Loh Min Choo v State of New South Wales

Background 7Most of the facts are not in dispute. I acknowledge that I have gratefully adopted most of these facts from the parties' submissions. 8For a period of time up to November 2006, the plaintiffs owned a property at Rose Bay ("the Rose Bay Property"). 9For a period of time until 7 October 2008, Affluent Properties held a corporation licence under the Property, Stock and Business Agents Act . 10From 20 December 2006 to 19 December 2008 Rodney Prestia held a real estate agent's licence under the Property, Stock and Business Agents Act . 11Between September 2005 to 21 November 2007, and between 10 January 2008 to 16 December 2009, Rodney Prestia was a director of Affluent Properties. At all relevant times Affluent Properties operated the business of a real estate agent trading under the name Century 21 Property Group, Double Bay.

The agency agreement 12On 25 August 2006 the plaintiffs (as principals) and Affluent Properties (as agent) entered into an agreement titled "Sales Inspection Report and Exclusive Agency Agreement" in respect of the Rose Bay Property ("the Agency Agreement"). Terms of the Agency Agreement included the following provisions: "Agent's remuneration 3. The Exclusive Agent shall be entitled to a fee of 1.25% incl GST if during the Exclusive Agency Period the property is sold. ... Expenses 6. The Agent shall be entitled to reimbursement for the following expenses incurred by them: Not applicable 7. Note: The fees and expenses cannot be varied except as agreed by the Principal in writing. ... Principal's Fee Obligation 10. The fee to which the Agent is entitled shall be due and payable on completion of the sale or upon demand if the sale is not completed owing to the default of the Principal after the parties have entered into a binding contract. The fees and expenses cannot be varied except by the Principal in writing. Deposit 11. It is irrevocably agreed that all monies paid by the purchaser as deposit monies shall be held by the Agent in trust as stakeholder pending completion."

Rose Bay sale contract 13On or about 5 September 2006, the plaintiffs (as vendors) and Flat Plan Pty Ltd (as purchaser) entered into a contract for the sale of the Rose Bay Property ("the Rose Bay Sale Contract"). Terms of the Rose Bay Sale Contract included the following: (a) The contract price was $ 14,200,000. (b) The deposit was $5,000,000 14Pursuant to clause 44, in respect of the deposit: (a) 10% of the purchase price (ie $1,420,000) was to be paid on the date of exchange; and (b) the balance of the deposit (ie $3,850,000) was to be paid within 25 days from the date of exchange. 15Clause 2 relevantly provided: "2.1 The purchaser must pay the deposit to the depositholder as stakeholder. 2.9 If each party tells the depositholder that the deposit is to be invested, the depositholder is to invest the deposit (at the risk of the party who becomes entitled to it) with a bank ... in an interest bearing account in NSW, payable at call, with interest to be reinvested, and pay the interest to the parties equally ..." 16Clause 16 relevantly provided: "16.9 If any of the deposit is not covered by a bond or guarantee, on completion the purchaser must give the vendor an order signed by the purchaser authorising the depositholder to account to the vendor for the deposit. 16.10 On completion the deposit belongs to the vendor."

The transfer of funds 17On 5 September 2006, Affluent Properties received a cheque in the amount of $1,420,000, which was the first part of the deposit of $5,000,000. On the same occasion, the parties directed Affluent Properties to invest the deposit (in accordance with clause 2.9 of the Rose Bay Sale Contract). 18On or about 7 September 2006, Affluent Properties deposited the cheque in the sum of $1,420,000 into an account at the National Australia Bank in the name of "Century 21 Double Bay at Flatwell Pty Ltd and Choo and Lim" with account number ("the Deposit Trust Account"). 19On and from 7 September 2006, Mr Prestia commenced transferring money out of the Deposit Trust Account without the knowledge or authority of the plaintiffs for the benefit of Affluent Properties, Mr Prestia, or some other companies or individuals with which or with whom Mr Prestia was associated. The transfers were as follows: (a) On 7 September 2006, $300,000 was transferred to Century 21 as "Commission". (b) On 19 September 2006, $120,000 was transferred to Century 21. (c) On each of 5, 16 and 25 October, $20,000 was transferred out of the account. (d) On 2, 6, 8, 17, 20 and 24 November 2006, $10,000, $20,000, $20,000, $10,000, $10,000 and $15,000 respectively was transferred out of the account. (e) On 4 December 2006, $262,916 was transferred out of the account. 20On or about 27 September 2006, Affluent Properties received a cheque in the amount of $3,580,000, which was the second and final part of the deposit of $5,000,000. 21On 29 September 2006, Affluent Properties deposited the cheque into the Deposit Trust Account.

Completion of Rose Bay contract 22On 17 November 2006, the sale of the Rose Bay Property was completed. On that day, the plaintiffs authorised and directed Affluent Properties to account to them for the deposit. Also on 17 November 2006, following adjustments, the purchaser paid to the vendors (the plaintiffs) the balance of the purchase price of $9,208,962 by way of a bank cheque. 23By letter dated 17 November 2006, the solicitor for the plaintiffs wrote a letter to Mr Prestia which stated: "We advise the above mentioned matter settled today and you are now authorised and directed to account to the vendor for the deposit and to the vendor and purchaser for any interest accrued." 24As at the completion of the sale of the Rose Bay property, Affluent Properties was obliged to account to the plaintiffs for the deposit as follows (the amount of commission is disputed and is discussed further below): Deposit $5,000,000.00 Half of the interest on the deposit 11,458.28 Sub-total $5,011,458.28 Less - commission payable to Affluent Properties $ 224,993.34 Affluent Properties obliged to account for $4,786,464.94

Mrs Loh's evidence in relation to the funds 25In respect of the amount of $5,000,000, being the deposit, Mrs Loh's evidence is that she had several conversations with Mr Prestia. The first conversation occurred shortly after the Rose Bay sale contract was completed. The first conversation was as follows: Prestia: You should keep some of the proceeds in Australia and I can look out for some property development opportunities for you. I suggest you keep about $1.2 million here split over two accounts. I can arrange for two trust accounts to be set up for you ... Loh: I do not want them set up as trust accounts. Set up one in my name and one in my husband's name. 26Mrs Loh hand another conversation shortly thereafter with Mr Prestia the following effect: Prestia: Nick has brought paperwork to open two accounts at his branch of the National. I suggest you pay $600,000 into each account from the proceeds of the sale: Loh: Yes. And transfer the rest of the monies from the sale into my UBS account. I then signed documents shown to me by Mr Popovich ..." 27Mrs Loh said that at the conclusion of this second conversation she signed documents produced to her by Mr Popovich who was present during the discussion with Mr Prestia. 28On 20 November 2006, Mr Prestia transferred $3,580,000 from the Deposit Trust Account to an account at the National Australia Bank following which the money was transferred to a UBS account of the plaintiffs on the same day. In October 2008, Mrs Loh signed a statutory declaration stating that she and her husband received this money. 29Shortly after the completion of the sale, the plaintiffs directed Affluent Properties to account to them for the deposit by paying approximately $1,200,000 of the deposit into two accounts to be opened for the plaintiffs at the Chatswood branch of the National Australia Bank, with the payments to be split between those two accounts. The balance of the deposit was to be paid into an account held by the Mrs Loh with UBS. There is no dispute that Affluent Properties paid $3,580,000 of the deposit into the UBS account as directed by the plaintiffs. 30On 20 November 2006, the plaintiffs received $12,788,927 which appears to correspond with the payment of: (a) $9,208,962 plus interest on 17 November 2006; and (b) $3,580,000 on 20 November 2006. 31On 30 November 2006, Mr Prestia told the plaintiffs that Affluent Properties had paid $600,000 into an account in the name of the first plaintiff at the Chatswood branch of the National Australia Bank ("the first NAB account"); and the sum of $582,973.59 into an account in the name of the second plaintiff at the Chatswood branch of the National Australian Bank ("the second NAB account"). 32There is no dispute that on either 4 or 5 December 2006, Affluent Properties paid the sum of $600,000 into the first account in accordance with the directions of the plaintiff. It is however contended that no money was deposited into the second Nab account and is, as I understand it, accepted by the defendants that Affluent Properties did not pay the sum of $582,973.59 or any other amount into that account or any other account in that name of either of the plaintiffs. 33The plaintiffs submitted that resulted in Affluent Properties failing to account to the plaintiffs for the deposit in the amount of $606,464.94, calculated as follows: Deposit, plus half the interest, less commission $4,786,464.94 claimed by the defendants Less - amount paid into UBS account $3,580,000.00 Less - amount paid into First bank account 600,000.00 Affluent Properties failed to account for $606,464.94

34The defendant disputes $11,458.28 of this sum, which comprises half of the amount of interest that was earned on the deposit. The defendant submitted the plaintiffs are not entitled to this sum, even if they pass through the gateway provision of s 173(2) of the Act. 35As at 4 or 5 December 2006, the plaintiffs believed that Affluent Properties had accounted to them for the deposit, in part, by paying $582,973.59 into the NAB account. Mr Prestia provided the plaintiffs with reconciliation statements and copies of bank deposit slips, which purported to show that the sum of $582,973.59 had been paid in the second NAB account. 36Also around this time, Mr Prestia met with Mrs Loh at her daughter Sylvia's house. Mrs Loh described what occurred at two meetings as follows: "Shortly after the occasion when I signed the documents shown to me by Mr Popovich, Mr Prestia came to my daughter's home again and gave me:

1. invoice for acting on the sale of the property...; and
2. document titled (sic) "Reconciliation of Funds Disbursed"... ... After briefly looking at the invoice, Mr Prestia and I had a conversation to the following effect: Loh: "This invoice does not look right." Prestia: "...I will take a look at it and get back to you." A few days later Mr Prestia came to my daughter's home again and gave me the following documents:
3. A further invoice for acting on the sale of the property; and
4. A document commencing with the words "We confirm that we have remitted the following into your national bank Account"... After Mr Prestia gave me those documents, we had a conversation to the following effect: Loh: "...The invoice still does not seem right to me." Prestia: "...It is right." Loh: "I will have to have a proper look at it." Prestia: "The monies are already in your accounts. I will show you the deposit slips sometime." 37In respect of the two documents Mr Prestia gave Mrs Loh at the first of the two meetings: (a) The invoice ("the first invoice") recorded (inter alia): (i) the sales commission charged by Affluent Properties as totalling $213,000; (ii) Disbursements and/or expenses charged by Affluent Properties as totalling $24,743.34; and (iii) The "[t]otal payable to Century 21 Property Group Double Bay" as $242,743.34, being the aggregate of (i) and (ii) above. 38The words "Marjorie Lim and Sylvia Dan...Bryant Lim..." were handwritten at the top of the document and, according to Mrs Loh, were written prior to her being shown the document. (b) The document entitled "Reconciliation of Funds Disbursed" ("the first reconciliation statement") recorded (inter alia): (i) That the first invoice had been rendered (the amount of which was $242,743.34); (ii) Two UBS transfers of $3,580,000 and $9,208,962 as debits. (iii) A debit of $600,000 in respect of the "Majorie Lim NAB Holding Account". (The first NAB account.) (iv) A debit in the amount of $582,973.59 in respect of the "Bryant Lim NAB Holding Account". (The second NAB account). 39In respect of the two documents that Mr Prestia gave Mrs Loh at the second of the two meetings: (a) The invoice ("the second invoice") contained recorded. (i) The sales commission of Affluent Properties as totalling $195,250 (a reduction of $17,750 on the amount claimed in the first invoice). (ii) Disbursements and/or expenses charged by Affluent Properties as totalling $29,743.34 (the same figure charged in the first invoice). (iii) The "Total payable to Century 21 Property Group Double Bay" was $224,993.34, being the aggregate of (i) and (ii) above. (b) The second document provided By Mr Prestia to Mrs Loh at that meeting was untitled (untitled document) stated (inter alia): "We confirm that we have remitted the following payments into your national bank Account:

1. Account 1: Majorie Lim and Sylvia Lim... $600,000
2. Account 2: Bryant Lim and Sylvia Lim... $582,973.59" 40The document records that "[t]otal [p]ayment still outstanding to Majorie $26,819.00". 41There is handwriting on the second reconciliation statement. Mrs Loh states: (a) The handwritten notations that appear on the document level with the printed notations were made by Mr Prestia in the presence of Mrs Loh and in the course of a conversation between the two concerning the figures. (b) The handwritten notations below the printed notations were made by Mrs Loh "shortly after" the above conversation. 42Part of the handwritten notation involves crossing out the figure of $23,967 and inserting the figure of $26,819. 43Mrs Loh stated that these two meetings occurred "shortly after 17 November 2006" (statutory declaration dated 13 October 2008). In light of the handwritten words at the top of the first invoice, it is likely that the first meeting occurred after Mr Prestia deposited $600,000 into the first NAB Account on 4 or 5 December 2006. In cross examination Mrs Loh could not remember exactly when the second meeting occurred but stated that it was "a few days" or "not long after" after the first meeting. In relation to the gap between the two meetings, were the two meetings within a few days of each other or within a week or two weeks? 44In October 2007, Mrs Loh became concerned that she had not received any statements for the second NAB account which she believed had been opened at the Chatswood branch of NAB. 45On 18 October 2007, Mrs Loh sent an e-mail to Nick Popovich at NAB as follows: "I have not been receiving Bryant's deposit statement since we started the account. Please send me the statement on a regular basis to the following postal address ..." 46On 18 October 2007, Mr Popovich replied as follows: "Hi Marjorie Trust accounts usually have half yearly statements that go directly to the trustee, in this case Century 21 Double Bay. If you have any questions with relation to this account, please speak to Rodney Prestia" 47Mrs Loh said that: "I phoned Mr Prestia in late October 2007 after my e-mail correspondence with Mr Popovich and had a conversation with him to the following effect: Loh: Please arrange for the rest of the deposit in my husband's account with NAB to be transferred to me. Prestia: OK. I do not now recall but it is possible that by 7 November 2007 I had made a further telephone call to Mr Prestia to follow up my request for the monies held in the remaining NAB account to be transferred to me. My recollection is that on the first few occasions that I spoke with Mr Prestia to follow up on my request that the monies held be transferred to me, he said words to the effect "I will get onto it". " 48Mr Prestia did not transfer to the plaintiffs any money in response to the request by Mrs Loh. 49On 19 August 2008, the plaintiffs commenced proceedings against Affluent Properties and its principal, Mr Prestia, in the Equity Division of this Court ("the equity proceedings"). In those proceedings the plaintiffs sought orders against 7 defendants including Affluent Properties and Mr Prestia for amounts exceeding $600,000. All told the plaintiffs claimed $736,566.14. 50Under letter dated 3 November 2008 the plaintiffs' solicitors lodged three claim forms against the Fund and accompanying material with the New South Wales Office Fair Trading. It was not disputed that the Office of Fair Trading received the forms and accompanying material on 5 November 2008. The forms, which were in the name of Mrs Loh and Mr Lim, disclosed that the plaintiffs claimed $606,939.80, $47,493.34 and $40,500.00 plus interest and costs on each amount. (For ease I shall term these transaction 1, 2 and 3 respectively.) Each of the claim forms stated that the failure to account was committed by "[Mr] Prestia of Affluent Properties..." and attached documents entitled "details of the transaction" which outlined the facts and circumstances giving rise to the claims. 51The claim form in respect of transaction 1 lists the date that loss was suffered as being 17 November 2006. The attached details of transaction document relevantly provides: "CIRCUMSTANCES OF FINDING OUT ABOUT THE LOSS (Section 3)

11. My husband and I first became aware of the failure to account when Century 21 Double Bay failed to account to us following my requests which commenced in about December 2007." 52The claim form in respect of transaction 2 also lists the date that the loss was suffered as being 17 November 2006. The attached details of transaction document relevantly provides: "CIRCUMSTANCES OF FINDING OUT ABOUT THE LOSS (Section 3) "8. My husband and I first became aware of the failure to account for the proceeds of sale due on completion as a result of Century 21 Double Bay overcharging the amount properly due for commission when we obtained legal advice in mid-August 2008 at the time of commencing proceedings against Century 21 Double Bay and Mr Rodney Prestia. It was only after receiving this advice that my husband and I became aware that Century 21 Double Bay had deducted an amount of $224,993.34 from the monies payable to my husband and I on completion and that the correct calculation of the commission payable was $117,500.00" 53The claim form in respect of transaction 3 lists the date that the loss was suffered as being 30 June 2008. The attached details of transaction document relevantly provides: "CIRCUMSTANCES OF FINDING OUT ABOUT THE LOSS (Section 3)
12. My husband and I first became aware of the failure to account when Century 21 Double Bay failed to account to us following my requests which commenced in about April 2008." 54Under letter to the plaintiff's solicitors dated 27 August 2009 the Office of Fair Trading advised that consideration of the plaintiffs' claims would be deferred until the equity proceedings had been finalised. 55On 12 October 2009 , the plaintiffs obtained judgment in the equity proceedings against Affluent Properties and Mr Prestia ordering each to pay the sum of $694,452.28 and a further sum of $22,025 against Affluent Properties for damages. An order for costs was also made against Affluent and Mr Prestia. The plaintiffs have not recovered any amount in satisfaction of that judgment. 56On 22 October 2009 the plaintiffs' solicitor wrote to the Office of Fair Trading advising that judgment had been entered in the equity proceedings. A further letter was sent by the plaintiffs' solicitor on 10 November 2009 enquiring as to the progress of the assessment of the plaintiffs' claims. 57Under letter dated 15 December 2009 the Office of Fair Trading advised that the Director-General had "formed the view that your clients became aware of the failure to account before 7 November 2007" (the plaintiffs' "joint claim" having been received by the by the Director-General on 7 November 2008 ) and therefore the "claim [had] not been made within the period specified in section 173(2)(a) of the [ Property, Stock and Business Agents ] Act." On 8 January 2010 the plaintiffs' solicitor wrote to the Office of Fair Trading enquiring as to the basis upon which the Office of Fair Trading formed the view that the plaintiffs had become aware of the failure to account prior to 7 November 2007. A letter in reply was sent by the Office of Fair Trading on 9 February 2010. (As this is not a judicial review of the decision of the Office of Fair Trading it is unnecessary for me to set these reasons out). A further letter was sent by the plaintiffs' solicitor on 30 March 2010 which, in essence, disputed the findings made by the Office of Fair Trading and inviting the Director-General to re-consider the determination in respect of transaction 1. The Office of Fair Trading wrote to the plaintiffs' solicitor informing her that none of the plaintiffs' claims had been disallowed but rather the claim in respect of transaction 1 could not be made because it was not made within the time period specified in s 173(2)(a) of the Property, Stock and Business Agents Act . A letter in response was sent by the plaintiffs' solicitor on 13 April 2010. On 8 June 2010 the Office of Fair Trading wrote to the plaintiffs' solicitor informing her that the claims in relation to transactions 2 and 3 were not made within the specified time in s 173(2)(a). 58On 15 June 2010 the plaintiffs filed a statement of claim in this Court seeking, amongst other things, declaratory relief against the Director-General in respect of the determinations regarding the plaintiffs' claims. By instrument dated 28 March 2011 the Director-General gave leave pursuant to s 174(1) of the Property, Stock and Business Agents Act to the plaintiffs to commence the current proceedings.

The legislative framework 59Part 10 of the Property, Stock and Business Agents Act contains the relevant provisions relating to the Fund. Section 165 provides for the establishment and maintenance of the Fund by the Director General while Division 3 provides for the making of claims against the Fund. 60Section 173 of the Act relevantly provides the means by which claims may be made: "173 Claims against Compensation Fund (1) The Compensation Fund is held, and is to be applied, for the purpose of compensating persons who suffer pecuniary loss because of a failure to account. (2) A person who claims to have suffered a pecuniary loss because of a failure to account may make a claim against the Compensation Fund, but only if the claim is made in writing to the Director-General within: (a) a period of 12 months after the person has become aware of the failure to account, or (b) a period of 2 years after the date of the failure to account, whichever period ends first. (3) However, a claim caused by a failure of a licensee (or an employee or agent of a licensee) to lodge a rental bond with the Rental Bond Board may also be made at any time within one year after the termination of the tenancy agreement. (4) A licensee does not have a claim against the Compensation Fund in respect of a pecuniary loss suffered in connection with the licensee's business as a licensee because of a failure to account. (5) Subject to this section, the Director-General may receive and allow, in whole or in part, any claim against the Compensation Fund at any time after the relevant failure to account arose. (6) The Director-General may disallow any claim, in whole or in part, in appropriate cases. In particular the Director-General may disallow a claim to the extent that pecuniary loss was suffered as a result of a failure to mitigate loss or was occasioned by unreasonable delay in making a claim." 61Section 170 defines "pecuniary loss" resulting from a failure to account as including: "(a) all costs (including the legal costs and disbursements of making and proving a claim), charges and expenses that a claimant has suffered or incurred as a direct consequence of the failure to account, and (b) all interest on money or other valuable property that a claimant would have received but for the failure to account for the money or other property, with that interest calculated to the date on which the Director-General determines the claimant's claim or a judgment is recovered against the Director-General in relation to the Compensation Fund in respect of that money or other property." 62Section 171 defines "failure to account": "171 Meaning of "failure to account" (1) In this Division, a reference to a failure to account is a reference to a failure by a licensee to account for money or other valuable property entrusted to the licensee or an associate of the licensee in the course of the carrying on of the licensee's business as a licensee. (2) This Division applies only to a failure to account that arises from an act or omission of the licensee or associate. (3) For the purposes of this Division, it does not matter that the failure to account occurred after the licensee ceased to be licensed, if the money or other valuable property concerned was entrusted to the licensee (or an associate of the licensee) before the licensee ceased to be licensed. (4) This Division applies whether the failure to account, or the act or omission, took place before or after the commencement of this Division." 63Section 174 provides for the commencement of proceedings in relation to the Fund: "(1) A person cannot, without the leave of the Director-General, commence any proceedings in relation to the Compensation Fund unless the person has made a claim and the Director-General has disallowed the person's claim. (2) A person cannot recover from the Compensation Fund by way of any such proceedings an amount greater than the amount of pecuniary loss suffered by the person, after deducting from the total amount of the pecuniary loss: (a) the amount or value of all money or other benefits received or recovered from any source (other than the Compensation Fund) in reduction of the pecuniary loss, and (b) any such amount or value that, in the opinion of the Director-General, might have been received or recovered but for the person's neglect or default. (3) Any proceedings in relation to any claim against the Compensation Fund are to be as for a debt due by the Crown and are to be brought in a court of competent jurisdiction. The proceedings do not lie against the Director-General. (4) In those proceedings: (a) all defences that would have been available to the licensee in relation to whom the claim arose are available to the Crown, and (b) all questions of costs are in the discretion of the court or, where the proceedings are tried with a jury, the judge presiding at the trial. (5) Any order for the payment of costs made by the Local Court operates as a judgment debt under the Civil Procedure Act 2005 and is enforceable as such under that Act. (6) No proceedings can be brought against the Crown in relation to a claim against the Compensation Fund after the end of: (a) a period of 6 months after the claimant has been notified that the claim has been disallowed, or (b) such longer period as the court may permit, on sufficient cause being shown and on such terms as it thinks fit." 64Section 175 provides for the capping of the amount which may be awarded to a person making a claim against the Fund: "(1) The amount that a person may recover from the Compensation Fund cannot, in any case or in any event, exceed $500,000 or, if another amount is prescribed by the regulations, the prescribed amount. (2) The aggregate sum that may be applied in compensating all persons who suffer or incur pecuniary loss because of a failure to account, or of related failures to account, cannot exceed $2,000,000 or, if another amount is prescribed by the regulations, the prescribed amount. (3) The Director-General may disregard subsection (2) in the case of successive failures to account by a licensee, to the extent that the Director-General is satisfied that the failures are not connected. (4) If the total amount of claims or judgments (or both) exceeds the aggregate sum provided for by this section, the Director-General has an unfettered discretion to determine the division and allocation of the available money among the various parties (whether or not to the exclusion of any one or more of them)."

Discussion 65By virtue of s 173(2) a claim against the Fund must be made within 12 months of a person becoming aware of a failure to account (173(2)(a)) or within 2 years after the date of the failure to account, which ever occurs first. The person propounding the claim bears the onus of establishing that the claim was made within the shorter of the two periods. Accordingly, the matters for determination are: (a) When did the plaintiffs' make their claim against the Fund? (b) When did the relevant failure to account occur? (c) When did the plaintiffs become aware of the relevant failure to account?

When did the plaintiffs make their claim against the Fund? 66As noted earlier, it was accepted by the parties that the plaintiffs' made their claim against the Fund on 5 November 2008 and it is therefore unnecessary to consider the matter further.

When did the relevant "failure to account" occur? 67The definition of "failure to account" in s 171 is unhelpful in determining when the relevant failure to account occurred and has not, to my knowledge, been the subject of judicial comment in the context of the Property, Stock and Business Agents Act . Notwithstanding, the phrase "failure to account" has previously been considered by this Court in the context of other legislation. Yeldham J in Francis v Law Society of NSW (1982) 2 NSWLR 191 had occasion to consider the phrase as it operated in the Legal Practitioners Act 1898 in respect of a solicitor's failure to account. His Honour stated at 204: "...I do not think it is desirable to endeavour to attempt any exhaustive definition of what is involved in "failure to account" as part of the defined phrase in s 56(1). But it is certainly sufficient for a person who alleges pecuniary loss of moneys entrusted to a solicitor to establish that the solicitor has dishonestly failed to pay them to or for the benefit of that person, or at that person's direction, at a time when, in the ordinary course of his practice as a solicitor, and in the light of the professional work which he was reasonably required or obliged to do, they should have been so paid or applied . In other words the "failure" which must be shown is a failure to pay or deliver moneys or other valuable property to or on behalf of a person entitled thereto at the time when such payment or delivery should reasonably have been made ..." (Emphasis added.) 68The decision in Francis , and in particular the comments of Yeldham J extracted above, were cited with approval by the Court of Appeal in Law Society of New South Wales v Glenorcy Pty Ltd (2006) 67 NSWLR 169, [2006] NSWCA 250, where Mason P (with whom McColl and Basten JA agreed) stated at [26]: "The Society submits that Smith failed to account in relation to the subject transactions when, contrary to the mandate on which he had received the moneys, he deposited them in bank accounts under his control, thereby misappropriating them. There may have been subsequent failures to account in each transaction but the Society is correct in this submission as to the nature, timing and (Queensland) location of the initial failures to account in each transaction (see Francis v Law Society of New South Wales [1982] 2 NSWLR 191 at 204-205; Travel Compensation Fund v Tambree (2006) 224 CLR 627 at 632)." 69In Travel Compensation Fund v Tambree (2006) 224 CLR at 632, the High Court discussed a travel compensation fund which, similarly to the Fund, was to be applied to compensate a beneficiary "who has suffered or may suffer pecuniary loss arising directly from a failure to account for money or other valuable consideration". In relation to this scheme Gleeson CJ said at 632: "In such a context, failure to account includes, and typically involves, failure to apply money for the purpose for which it was entrusted to the agent." 70It was submitted on behalf of the plaintiffs that the interpretation applied to the phrase "failure to account" in Francis , and approved in Glenorcy , is appropriate and should applied to the phrase in the Property, Stock and Business Agents Act such that a failure to account will occur when there is a "failure to pay or deliver money at the time when such payment or delivery should reasonably have been made". They submit that this is so because such an interpretation recognises that the legislature intended to establish a compensation scheme which provides greater protection to the public by permitting them to claim for loss caused by a failure to account, which they submit is a broad concept, and not just in cases of theft or fraudulent misappropriation. They further submit that such a construction pays proper regard to the "underlying common law principles" which have been incorporated in Part 10. In particular they contend that the Property, Stock and Business Agents Act "recognises" the distinction between the duties owed by a real estate agent when holding a deposit as a stakeholder until completion and the duty owed by that agent to account to the vendor on completion. To this end they point to the definition given to the phrase "failure to account" in Part 9 of the Property, Stock and Business Agents Act as indicating that the phrase as it appears in Part 10 does not include a failure by the real estate agent to perform the duties of a stakeholder. 71The plaintiffs contend that Mr Prestia and/or Affluent Properties were under an obligation to account in two respects; first, in respect of the deposit on the Rose Bay property in the amount of $606,494.94; and secondly, in respect of $47,493.34, which the plaintiffs say he overcharged pursuant to the contract of sale for the Rose Bay property. The plaintiffs submit that in so far as the $606,494.94 is concerned the obligation to account arose on completion of the sale of the property, which occurred on 17 November 2006, and that the failure therefore occurred on some date thereafter and that Affluent Properties should "reasonably" (adopting the terminology applied in Francis ) accounted for the deposit by 30 November 2006, the date it falsely represented to Mrs Loh that it had deposited money into the second NAB account. They submit that even if there was a prior breach by way of misappropriation or some other means the decision in Glenorcy establishes that there may be more than one failure to account in a transaction and s 175 of the Property, Stock and Business Agents Act "expressly recognises that there may be "related failures to account" rather than merely one failure to account involved in a claim." 72On the other hand, the defendants submitted that the phrase "failure to account" lends itself to a number of definitions. In particular they submit that it may include the date a real estate agent: deals with money entrusted to it in a manner contrary to its statutory obligations; fails to transfer money entrusted to it in accordance with an instruction given by a person entitled to give instructions; or fails to deliver money entrusted to it at the time when such delivery should have been made. The defendants submit, despite conceding that there may be more than one failure to account in respect of the same money, that s 173(2) "requires a consideration of when, in respect of an amount of money, a failure to account first occurred" and the plaintiffs cannot rely upon a subsequent failure to account in respect of the same money in order to bring themselves within the time period specified in s 173(2). The defendants submit that on each occasion Mr Prestia transferred money out of the deposit trust account on and from 7 September 2006, there was a failure to account on that day in respect of the amount transferred out of the deposit trust account and, accordingly the relevant date was prior to 5 November 2007. They point to 7 or 19 September 2006. 73The defendants contend that there are two reasons for favouring this interpretation over that advanced by the plaintiffs. First, the defendants submit that the decision in Francis has been "overtaken" by more recent and binding authority and that the comments of Yeldham J were obiter and made in the absence of detailed argument. They point to the decision of Gleeson CJ in Tambree citing that passage cited above. Secondly, the defendants contend that, as a matter of statutory construction the dates other than that contended by them would be contrary to the purpose of the Property, Stock and Business Agents Act . In particular they cite ss 126 and 138 which provide for the appointment of a manager or a receiver to a licensee's business or property if the Director-General or the this Court is of the opinion that, amongst other things, there has been a failure to account by a licensee. They submit that in light of the purpose, as disclosed by those sections, it is "likely" that the Director-General and/or the Supreme Court may appoint a manager or receiver at the date a real estate agent deals with property in an improper manner and that this interpretation should be applied to s 173(2). 74The defendants reject the plaintiffs' submission in so far as they contend that the use of the phrase "failure to account" as distinct from "loss caused by acts of theft or fraudulent misappropriation" on the basis that the purposes of the legislative amendment was "to expand the scope of losses" and not "to change the time at which the wrongful conduct occurred." They also reject the plaintiffs' submission concerning the incorporation by the legislation of the common law principles regarding the obligations of real estate agents holding deposit as stakeholders and their duties to account for the deposits held by vendors. They submit that the submission is reliant upon a line of authority including the decision in Hastingwood Ltd v Saunders Berman Anselm [1990] 3 WLR 623 which they submit indicates uncertainty in the case law as to whether a stakeholder holds a deposit on trust for the vendor and purchaser and the plaintiffs' submissions fail to have regard to s 86 of the Property, Stock and Business Agents Act which states that a deposit is "to be held by the licensee exclusively for" a person and "until so paid is to be paid into and retained in a trust account". 75There are, in my view, several possible definitions of when the relevant failure to account may have occurred in this case but before considering which of those definitions is correct, it is necessary to consider the purpose of the Part 10 of the Property, Stock and Business Agents Act . In the second reading speech of the Property, Stock and Business Agents Bill 2001 (New South Wales Legislative Assembly, Parliamentary Debates , (Hansard), 9 May 2002 at 1964) the Minister for Fair Trading, John Aquilina, said in reference to the Fund: "Another important facet of consumer protection is the Compensation Fund established under the current Act. The bill continues to provide for the fund, which protects consumers who suffer loss because of an agent's failure to account for money or property received on a consumer's behalf. All licensees will continue to be required to contribute to the Compensation Fund. The bill introduces a very important change to the operation of the Compensation Fund to further improve consumer protection. At present, claims against the fund can only be made if the person responsible for the loss is a licensee or an employee of the licensee. As a result, through no fault of their own consumers can find themselves without compensation. This has occurred in the past when a person continued to trade after their licence lapsed. The new provisions will extend the right to compensation to cases in which a consumer has lost money when dealing with an unlicensed person whom they reasonably believed to be licensed at the time." 76Unhelpfully, the Act does not contain a "purpose" provision however, in my view the purpose of the Act, or at least Part 10, is to protect consumers from loss incurred by the conduct of real estate agents, and other licensees under the Act whether as a result of inappropriate conduct on the part of the latter or not. A purpose which, to my mind is wholly beneficial, despite the limitations which are, for better or worse, placed on seeking compensation. Accordingly, it is necessary to apply a construction of Part 10 in a manner consistent with its beneficial purpose for which it was enacted. 77In I W v City of Perth (1997) 1919 CLR 1, Brennan CJ and McHugh J said at 12: "...the rule of construction that beneficial and remedial legislation, like the Act, is to be given a liberal construction. It is to be given "a fair, large and liberal" interpretation rather than one which is 'literal or technical'". 78More recently in AB v State of Western Australia [ 2011] HCA 42 the High Court discussed the interpretation of beneficial legislation. The discussion was in an altogether different context, namely that of l egislation providing for the registration of a change to the official records of a person's gender. However, the Court made important statements endorsing the regard that must be had to policy decisions and the objects of an Act in the construction to be given to its provisions. At [38] the Court said: "The Act contains no warrant for implying further requirements... The Act reflects the policy decisions taken. The objectives of the Act, and their social and legal consequences, are to be met by reference to its stated requirements. Those requirements... are to be given a fair and liberal interpretation in order that they achieve the Act's beneficial purposes." 79In AB the High Court referred to CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384 where Brennan CJ, Dawson, Toohey and Gummow JJ went further and acknowledged the need to interpret legislation in light of the legislative intent, at 408: "It is well settled that at common law...the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses "context" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy." (citations omitted) 80In Glenorcy Mason P noted at [42], in relation to claims against the legal practitioners' Fidelity Fund, that: "There is an obvious correlation between requiring a particular group of practitioners to contribute to the Fund and recognising that their misconduct will be the occasion for allowing claims on the Fund. There is no discernible purpose in reading the scheme in the cramped manner proposed by the Society." 81In my view the same approach should be taken in relation to Part 10 of the Property, Stock and Business Agents Act and in particular s 173(2) so that persons who have suffered pecuniary loss due to a failure to account under the Property, Stock and Business Agents Act can be compensated. 82Returning to the issue of when the relevant failure to account occurred, the plaintiff pointed out that the applicant for compensation under the Property, Stock and Business Agents Act is required to make a claim under s 172(2) in writing to the Director-General. Thus, the applicant is required to specify both the claimed "pecuniary loss" and the claimed "failure to account". 83Section 173(2) entitles "a person who claims to have suffered a pecuniary loss because of a failure to account" to make a claim against the Fund. The claim is therefore in respect of a pecuniary loss that is causally connected to a failure to account. 84In relation to the Rose Bay deposit, the claim made by the plaintiffs was a claim to have suffered pecuniary loss because of the failure of Affluent Properties to account for the deposit on completion of the sale of the Rose Bay property. The defendants submitted that Affluent Properties failed to account for the deposit on completion and that this was a failure to account for the purposes of s 173(2). The defendants conceded that the plaintiffs suffered pecuniary loss because of this failure to account. 85The defendants submitted that the limitation period in s 173(2)(a) should be determined by reference to "the date the person first became aware of any failure to account in respect of the money" (emphasis added). However, s 173(2)(a) does not use the expression " any failure to account" but, rather, uses the expression " the failure to account" to refer back to the claimed failure to account. 86Similarly, the defendants submitted that the limitation period in s 173(2)(b) should be determined by reference to "the date a failure to account in respect of the money first occurred ". However s 173(s)(b) does not use the expression "the date a failure to account first occurred" but, rather, uses the expression "the date of the failure to account" to refer back to the failure to account claimed by the person. 87There is no justification for departing from the clear words of the section. Furthermore, the defendant's construction means that the limitation periods in paragraphs (a) and (b) of section 173(2) can be framed by reference to two different failures to account. The defendants suggest that the limitation period in paragraph (a) should be determined by reference to a purported failure to account occurring in October 2007 but that the period in paragraph (b) should be determined by reference to different purported failures to account occurring before November 2006. Neither of these purported failures to account is the failure to account actually claimed by the plaintiffs. 88The plain meaning of s 173(2) is that these periods are to be worked out by reference to the failure to account claimed by the person making the claim. The 'failure to account' referred to in paragraphs (a) and (b) of s 173(2) is clearly the same 'failure to account' identified earlier in the section as forming part of the claim made by the person. Thus, the limitation periods in subsections (a) and (b) of s 173(2) are determined by reference to the failure to account claimed by the person making the claim and not any other failure which may be arbitrarily selected. 89In addition, a significant factor of difference between cases such as Francis v Law Society of NSW and Law Society of New South Wales v Glenorcy Pty Ltd on the one hand and the present case on the other, is that in the former, the claimant had an immediate claim to the funds deposited with the legal practitioner. In this case, the plaintiffs had no immediate claim on the funds held as a deposit, until settlement of the sale, on 17 November 2006. 90In my view that the proper construction of s 173(2) is that the limitation periods in subsections (a) and (b) should be determined by reference to the failure to account claimed by the person making the claim. That failure to account occurred when Mr Prestia failed to account for the deposit when it became due to the plaintiffs, on a date after the completion of the sale of the Rose Bay property on 17 November 2006. Hence, the date of the failure to account is, at the earliest, 17 November 2006 the plaintiffs having made the claim on 5 November 2008 against the Fund under s 173(2(b).

When did the plaintiffs become aware of the failure to account? 91The plaintiffs submitted that they satisfied the first limb of the limitation period under s 173(2)(a), namely that they made their claim within 12 months of becoming aware of the failure to account. 92There are two relevant events the occurrence of which the plaintiffs need to satisfy the court they were not aware of prior to 5 November 2007, namely: (a) The failure to transfer $582,973.59 into Mr Lim's account at NAB; and (b) The failure to account for $47,493.34 by way of overcharging. 93The plaintiffs submitted that, as a result of Mr Prestia's fraudulent conduct, they did not become aware that Affluent Properties had failed to follow their direction to pay part of the deposit into an account at the National Australia Bank until that fact was revealed during the course of the equity proceedings in late August 2008. Until that time, the plaintiff believed that Affluent Properties had paid the relevant part of the deposit in the sum of $582,973.59 into the National Australia Bank account as instructed. In relation to the overcharged amount of $47,493.34, Mrs Loh gave evidence that it was not until she received legal advice in August 2008 that she became aware that Affluent Properties had overcharged her. No evidence was given by Mr Lim. 94The defendant submitted that the plaintiff was aware of the failure to account (involving both amounts) prior to 5 November 2007. I have summarised the evidence relied on by the defendants below, but will first examine the meaning of "become aware" in s 173(2)(a). 95In Harris v Commercial Minerals Ltd (1996) 186 CLR 1, the High Court said, in relation to the Limitation Act: "...reasonable foreseeability has no part to play in determining the issue posed by s 60I(1)(a)(ii). To satisfy s 60I(1)(a), an applicant must prove that he or she was "unaware of the nature or extent of personal injury" (s 60I(1)(a)(ii)) or "unaware of the connection between the personal injury and the defendant's act or omission" (s 60I(1)(a)(iii)) at the relevant time. To look to anything other than the applicant's actual awareness of the matters referred to in sub-pars (ii) and (iii) would be to read into s 60I(1)(a) a doctrine of constructive notice that is not justified by the language of the provision." 96The Court in Harris cited with approval a passage from Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd (1983) 155 CLR 129. In that case Mason, Deane and Dawson JJ discussed the meaning of the words "first becomes aware of" in respect of Queensland legislation: "[T]he very words 'become aware' strongly indicate that the statute is looking to the purchaser's actual knowledge of the failure which, by description, is a failure to comply with the statutory provisions. We conclude that the words 'becomes aware of the failure' in s 49(5) involve not only knowledge that a statement containing the specified material had not been given but an awareness that the fact that such a statement was not given constitutes a 'failure' to do something which the Act says should not be done." 97It is my view that as the cases quoted above provide, the plaintiffs' required knowledge is the actual knowledge that money had not been paid to them in accordance with their instructions and as per the contract of sale, and that that constituted a failure to account. Put another way, it is an objective, not a subjective, knowledge test. 98Interestingly, Mason, Deane and Dawson JJ in Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd specifically held that despite the "drastic" consequences that their interpretation would create, they were not prepared to read the awareness requirement more widely than the plain meaning of words of the statute allowed. Their Honours said: "The consequences of this interpretation are drastic: a purchaser who is not given a statement under s. 49 containing the material particulars may avoid the contract even after its completion (s. 49(6)) so long as he does so within thirty days of becoming aware of the statutory provisions or of their relevant effect, namely, that they imposed an obligation on the vendor in a respect or respects in which the statement is deficient. Drastic though they be however, those consequences do not justify the adoption of an interpretation more favourable to the vendor unless the statutory language lends itself to such an interpretation. And the language of sub-s. (5) is not susceptible of such an interpretation unless one can impute to a purchaser knowledge of the requirements of s. 49. We would be inventing a new doctrine of constructive notice if we were to hold that a purchaser is "aware" of a failure to comply with particular statutory provisions when he knows the facts, even though he is ignorant of those provisions and of the obligations which they impose."

The plaintiffs' awareness of the failure to account for $582,973.59 (deposit moneys) 99There is no evidence about Mr Lim's awareness. In fact the sum of $582,973.59 was never deposited into Mr Lim's account. The evidence relates to Mrs Loh's awareness. This is because she was the one who dealt with the investment, the transfer of funds and she was the one who had the dealings with Mr Prestia. The defendants drew the Court's attention to the following events in relation to the $582,973.59 that was not deposited into Mr Lim's NAB account: (a) In late November or early December 2006, Mr Prestia and Mrs Loh met and discussed the Second Reconciliation Statement that, following a handwritten amendment, recorded that Affluent Properties had not paid $26,819 to the plaintiffs. On this occasion, the defendants say Mrs Loh knew there was a failure to account in respect of $26,819. The plaintiffs submitted, and I accept, that the fact that Mr Prestia stated that he still owed the plaintiffs that amount did not make Mrs Loh aware that Affluent Properties had failed to pay the $582,973.59 into the second NAB account. In fact the proposition that Mr Prestia still owed $26,819 to the plaintiffs depended on an assertion by Mr Prestia that he had paid the $582,973.59 into the second NAB account. (b) On the same occasion in November or December 2006, Mr Prestia presented Mrs Loh with the second invoice. If the overcharging in the second invoice was a failure to account, Mrs Loh knew at the time that Affluent Properties had overcharged and hence Mrs Loh knew there was a failure to account in respect of $47,493.34 at this time. The plaintiffs say, and I accept, that Mrs Loh was unsure whether, or even believed that, Mr Prestia had overcharged in some amount and this did not make Mrs Loh aware that Affluent Properties had failed to pay the $582,973.59 into the second NAB account. (c) On 18 October 2007, Mrs Loh received an email from Mr Popovich which stated, contrary to instructions she gave in November 2006, that money was held in a trust account rather than an account, which was not a trust account. The defendants say at this point in time Mrs Loh became aware of a failure to account. The plaintiffs submitted, and I accept, that the fact Mrs Loh was told by Mr Popovich that the second NAB Account was a trust account did not make Mrs Loh aware that Affluent Properties had failed to pay into the $582,973.59 second NAB Account. (d) In late October 2007, Mrs Loh phoned Mr Prestia and asked him to "arrange for the rest of the deposit in my husband's account with NAB to be transferred to me". Some time afterwards, Mrs Loh became aware that Mr Prestia had not transferred the money as directed. The defendants say that at this point in time Mrs Loh became aware of a failure to account. The plaintiffs submitted, and I accept, that the fact that Mr Prestia did not comply with an (impossible) request to transfer the (non-existent) monies out of the second NAB account in October 2007 did not make Mrs Loh aware that Affluent Properties had failed to pay the $582,973.59 into the second NAB account in November 2006. 100None of the above events amount to a demonstration of actual awareness on behalf of Mrs Loh of the failure to account. Mrs Loh gave evidence that as at 5 November 2007 she was not aware that Mr Prestia had failed to transfer the $582,973.59 into her husband's NAB account. I accept that evidence. I am supported in this view by the following: (a) Mrs Loh was not cross-examined on this evidence; (b) As at April 2007 Mrs Loh was willing to trust Mr Prestia with over $40,000 (being deposit money for an eventual purchase in Maroubra); (c) Mrs Loh did not instruct Mr Prestia to account for the deposit money in relation to the Maroubra property until April 2008; (d) The emails in evidence between Mrs Loh and Mr Prestia indicate that she was not aware that $582,973.59 had never been transferred to a NAB account in her husband's name. One email of 4 March 2008 read: "Rodney... I am writing to you again to urge you to settle the transfer of the balance of deposit from the sale or Rose Bay immediately..." (e) Even as late as 1 July 2008, she sent a copy of the deposit slip for the sum of $582,973.59 to Mr Popovich, the bank officer and had a telephone conversation where she asked, "[c]an you tell me if the deposit slip for the deposit of $582,973.59 is genuine?" and Mr Popovich replied, "It does not look like a valid receipt to me". 101I have not reproduced all of the emails sent by Mrs Loh to Mr Prestia but these emails support Mrs Loh's evidence that she was not aware, well into 2008, that Mr Prestia had never deposited the $582,973.59 into her husband's account. 102As at 5 November 2007, being 12 months before the claims against the Fund were made to the Director-General, the plaintiffs were not aware that the sum of $582,973.59 had not been paid into the second bank account. The plaintiff believed that Affluent Properties had paid the amount into the second bank account in accordance with the plaintiffs' directions, because of the incorrect statements made by Mr Prestia. It is my view that the plaintiffs have satisfied the court they became aware of the failure to account in relation to that amount after 5 November 2007. 103It follows that the plaintiffs' application on 5 November 2008 was made within a period of 12 months after the plaintiffs had become aware in August 2008 of the failure to account by Mr Prestia by not paying the $582,973.59 of the deposit monies into the second NAB account in accordance with the directions given by the plaintiffs on completion of the sale of the Rose Bay property. The plaintiffs' awareness of the failure to account for $47,493.34 (overcharging) 104The defendants rely on the following evidence to demonstrate that Mrs Loh had become aware of the failure to account in respect of the $47,493.34 overcharging. They are: (a) In late November or early December 2006, Mrs Loh discussed the Second Reconciliation Statement with Mr Prestia and was aware that Affluent Properties was charging the plaintiffs $224,993.34 and not $177,500; (b) Mrs Loh's admitted in her affidavit of 13 December 2010 that her concerns were raised when she was given the Second Reconciliation Statement. She states that she had a conversation in which she said: "Loh: 'I do not have our agreement with me, but the invoice still does not seem right to me.'" 105The authorities, some of which I have referred to above, interpret the phrase "become aware" strictly, by requiring actual knowledge of a plaintiff not only of the facts constituting the failure to account, but also that these facts amounted to a failure to account. 106The requirement for actual knowledge, coupled with the beneficial nature of the legislation requiring interpretation in accordance with the purposes of the Property, Stock and Business Agents Act in case of ambiguity, lead me to conclude that Mrs Loh was not aware, for the purposes of s 173(2)(a), of the failure to account to her by overcharging, prior to mid August 2008. 107Turning to the second limb of s 173(2), namely s 173(2)(b), the failure to account occurred at the earliest on 17 November 2006 and the date of the plaintiffs' claim is 5 November 2008. The claim was made within the time period stipulated in s 173(2)(b). Hence, the written claim made by the plaintiffs was made within both limbs of the time frames set out in s 173(2) but this Court has to determine whichever periods ends first. Both limbs end on 5 November 2008. 108Therefore the claim made by the plaintiffs was made within a period of 2 years after the date of the relevant failure to account. The plaintiffs' claims fall within the time frame referred to in s 173(2)(b).

What is the amount of pecuniary loss suffered by the plaintiffs because of the failure to account? 109Having determined that the plaintiffs brought their claim within time, there remains a dispute as to the amount of the pecuniary loss suffered by the plaintiffs as a result of the failure to account. 110The issues to determine can be summarised as follows: (1) Whether the overcharging by Mr Presta in the amount of $47,493.34 is a contractual dispute and was not a failure to account and therefore could not cause a pecuniary loss; (2) Whether the interest earned on the deposit whilst held by the stakeholder came into the pecuniary loss; (3) Costs; and (4) Interest payable on the amount to be awarded; 111I have earlier determined that the overcharging in the amount of $47,493.34 was a failure to account. It therefore forms part of the pecuniary loss suffered by the plaintiffs as a result of the defendants' failure to account. 112In relation to the interest earned on the deposit, the plaintiffs submitted that they were entitled to half that interest, being $11,458.28, because clause 2.9 of the contract of sale of the Rose Bay property stipulated that, if interest were invested, the deposit holder (Mr Prestia) was to pay the interest to the parties equally. The Director-General submitted that their pecuniary loss did not include half of the interest which actually accrued on the deposit by operation of ss 90(1) and (7) of the Property, Stock and Business Agents Act . Section 90 reads: "90 Interest earned on trust accounts to be paid to Statutory Interest Account (1) Each authorised deposit-taking institution must: (a) after the end of each named month, calculate interest on the daily balances of all money held during the month in trust accounts kept with the authorised deposit-taking institution (being trust accounts notified to the institution as trust accounts required by this Act) by applying to those balances the prescribed percentage of the trust account rate applicable to the institution for the purposes of this section, and (b) before the end of the 7th business day of the next named month pay the amount of that interest to the Director-General for crediting to the Statutory Interest Account. Maximum penalty: 100 penalty units ... (7) This section does not apply to a trust account of a class of trust accounts prescribed by the regulations as exempt from this section." 113However, regulation 34 of the Property, Stock and Business Agents Regulation 2003 reads: "34 Exemptions Sections 90 (Interest earned on trust accounts to be paid to Statutory Interest Account) and 91 (Monthly returns by authorised deposit-taking institutions) of the Act do not apply to: ... (b) a separate trust account opened by a licensee for the exclusive benefit of both the vendor and the purchaser of land." 114Therefore, s 90(7) of the Property, Stock and Business Agents Act does not apply to interest earned on the deposit in this case so the plaintiffs are entitled to half that interest earned on the deposit. This amount formed part of the pecuniary loss. 115Leaving aside issues of costs and interest on the amount awarded, the defendants submitted, in the alternative, several calculations of pecuniary loss that depended on the court's ruling in relation to the limitation period. Several of those submissions need not be dealt with since I have found that the plaintiffs' claim fell within s 173(2) and that the overcharging of $47,493.34 was a failure to account. 116The defendants submitted that, if the court found that the limitation periods were satisfied, the amount of pecuniary loss was $568,247.66, which included a deduction of $26,819. Mr Prestia admitted that he still owed that amount to the plaintiffs when he gave Mrs Loh the Second Reconciliation Statement and the defendants therefore say that Mrs Loh was aware of that failure to account in late 2006. 117Mrs Loh's evidence on this point is that at the time that Mr Prestia admitted he still needed to pay the plaintiffs $26,819 that she said "I am still not sure this is right". She therefore lacked the requisite actual awareness that there had been a failure to account in this amount. 118It is important however to remember that the relevant failure to account that is the subject of these proceedings is the failure to account for the deposit on the sale of the Rose Bay property in the amount of $ 582,973.59 (by not depositing this amount into Mr Lim's account) plus $47,493.34 (by way of overcharging), and the failure to account for the deposit of the Maroubra property. 119Therefore, in my view, the pecuniary loss (leaving aside the question of interest and costs) caused by Mr Prestia's failure to account for the deposit on the sale of the Rose Bay property, as identified for the purpose of these proceedings, can be calculated as follows: Deposit funds not deposited into Mr Lim's NAB account $582,973.59 Overcharging $47,493.34 Deposit on Maroubra property $40,494.00 Amount of pecuniary loss (without interest or costs) $670,960.93 120I have not included the full amount of $606,464.94 claimed by the plaintiffs in relation to the deposit on the Rose Bay property. This is because the failure to account relied on by the plaintiffs is Mr Prestia's failure to deposit $582,973.59 into Mr Lim's account. In my view, the failure to account that led to the pecuniary loss of $23,491.35 (being the balance of the deposit minus the funds said to have deposited into Mr Lim's account) cannot be claimed since Mrs Loh had actual awareness that Mr Prestia had not accounted for that sum, as early as 2006.

Recovery of plaintiffs' costs 121Section 170(a) of the Property, Stock and Business Agents Act defines pecuniary loss as all costs (including the legal costs and disbursements of making and proving a claim), charges and expenses that a claimant has suffered or incurred as a direct consequence of the failure to account. 122The issue is therefore, for the purpose of the definition of "pecuniary loss" in s 170, what is the amount of costs that the plaintiffs have suffered as a direct consequence of the failure to account ? 123The plaintiffs submitted that the pecuniary loss suffered by them included: (a) the legal costs and disbursements incurred in prosecuting the equity proceedings which amount to $137,496.08; and (b) the legal costs of making the claim to the Director-General which amount to $4,000. 124The defendants submitted that the plaintiffs' costs in prosecuting the equity proceedings did not form part of their pecuniary loss. The defendants said: (a) that the plaintiffs' legal costs were limited to "the legal costs of making and proving a claim", which were incurred reasonably and were a direct consequence of the failure to account; they did not include the plaintiffs' costs of the present court proceedings; (b) that the legal costs recoverable were limited to their costs up to the time of the decisions of the Director-General, that the claims could not be made, on 15 December 2009 and 8 June 2010 and did not include costs incurred in bringing legal proceedings pursuant to s 174 of the Property, Stock and Business Agents Act ; (c) that the plaintiffs could have made a written claim to the Director-General prior to prosecuting the equity proceedings, or could have joined the Director-General as a party to those proceedings; (d) that the wording of s 170(a) ("legal costs and disbursements of making and proving a claim") suggested that the legislature had intended only limited recovery of costs; (e) that the preparation of the equity proceedings involved claims not connected to the claim against the Fund, such as a claim for conversion of furniture. 125Further, the defendants submitted that if the court agreed that parts of the plaintiffs' claims were not made within time, the amount of legal costs recoverable by the plaintiffs should be reduced proportionally. However, this issue does not arise since I have determined that the plaintiffs' claims were brought within time. 126The defendants accepted that the legal costs of making this claim to the Director-General were recoverable. In relation to costs in these proceedings, as the defendants requested an opportunity to make submissions after judgment on the substantive issue was handed down, I will afford the parties that opportunity. I note however, that pursuant to s 174(4) of the Property, Stock and Business Agents Act "all questions of costs are in the discretion of the court". This provision suggests that the costs of the current proceedings do not form part of the pecuniary loss suffered by the plaintiffs, in the sense that their award is not affected by the limit on amount recoverable in s 175(1). 127At this stage the only issue for consideration is whether the plaintiffs' pecuniary loss includes the costs associated with the prosecution of the equity proceedings. Section 174(2) of the Property, Stock and Business Agents Act states that a person cannot recover from the Fund an amount greater than their pecuniary loss, after deducting an amount that, in the opinion of the Director-General, might have been received or recovered but for the person's neglect or default. The equity proceedings were taken to mitigate against the primary loss. Furthermore, on 27 August 2009 a Senior Claims Officer wrote to the plaintiffs on behalf of the Office of Fair Trading advising them that consideration of their claim was postponed until the conclusion of the equity proceedings. 128The plaintiffs drew my attention to s 177 of the Property, Stock and Business Agents Act which provides: "177 Subrogation (1) On payment out of the Compensation Fund in settlement in whole or in part of a claim under this Act, the Crown is subrogated, to the extent of the payment, to all the rights and remedies of the claimant against the licensee, or the former licensee, in relation to whom the claim arose, or any other person..." 129I accept the plaintiffs' submission that the Crown should not benefit from the right of subrogation to the rights of the plaintiffs gained by the judgment in the equity proceedings, pursuant to s 177, without compensating the plaintiffs for the costs incurred in obtaining that judgment. In the circumstances where, on payment out of the Fund of a claim, the Crown would be subrogated to the rights and remedies of the plaintiffs under the judgments obtained in the equity proceedings, the Property, Stock and Business Agents Act intends the costs of obtaining that judgment to be costs incurred as a direct consequence of the failure to account. 130I am satisfied that the costs incurred in prosecuting the equity proceedings were incurred as a direct consequence of the failure to account and therefore that they form part of the plaintiffs' pecuniary loss recoverable against the Fund. 131I accept that part of the claim brought in the equity proceedings, namely the conversion of furniture, was not related to the failure to account that is the subject of these proceedings. This formed only a small part of the overall claim. Therefore, the plaintiffs' costs in the equity proceedings should be adjusted accordingly and the defendants are not liable to compensate the plaintiffs for the costs in prosecuting that part of their claim. 132As to the basis on which these costs should be assessed, the defendants submitted that it should be on a party and party basis, not an indemnity basis. The defendants relied on authority construing "all costs" in the context of a mortgagee claim pursuant to a contract as party and party costs only. In Kyabram Property Investments Pty Limited v Murray [ 2005] NSWCA 87 at [12], the Court of Appeal said: "It is well established that a mortgagee may rely upon its contractual entitlement to costs so as to claim an order other than on a party/party basis. In Re Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498 , Vaisey J at 502 observed that the prima facie rule was that costs were awarded on a party/party basis unless some alternative basis was shown "either on some well-recognised principle, or under some contract plainly and unambiguously expressed "." (original emphasis) 133The situation is differs somewhat. The plaintiffs are not suing pursuant to a contract but rather are seeking costs pursuant to beneficial legislation. Furthermore a large amount of costs was incurred in relation to the equity proceedings, after November 2008. Had Mrs Loh's claim against the Compensation Fund succeeded at the early stages of those proceedings, these costs would not have been incurred. On 27 August 2009, the Office of Fair Trading advised the plaintiffs that their claim would receive further attention upon finalisation of the equity proceedings. Hence, the Director-General elected to wait until the equity proceedings were finalised before giving their claim further attention. In the circumstances the plaintiffs had no option but to continue with the equity proceedings and incur those legal costs. 134The phrase " all costs (including the legal costs and disbursements of making and proving a claim)" in s 170 needs to be examined. In Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651 Pty Ltd [2005] VSCA 165, t he Court of Appeal of the Supreme Court of Victoria discussed the expression "reasonable legal costs and expenses" in the context of a settlement between a building developer and an insurer, where the insurer was to indemnify the builder. Ormiston JA's determination in Pacific Indemnity is helpful in analysing the expression "all costs" in s 170 of the Property, Stock and Business Agents Act . His Honour said that the insurance policy being discussed was "issued pursuant to statute as a means of providing consumer protection", but that this was a "relevantly insignificant factor" and he did not accept that "the policy was one which was intended to provide a 'full indemnity' or, more precisely, that the Building Act and the ministerial order both intended that such policies should provide a full indemnity." 135Ormiston JA formed his view, in part, on the basis that there was a limit on recovery against the insurer (as there is against the Fund pursuant to s 175 of the Property, Stock and Business Agents Act .) His Honour said at 510-511: " The difficulties in those provisions [imposing limits on amounts recoverable], especially those relating to liability limits, have already come before this court, but, howsoever they be construed, it cannot be said that there is a general requirement under the prescribed domestic building policy that there should be "full indemnity" in respect to relevant claims by a building owner. Whatever be the reason for the limit, whether it was thought that to impose unlimited liability would result in excessive premiums or the like, the basic right to an indemnity under the policy does not have to exceed $100,000 per house, together with the relevant reasonable costs and expenses. I am therefore not persuaded that any great significance can be placed on the undoubted intention that the ministerial order should be a consumer protection measure for the purpose of determining whether a "full indemnity" was intended by the use of the expression "reasonable legal costs and expenses"." 136In my view that definition of pecuniary loss under s 170 does not entitle the plaintiffs to costs on an indemnity basis. Costs are to be assessed on the usual basis, namely on a party/party basis. My determination as to costs does not relate to the costs of the present litigation. These costs are subject to the limitation on recovery in s 175 of the Property, Stock and Business Agents Act , discussed below.

Recovery of interest 137Section 170(b) of the Property, Stock and Business Agents Act defines pecuniary loss as follows: "(b) all interest on money or other valuable property that a claimant would have received but for the failure to account for the money or other property, with that interest calculated to the date on which the Director-General determines the claimant's claim or a judgment is recovered against the Director-General in relation to the Compensation Fund in respect of that money or other property." 138The issue is therefore, for the purpose of the definition of "pecuniary loss" in s 170, what is the amount of interest proved by the plaintiffs? 139The plaintiffs claimed interest at Court rates or, alternatively, at the rate payable on the money in Mrs Loh's NAB Account, from the date of the failure to account to 14 June 2011 which was the first day of the hearing. As judgment has been reserved, they have been deprived of their interest during this period and are entitled to interest during this period, up until the date of judgment. 140The defendants contended that the plaintiffs have not proven an entitlement to interest. They submitted: (a) that s 100 of the Civil Procedure Act 2005 precludes a court from awarding interest in this case because interest is payable as of right under the Property, Stock and Business Agents Act ; and (b) that the plaintiffs have not provided sufficient evidence in relation to their claim, in the alternative, for interest at the rate earned on the money deposited into Mrs Loh's NAB account. 141Section 100 of the Civil Procedure Act provides: "Interest up to judgment (1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit: (a) on the whole or any part of the money, and (b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect. (2) In proceedings for the recovery of a debt or damages in which payment of the whole or a part of the debt or damages has been made after the proceedings commenced but before, or without, judgment being given, the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit: (a) on the whole or any part of the money paid, and (b) for the whole or any part of the period from the time the cause of action arose until the time the money was paid. (3) This section: (a) ... (b) does not authorise the giving of interest on a debt in respect of any period for which interest is payable as of right, whether by virtue of an agreement or otherwise... " (emphasis added) 142In Degmam Pty Ltd v Wright [1983] 2 NSWLR 348 Holland J discussed the predecessor to s 100 of the Civil Procedure Act 2005, s 94 of the Supreme Court Act 1970. His Honour said at 353: "...the intention of the section was to provide a discretion to award interest to fill the gap where, on a claim to recover money, a legal right to include a claim for interest did not exist and not to intrude at all where a right to interest on a debt already existed as a result of the exercise by parties of their freedom to contract or by statute or some rule of law." 143The defendant's argument that s 100(3)(b) prevents an award of interest is misguided as interest is not "payable as of right" under the Property, Stock and Business Agents Act . Successful plaintiffs who obtain a money judgment will generally be entitled to an award of interest. However, there is no relevant agreement in this case, under which the plaintiffs are entitled as of right to interest. Rather, s 170 of the property, Stock and Business Agents Act entitles them to recoup interest that would have been earned had the failure to account not occurred. This entitles the plaintiffs only to interest awarded by the court or by the Director-General, in their discretion. Sections 173(5) and s 173(6) make plain that the claim (and therefore the interest) is not payable as of right. 144The plaintiffs are entitled to interest pursuant to s 100 of the Civil Procedure Act calculated as set out below. I have adopted the periods of interest payable claimed by the plaintiffs because they represent the periods between the date of the failure to account (at the latest) and the first day of the hearing of these proceedings. I base the rates of interest on the relevant Supreme Court Practice Note ( Practice Note SC Gen 16) . (a) On the deposit moneys in relation to the Rose Bay property, from 1 December 2006 to 14 June 2011, the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before each period 1 January to 30 June. (b) On the overcharged amount of $47,493.34, from 1 December 2006 to 14 June 2011, the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before each period 1 January to 30 June. (c) On the deposit moneys in relation to the Maroubra property, from 1 May 2008 to 14 June 2011, the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before each period 1 January to 30 June. 145The parties are to calculate the amount of interest payable.

Section 175: Limits on amount recoverable 146As noted above, s 175 of the Property, Stock and Business Agents Act limits the amount which a person may recover in proceedings in respect of the Fund. 147The defendants submitted that section 175(1) (extracted above) limits the amount the plaintiffs may jointly recover from the Fund so that in total they may not recover more than $500,000. The plaintiffs submitted that each of them was individually entitled to a maximum of $500,000. 148The defendants repeatedly referred to the plaintiffs having a 'joint entitlement', but their rights to the deposit under the sale contract of the Rose Bay property were held jointly and severally. 149I agree with the plaintiffs' submission that the use of the singular 'person' in s 175(1) is deliberate, as demonstrated by the use of the plural 'persons' in s 175(2). If the word person in s 175(1) is read as including the actual plural 'persons', then s 175(2) is deprived of any effective operation. 150By s 173 of the Property, Stock and Business Agents Act , the Fund is to be applied for the purpose of compensating persons who suffer pecuniary loss because of a failure to account. In this respect, the Property, Stock and Business Agents Act is clearly beneficial legislation and in the case of any ambiguity it to be construed in a manner which advances the objects of the Act. Section 175(1) of the Property, Stock and Business Agents Act should be read so as to permit the plaintiffs to bring their claims severally and recover compensation to the individual limit permitted by the section. This approach will not involve any double compensation. 151In relation to the plaintiffs' claim concerning the Rose Bay property and the claim concerning the Maroubra property, my view is that s 175(1) limits the total amount the plaintiffs may recover from the Fund in respect of the two claims. Therefore they may not recover more than $500,000 each. 152As stated above, I do not consider that the limit on the amount recoverable includes the costs of these proceedings. I note that the defendants argued that the costs of these proceedings did not form part of the plaintiffs' pecuniary loss, and therefore are not captured by s 175. I have found that the plaintiffs' pecuniary loss, without interest or costs, amounts to $670,960.93. Costs of these proceedings are reserved. The only proposed order I intend to make at this stage is that the parties bring in short minutes in accordance with my directions and make submissions as to the amount of costs of the equity proceedings and costs of these proceedings.

The Court orders: (1) I find that the plaintiffs' pecuniary loss, without interest or costs, amounts to $670,960.93. (2) Costs of these proceedings are reserved. (3) The parties are to bring in short minutes in accordance with my directions and make submissions as to the amount of costs of the equity proceedings and costs of these proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 December 2011