse the monies when no applications were lodged by ZPG for lots 480, 486 or 487.
  6. [110]
    I note that Scarrott told Kine and gave him the impression that his funds would be held in a trust account. It is difficult to determine the full details of the express and implied authority that Scarrott was to hold the monies on behalf of Kine for the payment of expenses to progress the Council applications from the conversations and correspondence between Kine and Scarrott/Key. Also, the details of payments to other consultants and contractors (if any) have not been produced to the Tribunal to ascertain how much was paid to these parties. Notwithstanding this lack of clarity, I find that there was an express/implied authority that Scarrott was to hold Kine’s funds in trust and only disperse the funds for the deposit for the P&Cs, possibly one management fee of $44,000 (for lot 487) and to prosecute the Council applications to subdivide lots 480, 486 or 487, not for other expenses or Scarrott/Key’s fee. Therefore, I find that Scarrott/ Key have breached section 82(1) (a) and (b) of the AFAA.
  7. [111]
    After taking the deposits for the P&Cs and one management fee into account, I calculate that Scarrott/Key had at their disposal approximately $140,000. These funds were disbursed fraudulently and dishonestly without the authority of Kine.
  8. [112]
    The only way to determine exactly when and how much Scarrott and Key disbursed from their account without implied or express authority would be for an accountant to forensically examine the bank accounts of Scarrott and Key. I do not have these details. However, I have little doubt, given the amount of money available to Scarrott, the lack of progress in prosecuting the applications to the Council on many of the lots and his admissions, that he was dishonest and acting without authority in his dealing and disbursement of money held by him.
  9. [113]
    Did Scarrott contravene section  82(1) (g) of the AAFA? To determine this question, it is necessary to consider whether there have been any contraventions of sections 154, 155, 206, 207, 208, 209 and 212 of the POA.
  10. [114]
    In section 80 of the AFAA is the definition of “relevant person”. At all relevant time Scarrott was a relevant person because he was an “agent”.

COMPLIANCE

  1. [115]
    It is not clear if Scarrott/Key had an actual trust account. It seems to me Kine understood from Scarrott, and he was given the impression by Scarrott that the funds that they transmitted to Key were to be paid into a trust account. The international money transfer (page 15 of the Referral Document Bundle) dated 24 April 2019 refers to the payment “Key to Australia”. It is not necessary for me to establish if Scarrott/Key established a trust account under Part 2 of AFAA.
  2. [116]
    It is sufficient for me to say that Kine paid the funds to Key.
  3. [117]
    It is noted that Scarrott was not charged with or convicted of any contravention of the AFAA or the POA. He was charged with and pleaded guilty of a contravention of the ACL.
  4. [118]
    Scarrott and Key pleaded guilty to breaches of the ACL. Scarrott’s admissions that he used investor’s funds dishonestly and fraudulently were outlined to the Court in these proceedings.
  5. [119]
    On the balance of probabilities, Scarrott has contravened sections 21, 22 and 82(1)(a) and (b) of the AFAA.
  6. [120]
    Sections 154 and 155 of POA refer to disclosure of a beneficial interest. These provisions do not apply to the facts and circumstances of the Claim.
  7. [121]
    The provisions of sections 206, 207, 208 and 209 do not apply to the facts and circumstances of the Claim.
  8. [122]
    The facts and circumstances of the Claim that relate to Scarrott making false and misleading representations about a scheme that induced Kine to commit funds to Key and to enter the P&C are a breach of section 212 of the AFAA. This scenario fits squarely into section 212 of the POA. Therefore, I find that Scarrott has contravened section 82(1)(g) of the AFAA.

OBJECTS OF AFAA AND POA

  1. [123]
    The main object of the AFAA is set out in section 6 of the AFAA. In summary, the object is to protect consumers from financial loss in dealings with agents and this is to be achieved by regulating the ways agents operate trust accounts and establishing a claim fund to compensate persons in particular circumstances for financial loss arising from dealings with agents.
  2. [124]
    The main objects of the POA are set out in section 12 of the POA. In summary, one of these objects is to provide a system of licencing of property which balances between the need to protect consumers and promote freedom of enterprise in the marketplace. Another object is to provide a way of protecting consumers against undesirable practices associated with the promotion of residential property.
  3. [125]
    In essence, the objects of both pieces of legislation are to provide for a system for licencing agents and to protect consumers.
  4. [126]
    If there are any inconsistencies or ambiguity in the facts, circumstances and interpretation of relevant legislation in these proceedings then given the objects of the legislation is squarely aimed at consumer protection, then any such inconsistencies and ambiguities should be exercised in the claimant’s favour.

FINDINGS

  1. [127]
    On the balance of probabilities, in their dealings with Kine regarding lots 480, 486 and 487, I find as follows:
    1. Key and Scarrott have not complied with sections 82 (1) (a), (b) and (g) of the AFAA.
    2. Key and Scarrott were “relevant persons” and “licenced agents” as contemplated in the provisions of the AFAA and POA, in particular section 80 of AFAA.
    3. Key and Scarrott were carrying out the activities of real estate agents as outlined in sections 26 (1) (a) and (c) of the POA. That is facilitating/negotiating the purchase and sale of interests in real property.
    4. Kine has lodged a valid claim pursuant to section 82 of AFAA.
    5. Kine has suffered a financial loss.
    6. Key and Scarrott are responsible for the financial losses of Kine.
    7. Kine cannot claim any capital losses and interest. See section 113(5) of the AFAA.
    8. The limit for any claim is $200,000. See section 113(4) of the AFAA and regulation 25 of the Agents Financial Regulation 2014 (Qld).
    9. Kine has made a claim for $240,800. I allow this claim to the limit allowed under section 114(4) of the AFAA. Therefore, I allow the amount of $200,000 for Kine’s claim.
    10. Scarrott and Key are jointly and severally responsible for the Kine’s financial losses.
    11. Pursuant to section 116(3) of AFAA Scarrott and Key are jointly and severally liable to reimburse the Claim Fund in the amount $200,000.

Footnotes

[1]OFT Supplementary Document Bundle filed 17 March 2023, 10-3.

[2]The Referral Document Bundle, 12-3.

[3]Ibid 14-5.

[4]Ibid 16.

[5]Ibid 17.

[6]Ibid 17-8.

[7]The Referral Document Bundle, 8-9.

[8]The Referral Document Bundle, 352-7.

[9]The Referral Document Bundle, 368-375.

[10]The Referral Document Bundle, 361-7.

[11]The Referral Document Bundle, 361.

[12]The Referral Document Bundle, 362.

[13]Freehold, 425-6.

[14][2007] QCCTPAMD 2 (‘Goodchild’).

[15][2014] QCATA 43.

[16]Ibid [30].

Close

Editorial Notes

  • Published Case Name:

    Kine v Key to Australia Pty Ltd and Anor

  • Shortened Case Name:

    Kine v Key to Australia Pty Ltd

  • MNC:

    [2024] QCAT 215

  • Court:

    QCAT

  • Judge(s):

    Member Poteri

  • Date:

    16 May 2024

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Airstrike Industrial Pty Ltd v Robertson [2014] QCATA 43
2 citations
Jump To
Cite 1 - [2014] QCATA 43
Cite 2 - [2014] QCATA 43
Dunn v Chief Executive, Department of Justice and Attorney General [2012] QCAT 476
2 citations
Jump To
Cite 1 - [2012] QCAT 476
Cite 2 - [2012] QCAT 476
Freehold Land Investments Ltd v Queensland Estates Pty Ltd (1970) 123 C.L.R 418
2 citations
Jump To
Cite 1 - (1970) 123 C.L.R 418
Cite 2 - (1970) 123 C.L.R 418
Goodchild v Ferrantino [2007] QCCTPAMD 2
2 citations
Jump To
Cite 1 - [2007] QCCTPAMD 2
Cite 2 - [2007] QCCTPAMD 2
To v Chief Executive, Department of Tourism, Fair Trading and Wine Industry Development [2006] QDC 381
2 citations
Jump To
Cite 1 - [2006] QDC 381
Cite 2 - [2006] QDC 381

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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