DISTRICT COURT OF QUEENSLAND

1. [1]
   This is an application for leave to appeal from a decision of the Commercial and Consumer Tribunal which on 20 November 2007 ordered that the appellants’ claim be dismissed.  The appellants had made a claim under the Property Agents and Motor Dealers Act 2000 (“the Act”) seeking payment out of the fund established under the Act for financial loss suffered as a result of the actions of the respondents.  The first and second respondents were licensed motor dealers under the Act.  There was a third respondent before the Tribunal, but the claim against that respondent was dismissed during the hearing with the consent of the appellants and the appellants do not seek to challenge that conclusion.

2. [2]
   The second respondent is a company which went into liquidation on 9 November 2006.^[1]  Leave to proceed with the appeal against the second respondent was not obtained by the appellants prior to the hearing, and the liquidators took no part in the appeal, though the notice of appeal subject to leave was served on them.  Subsequently leave to proceed nunc pro tunc was granted by the Supreme Court.^[2]  The liquidators did not seek to make any submissions, although the matter was listed again for further hearing.  The first respondent, who was also served with the notice of appeal, took no part in the proceeding in this court, and did not appear on the hearing of the application for leave to appeal.  Although the appellants are seeking an order for payment of an amount out of a fund administered by a government department, it appears from decisions of the Tribunal that its practice is that the administering department is not an appropriate party to the proceeding in the Tribunal.^[3]  Accordingly the department was not made a party to the appeal, nor given notice of it.^[4]

The facts

3. [3]
   The facts of the matter are in short compass. The second appellant, a company of which the first appellant was a director and apparently the governing mind, owned a motor vehicle which was the subject of a security interest to a financier, GMAC. The appellants were interested in purchasing a new vehicle which the second respondent had for sale, and entered into a contract to do so in terms which involved trading in that vehicle. The amount allowed by way of trade-in against the price of the new vehicle was less than the payout figure on the security, but the contract between the parties provided that the motor dealer, the second respondent, would pay out that contract. The appellants arranged part finance for the purchase by a loan of $100,000 from a bank, and paid over that amount plus $30,000 of their own money, handed over the trade‑in vehicle, and took possession of the new vehicle.  The respondents, however, failed to pay out GMAC, and the appellants have in fact continued to make the payments due under the finance agreement, although that vehicle was resold by the respondents and has not been recovered by the appellants.

4. [4]
   The matter was argued before me on the basis that in these circumstances there had been a misapplication by the motor dealers of the money provided to them in that they failed to pay the relevant part of it into their trust account and to use it to pay out the security on the traded vehicle, as they were required to do under the Act and the contract. The contract document, which appears to be in a statutory form, is drafted in a somewhat curious fashion, but it includes what is described as a statement by the vendor which provides, relevantly, that the traded vehicle was subject to a security and that the “dealer is to pay out the security” on the vehicle. Although this was expressed as a statement of the vendor, that is to say the second appellant, it was included in a form which was described overall as a contract, or at least capable of becoming a contract if accepted by the motor dealer, which is what occurred in this case, and it seems to me that when the contract came into existence this amounted to both a contractual obligation on the part of the dealer to discharge the security by payment of that amount, and a written direction by the vendor to the dealer to make such payment.

The fund

5. [5]
   The Act provides for a fund from which a person who suffers a financial loss because of the happening of any of the events set out in s 470(1) may make a claim.  Relevantly paragraph (e) of that subsection provides that one of the events is “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 appellants’ submission was that, at least insofar as the money paid by the appellants to the respondents was to be used by the respondents pursuant to the contract to pay out the security on the traded vehicle, this was property entrusted to the respondents as agents for the appellants (or at least the second appellant) in the respondents’ capacity as a relevant person.  The respondents were found to be relevant persons by the Tribunal.  In circumstances where the money had been paid specifically on the basis that it was to be used to discharge the security, where there was a failure to use it for that purpose there had necessarily been a misapplication of it, although the argument for the appellant was that, because of a failure to comply with the requirements of the legislation to pay such money into the trust account of the second respondent, there was an anterior misapplication of that money.

Decision of the Tribunal

6. [6]
   In essence, the Tribunal proceeded on the basis that what occurred here did not involve any property entrusted to the respondents as agent for the appellants or either of them. The Tribunal said that under the contract the appellants were liable to pay a total of $130,000 cash (of which $100,000 was raised by way of loan from the bank), and there was no more than a contractual obligation on the part of the respondents to discharge the security over the traded vehicle. In those circumstances, the money once paid pursuant to the contract became the respondents’ money and was not held by the respondents on behalf of the appellants or anyone else.^[5]  Although there had been a breach of contract by the respondents, the facts did not fall within paragraph (e) and therefore the appellants were not entitled to claim against the fund.

Submissions of the appellants

7. [7]
   The appellants’ submission was based on the proposition that under earlier provisions of the Act there was an obligation to pay the moneys paid to the respondents into the trust account required to be maintained under the Act. Section 379 applies in circumstances where a licensee receives an amount for a transaction, or with a written direction for its use, which includes purchase moneys for a transaction:  s 378.  In the present case, the amount of $130,000 was received for a transaction, and, to the extent of the amount required for payment out of the security on the traded vehicle, with a written direction for its use.  It plainly fell within s 378 of the Act.  In those circumstances, the second respondent was obliged by s 379 of the Act immediately on receiving the amount to pay it to its general trust account.  Failure to do so was an offence under s 379.

8. [8]
   Accordingly it was submitted that immediately upon receipt of the $130,000, the second respondent was obliged by the statute to pay at least the relevant part into its trust account. In those circumstances, it was not money which was received beneficially by the second respondent, but was money which was held on trust by the second respondent, pursuant to the statute. The second respondent’s obligations in relation to that money were also dealt with by the Act: s 384 set out the circumstances in which payment may be made from the trust account.  It was submitted that the effect of that section was there was an obligation on the part of the second respondent to make the payment required under the contract to GMAC from that money.  It was submitted that in these circumstances the obligation on the second respondent under the statute was more than a mere contractual obligation; to the extent that money was to be paid from that amount in the trust account to GMAC, that money was held on trust to make that payment.  The obligation to pay the money to GMAC was an obligation owed to GMAC by the second appellant, and therefore the payment which was to be made by the dealer was a payment to be made on behalf of the second appellant.  The money was therefore held on behalf of the second appellant.  I accept those submissions.

Analysis

9. [9]
   The consequence that the moneys after payment were held, not beneficially by the respondents but on trust to make the payment to the financier, is consistent with the recognition, apart from the statute, of what is frequently referred to as a Quistclose Trust. This doctrine was recognised by the House of Lords in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, and has been endorsed by the High Court in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (1978) 141 CLR 335.  In the latter case, the specific requirement was noted that the moneys the subject of the trust were to be kept separate and not to become part of the general assets of the party receiving them (p 353), but that was the consequence of the statutory obligation to pay the money into the trust account, so that that requirement was met in the present case.  Had the statutory obligation to pay the money into the trust account been performed, that money would have been available to discharge that obligation to the appellant, since money in the trust account is not available for the discharge of the ordinary debts of the second respondent:  s 383.

10. [10]
    Those two decisions concerned a situation where money was lent for use in a particular way, but the doctrine has been extended to money which has been paid pursuant to a contractual obligation: Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207.  It seems to me that that was the situation here.  The effects of the contractual arrangement between the second appellant and the second respondent (in the light of the statutory obligation) was that the second respondent would, out the money provided by the second appellant, discharge the security over the traded vehicle on behalf of the second appellant.  It is I think in these circumstances not difficult to imply a term of the contract that, if the amount required to discharge the security were not so paid, there was an obligation to make a refund of that amount to the second appellant.

11. [11]
    In these circumstances the reasoning of the Tribunal member was wrong in law; this was not simply a matter of contract between the parties, but there was a trust obligation imposed by statute in respect of the money to be used to discharge the security over the traded vehicle, and in those circumstances the case falls within s 470(1)(e).  There was no dispute before the Tribunal as to the relevant facts, no material was put forward on behalf of the respondents, and in those circumstances on the material before it the Tribunal, deciding the matter according to law, could have come to only one decision, namely that the second appellant was entitled to be paid the amount of its financial loss out of the fund.  Accordingly the appropriate course for this court in order to correct the error of law on the part of the Tribunal is to set aside the Tribunal’s decision and make the decision that the Tribunal ought to have made on the evidence before it.

Leave to appeal

12. [12]
    Leave is required to appeal from the decision of the Tribunal to this court, which appeal is available only on the grounds of error of law or of jurisdiction: Commercial and Consumer Tribunal Act 2003 s 100.  In the present case, the matters argued on behalf of the appellants raise questions of law, and in my opinion they are at least reasonably arguable.^[6]  They raise general questions about the scope of the operation of s 470 of the Act, particularly paragraph (e).  I was told that in similar circumstances the Tribunal, differently constituted, has come to a different conclusion as to the application of those provisions.^[7]  I note that the inspector’s report, obtained pursuant to s 477 of the Act, supported the second appellant’s claim.  In these circumstances, it is appropriate for leave to appeal to be given, in order to enable the issue to be resolved.

Quantification of the loss

13. [13]
    The Act provides an entitlement to claim the financial loss suffered as a result of the misapplication of the property, that is, the failure to pay the money. Unfortunately there was no precautionary finding by the Tribunal of the amount of the financial loss, and I have to make the finding myself. Once the second appellant realised that the contract had not been paid out, it continued to make payments to the financier. In order to pay out the finance contract now, a lesser amount would have to be paid, though the total of the payments made to date and the amount now required to pay out the finance contract is greater than the amount which would have been required to pay out the finance contract at the time when the transaction was entered into. Nevertheless, in my opinion that was a financial loss suffered as a result of the failure of the second respondent to pay out the financier. That amount as at the date on which the appeal was argued was in the sum of $49,352.06, and this certainly represents part of the financial loss of the second appellant.^[8]

14. [14]
    The appellants also claimed legal costs they had incurred legal costs, although the first appellant appeared in person at the hearing in the Tribunal. There were costs associated with attempts to obtain the money directly from the second respondent, including a statutory demand on the second respondent and winding up proceedings. Those steps were ineffectual, and the company although now wound up is without funds, and it is clear that there will be no amount paid out to the second appellant as a result of the liquidation of the company. These expenses were all natural and reasonable consequences of the actions of the second respondent, in failing to deal with the money as required by the statute and the contract with the second appellant, and in those circumstances in my opinion these also amount to financial loss.^[9] 

15. [15]
    The evidence before the Tribunal and before me is not all consistent, and does not correspond to the amount sought in submissions on the hearing of the appeal. Attached to the Inspector’s Report (Exhibit 1 in the Tribunal) were three accounts from former solicitors of the appellants,^[10] and a statement by the first appellant filed in the Tribunal on 10 September 2007 (Exhibit 2) annexed a further five accounts from those solicitors.^[11]  It also annexed eight receipts for payment issued by those solicitors, which cover all of those accounts except that of 31 October 2006, for which there is no receipt.  Hence the amount proved to have been paid to those solicitors is $20,222.55.  The statement also said that $9,673 had been paid to the current solicitors, and the evidence before me^[12] supports a further payment of $3,264.31.  This proves that, apart from the costs of the appeal, the amount so expended and hence part of the second appellant’s loss comes to $33.159.86.^[13]

16. [16]
    The appellant also submitted that the costs of the appeal represented a financial loss as a result of the breach. It was submitted that the Act was remedial^[14] and should be construed widely, and given a purposive construction, and costs were not excluded from “financial loss” in s 469 of the Act, as was interest.  However, it seems to me that the costs of the appeal are really in a different situation; these costs were incurred not as a result of the breach by the first and second respondents, but as a result of the failure of the Tribunal properly to apply the law.  In these circumstances I do not consider that the costs of the appeal represent a financial loss suffered for the purpose of s 470.  Other legislation allowing compensation for loss, such as the Trade Practices Act 1974 (Cth), has not generally been interpreted as including costs of the proceedings as a relevant loss; since the suffering of the loss is the injury which founds the claim,^[15] to treat the costs of the claim as a loss for the purposes of the claim would be self‑justifying.  Counsel for the appellants was unable to refer me to any earlier case where the costs of an appeal had been treated as a financial loss for the purpose of this provision.  Prima facie, the ordinary consequences as to costs should follow.  I find on a precautionary basis that the costs of the second appellant of the appeal were $16,635.81.^[16]

17. [17]
    The evidence was that it was the second appellant which was the party to the transactions and which suffered any financial loss, and counsel conceded that it was the second appellant which was entitled to pursue the claim, and that there was no separate claim on the part of the first appellant. In relation to the first appellant, therefore, the decision of the Tribunal was appropriate, though not for the reasons given. In relation to the second appellant, however, its claim ought to have succeeded. Accordingly, the appeal is allowed, the decision of the Tribunal is set aside and in lieu thereof it is ordered that the second appellant Ansar Homes Pty Ltd is entitled to be paid from the claim fund pursuant to the Act its financial loss, namely $82,511.92.

18. [18]
    Section 488(3)(c) of the Act requires that I find who was liable for that loss.  The obligation to make the payment into the trust account was an obligation on the  motor dealer which, relevantly, meant the second respondent.  The obligation properly to deal with money in the trust account was an obligation on the second respondent, and it was the second respondent who was a party to the contract and therefore received the direction to pay the money to the financier.  It was the second respondent therefore which misapplied moneys which ought to have been paid into the trust account, and which was therefore responsible for the financial loss suffered by the second appellant.  Accordingly I declare that the person liable for the second appellant’s financial loss is Palron Pty Ltd.

19. [19]
    Although under s 530 of the Act an order can be made for reimbursement, that order is not mandatory.  In circumstances where the company is in liquidation and is without assets, in my opinion it would be inappropriate to make such an order as any such order would be futile.  The second respondent is the only party against whom the second appellant has been successful.  Accordingly I order the second respondent to pay the second appellant’s costs of the appeal, which I fix in the sum of $16,635.81.