GRAHAM THOMSON AS TRUSTEE FOR TRAYNOR THOMSON FAMILY TRUST

RENNELK & SAMOHT PTY LTD AS TRUSTEE FOR RENNELK & SAMOHT FAMILY TRUST

DEE ELETRICAL SERVICES PTY LTD AS TRUSTEE FOR DEMPSEY FAMILY TRUST

PALMHEIGHTS PTY LTD AS TRUSTEE FOR G & D FAMILY TRUST

Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA

Citation : WILSON and COMMISSIONER FOR CONSUMER PROTECTION [2012] WASAT 200

Statutes - Settlement Agents Act 1981 (WA) - Claim against Fidelity Fund for loss sustained as a result of defalcation by settlement agent - Whether interest incurred in borrowing funds for investment recoverable - Reimbursement limited to the extent of the defalcation

Words and phrases - 'actual loss', 'defalcation', 'by reason of'

Legal Practitioners' Act 1981 (SA)

Legal Profession Act 2004 (Vic)

Legal Profession Practice Act 1958 (Vic)

Real Estate and Business Agents Act 1978 (WA)

Settlement Agents Act 1981 (WA), s 3, s 49, s 93(1), s 95, s 95(2), s 95(3)

State Administrative Tribunal Act 2004 (WA), s 105, s 105(7)

Strata Titles Act 1985 (WA), s 70, s 70A, s 70B, s 70(3), s 70(5)

Application for an extension of time to appeal dismissed

Bontempo v Mirvac (WA) Pty Ltd [2012] WASC 104

Daly v Sydney Stock Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371

Dobcol v Law Institute of Victoria [1979] VicRp 42; [1979] VR 393

Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40; (2004) 221 CLR 309

Eumeralla Finance Co Pty Ltd v Law Institute of Victoria [1973] VicRp 8; [1973] VR 98

Florence v New Zealand Law Society [1989] 1 NZLR 132

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125

Legal Services Board v Gillespie-Jones [2013] HCA 35

March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

Mirvac (WA) Pty Ltd v Yeo [2011] WASC 162

Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361

Public Trustee v The Attorney General for the State of South Australia & The Law Society [2000] SASC 184

Re Queensland Law Society Incorporated [1995] 1 Qd R 381

Re Real Estate & Business Agents Supervisory Board; Ex parte Cohen [1999] WASCA 47; (1999) 21 WAR 158

Real Estate and Business Agents Supervisory Board v Cohen [2004] WASCA 19; (2004) 28 WAR 475

Schofield v Consolidated Interest Fund (1988) 49 SASR 546

Secretary to the Department of Premier and Cabinet v Hulls (1999) VSCA 117; [1999] 3 VR 331

Simonsen v Legge [2010] WASCA 238

Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627

Walker v Clough Property Claremont Pty Ltd [2009] WASC 367

Wilson and Commissioner for Consumer Protection [2012] WASAT 200

Zampatti v Western Australian Planning Commission [2010] WASCA 149

1 The applicants, a group of property investors who it is unnecessary to name, apply for an extension of time within which to apply for leave to appeal, and for leave to appeal from a decision of the State Administrative Tribunal (the Tribunal). Before the Tribunal the applicants successfully established that a decision of the respondent, the Commissioner for Consumer Protection, disallowing their claims for compensation from the Fidelity Guarantee Account established by the Settlement Agents Act 1981 (WA) (the Act) as a result of defalcation by a settlement agent, should be set aside, and instead their claims against the Fidelity Guarantee Account allowed to the extent of the funds which had been deposited in the trust account of the relevant settlement agent. However, they seek to challenge that portion of the Tribunal's decision to the effect that their claims for compensation in respect of interest which accrued on borrowings which they made to enable the funds to be provided to the relevant settlement should be disallowed.

2 For the reasons which follow, the application for an extension of time and the application for leave to appeal should each be dismissed on the ground that the decision of the Tribunal is not attended with sufficient doubt to justify either the grant of an extension of time, or leave to appeal.

3 The facts relevant to the applicants' claim with respect to interest on funds borrowed are narrower in compass than those relevant to the Tribunal's decision to the effect that the applicants' claim against the Fidelity Guarantee Account should be allowed to the extent of the funds which they provided to the settlement agent. The facts relevant to the applicants' claim for interest on funds borrowed can be taken from the decision of the Tribunal (Wilson and Commissioner for Consumer Protection [2012] WASAT 200) and shortly expressed as follows.

4 In late 2006 and early 2007, R & Z Investments Pty Ltd (R & Z) entered into contracts to acquire land in the suburb of Thornlie. Shoalwater Settlements (Shoalwater), a settlement agent licensed pursuant to the Act, was appointed to act on behalf of R & Z in relation to the settlement of the Thornlie purchases, which took place on 20 July 2007. That day, contracts were executed for the sale of some of the land from R & Z to MKT Thornlie Nominees Pty Ltd (MKT), and for the sale of the remainder of the land to TBoase Investments Pty Ltd (TBI). R & Z nominated Shoalwater to act on its behalf in relation to each contract. Although the terms of those contracts were subsequently varied, none of the variations are material to the present issue.

5 MKT and TBI proposed to develop the Thornlie land which was to be subdivided into strata titled lots and sold to investors. During September 2007, the applicants (and others) entered into contracts with MKT and TBI for the purchase of proposed strata lots to be created through the development of the land. Each of the strata lot sale contracts contained a term requiring the purchaser to pay a deposit of $51,000, of which $6,000 was to be paid upon execution of the contract (or in one case $8,000), and the balance ($45,000 in all but one case, and $43,000 in the exceptional case) was to be paid within 14 days of acceptance and was to be held by Shoalwater. Each of the contracts contained the following terms as Special Condition 3:

The Buyer agrees that the deposit monies paid under this contract are released to the Seller and may be utilised by the Seller with respect to the acquisition and development of the Land prior to a new title being issued for the Property and the settlement of this Contract.

6 Each of the strata lot sale contracts incorporated the 2002 Joint Form of General Conditions for the Sale of Land published by the Law Society of Western Australia and the Real Estate Institute of Western Australia (the General Conditions), so far as they were not varied by or inconsistent with the specific terms of the contract. Clause 1.3(a) of the General Conditions provided that:

Where the Contract relates to the sale of a proposed strata lot in a proposed Strata Scheme, the Deposit must be paid to and held by a solicitor, Real Estate Agent or Settlement Agent in accordance with Section 70 of the Strata Titles Act until registration of the Strata Plan.

7 Funds were paid by the various purchasers (including the applicants) to Shoalwater as and by way of the deposits due under the strata lot sale contracts to which I have referred. By 2 October 2007 Shoalwater held $898,000 in its trust account which had been provided by purchasers as and by way of deposits due under the contracts for the purchase of the strata lots to be created pursuant to the development. On 11 October 2007, R & Z directed Shoalwater to release $673,000 from the funds held on trust into bank accounts nominated by R & Z in respect of deposits held for the purchase of strata lots to be provided by MKT. Those funds were provided by Shoalwater to the accounts nominated by R & Z in two tranches, one provided that day (11 October 2007), and the other provided the following day. On 2 November 2007, Shoalwater paid a further $225,000 into a bank account nominated by R & Z which related to the funds which had been deposited and held on trust in respect of the purchase of strata lots to be provided by TBI (other than one lot). Shoalwater had by then received some additional funds from purchasers, taking the total funds received over $900,000.

8 On various dates Shoalwater obtained from each of the purchasers a document signed by them and which stated:

I wish to confirm and authorise that Annexure A Condition 3 [Special Condition 3] of the above property (sic) allows the deposit moneys paid to be released to the Seller and may be utilized by the Seller with respect to the acquisition and development of the land prior to a new title being issued for the property and settlement.

The circumstances in which these documents were provided by the purchasers varied from case to case.

9 Settlement of the sale of the Thornlie land from R & Z to MKT and TBI took place during November 2007. However, the development of the land did not proceed, and on 9 July 2008 TBI was placed into liquidation, and on 14 July 2008, MKT was placed into liquidation. At the time of the decision of the Tribunal no dividends had been paid to creditors by the liquidators of MKT or TBI.

10 On 1 July 2008, shortly prior to the commencement of the liquidation of TBI and MKT, solicitors acting on behalf of the purchasers gave notice of termination of the contracts for the purchase of the strata lots pursuant to s 70(3) of the Strata Titles Act 1985 (WA) (the STA) (other than in respect of one contract). By letter of the same date addressed to Shoalwater, solicitors acting on behalf of the purchasers demanded that Shoalwater repay the deposits to a number of the applicants pursuant to s 70(5) of the STA. Of course, by the time those demands were made, the deposit funds had been paid by Shoalwater to or at the direction of R & Z many months earlier.

11 Some of the purchasers, being essentially the current applicants, borrowed funds so as to provide the wherewithal to pay the deposits due under the strata title purchase contracts into which they had entered. Evidence was led before the Tribunal showing the amount of interest which had accrued on those borrowings, in the case of each appellant, between the date of borrowing and a date in June 2012 shortly before the commencement of the hearing before the Tribunal. The liability to pay interest accrued by each appellant varied from case to case and totalled a little over $200,000.

12 The purchasers made claims against the Fidelity Guarantee Account established under Pt V of the Act. They claimed reimbursement of the funds which had been deposited with Shoalwater. The purchasers who had borrowed money in order to enable them to pay the deposits to Shoalwater (who are, generally speaking, the current applicants), also claimed compensation from the Fidelity Guarantee Account in respect of the interest liability which they had incurred. The respondent rejected all claims.

13 The Act outlines the circumstances in which funds may be withdrawn from a settlement agent's trust account. Section 49 of the Act provides:

(4) Settlement moneys received by a settlement agent in the course of arranging or effecting a settlement shall not be withdrawn from a trust account except for the purpose of completing the settlement, or in accordance with the contract entered into between the parties to the transaction, or as otherwise authorised by this Act, or by the prior written consent of all parties to the transaction involved.

(5) A settlement agent shall pay moneys withdrawn from a trust account to the person or persons lawfully entitled or authorised to receive them.

(a) a settlement of a real estate transaction or a business transaction is completed; and

(b) the settlement agent who arranged or effected the settlement received moneys in respect of the real estate transaction or business transaction in the course of arranging or effecting the settlement; and

(c) the settlement agent is authorised in writing by the vendor to make a payment from those moneys to an agent as payment of the whole or part of the commission, reward or remuneration to which the agent is entitled for arranging the real estate transaction or business transaction to which the settlement relates,

the settlement agent may, despite subsections (4) and (5), pay to the agent from those moneys such sum as the settlement agent is so authorised to pay.

agent means an agent as defined in section 4(1) of the Real Estate and Business Agents Act 1978 who is entitled to a commission, reward or remuneration for arranging the real estate transaction or business transaction to which a settlement relates;

vendor means the person or persons lawfully entitled to receive the purchase price in respect of a real estate transaction or business transaction.

14 The right to reimbursement from the Fidelity Guarantee Account is governed by s 93(1) of the Act. That section provides that:

1. Purpose of Account; making claims against Account

(1) Subject to this Act, the Account shall be held and applied for the purpose of reimbursing persons who may suffer pecuniary loss or loss of property by reason of any defalcation by a licensee during any period when he was the holder of a current triennial certificate, but reimbursing only to the extent of the defalcation of the licensee.

15 Accordingly for a person to recover money from the Fidelity Guarantee Account, it must be found that a person has suffered 'pecuniary loss or loss of property' and that the loss occurred 'by reason of any defalcation by a licensee. The amount that can be recovered is limited to 'the extent of the defalcation of the licensee'.

16 The expression 'defalcation by a licensee' is defined in s 3 of the Act in the following terms:

defalcation by a licensee includes criminal or fraudulent conduct -

(a) of a licensee; or

(b) of any one or more of the servants or agents of the licensee; or

(c) of a person who is a partner in the business of the licensee; or

(d) where the licensee is a firm and a body corporate is a partner in the firm or where the licensee is a body corporate, of any one or more of the directors, officers, servants, or agents of the body corporate[.]

17 Section 95 of the Act contains provisions which further define the extent of reimbursement available from the Fidelity Guarantee Account. Relevantly, that section provides:

1. Claims against Account; recovery from Account

(2) A person is not entitled to recover from the Account an amount greater than the balance of the actual loss suffered by him after deducting from the total amount of his loss, the amount or value of all money or other benefits received or receivable by him from any source other than the Account in reduction of his loss, including any benefits received by reason of services rendered or payments made by the defaulting licensee.

(3) No amount shall be charged or be chargeable to the Account as interest on the amount of any judgment obtained or of any claim admitted against the Account.

18 In this case, the defalcation was said to arise from the effect of relevant provisions of the STA, namely, s 70, s 70A and s 70B. Those sections provide:

1. Holding of deposit and other contract moneys when a lot is pre-sold

(1) No person shall sell a lot in a proposed scheme before the strata/survey-strata plan is registered under Part II unless the contract of sale provides that any deposit and all other moneys payable by the purchaser prior to the registration of the strata/survey-strata plan are to be paid to a solicitor, real estate agent or settlement agent, who shall be named or specified in the contract, to be held by that solicitor, real estate agent or settlement agent on trust for the purchaser until the strata/survey-strata plan is registered.

(2) Any deposit and other moneys payable and paid by the purchaser prior to the registration of the strata/survey-strata plan under any such contract as is referred to in subsection (1) shall be paid by the purchaser to the solicitor, real estate agent or settlement agent named or specified in the contract of sale.

(3) In the event of a contravention of subsection (1) or subsection (2), the purchaser may at any time before the strata/survey-strata plan is registered avoid the sale.

(4) If the strata/survey-strata plan is not registered -

(a) within such period after the date of the contract as is agreed in writing by the purchaser and the vendor; or

(b) in the absence of any such agreement, within 6 months after that date,

the purchaser may avoid the sale at any time before the plan is registered.

(5) Where a purchaser avoids a sale under this section, all moneys, including the deposit, shall be recoverable by him from the solicitor, real estate agent or settlement agent or other person to whom they were paid, but the purchaser shall be liable to pay an occupation rent for any period during which he was in occupation of the lot or entitled to receive the rents and profits of the lot.

...

(8) In this section -

date of the contract means the day on which the contract of sale referred to in subsection (1) was signed or, if the parties signed it on different days, the last of those days;

real estate agent means a person licensed as a real estate agent under the Real Estate and Business Agents Act 1978;

settlement agent means a person licensed as a settlement agent under the Settlement Agents Act 1981.

(1) A contract or arrangement is of no effect to the extent that it purports to exclude or restrict the operation of this Part or the rights and remedies conferred on a purchaser by this Part.

(2) A purported waiver of a right, remedy or benefit conferred on a purchaser by this Part is of no effect.

Except as provided by sections 69D, 70(3) and (4) and 70A, this Part does not apply so as to render any contract illegal or void or to empower any party to avoid the contract.

19 After setting out the facts which it found, and the relevant statutory provisions, the Tribunal referred to a number of decisions of Kenneth Martin J concerning the operation and effect of the relevant provisions of the STA - namely, Walker v Clough Property Claremont Pty Ltd [2009] WASC 367; Mirvac (WA) Pty Ltd v Yeo [2011] WASC 162, and Bontempo v Mirvac (WA) Pty Ltd [2012] WASC 104. The Tribunal concluded that s 70A of the STA rendered ineffective contractual provisions which had the effect of excluding the operation of that Part of the Act, and Special Condition 3 in the contracts for purchase of the strata lots would have had that effect. It followed that s 70A rendered Special Condition 3 ineffective, with the result that the contracts provided, by cl 1.3 of the General Conditions and consistently with s 70(1), that the deposits were to be held in trust for each purchaser until the strata plan was registered, which of course never occurred.

20 The Tribunal concluded that 'defalcation by a licensee' within the meaning of the Act was not confined to criminal or fraudulent conduct, but extended to include 'a wrongful diminution or reduction of the amount of the moneys held in trust' (referring to Daly v Sydney Stock Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371, 380 - 381 (Gibbs CJ)). Accordingly, the Tribunal accepted that there would have been a defalcation by Shoalwater if the deposit funds held in its trust account were disbursed in breach of trust. The Tribunal concluded that the funds had been disbursed by Shoalwater in breach of trust because neither Special Condition 3, nor the written 'confirmations' ultimately provided by the various purchasers were effective to authorise disbursement of the funds held on deposit contrary to the requirements of the STA and cl 1.3 of the General Conditions. Further, at least in the case of the deposits paid in respect of the purchase of strata lots from MKT, the Tribunal concluded that payment to R & Z was not authorised in any event, because R & Z was not the seller of the strata title lots. A different conclusion was reached in relation to the funds held as deposits for the lots to be purchased from TBI, because of evidence to the effect that TBI had authorised payment of the funds at the direction of R & Z.

21 The Tribunal went on to conclude that each purchaser was entitled to reimbursement in an amount equal to the deposit which had been disbursed by Shoalwater because each purchaser had suffered loss in that amount 'by reason of' Shoalwater's defalcation. That is because if the funds had not been disbursed by Shoalwater, they would have remained in trust and would have been available to be returned to the purchasers following termination of the contracts for the purchase of the strata units in July 2008.

22 However, the Tribunal rejected the claims for reimbursement from the Fidelity Guarantee Account in respect of the liability to pay interest which had been incurred by those purchasers who borrowed funds in order to pay their deposits. In rejecting those claims, the Tribunal referred to s 95(2) and s 95(3) of the Act, and placed particular emphasis upon the concluding words of s 93 of the Act which limit reimbursement from the account 'only to the extent of the defalcation of the licensee'. The Tribunal also relied upon the decision in Real Estate and Business Agents Supervisory Board v Cohen [2004] WASCA 19; (2004) 28 WAR 475 and distinguished various cases in other jurisdictions upon which the applicants had placed reliance. It is this aspect of the Tribunal's decision which the applicants wish to challenge.

The applications for extension of time and for leave to appeal

23 Section 105 of the State Administrative Tribunal Act 2004 (WA) provides that leave to appeal to this court from a decision of the Tribunal is required before that appeal can be heard, and that an application for leave to appeal must be made within 28 days of the day on which the Tribunal made its decision. In this case, the appeal notice was filed some two weeks after the date within which the application for leave to appeal had to be made.

24 Section 105(7) of the State Administrative Tribunal Act provides that the court may grant an extension of time. The applicants have applied for such an extension, and rely upon the affidavit of Idris Mark Owain Matthews, their solicitor, which identifies the reasons for the delay in making the application for leave to appeal. Those reasons include the time taken in communications with the respondent concerning the appeal, its mechanism and timing, and the costs of the appeal, and the time taken to obtain instructions from the various applicants.

25 The principles governing the grant of an extension of time within which to commence appellate proceedings are well known, and can be conveniently taken from the decision in Simonsen v Legge [2010] WASCA 238 [8]:

The relevant matters to consider when a party seeks to extend the time for filing its notice of appeal include the following:

(a) on the expiry of the time for appealing, the respondent has a vested right to retain the judgment unless the application for an extension of time is granted: Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459;

(b) the grant of an extension of time under the rule is not automatic; the object of the rule permitting extensions of time is to ensure that the rules which fix time for the doing of acts do not become instruments of injustice; and the discretion to extend time is given for the sole purpose of enabling the court to do justice between the parties: Gallo v Dawson (459);

(c) nevertheless, the rules of court must, prima facie, be obeyed, and in order to justify a court in extending the time, there must be some material upon which the court can exercise its discretion: Gallo v Dawson (459);

(d) there are, generally, at least four major factors to be considered, although they are not necessarily exhaustive in each case:

(i) the length of the delay;

(ii) the reasons for the delay;

(iii) the prospects of the applicant succeeding in the appeal; and

(iv) the extent of any prejudice to the respondent: Esther Investments Pty Ltd v Markalinga Pty Ltd (1989) 2 WAR 196 at 198; In de Braekt v Powell [2007] WASCA 55 [11]; [2007] WASCA 55; (2007) 33 WAR 389;

(e) other factors may include whether the delay was intentional, or contumelious, or merely the result of a bona fide mistake or blunder, and whether the delay is that of the litigant or of its lawyers with which the litigant should not be saddled: City of Canning v Avon Capital Estates (Aust) Ltd [2009] WASCA 120 [33];

(f) the length and reasons for the delay must be addressed by the applicant and the cogency of the explanation increases as the period of the extension sought increases: Girando v Girando (1997) 18 WAR 450 at 454;

(g) in relation to the third matter referred to in subpara (d) above, the time for appealing will not be extended unless the proposed appeal has some prospect of success; the converse of that proposition is not that time must be extended if an appeal has any prospect of success, but rather, the fact that an appeal has some prospect of success is a factor which is to be taken into account, together with all other relevant factors: City of Canning v Avon Capital Estates (Aust) Ltd [17]; and

(h) similarly, it is not the law that, whenever an applicant demonstrates an arguable case, or even a strongly arguable case, in the absence of significant prejudice suffered by the respondent, an extension of time should be granted: City of Canning v Avon Capital Estates (Aust) Ltd [16].

26 In this case, the length of delay was not excessive and plausible reasons for the delay have been provided. There is no evidence of prejudice to the respondent, and the respondent does not oppose the grant of an extension of time for the commencement of the application for leave to appeal. Nevertheless, the prospects of success in the application for leave to appeal remain a relevant consideration in the exercise of the discretion to grant an extension of time. It is therefore appropriate to now refer to the principles governing the grant of leave to appeal from the decision of the Tribunal.

27 It is now well established that leave to appeal from a decision of the Tribunal will be granted if, in all the circumstances, it is in the interests of justice that there be a grant of leave, and that there are no rigid or exhaustive guidelines governing the grant of leave: Zampatti v Western Australian Planning Commission [2010] WASCA 149 [34] (Buss JA); Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361 [16] - [18] (Buss JA, Wheeler & Pullin JJA agreeing). However, the observations made by Phillips JA in Secretary to the Department of Premier and Cabinet v Hulls (1999) VSCA 117; [1999] 3 VR 331 in an analogous context are generally applied. There his Honour observed:

When leave is sought to appeal ... it will be necessary for the applicant to identify a question of law which is relevant to the granting of the relief sought on appeal. The importance of the question, either generally or to the would-be appellant in the particular case, will probably be relevant. The applicant must show that there is a real or significant argument to be put on that question of law at least to this extent: that there is sufficient doubt about it to justify the grant of leave. Moreover, it may have to be shown that to allow the error to go uncorrected would impose substantial injustice, although, where the order below is final, that injustice will often be more readily discernible [16].

28 It follows that the question of whether leave to appeal should be granted, and therefore whether time should be extended to enable an application for leave to appeal to be made, is inextricably connected with the merits of the arguments which the applicants would advance if granted an extension of time and leave to appeal, in the sense that there must be sufficient doubt as to the correctness of the Tribunal's decision to justify the grant of leave.

29 There are two proposed grounds of appeal. It is unnecessary to set them out. Together they embody the proposition that the Tribunal erred in law by misconstruing s 93 and s 95 of the Act so as to conclude that the applicants' claim for the interest incurred in borrowing funds in order to deposit funds into the Shoalwater Trust Account was not a valid claim as against the Fidelity Guarantee Account by virtue of the operation of those sections of the Act.

30 The applicants claim an entitlement pursuant to statute. Their entitlement is to be determined by reference to the words of the statute. Particular attention must be given to the precise words used in the statutory provisions relevant to the applicants' claim, given the reliance which the applicants place upon decisions in other jurisdictions under different statutory regimes.

31 Analysis of s 93 and s 95 of the Act shows that there are six aspects of the statutory scheme which the applicants must satisfy before they can establish their claims in respect of the interest liabilities which they incurred. They are:

(a) there must have been a defalcation by a licencee during a period when the licencee was the holder of a current licence;

(b) the applicants must have suffered pecuniary loss or loss of property;

(c) the pecuniary loss or loss of property must have been suffered by the applicants 'by reason of' the defalcation;

(d) the applicants' claim must be limited to reimbursement 'only to the extent of the defalcation of the licensee';

(e) the applicants cannot recover from the Fidelity Guarantee Account any amount greater than the balance of the actual loss suffered by them after bringing to account in reduction of that loss the amount or value of all money or other benefits received from any source other than the Account in reduction of the loss;

(f) the applicants are not entitled to interest on the amount of 'any claim admitted against the account'.

32 The written submissions provided by the applicants focus exclusively upon the last three aspects. They give no attention to the first three elements which must be satisfied in order to establish the applicants' claim. A lack of attention to the first two elements is understandable, because the Tribunal found that the payment out of trust of the deposit funds held on behalf of the applicants was a defalcation by Shoalwater at a time when it was a licensed settlement agent. Further, the Tribunal found, as a fact, that the applicants had incurred interest liabilities on funds borrowed and used to pay the deposits, in particular amounts, up to a date shortly before the Tribunal hearing. However, it is clear from s 93 of the Act that the interest liabilities incurred by the applicants can only be reimbursed from Fidelity Guarantee Account if they are pecuniary losses incurred 'by reason of' Shoalwater's defalcation. When this element of the applicants' claim, which might be called the causative element, was raised with counsel for the applicants during the course of oral argument, it was clear that little or no attention had been paid to this element of the applicants' claim in preparation for the appeal or during the course of the proceedings in the Tribunal.

33 There can be no doubt that the use of the words 'by reason of' in s 93 of the Act require an applicant for reimbursement from the Fidelity Guarantee Account to establish a causal connection between the defalcation and the loss for which reimbursement is claimed. As three members of the High Court recently observed in Legal Services Board v Gillespie-Jones [2013] HCA 35, 'causation in a legal context is always purposive' ([137] (Bell, Gageler and Keane JJ), citing Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627, 639 [28] - [30], 642 - 643 [45] - [46]). So, the character of the causal connection required may be informed by the purpose of the relevant statutory scheme. In that case, those members of the court concluded that the causal requirement provided a basis for concluding that the only persons who could claim reimbursement from the relevant fund were persons for or on whose behalf trust moneys had been held (in that case, by a law practice). By analogy, the nature of the causal connection required under the Act might be informed by the statutory purpose evident in other elements of the statutory scheme, including the limitations upon the entitlement to reimbursement provided by the last three aspects of any claim which I have listed above [31].

34 However, for the purposes of these applications, it is unnecessary to give detailed consideration to the precise nature of the causal connection required between the relevant defalcation and the loss for which reimbursement is claimed. It is unnecessary to determine whether an applicant for reimbursement must establish that the loss claimed would not have been suffered but for the defalcation of the licencee, or whether it is sufficient if the defalcation caused the loss in a practical and common sense way (see March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506). That is because, on the face of it, the interest liabilities incurred and which are the subject of the applicants' claims have no connection, causal or otherwise, with Shoalwater's defalcation.

35 The applicants comprise only some of the purchasers of strata lots who suffered loss by reason of Shoalwater's defalcation. The distinction between the applicants and the purchasers who do not appeal to this court is that the applicants chose to finance their investment by borrowing funds rather than by utilising their capital resources. The decision by individual investors to finance their investment by a specific borrowing, rather than by using existing capital resources (which may or may not have been generated by a less specific borrowing) was entirely unrelated to Shoalwater's defalcation. By definition that decision was made before the defalcation occurred. The cause of the interest liability incurred by the applicants was their decision to borrow funds, not Shoalwater's defalcation.

36 When this proposition was put to counsel for the applicants in the course of oral argument, he provided two responses. First, it was suggested that if the defalcation had not occurred, and Shoalwater had complied with the obligation to retain the deposit funds until the strata plan had been registered, those funds could then have been provided to the developers in partial discharge of the price to be paid by the purchasers, who would thereby have received a benefit equal to the amount of the deposit. There are two obvious difficulties with this proposition. First, the development never progressed to the point at which a strata plan was registered, and each of the developers went into liquidation well before that point was reached. The scenario propounded is therefore entirely hypothetical. Second and in any event, under this scenario the applicants would have maintained their borrowing and would have continued to incur a liability for interest on their borrowings. This observation reinforces the view that the interest liability incurred by the applicants is unconnected with Shoalwater's defalcation.

37 The second proposition advanced by counsel was to the effect that if the defalcations had not occurred, when demand was made for the return of the deposits on 1 July 2008, Shoalwater would have been in a position to return the deposit to each appellant, who could then have used the money to repay their borrowings with the result that no further interest liability would have been incurred.

38 There are two problems with this proposition. First, the interest claimed and found by the Tribunal has not been calculated on this basis. Rather, the interest claimed has been calculated from the time of borrowing, not from the time at which Shoalwater failed to repay the deposits when demanded on 1 July 2008.

39 The second difficulty with this proposition is that, as counsel for the applicants properly conceded, there was no evidence before the Tribunal to the effect that each applicant would have used funds provided by Shoalwater as the return of their deposits in order to repay borrowings if those funds had been returned at the time demand was made. Counsel suggested that an inference could be drawn to that effect. However, on one view at least, establishment of the requisite causal connection is a matter for evidence, not supposition.

40 If evidence had been given by each of the applicants to the effect that if the deposit moneys had been returned to them by Shoalwater in early July 2008, they would have used those moneys to defray borrowings upon which they otherwise incurred a liability to interest, it is possible that a causal connection might have been established between Shoalwater's defalcation, and interest liability incurred after demand for repayment was made. However, there was no evidence to that effect, nor was that the basis upon which the applicants' claim for interest was formulated either before the Tribunal or on appeal.

41 However, it is unnecessary to decide these applications on the basis of the applicants' failure to establish the requisite causal connection between the losses for which they claim reimbursement and Shoalwater's defalcation. That is because it is clear that the applicants cannot overcome the obstacles created by the statutory provisions to the effect that their claims are limited to 'actual loss suffered', 'only to the extent of the defalcation' of Shoalwater.

42 In order to obtain the extension of time and leave to appeal which they seek, the applicants must establish that there is an arguable case to the effect that the interest liabilities which they incurred can be recovered from the Fidelity Guarantee Account notwithstanding the statutory provisions which limit reimbursement from that account to 'actual loss suffered' and 'only to the extent of the defalcation' of Shoalwater. The difficulty which they face in that respect is that there are two decisions of the Full Court of this court which decide otherwise in the context of legislation which is in all respects identical to the Act, save that in one respect the Act is less favourable to the applicants' contentions.

43 Those decisions are concerned with claims made against the Fidelity Guarantee Account established pursuant to the provisions of the Real Estate and Business Agents Act 1978 (WA) (the REBA Act). That legislation was enacted three years prior to the Act. The correspondence between its relevant provisions, and the relevant provisions of the Act, sustain the irresistible inference that it was used as the drafting template for the relevant provisions of the Act. Section 116 of the REBA Act describes the ambit of claims for reimbursement from the account created by that Act in terms which are materially identical to the terms of s 93 of the Act. Further, the expression 'defalcation by a licensee' is defined by s 4 of the REBA Act in terms which are relevantly identical to the definition of the equivalent expression contained in s 3 of the Act. Section 117 of the REBA Act describes the procedure for the making of claim against the account created by that Act, and the limitations upon such claims in terms, which are relevantly identical to s 95 of the Act, save that the word 'actual' is included before the word 'loss' when that word first occurs in s 95(2) of the Act, whereas the REBA Act makes no reference to the reimbursement of 'actual loss'. It is a fair inference that the word 'actual' was inserted in s 95(2) of the Act as a consequence of the publication of the decision in Dobcol v Law Institute of Victoria [1979] VicRp 42; [1979] VR 393, between the enactment of the REBA Act and the Act in issue in this case. I will refer to that decision in due course.

Real Estate and Business Agents Supervisory Board; Ex parte Cohen

44 The first decision under the REBA Act which is directly contrary to the applicants' contentions is Re Real Estate & Business Agents Supervisory Board; Ex parte Cohen [1999] WASCA 47; (1999) 21 WAR 158. In that case a licensed real estate agent fraudulently misappropriated funds provided to her by a client for the purpose of lending money to be secured by registered first mortgages over land. In fact the money was never advanced by the real estate agent against first registered mortgage security or otherwise, but was misappropriated to her own use. The investor's claim for reimbursement from the fidelity fund created by the REBA Act included a claim for the interest which would have been earned on the funds provided to the agent if they had been invested in accordance with his instructions. That claim was disallowed by the board responsible for the administration of the account. Prerogative proceedings were commenced in order to challenge the board's decision in that respect, on the basis that the board had made a jurisdictional error in the construction of the REBA Act. The applicant for prerogative relief contended that, by analogy to the decision of the High Court in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, interest foregone on the funds misappropriated was a component of the investors' loss which was reimbursable from the account. It was submitted that this proposition was supported by s 117(2) of the REBA Act (which, as I have noted, corresponds identically with s 95(2) of the Act save that in the Act the word 'actual' appears before the word 'loss') which was said to sustain the proposition that all losses suffered by the applicant for reimbursement by reason of the defalcation were reimbursable, including amounts analogous to damages by way of interest foregone. Malcolm CJ (with whom the other members of the court agreed) rejected those contentions. In his view:

[W]here the claim is in respect of an amount of money misappropriated, s 117 when read with s 116(1) has the effect that the claim is limited to that amount and does not extend to any loss of interest on the amount by reason of the misappropriation [104].

As outlined at [43], s 117 of the REBA Act corresponds to s 95 of the Act, and s 116(1) of REBA Act corresponds to s 93(1) of the Act.

Real Estate & Business Agents Supervisory Board v Cohen

45 The same series of defalcations gave rise to the second decision which is directly contrary to the applicants' contentions in Real Estate and Business Agents Supervisory Board v Cohen. The case came to the Full Court by way of an appeal from a decision of a judge in the District Court to the effect that if it was established that the respondents had been fraudulently induced to part with their money, money that they had received from the real estate agent as 'interest' on the fictitious mortgage did not have to be deducted from the amount recoverable from the Fidelity Account. The basis of this decision was that the money actually received from the agent would be equivalent to the amount of interest foregone by the respondents. In this respect, the issue in this case was the same as in Ex parte Cohen.

46 The appeal was allowed, with the result that the claims for amounts corresponding to interest foregone were disallowed. The reasoning of Murray J (with whom Anderson and Wheeler JJ agreed) is apparent from the following portion of his reasons:

To my mind, the meaning of s 116(1) and s 117(2) in the context of the other material provisions of the Act to which I have referred, is clear. The Fidelity Fund is held for the purpose of reimbursing persons who may suffer pecuniary loss or loss of property by reason of any defalcation by a licensee, that is, to refund or repay pecuniary loss in the sense of the loss arising out of that which has been expended. As I have mentioned, the term "defalcation by a licensee" is defined to include any criminal or fraudulent conduct of a licensee in the course of a licensee's business from which arises pecuniary loss or loss of property. So one is concerned to identify in a case such as this what is the pecuniary loss which is caused by the defalcation.

There is no reason to suppose that the concept of causation flowing from the statutory provisions is not that which the law generally recognises a loss will be caused by a defalcation if it is such that, in a commonsense manner, it can be seen to flow from or result from the defalcation: cf Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434. In that event, the pecuniary loss might, in a case such as this, include a loss by way of interest forgone or other elements of loss of an indirect or consequential kind.

But there are important words of limitation contained in the statute. By s 116(1), the reimbursement may be "only to the extent of the defalcation of the licensee." The extent of the reimbursement in a case such as this, where one is dealing with pecuniary loss, may not exceed the total sum taken or lost as a result of the criminal or fraudulent conduct of the licensee. Consistent with that approach is the provision in s 117(3) that the Fidelity Fund may not be charged with interest on the amount of any judgment obtained or claim admitted against the Fund. There may, in other words, be no compensation in that way for the claimant upon the Fund being kept out of their money up to the time of reimbursement as a result of the pecuniary loss caused by the licensee: see Ex p Cohen at 182 - 183, [103] - [104].

...

It follows, in my view, that in this case the fund is only liable to reimburse the respondents to the extent of their capital loss, the money actually misappropriated by the agent, less the sum of $839,726.19, which they had already recovered by the receipt of that sum from the agent. No process allied to the assessment of damages for deceit or any other cause of action is involved in the determination of the extent of the liability to make reimbursement from the Fund. I would allow the appeal and dismiss the cross-appeal [30] - [32], [34].

As I have noted, s 116(1) of the REBA Act corresponds identically to s 93(1) of the Act, and s 117(2) of the REBA Act corresponds with s 95(2) of the Act save that the word 'actual' has been added to the latter provision.

47 The legislative provisions which were the subject of the two decisions of the Full Court to which I have referred are in all material respects identical to the legislation at issue in this case, save that in one respect that legislation is more favourable to the present applicants' contentions. Those decisions (Cohen Cases) are authority for the following propositions:

(a) where a claim for reimbursement arises from a defalcation by way of misappropriation or misapplication of trust moneys, because the claim is limited 'to the extent of the defalcation', it is limited to the amount of the trust moneys misapplied or misappropriated, and does not extend to losses consequential upon the misappropriation;

(b) reference to recovery of the loss suffered by the claimant in s 117(2) of the REBA Act (or s 95(2) of the Act), does not provide an entitlement to reimbursement for consequential losses or any losses other than the trust moneys misapplied or misappropriated;

(c) the statutory claim for reimbursement from the Fidelity Guarantee Account is not analogous to a common claim for damages.

48 The doctrine of stare decisis and the interests of legal certainty and commercial order require this court to follow those decisions unless this court is satisfied that they are wrong, or that they can be distinguished from the circumstances which arise in this case. The applicants did not contend that the decisions in the two Cohen Cases were wrong, but did endeavour to distinguish them on four grounds.

49 First, it was contended that there is a material distinction between the claims for interest foregone in the Cohen Cases, and the claims in this case, which are concerned with interest liability actually incurred. However, it is clear that this is not a distinction which was material in any way to the reasoning applied by the courts in the two Cohen Cases. Central to that reasoning was the conclusion that the words which limited reimbursement 'to the extent of the defalcation of the licensee' limited a claim arising from defalcation in the form of misapplication of trust moneys to the amount of those trust moneys. It is irrelevant to that line of reasoning whether the claim for interest was in respect of interest that would have been earned if the trust funds had been invested as directed, or elsewhere, or that the claim was in respect of interest liability incurred through borrowing funds in order to make the deposit into trust, save that, in the latter case claimants would be confronted by the causation difficulties to which I have already referred.

50 I note also that this proposed ground of distinction is inconsistent with the applicants' reliance upon the principles enunciated in Hungerfords v Walker as the basis upon which their claim for reimbursement should succeed, given that Hungerfords v Walker was concerned with claims for interest foregone as a component of damages.

51 The second basis upon which the applicants contended that the Cohen Cases should not be applied in this case was in reliance upon the ambit of the definition of 'defalcation' in the Act. However, as I have noted there is no material distinction between the definition of defalcation in the REBA Act and the definition of the same expression in the Act. Accordingly, this aspect of the legislation provides no basis upon which the Cohen Cases can be distinguished even if the ambit of the actions giving rise to a reimbursable defalcation could somehow overcome the clear words imposing limits upon the ambit of reimbursement in s 93 and s 95 of the Act.

52 The third proposition upon which the applicants relied in order to distinguish the decision in the Cohen Cases is the inference said to arise from s 95(3) of the Act. It was submitted that this provision properly construed, excluded only interest after judgment or after a claim had been admitted against the account, giving rise to an inference that claims for interest prior to judgment or prior to admission of the claim could be allowed.

53 There are three reasons why this proposition should not be accepted. First, s 95(3) is identical to s 117(3) of the REBA Act and therefore provides no basis for distinguishing the Cohen Cases. Second, in the Cohen Cases the court expressly relied upon the equivalent provision in the REBA Act to sustain the conclusion that claims for interest were not recoverable, perhaps drawing upon a wider view of the effect of s 117(3). Third, the subsection does not, in its terms, confer an entitlement to anything - rather, like the subsection which precedes it, it is expressed in negative terms and constrains the ambit of any claim for reimbursement. It is difficult, as a matter of construction, to draw an inference of positive entitlement from a restriction upon the ambit of a claim, especially given the clear and unequivocal words of limitation found in s 93(1) of the Act.

54 The fourth basis upon which it was contended that the applicants' claims should be allowed notwithstanding the decision in the Cohen Cases was the proposition that reference in s 95(2) of the Act to recovery of the claimants' 'actual loss' connoted an entitlement to reimbursement of all losses incurred, including consequential losses such as the interest liabilities incurred by the applicants.

55 There are at least three difficulties with this proposition. First, it is directly contrary to the decision in the Cohen Cases in which an identical argument was put and rejected.

56 Second, the proposition requires that s 95(2), which is expressed in negative terms ('a person is not entitled to recover from the account ...') be read as conferring a positive entitlement to recover components of loss notwithstanding the clear words of limitation contained within s 93(1).

57 Third, as I have noted, s 95(2) of the Act differs from s 117(2) of REBA Act in one material respect, in that the word 'actual' has been included before the word 'loss' where it first appears. Given the clear inference to the effect that the REBA Act provided the drafting template for the relevant provisions of the Act, and the specialised nature of the legislation, there is a fair inference to the effect that the word 'actual' was introduced as a consequence of the publication of the decision in Dobcol v Law Institute of Victoria in 1979, between the enactment of the REBA Act and the Act in issue in these proceedings, and that the parliament intended that word to have the effect attributed to it in the decision in Dobcol - see Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40; (2004) 221 CLR 309 [81] (McHugh JA).

Dobcol Pty Ltd v Law Institute of Victoria

58 Dobcol Pty Ltd v Law Institute of Victoria concerned a claim for compensation from the Solicitors' Guarantee Fund created by the Legal Profession Practice Act 1958 (Vic). Relevantly, s 64(5) of that Act provided that the entitlement to compensation from the fund was 'the amount of the actual pecuniary loss suffered' by the claimant after bringing to account all moneys or other benefits received in reduction of the loss. The component of the claim in that case which is relevant to the present issues concerns the claim for various losses said to be consequential upon the defalcation by the relevant solicitor, including interest on funds borrowed to make good the defalcation, a loss upon sale of assets and various other costs. Anderson J considered that the question turned upon whether those costs could be said to fall within the meaning of the expression 'actual pecuniary loss'. In that context he observed:

It is the intrusion of the word 'actual' which creates the problem. Usually the word 'actual' does not advance the meaning of a phrase. Speaking generally, a thing is not more itself because it is spoken of as 'actual' (Gladstone v Padwick (1871) LR 6 EX 203). However, 'it is to be observed that though a Parliamentary enactment (like Parliamentary eloquence) is capable of saying the same thing twice over without adding anything to what has already been said once, the repetition in the case of an Act of Parliament is not to be assumed. When the legislature enacts a particular phrase in a statute the presumption is that it is saying something which has not been said immediately before. The rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something which would not be there if the words were left out'; per Viscount Simon in Hill v WM Hill (Park Lanes) Ltd [1949] AC 530, 546.

This observation has particular point, for elsewhere in the Act, eg s 64(1), the phrase 'pecuniary loss' is used without the accompanying word 'actual'. There have been occasions when the word 'actual' has been held to impose some limitation or qualification on the subject matter in connexion with which it has been used, and that it is not to be brushed aside on the assumption that it is mere surplusage. The Legal Profession Practice Act is a modern Act, and on that account it may be reasonably assumed that the word has been used with a purpose, and accordingly some meaning consistent with its context should be given to it if at all possible. This was pointed out in Re Palais de Danse Pty Ltd [1951] VicLawRp 1; [1951] VLR 1, where Gavin Duffy J had to consider the meaning of the phrase 'actual physical damage' which occurred in a war time National Security Regulation which provided for compensation of owners whose premises had been commandeered and used and damaged by military authorities. At p 11 of the report his Honour said:

I cannot read 'actual physical damage' as including any loss of profits consequent on the physical damage, and though 'actual' adds nothing to the words 'physical damage' since if they are physical damages they are 'actual' physical damages, an endeavour should be made to give some meaning to the word used, and I think it is not an unfair conclusion that 'actual' is used here to emphasize that it is physical damages, and physical damages alone, that are to be compensated for

The delimiting effect of the word 'actual' is also illustrated by the decision of the High Court of Australia in Moors v Burke [1919] HCA 32; (1999) 26 CLR 265, where it was held that a person did not have 'actual possession' of property within the meaning of s 40 of the Police Offences Act 1915 unless he had complete present personal physical control of the property involved, and 'possession' was thereby given a more limited meaning than conventionally given in various branches of the law.

There are, of course, instances readily envisaged where the word 'actual' adds nothing to the meaning of the words it purports to qualify, such as 'actual time', or 'actual date', or 'actual place'. An enumeration of the multitude of cases in which the word 'actual' has been considered in a great variety of context would, I think, be unrewarding. What this case is concerned with is the meaning of the composite phrase 'actual pecuniary loss' in the contexts in which it appears in the Legal Practice Act (395 - 396).

59 Anderson J went on to refer to the earlier decision of Smith J in Eumeralla Finance Co Pty Ltd v Law Institute of Victoria [1973] VicRp 8; [1973] VR 98 where his Honour had expressed the view obiter, to the effect that consequential losses did not fall within the words 'actual pecuniary loss' used in s 64(5) of the Legal Profession Practice Act (104).

60 Anderson J arrived at the same conclusion and held that 'actual pecuniary loss' should be construed as extending to 'only such pecuniary loss as stemmed from the value of the money or property the subject matter of the defalcation' (398). It should however be noted that there were provisions in the Legal Profession Practice Act which specifically conferred an entitlement to interest on claims, and which assisted Anderson J to arrive at that conclusion - cf s 95(3) of the Act. Nevertheless, the basic reasoning adopted by Anderson J, which involves giving some effect to the word 'actual' appears to me to apply with equal force to the use of that word in s 95(2) of the Act, and reinforces my conclusion as to the limited ambit of losses reimbursable from the Fidelity Guarantee Account provided by the concluding words of s 93(1) of the Act; loss 'only to the extent of the defalcation'.

61 It follows that there is no argument to be derived from s 95(2) of the Act which could have the effect of distinguishing the decisions in the two Cohen Cases. To the contrary, the words of the section reinforce the propositions for which those cases are authority.

62 Notwithstanding the clear authority of two decisions of the Full Court of this court which is determinative of the applicants' contentions, reliance was placed upon decisions from other jurisdictions made in other statutory contexts in support of those contentions. Out of deference to the argument advanced I will refer briefly to those cases, although before doing so it is vital to note that none of the cases to which reference was made involved the interpretation of statutory provisions which include any provision analogous to the limitation provided by the concluding words of s 93(1), which limit any claim for reimbursement from the Fidelity Guarantee Account 'only to the extent of the defalcation'. As the Cohen Cases make clear, those words are vital to the proper construction and effect of the statutory scheme created by the Act, and by their natural and ordinary meaning, compel the conclusion that the applicants' claim for reimbursement of interest liability incurred by them in borrowing funds which were provided to Shoalwater must be rejected.

63 In Schofield v Consolidated Interest Fund (1988) 49 SASR 546 the applicants claimed against the Consolidated Interest Fund created by the Land and Business Agents Act 1973 (SA) for an amount which included interest which would have been earned had the agent to whom the applicants had provided funds invested those funds according to the instructions given, rather than misapply them for his own purposes. Section 72 of the Act limited claims against the fund to 'the actual pecuniary loss suffered by the claimant in consequence of the fiduciary default'.

It seems to me that, at first sight, when the draftsman employed the expression 'actual pecuniary loss' he did so advisedly, with the positive intention of identifying only that direct monetary loss which is the subject of the actual defalcation (552).

65 Olsson J drew support for that conclusion from the decisions in Dobcol and Eumeralla Finance. After referring to those cases he concluded:

In particular due weight must be accorded the use of the word 'actual' in the context in which it appears. I am inexorably drawn to the conclusion that the draftsman was deliberately excluding considerations such as the economic loss occasioned by the failure of the broker to put the trust funds for their intended use, whatever that proposed use may have been. What he clearly had in mind and was at pains to emphasise was that the fund was to be applied - subject only to the limitations of available moneys in it - in the reimbursement of the actual subject matter of a fiduciary default.

This is the more so when it is borne in mind that, as was pointed out by Burchett J in Re Vassis; Ex parte Leung [1986] FCA 21; (1986) 9 FCR 518, 526 - 527, there is a clear distinction between the nature of claims for the actual trust moneys misappropriated and other consequential claims for damages which may arise from a breach of trust. The former constitutes a liquidated equitable debt, whereas the latter is essentially an unliquidated claim for damages - given that the proper quantum of those damages may fairly readily be established in pecuniary terms by reference to the arrangement made between the parties (554 - 555).

66 The decision in Schofield provides no support for the applicants' contentions.

67 In Re Queensland Law Society Incorporated [1995] 1 Qd R 381 the relevant legislation (the Queensland Law Society Act 1952 (Qld)) limited recovery from the relevant fund to 'the actual pecuniary loss suffered'. In that context, Ryan J applied the reasoning in Dobcol and concluded that claims against the fund were limited to the value of the money or property which was the subject of the defalcation (386).

68 There is nothing in this decision which supports the applicants' contentions.

69 Florence v New Zealand Law Society [1989] 1 NZLR 132 concerned the proper construction and effect of s 169 of the Law Practitioners' Act 1982 (NZ) which provided that the fund created by the Act was to be held and applied for the purpose of reimbursing 'persons who may suffer pecuniary loss by reason of the theft by a solicitor ... of any money or other valuable property entrusted to him ...' The case concerned a claim for reimbursement of certain amounts including interest and costs included in a judgment obtained against the claimant as a consequence of the solicitor's theft. Cooke P expressed the view that in their natural and ordinary meaning, the words conferring the right of reimbursement extended to:

[A]nything which may fairly be described as pecuniary loss suffered by reason of theft of money entrusted to a solicitor in the course of his practice. Claims for mental distress and the like are clearly excluded, but once a pecuniary loss is established and a real or substantial causal connection with the theft, there is nothing in the language of the section or the public safeguard aim of the statute which seems to me adequate to cut down what is in effect a statutory indemnity (135).

70 Richardson and Barker JJ agreed. All members of the court distinguished the decision in Dobcol on the basis of the different statutory language used, and in particular, the emphasis given in Dobcol to the effect of the use of the word 'actual'.

71 The legislation conferring the entitlement to reimbursement in Florence was very different in its terms not only to the legislation considered in Dobcol, but also to the legislation considered in the two Cohen Cases and the Act. In particular, with one exception to which I will shortly turn, the New Zealand legislation contained none of the words of limitation which have been found to be significant in the proper construction of the Australian legislation.

72 The exception is that s 171(3) of the New Zealand legislation provided that:

No amount shall be paid or payable out of the fund as interest on the amount of any judgment obtained or of any claim admitted against the fund.

73 It will be noted that those terms are relevantly identical to s 95(3) of the Act. Cooke P considered that the provision was:

[O]bviously enough, referring to interest on judgments or admitted claims against the fund, not to any lost interest which is an item in the claim for pecuniary loss itself.

74 It might be argued with some force that those observations draw upon the context in which the statutory provision was found, being in particular a context which contained no words of limitation upon the ambit of the loss recoverable against the fund, and that a different conclusion might be drawn with respect to the proper interpretation of s 95(3), viewed in its particular statutory context. It is, however, unnecessary to resolve this issue of construction for the purposes of this case, as the limitation upon the ambit of reimbursement contained within the concluding words of s 93(1) of the Act, reinforced by the language of s 95(2), is sufficient to compel the rejection of the applicants' claims for reimbursement of interest liabilities incurred.

75 Given the significant differences in the statutory language considered in Florence, it provides no support for the applicants' contentions.

Public Trustee v The Attorney General for the State of South Australia & The Law Society

76 Public Trustee v The Attorney General for the State of South Australia & The Law Society [2000] SASC 184 concerned the proper construction and effect of provisions of the Legal Practitioners' Act 1981 (SA) concerning claims against the Legal Practitioners' Guarantee Fund created by that Act. Section 60 of the Act provided that a person who suffered loss as a result of a fiduciary or professional default could claim compensation, the amount of which was not to exceed 'the actual pecuniary loss suffered by the claimant in consequence of the fiduciary or professional default'.

77 It is of the utmost significance to the decision in the case that the expression 'fiduciary or professional default' was defined by s 5(1) as follows:

(a) any defalcation, misappropriation or misapplication of trust money received in the course of legal practice by the legal practitioner or a firm of which the legal practitioner is a member; or

(b) any wrongful or negligent act or omission occurring in the course of practice as a legal practitioner, or a firm of which the legal practitioner is a member,

whether committed by the legal practitioner, an employee of the legal practitioner or any other person.

78 This provision is of significance because its effect was to extend the ambit of claims against the fund to include losses suffered not just by reason of misappropriation or misapplication of trust moneys, but so as to include losses suffered as a consequence of 'any wrongful or negligent act or omission'.

79 As it happens, the case was concerned with misappropriation of trust funds, and in particular the misappropriation of funds which had been placed by the errant solicitor in interest-bearing bank accounts. The claim included the interest that had been earned on those funds prior to their misappropriation, and the interest that would have been earned if the funds had not been misappropriated.

80 Gray J (with whom Olsson and Wicks JJ agreed) distinguished the earlier decisions in Schofield, Dobcol, Re Queensland Law Society and Ex parte Cohen on the basis of material differences in the legislative schemes there under consideration. In his Honour's view, the vital distinction was the much broader ambit of the professional misconduct which could give rise to a claim against the fund under the South Australian legislation. In his Honour's view the reasoning in those cases:

[L]oses its force when the extended definition of fiduciary or professional default is considered. The actual pecuniary loss can be in consequence of a wrongful or negligent act or omission. The actual pecuniary loss is not limited to money, the subject of defalcation [33].

81 There are two vitally significant differences between the South Australian legislation considered in Public Trustee and the Act. First, claims against the Fidelity Guarantee Account created by the Act do not extend to losses arising from any wrongful act or omission by a licensee, but are significantly more constrained. Second, in the South Australian legislation the only restriction upon the ambit of claim was to be found in the use of the expression 'actual pecuniary loss' - there was no provision limiting reimbursement 'only to the extent of the defalcation of the licensee'. These significant statutory differences were the reason why the South Australian court distinguished the previous Australian decisions.

82 When the significance of these statutory differences is appreciated, Public Trustee provides no support for the applicants' contentions.

83 Legal Services Board v Gillespie-Jones [2013] HCA 35 was concerned with a claim made by a barrister against the Legal Practitioners' Fidelity Fund created pursuant to the Legal Profession Act 2004 (Vic), in respect of unpaid fees following the misappropriation of trust funds by that barrister's instructing solicitor. Section 3.6.7(1) of the Act provided that a person who suffered 'pecuniary loss because of a default to which this Part applies' could make a claim against the fund to the board responsible for its administration. Significantly, s 3.6.2 of the Act defined 'pecuniary loss' to mean:

(a) the amount of trust money, or the value of trust property, that is not paid or delivered; or

(b) the amount of money that a person loses or is deprived of, or the loss of value of trust property.

84 All members of the court agreed that the barrister's claim should be dismissed, although different reasons were expressed for that conclusion in two joint judgments. The joint reasons of French CJ, Hayne, Crennan and Kiefel JJ contain no observations of relevance to the issues in this case. However, the applicants rely observations contained in the joint judgment of Bell, Gageler and Keane JJ.

85 As those members of the court concluded that funds which had been provided by the client and which were to be used for, inter alia, payment of the barrister's fees, were held by the solicitor on trust for the client, not the barrister, the question which had to be considered was whether the barrister was a person who was entitled to compensation from the Fidelity Fund. In that context their Honours observed:

Under Pt 3.6 of the Act, the relevant provisions of which have already been set out, the entitlement of a person to claim against the Fidelity Fund requires: first, a 'default' by a law practice; secondly, the suffering of 'pecuniary loss' by the person; and thirdly, the existence of a relevant causal connection between the suffering of that pecuniary loss and that default, connoted by the words 'because of'. The amount payable is then limited to 'the amount of the person's actual pecuniary loss resulting from the default'.

Exposition of those requirements and that limitation is assisted by reference to legislative history. At the time of the adoption of the model law in 2004, different provisions for claiming compensation from fidelity funds existed in legislation regulating the legal profession in each State and Territory. Most relevant for present purposes is the legislation then existing in Victoria and New South Wales.

Legislation then existing in Victoria provided for the fidelity fund in that State to be applied 'for the purpose of compensating persons who suffer pecuniary loss from a defalcation of, or in relation to', money received by a legal practitioner for or on behalf of a person, other than the practitioner, in the course of or in connection with the practitioner's legal practice. That language had been held not to require a claimant to be either a client who paid the money or a person on whose behalf the money was received. A claim was limited to 'the amount of the actual pecuniary loss suffered by the person'. That language had been held to refer to the loss represented by the monetary value of the money the subject of the defalcation and not to include other consequential loss resulting from the defalcation.

Legislation then existing in New South Wales provided for the fidelity fund in that State to be applied 'for the purpose of compensating persons who suffer pecuniary loss because of a failure to account'. It defined 'failure to account' as 'a failure by a solicitor to account for, pay or deliver money ... received by, or entrusted to, the solicitor ... in the course of the solicitor's practice'. That statutory definition reflected judicial explanation of the expression 'failure to account' in the Legal Practitioners Act 1898 (NSW) as a 'failure to pay or deliver moneys ... to or on behalf of a person entitled thereto at the time when such payment or delivery should reasonably have been made'. Accordingly, there was a 'failure to account' if and when, 'contrary to the mandate on which he had received the moneys' a solicitor misappropriated them. The legislation in an earlier form had provided for the fidelity fund to be applied 'for the purpose of reimbursing persons who may suffer pecuniary loss by reason of the theft, or fraudulent misapplication by a solicitor ... of any moneys ... entrusted to the solicitor ... in the course of his practice as a solicitor' It had been held in that form to confine application of the fund to the reimbursement of persons 'having a legal or equitable interest in the moneys entrusted to the solicitor'.

Turning first to the requirement of the model law enacted in Pt 3.6 that there be a 'default' by a law practice, it is apparent that the definition of 'default' in Pt 3.6 builds on the definition of 'failure to account' in the previous New South Wales legislation, qualifying it to apply only to a case where the failure arises from or is constituted by an act or omission of an associate that involves dishonesty. There is a default within the meaning of the Part where a law practice, by reason of the dishonesty of an associate, fails to pay or deliver trust money according to the mandate on which the trust money was received and is held by the law practice. The default lies specifically in that failure to pay or deliver trust money, not in any broader pattern of dishonest conduct of which that failure might form part.

Turning next to the requirement of the model law enacted in Pt 3.6 that a person suffers 'pecuniary loss', the definition of 'pecuniary loss' in Pt 3.6 did not appear in the previous New South Wales or Victorian legislation or in the previous legislation of any other State or Territory. The first limb of the definition (referring to 'the amount of trust money ... that is not paid or delivered') is plainly limited to the amount of trust money that the law practice fails to pay or deliver by reason of the dishonesty of an associate. However, the second limb (referring to 'the amount of money that a person loses or is deprived of') plainly extends beyond the amount of trust money that the law practice fails to pay or deliver so as to encompass a loss or deprivation of other money that results from such a failure to pay or deliver trust money.

While the model law enacted in Pt 3.6 adopts the language of the previous Victorian legislation in limiting the amount payable to 'the amount of the person's actual pecuniary loss resulting from the default', that limitation must be read with the two limbs of the definition of pecuniary loss. The word 'actual' no doubt serves to exclude possible or contingent pecuniary loss. However, unlike the position under the previous Victorian legislation, actual pecuniary loss is not limited to the amount of trust money that is not paid or delivered. It extends by virtue of the second limb of the definition of pecuniary loss to a consequential loss or deprivation of money [129] - [135] (foonotes omitted).

86 Two propositions relevant to the issues in this case may be extracted from this portion of their Honours' reasons.

87 First, their Honours implicitly approved the reasoning in Dobcol, restricting loss to the monetary value of the money the subject of the defalcation and excluding other consequential losses resulting from the defalcation. Second, the only reason for drawing a different conclusion in relation to the more recent Victorian legislation considered by their Honours was the extended definition of 'pecuniary loss' which was not limited to the amount of trust money not paid or delivered, but, by its second limb, extended to consequential losses or the deprivation of money.

88 As the Act contains no provisions equivalent to the extended definition of 'pecuniary loss' found in the relevant Victorian legislation, the proper conclusion to be drawn from their Honours' observations is that the Act should be construed in the same way as the relevant Victorian legislation was construed in Dobcol. It follows that this decision provides no support for the applicants' contentions.

89 The contentions which the applicants wish to advance are contrary to the natural and ordinary meaning of the statutory scheme giving rise to their claimed entitlement, and in particular to the provision which limits their claim to reimbursement 'only to the extent of the defalcation of the licensee'. There are two decisions of the Full Court of this court which provide clear and unequivocal authority which is directly contrary to the contentions which the applicants wish to advance. There is no basis upon which those decisions can be distinguished, nor was it suggested that those decisions are wrong. When proper account is taken of the differences in relevant legislative schemes applicable in other jurisdictions, the applicants' contentions do not derive any support from any decision relating to those legislative schemes.

90 In these circumstances, the decision of the Tribunal is not attended with sufficient doubt to justify either the grant of an extension of time within which to apply for leave to appeal, or the grant of leave to appeal. Those applications should therefore be dismissed.