David Hambleton as joint and several liquidator of Sky 5 Pty Ltd (in liquidation) v The Chief Executive, Department of Justice and Attorney-General & Tuxford [2014] QCAT 64

CITATION: David Hambleton as joint and several liquidator of Sky 5 Pty Ltd (in liquidation) v The Chief Executive, Department of Justice and Attorney- General & Tuxford [2014] QCAT 64 PARTIES: David Hambleton as joint and several liquidator of Sky 5 Pty Ltd (in liquidation) (Applicant) v The Chief Executive, Department of Justice and Attorney-General (First Respondent) Stan Tuxford (Second Respondent) APPLICATION NUMBER: GAR243-13 MATTER TYPE: General administrative review matters HEARING DATE: 29 November 2013 HEARD AT: Brisbane DECISION OF: Judicial Member Brabazon, QC DELIVERED ON: 31 January 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. The Chief Executive, Department of Justice & Attorney General, is a proper respondent to Mr Hambleton’s application, and 2. The applicant is able to proceed against the Chief Executive and Mr Tuxford, having regard to s 511 of the Property Agents and Motor Dealers Act 2000. CATCHWORDS: PROPERTY AGENTS AND MOTOR DEALERS – role of Chief Executive – the Claim Fund – parties to proceedings – notice of claim to a respondent – notice given out of time Property Agents and Motor Dealers Act 2000 (Qld) ss 408, 409, 473, 474, 481, 473, 488, 512, 527, 530 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 61 -- 1 of 11 -- 2 APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr R Dickson for the Applicant RESPONDENT: Mr J Horton for the First Respondent REASONS FOR DECISION [1] On 4 September 2013, a QCAT Member, Mr D Paratz, directed that two questions of law in these proceedings be determined at an oral hearing. [2] That hearing took place on 29 November 2013. These were the questions of law: 1. Is the Chief Executive a proper respondent to this application? 2. Is the applicant, Mr David Hambleton, able to proceed against the Chief Executive and/or Mr Tuxford, having regard to s 511 of the Property Agents and Motor Dealers Act 2000 (PAMDA)? [3] It is helpful to understand the background to these applications. Attached to these reasons is the judgment in APL456-11 – Hambleton & McDonald v Tuxford. Though the details vary, it is similar to eight other judgments. All deal with losses inflicted on purchasers of blocks in a land development because Mr Tuxford, a real estate agent, stole (or helped others steal) their deposits. [4] A Claim Fund has been established according to the PAMDA legislation - see ss 408 - 409. Mr McDonald has been paid $131,856.11 from the Fund. That was paid directly to him, rather than to Mr Hambleton, as the liquidator of the company Sky 5 Pty Ltd. Mr Hambleton described the payment as “a dividend”. Claims on the Fund are classified as “minor claims”, or “claims other than minor claims”. The Chief Executive decides minor claims against the Fund – s 481. Other claims are allowed or rejected by this Tribunal – if a claimant suffers financial loss, the Tribunal can decide the amount of that loss, and name the person liable for that loss. See s 488. [5] The judgment in Mr McDonald‟s case is an example of that process. The QCAT order of 28 May 2012 says this: „Pursuant to s 530 of PAMDA, the Chief Executive --- is to pay Mr Angus John McDonald the sum of $131,856.11‟. [6] Mr Hambleton is unhappy with that result. He wishes to make further claims against the Fund. His general claim details set out at length his reasons for receiving more from the Fund. They are briefly described in paragraph 10 of that document – „the purpose of these new claims is to seek payment of the dividends paid to the deposit payers from the fund‟. -- 2 of 11 -- 3 [7] So, is the Chief Executive a proper respondent to his application to proceed further? Mr Horton, for the Chief Executive, points to the PAMDA legislation in support of his submission that the Chief Executive is not a proper respondent. [8] Section 473 says that a person may make a claim against the Fund. The claim must be made to the Chief Executive in the approved form. Section 474 says the Chief Executive must give notice of such a claim to the person whose actions are alleged to have given rise to the claim – Mr Tuxford in this case. That person is then described as “the respondent”. A respondent and a claimant may settle a claim and advise the Chief Executive – s 474(5). [9] The Chief Executive may make submissions, whether or not a party to the proceedings – s 512(2) and (3). [10] If a claim is allowed against a respondent, and the respondent does not pay it, the Chief Executive may apply to QCAT, for an order that the respondent reimburse the Fund – s 527. [11] It is submitted here that the Chief Executive has never been a proper party to this proceeding. [12] It is hard to see how that submission could be accepted. Section 512 itself says that the Chief Executive may be a party to a proceeding. A controversial claim against the fund could properly have the Chief Executive as a party to it. [13] In my opinion, the Chief Executive is a proper respondent to this application. Time [14] Is Mr Hambleton able to proceed against the Chief Executive, having regard to s 511 of PAMDA? [15] Mr Hambleton lodged his new claims on 8 April 2013. That was out of time, as they were lodged more than one year after the purchasers became aware of their losses, on 23 May 2008, and more than three years after the events that caused the financial loss. He was given a statutory notice to that effect – s 473(5) of PAMDA - form 52 – “Out of Time Notice”. [16] He was advised by letter of 28 May 2013, that he could ask for an extension by filing a form 42 application. In that case, he would have 14 days after receipt of the 28 May 2013 letter to lodge the application with QCAT. [17] Mr Hambleton complied with that notice – he returned his application within 14 days. However, it is said against him that he made a fatal mistake – he did not include Mr Tuxford as a party to the application. He did include the Chief Executive as a party. -- 3 of 11 -- 4 [18] It is submitted that the mistake meant that no effective application for an extension of time was made. (As it happened, Mr Tuxford was made a party by the QCAT decision of 4 September 2013 - see Mr Paratz‟s order). [19] Therefore it is submitted against Mr Hambleton, that no effective application for an extension of time was made within the 14 day limit. That being so, it is said, the application is time barred, with QCAT having no power to extend time further. [20] The reality is that Mr Tuxford had made no contact with anybody, at any time since taking the deposits. That is, there is no reason to think that any response from him would be made, after some five years had passed. On the other hand, the Chief Executive, and that office, have played an active role in the litigation. [21] There are two considerations that lead to the conclusion that any failure to include Mr Tuxford in the application should be overlooked. First, Mr Tuxford has not taken any active role since the claims against him were first made. It is clear that he has no prospect of being able to pay any of the claims. [22] Secondly, this is a procedural step in the proceedings. If the application to extend time is allowed, then s 474 of PAMDA will take effect – the Chief Executive will have to try to give notice of the claims to Mr Tuxford. See s 474. When that is done, Mr Tuxford will be no worse off. [23] So far, the assumption in this judgment has been that the above time limits found in PAMDA are effective. That is, that they are the results of the “modifying” provisions about time, found in PAMDA. [24] Mr Horton submitted that the general power of QCAT to extend or shorten a time limit, found in s 61 of the QCAT Act, was to be disregarded, in favour of the PAMDA provisions about time. [25] In my opinion, Mr Horton‟s submissions to that effect should be accepted, so that there was a need to give a timely notice to Mr Tuxford – even though it was a step that was not essential. If that view is incorrect, then the general power to extend time, in s 61 of the QCAT Act, should be applied so that the time for giving the notice is extended to 5 September 2013. The responses [26] The responses to the two questions of law are these: 1. The Chief Executive is a proper respondent to this application, and 2. The applicant is able to proceed against the Chief Executive and Mr Tuxford, having regard to s 511 of the Property Agents and Motor Dealers Act 2000. -- 4 of 11 -- CITATION: David Hambleton as joint and several Liquidator of Sky 5 Pty Ltd and Anor v Hutchinson (No 1) [2012] QCATA 89 PARTIES: David Hambleton as joint and several Liquidator of Sky 5 Pty Ltd (First Applicant) Angus John McDonald (Second Applicant) v Stanley Gordon Tuxford (Respondent) APPLICATION NUMBER: APL456-11 MATTER TYPE: Appeals HEARING DATE: 5 April 2012 HEARD AT: Brisbane DECISION OF: Mr Charles Brabazon QC, Member DELIVERED ON: 28 May 2012 DELIVERED AT: Brisbane ORDERS MADE: [1] The appeal is dismissed. [2] The orders made on 14 November 2011 are affirmed. [3] To the extent necessary the time limit fixed for making a claim by Mr McDonald under the Property Agents and Motor Dealers Act 2000 is extended. [4] Pursuant to s 530 of the Property Agents and Motor Dealers Act 2000, the Chief Executive of the Department of Employment, Economic Development and Innovation is to pay to Angus John McDonald the sum of $131,856.11. [5] Pursuant to s 488(3)(c) of the Property Agents and Motor Dealers Act 2000 the respondent Stanley Gordon Tuxford is named as the person who contravened s 470(1) and who is liable for the financial loss of Angus John McDonald. [6] Upon payment of the sum of -- 5 of 11 -- 2 $131,856.11 from the Claim Fund to Angus John McDonald, the respondent Stanley Gordon Tuxford is liable to reimburse the Claim Fund by paying that sum to the Chief Executive of Employment, Economic Development and Innovation. CATCHWORDS: PROPERTY AGENTS AND MOTOR DEALERS – Claim against the fund by liquidator – whether event caused financial loss – who suffered loss – payment of dividend Property Agents and Motor Dealers Act 2000, ss 469, 470, 476, 488, 530, 574 Queensland Civil and Administrative Tribunal Act 2009, ss 42, 61 APPEARANCES and REPRESENTATION (if any): APPLICANT: Mr Steele of counsel for the liquidator REASONS FOR DECISION The issues [1] There are two issues in this appeal. The company Sky 5 Pty Ltd is in liquidation. The liquidator is Mr David Hambleton. He cannot agree with the Chief Executive of the Department of Employment, Economic Development and Innovation (the Office of Fair Trading – OFT). Their dispute is about money – $131,856.11. The Chief Executive will not hand that money over to Mr Hambleton. First, he says that the fund he controls is not liable to pay the money. Secondly, he says that any money has to go directly to a creditor to Sky 5, Mr Angus McDonald. Who is right? [2] A short explanation of their different views is necessary. The details can be found in the judgment of this Tribunal dated 14 November 2011. There is not much dispute about the basic facts. [3] The directors of Sky 5, Mr Hutchinson and his daughter, wanted to make money. The idea was to sell blocks of land in the Waverly View Estate, owned by Land Equity Pty Ltd. Sky 5 was to act as the vendor, and obtain contracts with purchasers, in its own name. At settlement (called a ―back to back‖ settlement) Sky 5 would use the purchasers‘ money to pay for the land, and keep as its profit the mark-up on Land Equity‘s wholesale price. [4] Originally, Sky 5‘s plans were probably genuine ones. But, by around 2006, things went seriously wrong. Sky 5 appointed a real estate agent, Mr Gordon Tuxford to sell lots in the estate. He knew that any deposits from purchasers had to go into a trust account until settlement. He made around twenty sales, including the sale of five lots to Mr McDonald. He -- 6 of 11 -- 3 had no trust account. Sky 5 did not have a real estate corporation licence and did not maintain a trust account. [5] Mr McDonald agreed to buy five lots in the estate. He paid a total of $190,000 in deposits. [6] Mr McDonald‘s money was paid into an account in the name of a related company, Sky 1 Pty Ltd. Mr McDonald met Messrs Tuxford and Hutchinson. They persuaded him to transfer the money to the Sky 1 account. He believed that the money was to be deposited into a trust account, but that did not happen. His money then disappeared. The deposits have not been seen since. [7] Tuxford‘s conduct amounted to an ―event‖ contrary to s 470(1)(e) of the Property Agents and Motor Dealers Act 2000 (PAMDA). Mr McDonald‘s money was entrusted to Tuxford. [8] Hutchinson was experienced in real estate matters. The facts strongly suggest that he and Mr Tuxford acted together. The liquidator‘s conclusion is probably quite right – ―I have no doubt but Hutchinson and Tuxford were working together to secure the benefit of the deposits … Sky 5 could not complete the purchase of the allotments from Land Equity Pty Ltd without the deposit funds … I believe that the process was a sham arrangement conducted by Hutchinson and Tuxford.‖ [9] The OFT appointed an inspector to investigate this claim, together with numerous other claims. With respect to this claim, he concluded, on 14 January 2011, that Mr McDonald should recover his losses from the fund administrated by the OFT. [10] The member‘s judgement says that there was insufficient evidence to find that Mr Hutchinson was acting as a ―relevant person‖, in relation to this sale. That finding seems to have been based on the OFT‘s submission, that Hutchinson was not ―a relevant person‖. That conclusion, or assumption, may be doubted, but it is not considered further in these reasons. [11] Hutchinson and his daughter have disappeared. Tuxford has a solicitor, but nothing else. [12] Those unhappy events mean that the innocent parties including Mr McDonald were entitled to assistance from the fund maintained under the PAMDA Act. They qualify because there is an ―event‖ according to s 470 of the Act. This Tribunal may allow a claim when there is such an event – see s 488. There must be ―financial loss because of the happening of the event.‖ The ‗event‘ in this case was Tuxford‘s failure to put the deposits into a trust account. [13] The Chief Executive may refer claims to the Tribunal. That has happened. All the necessary legal and procedural requirements have been satisfied to put the resolution of claims by the innocent parties in the hands of this Tribunal. -- 7 of 11 -- 4 [14] It was submitted here, that the event was a failure to observe the requirements of s 11(d) of the Land Sales Act 1984. There are some difficulties with that. The section refers to, ―the owner of land to which that act applies.‖ Sky 5 did not own the land. The Act applies to a proposed subdivision of land. [15] It is more appropriate to apply s 470(1)(e) of PAMDA – ―(1) A person may make a claim against the fund if the person suffers financial loss because of the happening of any of the following events— (e) a stealing, misappropriation or misapplication by a relevant person of property entrusted to the person as agent for someone else in the person‘s capacity as a relevant person.‖ [16] Mr Hambleton was appointed liquidator on 5 June 2008. He says that the first step should be to put all the funds in his hands. The individual claimants would then be creditors of the company. There are some other creditors. He proposes to make a final distribution of the company‘s assets. Some other monies have come into his hands. There has already been a distribution of about one third of these claims. He predicts that the claimants will receive a large proportion of their claims, in a final dividend. [17] The Chief Executive opposes the liquidator‘s scheme. He says that the claimants should be paid directly from the fund and recover 100% of their losses, after taking into account dividends paid by the liquidator. [18] It is necessary to say something about the OFT‘s allegation that the company was responsible for the failures of Mr Hutchinson and Mr Tuxford – that the company would not have suffered any loss but for neglect or default of its directors and agent. [19] For the liquidator, in a comprehensive written submission, it was said that the misbehaviour of the company‘s director Mr Hutchinson, and its agent, Mr Tuxford, is no barrier to its claim. The company and its directors are separate entities, and the effect of that separation is reinforced by decisions of the courts. Mention was made of Dennis Wilcox Pty Ltd v FCT (1988) 79 ALR 267 at 274; Industrial Equity v Blackburn (1977) 137 CLR 567; McLeod v R (2003) 214 CLR 230. [20] In the McLeod decision, the High Court put it this way: ―… a company has rights, interests and duties which differ from those of its directors, officers and members. The conduct or state of mind of the latter is not always to be attributed to the former; this is particularly evident upon an insolvent winding up.‖ (at para 28, Gleeson CJ, Gummow and Hayne JJ). ―Even when the shares of a company are closely held for purposes (or interests) of the body corporate are not synonymous with the interests of the person or persons in control.‖ (McHugh J). [21] Therefore it was submitted that the company should not be penalised for its directors‘ misconduct, that the liquidator was now in proper control of the company, and that the full amount of the various claims should be paid -- 8 of 11 -- 5 out, with no deduction for the amount of the dividends already paid. (The last submission can be dismissed – it cannot be accepted). [22] In my opinion, the principal submission for the liquidator should be accepted. That is, the company and its director and agents are separate entities so that reprehensible conduct by those individuals should not be attributed to the company. That is this case. Sky 5, once under the independent control of the liquidator, and free of the misguided efforts of its directors and agent, is entitled to right the wrongs that have been done to it. [23] The liquidator has lodged appropriate claims, it was submitted, and that there was no good reason for OFT refusing to pay them in full. It is said for the company that it suffered financial loss, by not being able to complete its contracts. [24] Mr Hambleton has made every effort, to insist that he is the proper claimant of the fund, rather than the individuals who paid deposits. At the same time, it is clear that his claims are based entirely on the amounts paid by the purchasers, and nothing else. For example, see his submission to QCAT, dated 7 April 2011, the form containing a ―statement of claim details‖, and ex 3, a summary of the details of individual purchasers whose deposits were lost. [25] The answer to the competing claims is this. It became clear that the company could not complete its undertaking, to sell land to the purchasers. When Land Equity called for settlement of the contracts, and there was no response, it rescinded them. They then became entitled to a refund of their deposits. The consideration for these deposits wholly failed, and they should have been repaid. [26] Mr Hambleton is right to say that the disappearance of the deposits was a reason why the contracts could not be completed. It is another thing to claim that the result was a ―financial loss‖ because Sky 5 could not complete the contracts. The deposits had not become the property of Sky 5. A deposit, intended to be held in a trust account, is the beneficial property of the purchaser until settlement. Its disappearance was a financial loss for the purchaser, not Sky 5. Sky 5 was never entitled to the money. [27] For the company, it is not so clear what it had lost. The opportunity to settle the contracts was lost, but it is not possible to know the value of that lost opportunity. What costs were involved? What was the real market value of the blocks? In short, what did the company really lose? [28] What Sky 5 lost was the opportunity to complete the contracts. That opportunity may have been of some value. We do not know the amount of that loss, if any. [29] In the written submissions for the liquidator it is asserted that, ―on paper, Sky 5 would have made about $50,000 per lot, a far more significant sum then the amount claimed to have been misappropriated‖. If that claim -- 9 of 11 -- 6 could be proved, then, it might be the foundation for some other claims against the fund. It does not affect the rights of the present claimants. [30] The OFT has been right in asserting that the individual purchasers are entitled to payments from the fund. [31] Mr McDonald has received payments totaling $64,301.70 from the liquidator. He was entitled to recover $125,698.30 from the fund. The Tribunal member also allowed a payment of $6,157.81 because of his claim for legal costs. In my opinion, that was an appropriate decision. The costs were a financial loss, and they were caused by ―the event‖ – in effect, the loss of the deposits. The overall result is a payment to Mr McDonald of $131,856.11. [32] Section 492(5) of PAMDA says, ―Interest is not payable from the fund in relation to a claim allowed against the fund.‖ [33] Those words seem clear enough. However there are decided cases which show that there may be exceptions, where a claim is for a lost opportunity, to use the funds. In that case, it is said, the claim is really a claim for damages, and so outside the apparent prohibition. [34] See the decisions in Hungerford v Walker (1989) 171 CLR 125 (High Court), Chief Executive, Department of Tourism, Racing & Fair Trading v Hunter [2002] QDC 272 (District Court), Gettens v XFar Homes Pty Ltd [2012] QCAT 150 and Ryan v Ferrantino [2010] QCAT 495. See also Judge McGill‘s decision in Bieto v Triline Australia Pty Ltd (No 2) [2003] QDC 307. [35] As that last decision shows, there should be evidence of the loss that has been suffered, by the unavailability of the money. [36] In the present proceedings, the various purchasers have not been active parties in the appeal. Any possible issues about interest as damages have not been dealt with. [37] It should be recorded that Mr Hambleton has done much good work for the benefit of many unfortunate purchasers who lost their deposits. Without his assistance, it is likely that some would not have recovered anything. [38] These are the orders of the Tribunal: (a) The appeal is dismissed. (b) The orders made on 14 November 2011 are affirmed. (c) To the extent necessary the time limit fixed for making a claim by Mr McDonald under the Property Agents and Motor Dealers Act 2000 is extended. (d) Pursuant to s 530 of the Property Agents and Motor Dealers Act 2000, the Chief Executive of the Department of Employment, -- 10 of 11 -- 7 Economic Development and Innovation must pay to Mr McDonald the sum of $131,856.11. (e) Pursuant to s 488(3)(c) of the Property Agents and Motor Dealers Act 2000 declare that the respondent Stanley Gordon Tuxford is named as the person who contravened the terms of s 470(i) of that Act, and is liable for the financial losses of Mr McDonald. (f) Upon payment of the sum of $131,856.11 from the Claim Fund to Mr McDonald, Stanley Gordon Tuxford is liable to reimburse the Claim Fund by paying that sum to the Chief Executive of Employment, Economic Development and Innovation. -- 11 of 11 --