Chief Executive, Department of Employment, Economic Development and Innovation v Tuff Toys Qld Pty Ltd [2011] QCATA 126

CITATION: Chief Executive, Department of Employment, Economic Development and Innovation v Tuff Toys Qld Pty Ltd and Others [2011] QCATA 126 PARTIES: Chief Executive, Department of Employment, Economic Development and Innovation (Applicant/appellant) v Tuff Toys Qld Pty Ltd trading as Tuff Toys Qld (First Respondent) Wayne Arthur Oldman (Second Respondent) Advance Business Finance Pty Ltd (Third Respondent) Michael John Terry (Fourth Respondent) APPLICATION NUMBER: APL316-10 MATTER TYPE: Appeals HEARING DATE: 11 May 2011 HEARD AT: Brisbane DECISION OF: Justice Alan Wilson, President Michelle Howard, Member DELIVERED ON: 24 May 2011 DELIVERED AT: Brisbane ORDERS MADE: The appeal is dismissed. CATCHWORDS: APPEAL – PROPERTY AGENTS AND MOTOR DEALERS – where the applicant referred a claim against the statutory claim fund set up under the Property Agents and Motor Dealers Act 2000 by Advance Business Finance Pty Ltd – where the Tribunal ordered at first instance that Advance be paid $200,000 from the statutory claim fund, and that Tuff Toys Qld Pty Ltd and Wayne Arthur Oldman were jointly and severally liable for the loss suffered by Advance, and they were ordered to reimburse the fund in the sum of $200,000 – where the applicant seeks to appeal that decision – -- 1 of 11 -- 2 whether finance company excluded from claiming – whether financier – whether financier of a motor dealer’s business – whether financial loss suffered because of financing motor dealer’s business Property Agents and Motor Dealers Act 2000, ss 6, 10, 254, 331, 470, 471, 471(2)(d), 512, 534, 573 Queensland Civil and Administrative Tribunal Act 2009, ss 142, 146 Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 274, cited Chief Executive, Department of Tourism, Racing and Fair Trading v Feeney [2002] QDC 215, cited Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280, cited Coulton v Holcombe (1986) 65 ALR 656, cited Hope v Bathurst City Council (1980) 144 CLR 1, cited O’Brien v Komesaroff (1982) 150 CLR 310, cited Wingate Marketing Pty Ltd v Levi Strauss & Co (1994) 121 ALR 191, cited APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr D O’Gorman SC of Counsel instructed by DEEDI THIRD RESPONDENT: FIRST, SECOND and FOURTH RESPONDENTS Mr D Williams of Counsel instructed by McKays Lawyers No appearance REASONS FOR DECISION President: [1] I have had the advantage of reading Ms Howard’s Reasons in draft. I agree with them, and the conclusions she reaches and the order she proposes. Member Michelle Howard: [2] The Chief Executive, Department of Employment, Economic Development and Innovation (DEEDI) referred a claim made against the -- 2 of 11 -- 3 statutory claim fund set up under the Property Agents and Motor Dealers Act 2000 (the Act) by Advance Business Finance Pty Ltd (Advance) to the now abolished Commercial and Consumer Tribunal (CCT) (which has been superseded by the Queensland Civil and Administrative Tribunal (the Tribunal)). [3] In its correspondence referring the claim, DEEDI requested that it be included as a party only for the purposes of allowing DEEDI to register any orders made by the Tribunal. After considering this written request, the CCT made orders including DEEDI as a party, but excusing it from participation in the proceeding. [4] After a hearing, the Tribunal made orders that Advance be paid $200,000 from the statutory claim fund. The Tribunal also found that Tuff Toys Qld Pty Ltd trading as Tuff Toys Qld and Wayne Arthur Oldman were jointly and severally liable for the loss suffered by Advance, and they were ordered to reimburse the fund in the sum of $200,000. [5] DEEDI administers the claim fund. DEEDI now appeals the decision of the Tribunal about the claim. [6] DEEDI relies on a single ground of appeal: that the Tribunal made an error of law in allowing the claim because Advance is precluded under s 471(2)(d) of the Act from making a claim against the claim fund. It seeks orders that the decision be set aside and that the claim be disallowed. [7] By virtue of s 471(2)(d), a person cannot make a claim against the claim fund for financial losses, if it is: (d) a financier of a motor dealer's business who suffers financial loss because of financing the motor dealer's business; … [8] It is apparent from DEEDI’s submissions that it relies upon an expansive construction of the terms used in s 471(2)(d) in support of its grounds of appeal. Grounds of appeal [9] Under the Act, DEEDI may appeal to the Appeal Tribunal on the ground of error of law: s 534. Under the QCAT Act, errors of law may generally be appealed without leave. 1 [10] In Collector of Customs v Pozzolanic Enterprises Pty Ltd2 the Full Federal Court observed that the distinction between matters of law and fact, in a statutory context, rests upon a value judgment about the scope of the 1 Queensland Civil and Administrative Tribunal Act 2009, s 142. 2 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280. -- 3 of 11 -- 4 legislative provisions. 3 Whether facts as found fall within the provision of a statutory enactment properly construed is, generally, a question of law.4 [11] The issue raised in this appeal is whether Advance is precluded from making a claim because of s 471(2)(d) of the Act. Having regard to the observations of the Full Federal Court in Pozzolanic, I am satisfied that the question for determination, which falls within the provisions of the statutory enactment as properly construed, is a question of law. [12] Accordingly, the appeal must be decided under s 146 of the QCAT Act which provides that the Appeal Tribunal may confirm or amend the decision; set aside the decision, and substitute its own; set aside the decision and return the matter to the Tribunal for reconsideration, as directed by the Appeal Tribunal; or make any other order it considers appropriate. The threshold issue [13] Advance argues, as a preliminary point, that DEEDI ought not be allowed to raise this issue for the first time on appeal. It submits that DEEDI knew from the time Advance lodged its claim with DEEDI that Advance was a finance company which was claiming for a loss arising out of lending money to a third party for a Ferrari motor vehicle because, Advance alleged, of a motor dealer allegedly having acted dishonestly. [14] Advance relies, for its submission on this point, on the decision of the High Court of Australia in Coulton v Holcombe. 5 The majority held, in that case, that it is fundamental to the proper administration of justice that substantial issues between parties are ordinarily settled at trial. The High Court considered that if, in the circumstances of a case, evidence might have been led which could have prevented the point from succeeding the issue cannot be taken up afterwards. An exception was identified where the facts are admitted or ‘proved beyond controversy, it is expedient… that the question should be argued and decided’. 6 [15] Advance submits that it will be gravely prejudiced if the argument now raised by DEEDI is entertained for the first time on appeal. The reasons advanced include that it would be deprived of the opportunity to lead evidence about whether there was an ongoing relationship between Advance and Tuff Toys; whether or not, having regard to the definition of ‘financier’ in Schedule 2 of the Act, the ‘ordinary business’ of Advance is the provision of credit for motor vehicles and the applicability of the five subparagraphs in the definition; and, about the different ways in which a motor dealer might be financed by a finance company. It argues that the 3 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280, 289. 4 Ibid, 287, relying upon Hope v Bathurst City Council (1980) 144 CLR 1, 7 and Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 274, 277. 5 (1986) 65 ALR 656, 660. 6 O’Brien v Komesaroff (1982) 150 CLR 310, 319 as quoted in Coulton v Holcombe (1986) 65 ALR 656, 660. -- 4 of 11 -- 5 evidence about the issues upon which DEEDI proposes to rely on appeal is scant, and put together from evidence not led with a view to addressing whether the exemption in s 471(2)(d) applies. [16] During submissions, counsel for Advance handed up (without objection) two documents: one from the Motor Trades Association of Queensland website about car dealer wholesale floor plan financing, and the other from Capital Finance Website about motor vehicle finance through secondment services. The Appeal Tribunal was urged to observe that there are a variety of ways in which a motor dealer’s business may be financed, and to which the exemption may be directed. Counsel for DEEDI conceded that the Tribunal was entitled to take notice that those types of relationships which are commonly known exist for financing of motor vehicles and dealers. [17] Advance argues that the approach taken by Justice Sheppard in the Full Federal Court in Wingate Marketing Pty Ltd v Levi Strauss & Co7 should be adopted here. Justice Sheppard observed that it is difficult for counsel to say with certainty how a case would have been conducted if a point not relied upon at first instance had been taken. He suggests that what counsel says about it should be given great weight. In that case, the barrister told the court that he would have led further evidence about the point and Justice Sheppard did not consider that was unreasonable, or improbable.8 [18] DEEDI says that Advance’s submissions misunderstand the Act. It argues that it should be able to raise the issue on appeal. It submits that by virtue of s 512 of the Act, its role is limited to making submissions in a proceeding before the Tribunal involving a claim against the claim fund. Therefore, the legislation prevents it from having input into the facts adduced at the hearing. In effect, it says its role is supervisory. However, s 534 entitles DEEDI to appeal a Tribunal decision on an error of law. [19] The District Court decision of McGill QC, DCJ in Chief Executive, Department of Tourism, Racing and Fair Trading v Feeney9 is relied upon by DEEDI in support of its submissions. Judge McGill said that ‘…the fact that the point was not taken at first instance is not necessarily fatal…’. 10 He considered that whether it could be taken depended upon, among other things, whether the respondent is prejudiced by the failure to take the point at first instance. [20] DEEDI argued that Coulton v Holcombe is not applicable because its hands were tied at first instance. Further, DEEDI argues that the public has an interest in the outcome, and in the claim fund being defended. It suggests that the Tribunal was not permitted to make the order it did by s 471(2)(d) and that the point raised on appeal should have been a live 7 (1994) 121 ALR 191. 8 (1994) 121 ALR 191, 215. 9 [2002] QDC 215. 10 [2002] QDC 215, [45]. -- 5 of 11 -- 6 issue preventing a successful claim by Advance. It is implicit in DEEDI’s submission that it considers that all of the necessary evidence has been led to establish that s 471(2)(d) applies to Advance. [21] It is apparent from the claim form completed by Advance and lodged with DEEDI that Advance is a finance company which claims for loss occasioned as a result of the behaviour of a motor dealer, namely Tuff Toys. Therefore, DEEDI was on notice of this from the time it received the claim and at the time it forwarded the claim to the Tribunal. Despite this, it asked to be included as a party only for the purposes of recording any orders made by the Tribunal. Other than in relation to this appeal, it has not made any submissions to the Tribunal at any time in the proceeding. [22] Section 512 of the Act does not prohibit DEEDI from making submissions at first instance. Indeed, by virtue of s 512(3), DEEDI may make submissions whether or not it is a party to proceedings before the Tribunal involving a claim against the claim fund. It could have made submissions at any time, raising the exemption which it apparently believed prevented Advance from succeeding on its claim. If the issue had been raised at any time before the hearing, it could have been addressed by the parties and considered by the Tribunal. [23] It is not prevented by the legislation from taking an active part in proceedings involving claims before the Tribunal. On a plain reading of s 512, its role is confined to making submissions, which may be oral and/or written, as opposed to leading evidence or cross-examining witnesses. However, I do not accept the submission that its role amounts to a supervisory one. The Act provides for a limited, yet participatory role. [24] It follows that I do not accept that Coulston v Holcombe and other similar authorities are inapplicable, as contended by DEEDI. A point may only be raised for the first time on appeal in limited circumstances, essentially if it is in the interests of justice for it to be allowed and, either, the relevant facts are admitted or the relevant evidence has been adduced at hearing and proved beyond controversy. [25] In this case, the relevant facts are not admitted. Advance suggests various bases on which it would be prejudiced if the point is allowed to be raised on appeal, relating to it being deprived of the opportunity to lead evidence relevant to determining whether it falls within the exemption provided for in s 471(2)(d). Advance considers that the relevant evidence for determining the issue was not led at the hearing, as it was not raised as an issue. Advance does not accept the relevant facts to have been proved beyond controversy. [26] To make a decision about whether DEEDI should be allowed to raise this issue for the first time on appeal, it is appropriate to consider the basis on which DEEDI proposes to argue the appeal. Background and the Tribunal’s decision -- 6 of 11 -- 7 [27] Advance received a request from a finance broker to finance the purchase of a Ferrari motor vehicle by Saraya Pty Ltd. The request was accompanied by a document from Tuff Toys which Advance understood was an invoice. [28] Advance did searches, including a search which ascertained that the vehicle was not encumbered, and received a signed loan agreement, copies of the purchaser’s bank statements, rates notices, tax returns, and credit checks. It decided to finance the purchase but asked the broker for a fresh tax invoice from Tuff Toys showing all necessary details. The invoice was supplied. Advance then paid $250,000 into Tuff Toys’ account on the basis of its instructions from Saraya. Mr Oldman, a director of Tuff Toys, dispersed the funds the following day. [29] Tuff Toys was not the owner of the Ferrari. Instead, it had held the vehicle to undertake work as necessary for it to comply with Australian Standards, but did not have it when the finance was arranged and advanced. [30] The Tribunal found that Mr Oldman received two payments for the Ferrari, one from Westpac Bank for $230,000 and the second from Advance. On both occasions on the direction of a person, Metleg, the owner of the Ferrari, he transferred the bulk of the funds into the account of a Conrad Black. [31] Representatives of Tuff Toys acknowledged providing an invoice to Metleg nominating that it had a Ferrari for sale. Metleg obtained a Word version from them by email, saying that he had lost the invoice. The Tribunal inferred that the emailed version had then been altered and the altered versions passed on to the finance broker, who passed them on to Advance. [32] The Tribunal found that Tuff Toys made a false and misleading representation that it held a particular Ferrari for sale. However, it considered that Advance’s failure to notice changes in the second invoice and act on them broke the chain of causation, with the result that Advance did not suffer loss as a result of the false representation. [33] Mr Oldman thought that the money paid by Advance was a refinance of the earlier Westpac loan. The Tribunal found that, that being so, the monies from Advance belonged either to Westpac or the purchaser, Saraya. The Tribunal found, therefore, that Mr Oldman and/or Tuff Toys had dishonestly converted the money within the meaning of s 573 of the Act, and that Advance had suffered a loss because of the dishonest conversion. The exemption in s 471(2)(d) [34] DEEDI contends that the evidence establishes the relevant facts required for s 471(2)(d) to apply. To re-iterate, s 471(2)(d) provides that a person cannot make a claim against the claim fund for financial losses, if it is: -- 7 of 11 -- 8 (d) a financier of a motor dealer's business who suffers financial loss because of financing the motor dealer's business; … [35] The definition of ‘financier’ in Schedule 2 provides as follows: [F]inancier means a corporation whose ordinary business (whether or not it carries on any other business) is providing credit in relation to motor vehicles and that does not carry on the business of dealing with motor vehicles other than for 1 or more of the following purposes-- (a) selling motor vehicles on instalment terms; (b) hiring motor vehicles under hire-purchase agreements; (c) putting in place or enforcing securities over motor vehicles; (d) hiring motor vehicles, if no right to purchase the motor vehicle is included in the hiring of any vehicle; (e) disposing of motor vehicles acquired by it in connection with a purpose mentioned in paragraphs (a) to (d). [36] DEEDI argues that Advance is a ‘financier’ as defined in Schedule 2 of the Act in that it is a corporation whose ordinary business is providing credit in relation to motor vehicles. DEEDI says there is evidence that Advance refers to itself as a ‘finance company’ in the claim form. It contends that the director of Advance, Paul Crutchley, appeared to accept in his oral evidence that Advance is a financier. DEEDI also submits that documentation exchanged between Advance and Tuff Toys indicates that Advance was a financier. DEEDI says that on the evidence, at least part of Advance’s ordinary business, is providing credit in relation to motor vehicles. [37] Advance concedes that it is a finance company. However, it says, that the evidence does not establish that it is a ‘financier’ within the meaning of the Schedule 2 definition. It submits that there is virtually nothing in the transcript about the scope of its activities of lending money for the purchase of motor vehicles, and whether its ‘ordinary business’ is the provision of credit for motor vehicles. Further, it says the evidence does not address, at all, the five subparagraphs (a) to (e) in the definition. Nor, it says, is there evidence about the different ways in which a motor dealership might be financed by a finance company. It also submits that there is nothing in evidence to suggest that documentation was ever exchanged between Advance and Tuff Toys. [38] In my view, on a plain reading of the Act, a financier as referred to in s 471(2)(d) must meet the definition in Schedule 2. There are several components to that definition. It is insufficient of itself in order to establish that a person is financier within the meaning of s 471(2)(d), that it is a finance company. [39] It is clear from the transcript that Mr Crutchley was not answering questions relating to the Schedule 2 definition of ‘financier.’ That term also has a common usage, and I do not accept that he was conceding that Advance was a financier within the definition. [40] DEEDI refers to documentation exchanged between Advance and Tuff Toys. However, as Advance submits, there is nothing in the evidence -- 8 of 11 -- 9 that I have been able to locate which suggests that Advance and Tuff Toys exchanged any documentation. [41] Further, DEEDI says the evidence establishes that Advance was a financier ‘of a motor dealer’s business’ and it suffered ‘financial loss because of financing the motor dealer’s business’ because it provided finance to Tuff Toys by crediting to its bank account the sum of $250,000; Tuff Toys was conducting a motor dealer’s business; Advance will only finance motor dealers; Advance believed that Tuff Toys was a registered motor dealer; Advance suffered a loss as found by the Member at hearing; and it occasioned the loss because it financed Tuff Toys’ business. [42] DEEDI relies upon a broad construction of s 471(2)(d), such that the moment Advance finances a car by paying money to a motor dealer, it is financing a motor dealer’s business. Further, DEEDI contends that the financial loss was suffered because it advanced the money to allow the Ferrari to be purchased, in the sense that if it had not provided the finance, it would not have suffered the loss. [43] Advance argues that it did not provide finance to Tuff Toys. It says the evidence establishes that Tuff Toys was merely the borrower’s nominee for payment, because the letter of offer for credit was to Saraya Pty Ltd, the commercial loan agreement was between Advance and Saraya, and Advance, in compliance with Saraya’s direction, deposited the balance of the purchase price into Tuff Toys account as a one-off transaction. [44] It also argues that, contrary to DEEDI’s assertions, Paul Crutchley said that Advance, under its mandate, could not finance anything that came from a private individual, it must be from an authorised reseller of the product. Further, it says he gave no direct evidence about the scope of its activities concerning registered motor dealers. Specifically, he said, ‘…the vehicle or the asset: it does not matter what it is.’ Also, Tuff Toys did not own the vehicle, and invoices indicating that it owned it were accepted to be fraudulent. [45] Therefore, Advance argues that Tuff Toys was not engaged in any relevant activity of a motor dealer’s business which, having regard to s 279(1) of the Act is, relevantly, the sale or acquisition for resale of used vehicles either outright or on consignment, for the purposes of this transaction. Accordingly, Advance could not have financed any aspect of a motor dealer’s business. [46] On the basis of the construction for which DEEDI contends in respect of s 471(2)(d), it is irrelevant whether Advance lent the monies concerned to Tuff Toys, or, as was the case, another person, Saraya, who was unrelated to Tuff Toys but who directed payment to Tuff Toys. It is also irrelevant on this construction, that Tuff Toys acted fraudulently by, or through Wayne Oldman, dishonestly converting the monies it received from Advance, although he knew Tuff Toys had already received monies for the Ferrari which it did not own in any event, or even have possession -- 9 of 11 -- 10 of, from Westpac on an earlier occasion, and could not therefore, reasonably retain the funds advanced, or pay them out at Metleg’s direction. [47] It is sufficient, under DEEDI’s construction, that the monies lent were paid to a motor dealer, whatever other circumstances may surround that fact. [48] DEEDI also makes some arguments based on the scheme of the Act, which it submits militate against any argument that a financier such as Advance can make a successful claim. In particular, it seems to argue that the objects of the Act set out in s 10 do not support an interpretation that the Act was intended to compensate finance companies which suffer a loss, because financial institutions are not regulated by the Act. Further, the argument is made that having regard to the short title of the Act and the objects, the scheme makes it unlikely that Parliament intended to protect financial institutions from motor dealers; rather, it was established to protect consumers. [49] Advance says that the relevant regulated activity is that of a motor dealer, and the only relevant exclusion of finance companies is as set out in s 471(2)(d). It argues that, by implication, all other financiers are relevant consumers if the transaction is within the ambit of conduct regulated by the Act. [50] The Act provides for certain exemptions in ss 4 to 9. In s 6, it exempts operation of certain chapters of the Act upon financial institutions and trustee companies. The chapters concerned do not include Chapter 14 about claims against the claim fund. Also, various sections of the Act, such as ss 254 and 331, provide for different treatment of financiers, as opposed to other persons, in certain limited circumstances. Section 471 provides for persons who may not make a claim against the claim fund. In respect of financiers, the only exemption is contained in s 471(2)(d). [51] The objects of the Act set out in s 10 include the main object of regulating, among others, real estate agents and motor dealers and their employees for the protection of consumers. 11 The objects are to be achieved through various means, 12 including establishing a claim fund to provide compensation to persons occasioning financial loss in some circumstances as a result of their dealings with persons regulated under the Act.13 [52] Part 2 of Chapter 14 provides, in s 470, for the circumstances in which a claim may be made against the claim fund. Section 471 provides that certain persons may not claim against the fund for specified financial losses. Section 471(2)(d) then provides for when a financier of a motor dealer’s business may not claim, in particular, for ‘financial loss because of financing the motor dealer’s business.’ 11 Property Agents and Motor Dealers Act 2000, s 10(1). 12 Property Agents and Motor Dealers Act 2000, s 10(3). 13 Property Agents and Motor Dealers Act 2000, s 10(3)(f). -- 10 of 11 -- 11 [53] On this analysis, it is sufficiently clear that the Parliament did consider that financiers should be excluded from the operation of some aspects of the Act. The circumstances in which the Act does not to apply to them have been identified by Parliament throughout the Act. In respect of claims against the claim fund, the specific circumstances in which a claim against the fund will not be available are provided for in s 471(2)(d). By implication, if the exemption in s 471(2)(d) does not apply, a person who is a financier will be entitled to make a claim against the claim fund if they otherwise satisfy the requirements set out in the Act. [54] It follows that I do not accept the expansive construction for which DEEDI argues in respect of the application of s 471(2)(d), nor the arguments advanced that the scheme of the Act militates against a financier being able to make a successful claim against the Act. [55] If a financier of a motor dealer’s business suffers a financial loss because of financing the motor dealer’s business, then a claim will not be available. However, when a person, who may be a financier, suffers financial loss because of the happening of any of the events listed in s 470(1), the person may make a claim against the claim fund in accordance with that section. These events include the contravention of s 573, which deals in part with dishonest conversion of funds received. [56] I have already indicated that I am not persuaded that the evidence establishes that Advance is a financier within the definition in Schedule 2. Also, the evidence led at hearing does not establish that Advance financed Tuff Toys, as opposed to merely paying funds to it as the borrower’s nominee. It is common knowledge that finance may be extended to finance a motor dealer’s business by finance companies through a variety of arrangements between them. It is not apparent on the evidence that there was any arrangement or relationship between Tuff Toys and Advance, which might establish that Advance was financier of its business. [57] In any event, even if I am wrong in relation to any of those issues, it is not apparent that Advance suffered its loss because of financing Tuff Toys business. It suffered a loss, as found by the Member following the hearing at first instance, because Mr Oldman and Tuff Toys dishonestly converted the funds paid into Tuff Toys account, as contemplated by s 573 of the Act. Decision [58] I return to the threshold issue. Although I note Advance’s submission that it would have led more evidence if the exemption in s 471(2)(d) had been raised at or before the hearing, the issue raised by DEEDI on appeal can be determined without deciding the threshold point, and there is no reason not to take that course. [59] For the reasons discussed above, I would confirm the decision and dismiss the appeal. -- 11 of 11 --