Court of Appeal (WA)|1999-06-11|Before: Malcolm CJ

Re Real Estate and Business Agents Supervisory Board; Ex Parte Cohen [1999] WASCA 47 (11 June 1999)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : RE REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD; EX PARTE COHEN [1999] WASCA 47

MATTER : An application for a Writ of Certiorari and for a Writ of Mandamus against the Real Estate and Business Agents Supervisory Board

Administrative law - Prerogative writs - Certiorari and mandamus - Jurisdictional error of law by Real Estate and Business Agents Supervisory Board - Claims against Fidelity Fund for defalcations in form of fictitious mortgages by licensee - "Real estate transaction" in Real Estate and Business Agents Act 1978 includes mortgage finance broking by licensee

Administrative law - Prerogative writs - Certiorari and mandamus - No jurisdictional error of law by Board - Interest on claims sought as damages against Fidelity Fund - s 116(1) and s 117(2) of Act limits claims to extent of defalcation at time of defalcation

Administrative law - Prerogative writs - Certiorari and mandamus - Decision by Board that claims were out of time so manifestly unreasonable as to constitute a jurisdictional error of law

Administrative law - Prerogative writs - Certiorari and mandamus - Failure by Board to consider claims for costs a jurisdictional error of law

Administrative law - Prerogative writs - Remedies, forum and cause of action - Court's discretion to refuse prerogative relief on basis that District Court action was more appropriate not invoked

Administrative law - Natural justice and due process - Opinion of counsel retained by Board privileged - No obligation to provide copy to claimants against Fund, but obligation to fully disclose case against claimants

Gudgeon v Black (1994) 14 WAR 158 distinguished

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

Cocks v The Real Estate Agents Supervisory Board (1988) 5 SR (WA) 154 overruled

Real Estate and Business Agents Act 1978 s 4, s 6, s 7, s 8A, s 13, s 14, s 15, s 19, s 20, s 22, s 28, s 68, s 70, s 84, s 102, s 110, s 111, s 166, s 117, s 118, s 119, s 145

ACCC v Australian Safeway Stores Pty Ltd (1998) 153 ALR 393

Esso Australia Resources Ltd v FCT [1998] FCA 1655; (1998) 159 ALR 664

Hot Holdings Pty Ltd v Creasy & Ors (1996) 185 CLR 149

James Hardie & Co Pty Ltd v Seltsam Pty Ltd [1998] HCA 78; (1998) 159 ALR 268

Newcombe v Ame Properties Ltd (1995) 14 WAR 259

R v Criminal Injuries Compensation Board; Ex parte Lain [1967] 2 QB 864

Secretary of State for Trade v Baker [1998] Ch 365

Somerville v ASC (1995) 60 FCR 319

Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702

1 MALCOLM CJ: This is the return of an order nisi for a writ of certiorari and for a writ of mandamus made by Miller J dated 29 September 1998 by which it was ordered that:

1. The Real Estate and Business Agents Supervisory Board ("the Board") do show cause before the Full Court why a writ of certiorari should not be issued against the Board to remove into this Court for the purpose of being quashed the decision made by the Board to:

1.1 refuse parts of a claim by the first-named applicant ("Mr Cohen") in his personal capacity pursuant to s 117 of the Real Estate and Business Agents Act 1978 (WA) ("the Act") for the loss of moneys forwarded to Bridget Micheline Paterson ("Ms Paterson") or alternatively Ideal Realty, to be advanced to third parties as loans on the security of first registered mortgages, interest thereon and costs of applications by Mr Cohen, Betty Rose Cohen ("Mrs Cohen") and Margot Anne Levy ("Ms Levy") and of other actions to protect those applicants' claims against other parties;

1.2 refuse the whole of Mr Cohen's claim (in his capacity as trustee of the estate of Madge J Cohen) pursuant to s 117 of the Act;

1.3 refuse the whole of Mr Cohen's claim (in his capacity as trustee for the Cosmer Syndicate) made pursuant to s 117 of the Act;

1.4 refuse the whole of Mrs Cohen's claim made pursuant to s 117 of the Act;

1.5 refuse the whole of Ms Levy's claim made pursuant to s 117 of the Act;

1.6 refuse the whole of Mr and Mrs Cohen's joint claim made pursuant to s 117 of the Act; and

1.7 refuse the whole of the joint claim made by Mr and Mrs Cohen and Ms Levy pursuant to s 117 of the Act

2. The Board do show cause before the Full Court why a writ of mandamus should not be issued against the Board to require the Board to determine the applicants' claims made pursuant to s 117 of the Act according to law.

2 Section 117 of the Act provides for the Board to receive and settle claims against the Real Estate and Business Agents Fidelity Fund established under s 107 of the Act in respect of defalcation by a licensed agent.

3 The grounds of the application which are set out in detail in par 3 of the order nisi are in summary that:

(1) in making the determination the Board denied the applicants natural justice;

(2) further or alternatively, the Board made a jurisdictional error of law in finding that there was not a defalcation by a licensee within the meaning of that term as defined in the Act;

(3) further or alternatively, the Board made a jurisdictional error of law in holding that Mr Cohen's claim (in his capacity as trustee of the Cosmer Syndicate) could not be determined because it was made out of time when the evidence before the Board showed that it was plainly within time;

(4) further or alternatively, the Board made a jurisdictional error of law in refusing the applicants' claim for interest as damages made in accordance with the principles enunciated in Hungerfords v Walker (1989) 171 CLR 175;

(5) further or alternatively, the Board made a jurisdictional error of law by its failure to consider Mr Cohen's claim for costs; and

(6) further or alternatively, the Board made a jurisdictional error of law in failing to give the applicants reasons for the Board's decision despite request, in contravention of s 22 of the Act.

4 The substantive issue raised by the proceedings is whether a transaction, by which a customer of a licensed real estate agent provides money to the agent with instructions to invest the same on behalf of the customer, by way of a loan to a person to be found by the agent and to be secured by a first registered mortgage of land, is a "real estate transaction" as defined in s 4 of the Real Estate and Business Agents Act 1978. It was common ground that Ideal Realty and Ms Paterson were licensees under the Act.

5 There is a preliminary issue raised on behalf of the Board that the proper remedy for a claimant whose claim has been refused by the Board is simply to commence civil proceedings against the Board to enforce the claim, rather than to invoke a remedy by way of a prerogative writ. In this respect the Board says that on 16 October 1998 it granted the applicants leave to commence an action for indemnity by the Board from the Real Estate and Business Agents Fidelity Guarantee Fund ("the Fidelity Fund") in respect of their claims. Counsel for the Board submitted that this was the proper course to determine the applicants' entitlement to indemnity from the Fidelity Fund. It was contended that the present proceedings, if successful, could only result in a reconsideration of the claims by the Board and could not establish the applicants' entitlement to indemnity from the Fidelity Fund. It was submitted that the proceedings involve "a waste of limited judicial resources" and "should be summarily dismissed in the exercise of the Court's discretion".

6 In my opinion, it is not possible to determine the preliminary point without first making an examination of the scope and purpose of the Act and its relevant provisions.

Relevant Provisions of the Act

7 The Board is established by s 6(1) of the Act. Section 6(2) provides that:

(a) shall be a body corporate with perpetual succession and a common seal;

(b) shall be the licensing and supervisory authority for the purposes of this Act; and

8 Under s 8A(1)(c) and s 8A(1)(e) the functions of the Board include the administration of the scheme of licensing and registration established under the Act and the performance of such other functions as are conferred upon the Board under the Act. Such other functions include the administration of the Fidelity Fund and the receipt and settlement of claims against the Fund. By s 7 of the Act the Board consists of five members appointed by the Governor, of whom one, who is not a licensed agent, shall be appointed to be a member and chairman of the Board and one, being a person who is not a licensed agent, shall be a person who is a legal practitioner.

9 Section 13 of the Act provides that the Registrar may, of his own motion, and shall at the direction of the Board, and an inspector shall, at the direction of the Board or Registrar, make any investigation or inquiry that the Registrar or the Board considers necessary or expedient for the purpose of -

"(a) determining any application or any other matter before the Board;

(b) determining whether or not agents ... are complying with the requirements of this Act;

(d) detecting offences against this Act."

10 Section 14 of the Act contains provision for the Commissioner of Police, at the request of the Board or the Registrar, to cause his officers to make an investigation or inquiry and report relating to any matter that is the subject of investigation or inquiry pursuant to s 13. Section 15 confers wide powers to obtain information, require the production of documents, enter and search premises and inspect documents and to make a copy or abstract of any document produced or inspected, subject to obtaining a warrant from a Magistrate or Justice of the Peace. Section 19(1) of the Act requires the Board to give to any person who is a party to proceedings instituted before the Board reasonable notice of the time and place at which it intends to conduct those proceedings, and shall afford any such person a reasonable opportunity to call or give evidence, to examine or cross-examine witnesses, and to make submissions to the Board unless, relevantly for present purposes:

"(c) in the case of an application for an inquiry into the conduct of an agent, or a sales representative, there is no allegation against him which would, if substantiated, enable the Board to exercise its powers of discipline under the Act."

11 Section 20(1) gives wide powers to the Board in the exercise of its powers and functions under the Act to require the attendance of a person before the Board for the production of any books, papers or documents, to inspect the same, to require any person to make oath or affirmation, and require any person appearing before the Board, including the person whose conduct is subject to an inquiry, to answer any relevant questions put by the Board, or by any other person appearing before the Board. Section 20(3) provides for the application of the privilege against self-incrimination. Section 20(5) provides that:

"in any proceedings the Board shall act according to equity, good conscience, and the substantial merits of the case without regard to technicalities and legal form and it shall not be bound by the rules of evidence ..."

12 Section 22 provides that:

"The Board may, and, on request by any party to the proceedings, shall, give to the parties reasons for its decision."

13 Section 23 makes provision for an appeal to the District Court against a decision or order of the Board by any person aggrieved by such decision or order.

14 Part III of the Act makes provision for the licensing of agents. Part VI makes provision for agents' trust accounts. Part VII provides for the discipline of agents and sales representatives. Section 102(1)(a) provides that the Board may on the application of the Registrar, an inspector, or any other person:

"hold an inquiry into the conduct of any agent for the purpose of determining whether or not the agent is or has been acting in conformity with the special conditions, if any, of his licence and triennial certificate and with the agents' code of conduct and is or has been complying with the requirements of this Act."

15 Section 102(2) provides that:

"An application under subsection (1) shall be made in writing and in a manner and form determined by the Board in respect of such an application and shall contain such information as is required by the Board in respect of such an application."

16 Part VIII makes provision for the establishment of a Real Estate and Business Agents Fidelity Guarantee Fund. Section 116 of the Act provides that:

"(1) Subject to this Act the Fidelity Fund 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.

(2) A person shall not have a claim against the Fidelity Fund, unless notice of the claim was given in writing to the Board within one year after the claimant has become aware of the defalcation."

17 Section 117 of the Act relevantly provides that:

"(1) The Board may receive and settle any claim against the Fidelity Fund at any time after the defalcation in respect of which the claim has occurred, but no person is entitled, without the leave of the Board, to commence any action in relation to the Fidelity Fund, unless the Board has disallowed his claim and unless and until the claimant has exhausted all relevant rights of action and other legal remedies available against the defaulting licensee or any other person in respect of the loss suffered by the claimant.

(2) A person is not entitled to recover from the Fidelity Fund an amount greater than the balance of the 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 Fidelity Fund 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 Fidelity Fund as interest on the amount of any judgment obtained or of any claim admitted against the Fidelity Fund."

18 Section 118 provides that, in any action brought against the Board in relation to the Fidelity Fund, all defences that would have been available to the defaulting licensee are available to the Board. Section 119 provides that on payment from moneys standing to the credit of the Fidelity Fund in settlement in whole or in part of any claims under the Act, the Board shall be subrogated, to the extent of that payment, for rights and remedies of the claimant against the licensee in relation to whom the claim arose.

19 In my opinion, it is clear that, in the exercise of its functions as the administrator of the Fidelity Fund in determining whether to settle or admit a claim against the Fund, or to grant leave to a claimant to commence an action in relation to the Fund, the Board is acting as an administrative tribunal, but is not vested with judicial power in the exercise of these functions. The primary decision to be made by the Board is whether or not to admit the claim. While this may involve some consideration of the basis of the claim, the acceptance of the claim is an admission of liability, the refusal of the claim may involve a question of law, but the Board's determination does not decide the question of law. Consistently with the decision in Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163 at 179 per Brennan CJ, Deane, Toohey, Gaudron and McHugh JJ, where, as in this case, an administrative tribunal not vested with judicial power:

"... falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is a jurisdictional error which will invalidate any order or decision of the tribunal which reflects it."

20 In the case of the claims made or foreshadowed by the applicants, the question which arose was whether, in each case, the claim was made or to be made by a person who had suffered "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" within the meaning of s 116(1) of the Act.

21 By a letter dated 11 November 1997 the solicitors for Mr Cohen gave notice of claims against the Fidelity Fund. The particulars of the claims were as follows:

"The abovementioned claim arises out of the conduct of Bridget Micheline Paterson ('Paterson') and/or Ideal Realty. We are instructed that, in summary, Paterson and/or Ideal Realty engaged in the following conduct:

1. Paterson and/or Ideal Realty, whilst acting as managing agent, fraudulently mortgaged two properties owned by Cohen. The fraudulently mortgaged properties are 177-179 Oxford Street, Leederville, Western Australia and 51 Dixon Road, Rockingham, Western Australia (the 'properties'). Paterson and/or Ideal Realty mortgaged the Properties by forging Cohen's signature on the mortgages. Paterson and/or Ideal Realty successfully registered the mortgages against the titles to the Properties.

2. Cohen instructed Paterson, through Ideal Realty, to arrange for him to lend moneys secured by mortgages. Over time Paterson informed Cohen that she had arranged a number of such mortgages. Cohen paid the moneys to be lent to the mortgagees to Ideal Realty. Paterson and/or Ideal Realty never lent the moneys advanced by Cohen to the proposed mortgagees, nor did she obtain mortgages securing Cohen's loans. Paterson and/or Ideal Realty forwarded Cohen false Land Titles Office mortgage forms purporting to show mortgages securing Cohen's moneys.

3. Paterson and/or Ideal Realty arranged a number of other business investments for Cohen. She/they received moneys from Cohen to be invested in these ventures. No such investments were ever made."

22 The letter was supported by a statutory declaration made by Mr Cohen dated 11 November 1997 together with two files of copy documents referred to in the statutory declaration which showed Ms Paterson's and/or Ideal Realty's conduct in relation to Mr Cohen's land and moneys. It was said that his losses exceeded $2 million. It was asserted that the licensee company appeared to have been dissolved in June 1997 and that the business premises of Ideal Realty had been recently advertised for sale by auction. A statutory declaration made on 11 November 1997 by Mr Cohen stated that he was then 90 years old having been born on 21 March 1907. He had met Ms Paterson six or seven years previously when he inspected a property in Wanneroo which was for sale. Some time later Ms Paterson contacted him. Mr Cohen told her he was primarily interested in making loans secured by mortgages and did not wish to further invest in property acquisitions. Ms Paterson told him she could arrange for him to make loans to be secured by registered mortgages of land.

23 Ms Paterson, through Ideal Realty, managed a property which Mr Cohen owned in Oxford Street, Leederville ("the Leederville land"). She arranged the lease of the property, collected the rent from the tenant and paid disbursements on the land. Ms Paterson, through Ideal Realty, also managed a property which Mr Cohen owned, as trustee for a syndicate, at Rockingham ("the Rockingham land"). Ms Paterson arranged the lease of the land, collected the rent from tenants, paid disbursements on the Rockingham land and attempted to arrange for subdivision. Mr Cohen delivered the duplicate certificates of title for the Leederville land and the Rockingham land to Ms Paterson at her request. She asked for the documents to prepare new leases for the tenants of the two properties. Mr Cohen subsequently discovered that the Rockingham land had been mortgaged to secure a loan of $150,000. He claimed that his purported signature on the mortgage and application for finance was like his signature but he had signed neither of the documents. He had recently seen a copy of a cheque made payable to him from Barry Barr & Associates which purported to be endorsed by him in favour of Ideal Realty. He says he never signed the cheque and never paid any interest in relation to the mortgage on the Rockingham land. It appears that there was an extension of the mortgage granted in 1996 which Mr Cohen says he never signed or knew about. He found out about the Rockingham land mortgage when he was telephoned and asked to attend at Barry Barr & Associates and asked whether it was his signature on a mortgage he was shown in June 1997.

24 Mr Cohen found out that the Leederville land had been mortgaged in favour of the Uniting Church in Australia Property Trust ("the Uniting Church") by way of a guarantee to secure a loan of $313,000 to Ms Paterson. Mr Cohen says he never executed such mortgage. The mortgage was registered in 1995. Mr Cohen says that in 1995 he did not need to borrow any money or secure any borrowings by a mortgage over the Leederville land, nor did he agree to mortgage the Leederville land by way of a guarantee for a loan to Ms Paterson. He denies that the signature on the mortgage was put there by him. The mortgages of the Rockingham land and the Leederville land were alleged to have been forged and used by Ms Paterson to obtain money by fraud.

25 Mr Cohen says that from time to time he paid money to Ms Paterson or Ideal Realty to be invested on behalf of himself or on behalf of his wife and himself jointly and on behalf of his daughter. At various times Ms Paterson told him she had arranged for him to lend moneys to various persons and companies which were secured by registered first mortgages. Ms Paterson sent him copies of the front of various Land Titles Office mortgage forms which purported to show each mortgage she had arranged. There were a number of transactions of this type which included mortgages in favour of Mr and Mrs Cohen and Ms Levy (Mr Cohen's daughter). In all there appear to be some 26 mortgages in favour of Mr Cohen, Mr and Mrs Cohen and others including mortgages granted to Mr Cohen as administrator of the estate of the late Madge J Cohen.

26 All of the correspondence between Ms Paterson and Mr Cohen concerning the various mortgage investments had been on the letterhead of Ideal Realty. All of the moneys advanced by him on mortgage investment were paid to Ideal Realty to be advanced on security of mortgage. Until mid-1996 all payments due under the mortgages were made. Mr Cohen received typed statements (not on Ideal Realty letterhead) from Ms Paterson regarding the payments. Moneys paid were banked directly into Town & Country accounts. Furthermore, in 1992 original mortgages for three mortgagors (White, Pulitano and Austra Holdings) were repaid in full.

27 Mr Cohen went overseas in mid-1996. Upon his return he found no deposits had been made to the Town & Country accounts. He spoke to Ms Paterson expressing his concerns. He received various cheques from Ideal Realty dated 2 January 1997 for "outstanding interest", but did not deposit them because Ms Paterson asked him not to do so. In July 1997 Ms Paterson gave him three personal cheques drawn by her each for $50,000 dated 21, 22 and 23 July 1997. Ms Paterson asked him not to bank the cheques until she had funds to meet them. She would advise him when to bank them. She never so advised him. In August 1997 Ms Paterson gave Mr Cohen a further cheque for $200,000 drawn by Larkfield Holdings Pty Ltd dated 7 August 1997 after he and Mrs Cohen complained about non-payment. Ms Paterson told Mr Cohen he could show the cheque to his wife to satisfy her. Mr Cohen never showed the $200,000 cheque to his wife because he did not think there were funds to meet the cheque. In October 1997 Mr Cohen found out that all of the so-called mortgage investments were fictitious. There were no mortgages and no loans.

28 These were the main claims. Other claims are referred to below.

29 Receipt of the notice of claims was acknowledged by the Board by letter dated 13 November 1997, which indicated that the matters of complaint were being examined by officers of the Real Estate Business Unit of the Ministry of Fair Trading.

30 By letter dated 7 December 1997 the Board informed the applicants' solicitors that the licensee Ideal Realty Pty Ltd ("Ideal Realty") had been struck off by the Australian Securities Commission. Ms Paterson and one Stirling had been instructed by the Board on 4 August 1997 to cease trading immediately. The statutory auditor had been instructed to conduct a termination audit of the agency as required by s 70(8) of the Act. Inquiries had been conducted in relation to the business of the agency which were continuing. The letter concluded:

"In respect of Mr Cohen's complaint, I have been informed by officers of the Major Fraud Squad that they have commenced inquiries and to avoid prejudicing their case it is not intended to commence inquiries in respect of Mr Cohen's complaint until such time as the Major Fraud Squad has completed its inquiries."

31 On 17 November 1997 the statutory auditor reported that the trust account of Ideal Realty had not been regularly and properly maintained; was not ready for examination at the appointed time; and had not been in correct order during the period of audit namely 1 January 1997 to 31 August 1997. The report also stated:

"Furthermore it is my opinion that Ideal Realty Pty Ltd has not complied with all my audit requirements in that banking and other records for one of the four bank accounts making up the trust account were destroyed making it impossible to come to a firm conclusion on the overall trust account records. I draw this matter to the attention of the Real Estate and Business Agents Supervisory Board."

32 By February 1998 it had been ascertained that Ms Paterson was bankrupt.

33 By letter dated 6 February 1998 Solomon Brothers clarified the capacity in which the various claims were made and said that the total claim was for $2,201,193.34 as set out in an attached schedule, interest as damages in accordance with Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 and the costs of pursuing other remedies. It was noted that Mr Cohen may have a further claim for $313,000 and interest paid and costs in relation to the fraudulent mortgage over the property in Oxford Street, Leederville. It was indicated that the remedies were being pursued in relation to that property and a possible claim for $150,000 and interest paid and costs for the fraudulent mortgage over the Rockingham land. It was hoped that these losses would be recovered by other proceedings without the need to pursue a claim under the Act. The $2,201,193.34 claimed against the Fidelity Fund comprised amounts claimed against Ms Paterson in a writ which was issued, but stayed by reason of her bankruptcy. A copy of the statement of claim was enclosed. This amount did not include claims arising in relation to the Oxford Street property and the Rockingham property.

34 The applicants' solicitors also indicated that in their opinion the applicants had arguable claims against two solicitors who had been instructed by Ms Paterson and enclosed all documents in their possession supporting these claims. The applicants' solicitors requested urgent advice whether the Board would exercise its discretion to require the applicants to pursue the claims against the solicitors prior to the Board meeting a claim pursuant to s 117 of the Act, or whether the Board would agree to pay out the claims on the basis that the applicants would reimburse the Fidelity Fund for the net amount recovered in any proceedings against the solicitors.

35 By a letter dated 10 February 1998 the Board raised the question whether the applicants had yet made a formal claim on the Fund pursuant to s 117. The letter from Mr Rose on behalf of the Board said:

"My understanding is that the letter dated 11 November 1997 purported to give notice of a claim on behalf of Mr Cohen as required by section 116(2) of the Act. My further understanding is that the letter dated 6 February 1998, in addition to raising the issue dealt with above, purported to give notice of a claim on behalf of Mrs Cohen and Mrs Levy. Despite some of the language used in the letter dated 6 February 1998, it does not strike me as being the claim of Mr Cohen, Mrs Cohen and Mrs Levy.

Please find enclosed three Fidelity Fund claim forms. Please be advised that when claims are made, it is likely that the advice of Senior Counsel will be sought in relation to them. Please feel free to include with the claims any legal or other submissions which you consider will assist the claimants."

36 By letter dated 13 February 1998 the solicitors for the applicants made it clear that their clients had not made a formal claim against the Fidelity Fund at that time. They asked whether the Board required their clients to pursue their possible claims against the solicitors prior to the Board allowing a claim against the Fidelity Fund. It was indicated that claims would be lodged in due course.

37 By letter dated 16 February 1998 the Board made it clear that it was not necessary that all relevant rights of action and other legal remedies be exhausted before the Board would consider a claim on the Fidelity Fund. By letter dated 17 February 1998 solicitors for the applicants again requested an answer to the question whether the Board would require their clients to exhaust remedies against the solicitors or either of them before finalising the claims against the Fidelity Fund. By letter dated 19 February 1998 the Board made it clear that:

"The Board does not pend determination of claims whilst other legal remedies are pursued, and does not reject claims on the basis that a cause of action that would otherwise be available to it under subrogation cannot be pursued due to the expiration of a limitation period applying to that cause of action."

38 Formal claims were then made. The claims were verified by statutory declarations which are undated but were made shortly after the letter dated 19 February 1998 was received.

39 By letter dated 18 May 1998 the solicitor for the Board indicated that counsel was to be briefed to advise the Board on a number of matters. It was indicated that in the past the Board had not paid claims until the agent had been successfully prosecuted. Claims were also processed in the order in which they were received and there were some 20 claims ahead of those made by the applicants. It was indicated that it was highly unlikely that the entirety of the claims would be determined within the next six months. This prompted a substantive reply from the applicants' solicitors who threatened the issue of a writ of mandamus. Subsequently, at a meeting on 19 June 1998 the Board resolved to deal with the claims by the applicants as follows:

(1) The claims in respect of rental moneys allegedly collected by Ms Paterson, but not forwarded to Mr Cohen would be examined immediately by inspectors of the Board, with an expectation that submissions could be made to the Board within six weeks.

(2) The claims in respect of the "false" mortgages (also referred to as "fictitious mortgages") would be referred to counsel for consideration and advice in respect of:

(a) Whether the transactions in these circumstances were transactions which fell within the meaning of "real estate transaction" pursuant to the provisions of the Act.

(b) If counsel advised in the affirmative, what action needed to be taken in respect of each transaction for the Board to make a decision.

(3) The claims in respect of the "allegedly" forged signatures on the mortgages of the Leederville and Rockingham properties (also referred to as "the fraudulent mortgages") could not be resolved until the police were in a position to provide forensic evidence in the matter. However, the Board had asked counsel to determine if these transactions would satisfy the definition of "real estate transactions" contained in the Act.

40 It appears that the solicitors for the applicants subsequently obtained copies of a number of bank cheques from the Western Australian Major Fraud Squad. By these cheques Mr Cohen paid money to Ideal Realty or Ms Paterson to be advanced as loans to third parties secured by first mortgage. Most of the money advanced by Mr Cohen was by bank cheques payable to the trust account of Ideal Realty. Some cheques were payable to Ideal Realty or Larkfield Holdings Pty Ltd, which was referred to on the letterhead of Ideal Realty as the proprietor of the business. In one case the advance was made directly to Ms Paterson. It was alleged that the misappropriation of the proceeds of these various cheques amounted to defalcations by a licensee. Copies of the cheques were forwarded to the Board under cover of a letter dated 3 July 1998. It was contended that the conduct of Ms Paterson or Ideal Realty in relation to these cheques and their proceeds constituted defalcation by a licensee under the Act.

41 By letter dated 6 August 1998 the Board informed the applicants' solicitors that it expected to review counsel's opinion "in the next week or so". On 14 August 1998 the Board resolved that the applicants' claims be refused. By letter dated 17 August 1998 the Board asserted that criminal conduct by a licensee did not necessarily constitute a defalcation by a licensee. Finally, in a letter dated 7 September 1998 the Board notified the applicants' solicitors as follows:

"(i) In respect of the claim concerning what can conveniently be called 'fictitious mortgages', the claim is disallowed. The basis for disallowing the claim is that mortgage finance broking or arrangements are not in the course of the business of a licensee. The extended characterisation of services 'rendered' by an agent (in s 4(3)(d)) does not assist in the context of fictitious mortgages either.

(ii) In respect of the claim concerning Guildford Road, it is disallowed. Primarily because the claim is out of time.

(iii) In respect of the claim concerning '1/83 First Avenue, Mt Lawley', there is insufficient substantion [sic]. This claim has not been formally disallowed. I will revert to you shortly with requisitions.

(iv) In respect of the claim concerning the 'fraudulent mortgages', there is insufficient substantiation. This claim has not been formally disallowed. It is expected that the Fraud Squad will ultimately provide advice in this regard.

(v) The claim for 'interest' on otherwise allowable claims is disallowed.

As previously advised, I will be seeking a meeting with you to discuss the claim concerning unpaid rents."

42 Grounds 2 to 6 each allege that the Board made a jurisdictional error of law. Ground 2 was that the Board made a jurisdictional error of law in finding that there was not a defalcation by a licensee within the meaning of the Act. This ground related to the claims made in respect of what were referred to as the "fictitious mortgages". The Board disallowed these claims on the basis that the proposed transactions by way of investment in mortgages were "mortgage finance broking or arrangements" which were "not in the course of business of a licensee". As will appear, the Board appears to have concluded that a mortgage finance broking transaction and a real estate transaction were mutually exclusive.

43 It was contended on behalf of the applicants that the failure of Ideal Realty to deposit the money received into its trust account on account of proposed investment in first mortgages of land was a breach of s 68(1) of the Act and constituted a defalcation. Section 68(1) provides that:

"Every agent who holds a current triennial certificate shall maintain one or more trust accounts, designated or evidenced as such, in the prescribed manner, with an authorised financial institution and shall, as soon as practicable, pay to the credit of that account or those accounts all moneys received by him for or on behalf of any other person in respect of transactions".

44 The term "transaction" is defined in s 4(1) of the Act as:

" 'transaction' means a real estate transaction or a business transaction, or both a real estate transaction and a business transaction".

45 It was contended that in each case the relevant transaction was a real estate transaction. The term "real estate transaction" is defined in s 4(1) of the Act as:

"(a) means a sale, exchange, or other disposal and a purchase, exchange, or other acquisition of real estate and any exclusive right whether deriving from the ownership of a share or interest in a body corporate or partnership, or otherwise, to the use or occupation of real estate including the leasing, and letting, and the acquisition under lease or letting of tenancy or occupation of real estate; and

(b) includes any sale, exchange, or other disposal and any purchase, exchange, or other acquisition of goods, chattels or other property relating to a real estate transaction of a kind specified in paragraph (a); and

(ba) includes the collection of rents or other payments for use or occupation; and

"... land within or outside the State and includes land of any tenure and buildings or parts of buildings within or outside the State".

47 The term "land" is defined in s 3(1) of the Interpretation Act 1984 to mean:

"... any estate, interest, easement, servitude or right in or over land".

48 This definition first appeared in the Interpretation Act 1984. There was no such definition in the preceding legislation, namely, the Interpretation Act 1918.

49 At all material times since 1962 both the 1918 Act and the 1984 Act contained the definition of "estate" as it now appears in s 3(1) of the Interpretation Act 1984. The term "estate" in relation to land is defined in s 3(1) to include "any ... encumbrance in, over, to or in respect of the land". It follows that a transaction involving the loan of money secured by a mortgage of land, which constitutes an encumbrance in respect of the land, is a transaction which involves an "acquisition of real estate" for the purposes of s 4(1) of the Act. The consequence is that a transaction involving the loan of money upon the security of a mortgage over land is a "real estate transaction" as defined in s 4(1) of the Act: cf Re A Fidelity Bond given by the Colonial Mutual Fire Insurance Company Ltd [1931] SASR 173; and Schofield v Consolidated Interest Fund (1988) 49 SASR 546.

"The collection by an agent for and on behalf of another person of moneys in respect of -

(d) any payments under a mortgage or other security,

relating to a transaction is deemed to be a service rendered by the agent in his capacity as an agent, and those moneys are deemed to be moneys received by the agent, in the course of his business, for and on behalf of the other person in respect of the transaction, irrespective of whether or not the agent negotiated the transaction or participated in the negotiation thereof."

51 In my opinion, it is necessarily to be implied that if the agent negotiated the mortgage transaction or participated in the negotiation of the transaction it would constitute a service rendered by the agent in his or her capacity as an agent. The term "transaction" is defined in s 4(1) of the Act as:

"... a real estate transaction or a business transaction, or both a real estate transaction and a business transaction".

52 Having regard to the definition of "real estate transaction" in s 4(1) it seems clear that the collection of moneys in respect of the consideration for the sale of land, terms payments for the sale of land, rent or other consideration for the use or occupation of land, or any payments under a mortgage or other security of land would each involve the receipt of money on account of a "real estate transaction" as defined.

53 The opinion of Mr H D Seymour of counsel dated 3 August 1998, on which the Board relied, rightly said that the first question in respect of the "fictitious mortgages" was whether the proposed advances made by Mr Cohen and the other claimants came within the words "a sale, exchange or other disposal and a purchase, exchange, or other acquisition of real estate and any exclusive right ... to the use or occupation of real estate ...". Mr Seymour concluded they did not. Counsel expressed the view that a registered mortgage under the Transfer of Land Act 1893 only operated as a charge upon land for a sum of money secured by virtue of s 106. Section 106(1) of that Act provides that:

"A mortgage and a charge under this Act shall when registered as hereinbefore provided have effect as a security but shall not operate as a transfer of the land thereby mortgaged or charged..."

54 Thus a mortgage registered under the Transfer of Land Act did not operate or take effect as a transfer of land, in contrast to a mortgage under old system land: Patridge v McIntosh & Sons Ltd [1933] HCA 38; (1933) 49 CLR 453 at 466 per Dixon J, who distinguished between an interest in land in the nature of a charge and an estate in land. See also English Scottish & Australian Bank Ltd v Phillips [1937] HCA 6; (1937) 57 CLR 302 at 321-322 per Dixon, Evatt and McTiernan JJ. Mr Seymour concluded that:

"Given that a registered mortgage operates only as a charge it is my opinion that it is not encompassed within the definition of 'real estate transaction' in section 4. Simply put, it does not involve 'a sale, exchange or other disposal and a purchase, exchange or other acquisition of real estate and any exclusive right ... to the use or occupation of real estate'."

"There is no express reference to mortgages or mortgage transactions in the definition of 'real estate transaction' in section 4 (as opposed to leasing transactions). In my opinion if the legislature had intended to include mortgage transactions with the definition it would have specified them (as it did in the context of section 4(3) of the Act)."

56 In my view, this conclusion overlooks the definition of "real estate" in s 4(1) of the Act which includes "land" which in turn is defined in the Interpretation Act to mean any "interest ... in or over land". It is apparent that a mortgage under the Transfer of Land Act falls within the definition of "estate" in relation to land as defined in s 3(1) of the Interpretation Act as being "any ... interest ... charge ... or encumbrance in, over, to or in respect of the land". As Dixon J said in Patridge at 466:

"The statutory mortgage does not upon registration effect a transfer to the mortgagee of an estate in the land ... He has, of course, an interest in the land at law, but it is in the nature of a charge".

57 A mortgage under the Transfer of Land Act creates an interest in the subject land. It is a charge and it is also an encumbrance. In the English Scottish and Australian Bank case at 324 Dixon, Evatt and McTiernan JJ said of the Real Property Act 1886 (SA) that:

"... the plan of the legislation is to treat mortgages as distinct and persisting interests capable of the same ready transfer by registration or estates in fee simple and without any discrimination or concern as to the relation of the transferee or transferor thereof to any other estate or interest in land".

58 That case was applied in Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd [1999] HCA 20 May 1999. Gaudron, Gummow and Callinan JJ said at [22] that a Torrens System mortgage under the Transfer of Land Act 1958 (Vic) had effect as a security and was an interest in but did not operate as a transfer of the land.

59 In the present circumstances, the situation under the Western Australian legislation is indistinguishable from the relevant provisions in contemplation in the Land Agents Act 1925 (SA) in Re a Fidelity Bond (supra), the first of the South Australian cases, and in Schofield (supra), the second of those cases, which concerned the Land & Business Agents Act 1973 (SA) which referred in s 6 to "any interest in land".

60 Mr Seymour found some important additional support for the view that the definition in s 4 of the Act of a "real estate transaction" did not include a mortgage broking transaction in two reports of the Western Australian Law Reform Commission ("WALRC"), namely the Report on a Review of the Land Agents Act (Project No 37) and Report on Mortgage Brokers (Project No 45); Law Reform Commission of Western Australia Reports Vol 2, 1973-1975. Both reports were published in 1974 and were followed by the enactment of the Finance Brokers Control Act 1975 and the Act. Reference to such reports and to the second reading speeches in respect of the legislation to implement them is recognised by s 19 of the Interpretation Act as appropriate in order to assist in the interpretation of the legislation.

61 In the report on the Land Agents Act 1921 the Commission noted at par 4 that a separate working paper dealing with mortgage brokers was to be prepared. The relevant report considered whether mortgage brokers (and finance brokers) should be required to take out a bond or contribute to a fidelity fund. The Commission recommended that a bond system, or a separate fidelity fund, or a common fidelity fund for both land agents and mortgage brokers should be established. A mortgage broker was defined as a person who in the course of business as an agent negotiated or arranged loans of money upon the security of mortgages of land for and on behalf of another for reward. The Commission said that there was a doubt whether the provisions of the Land Agents Act extended to a licensed land agent when acting in the capacity of a mortgage broker. At that time the definition of "land transaction" in the Land Agents Act 1921 was as follows:

a sale, exchange or other disposal, and a purchase, exchange or other acquisition - except by auction, of land and estates and interest in land ..."

62 This definition was wider than the present definition of "real estate transaction" in the Act, in that it referred to an "interest in land". As has been seen, however, the definition of "estate", which now appears in the Interpretation Act 1984 has been included in the Interpretation Act 1918 since 1962, although the definition of "land" first appeared in the Interpretation Act 1984. In the course of the second reading speech on the Finance Brokers Bill, as recorded in Hansard (1975, vols 207-210 at 4037-4038) the Minister for Works referred to the Report of the Law Reform Commission in 1974 and said:

"There is doubt whether the provisions of the Land Agents Act extend to a land agent acting in the capacity of a mortgage broker. The government therefore considers that a land agent should be required to obtain a finance broker's licence before he can act as such a broker. I think this would be in accordance with the views of most land agents who would generally regard the activities of mortgage brokers as separate from those of land agents".

63 These views were repeated in the Legislative Council in the second reading speech by the then Minister for Justice: Hansard (supra) at 4363-4364. By the time the subject Act commenced, a bond system for finance brokers, including mortgage brokers, had been established under s 35 of the Finance Brokers Control Act 1975 instead of a separate or common fidelity fund.

64 Counsel advising the Board concluded that the two reports of the Law Reform Commission, the second reading speeches relating to the Finance Brokers Control Act 1975 and the timing of the enactment of the Real Estate and Business Agents Act 1978 indicated that the definition of "real estate transaction" in the latter Act was not intended by Parliament to encompass mortgage broking transactions conducted by real estate agents. It was also concluded that the fact that Mr Cohen and the other applicants advanced a total of $2,201,193.30 in some 25 transactions to Ms Paterson through Ideal Realty over a period of six years, when taken with the definition in s 5 of the Finance Brokers Control Act 1975 of a "finance broker", suggested that Ms Paterson was conducting a business as a finance broker for Mr Cohen (albeit without a licence): cf Simto Resources Ltd v Normandy Capital Ltd [1993] FCA 293; (1993) 43 FCR 78 at 88 and 96-97. There is a clear inference from the materials that the Board adopted the advice of counsel when rejecting the claims in respect of the "fictitious mortgages".

65 Counsel for the applicants contended that the significance of the extension of the scope of a real estate agent's business to the collection of payments under a mortgage under s 4(3) is that the final words of s 4(3) expressly contemplate that the agent may have negotiated, or participated in the negotiation of, the mortgage. This implies that such negotiations would be within the course of the business of the agent, adding weight to the submission that the business of a "real estate agent" may include the negotiation of loans of money to be secured by mortgage of land: cf Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 at [69] - [71]; [1998] HCA 28; (1998) 153 ALR 490 at 509-510 per McHugh, Gummow, Kirby and Hayne JJ. It is difficult to understand how the collection of interest under a mortgage after the transaction has been entered into constitutes part of the business of a land agent, but negotiation of the mortgage itself pursuant to which the money was lent is excluded. As counsel for the applicants submitted, such a construction of the Act would be "absurd, extraordinary, capricious, irrational or obscure" and should be avoided: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 at 320-322. The construction suggested by Mr Seymour and adopted by the Board would defeat that purpose and should be rejected: cf MacAlister v The Queen [1990] HCA 15; (1990) 169 CLR 324 at 330 per Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ; and Hospital Benefit Fund of Western Australia Inc v Minister for Housing and Community Services [1992] FCA 599; (1992) 111 ALR 1 at 6 per Willcox, Burchett and French JJ.

66 There was no evidence, apart from the subject transactions, that Ms Paterson or Ideal Realty was engaged in a separate business as a finance broker as distinct from a real estate agent. To the extent that the pretended and fictitious mortgage transactions were in the nature of finance broking transactions, I do not consider that this of itself would prevent them also being within the definition of "real estate transaction" in the Act. The Finance Brokers Act 1975 does not define a finance broking transaction. Section 4 of the Finance Brokers Act defines a "finance broker" as:

"means a person, who, as an agent, in the course of business negotiates or arranges loans of money for and on behalf of other persons but does not include the exceptions in section 5(1)".

67 None of the exceptions in s 5(1) are relevant in this case. There is nothing to suggest that a finance broking transaction could not also be a real estate transaction.

"Every agent who holds a current triennial certificate shall maintain one or more trust accounts, designated or evidenced as such, in the prescribed manner, with an authorized financial institution and shall, as soon as practicable, pay to the credit of that account or those accounts all moneys received by him for or on behalf of any other person in respect of transactions."

69 Section 84 provides that a breach of s 68(1) is an offence. Consequently, the failure of Ms Paterson to deposit in a trust account the proceeds of the cheques paid to her by or on behalf of the applicants for investment in mortgages of land constituted criminal conduct and a defalcation by a licensee. Details of the cheques were set out in par 23 of Mr Cohen's affidavit sworn 17 September 1998 when read with Exhibit HC28, being the letter dated 3 July 1998 from the solicitors for the applicants to the Board, to which copies of the relevant cheques were attached.

70 In my opinion, the failure to deposit any part of the moneys in the trust account of Ideal Realty was clearly in breach of s 68(1) of the Act. Such a breach constitutes an offence by virtue of s 84 of the Act. Neither counsel for the Board nor the Board appear to have considered this point. In my opinion, the Board wrongly decided that it had no jurisdiction in relation to the claims in respect of the fictitious mortgages. In my opinion, that error by the Board was a jurisdictional error. On the face of it, therefore, ground 2 has been made out and certiorari would be available to quash the decision in respect of the "fictitious mortgages".

71 Counsel for the applicants submitted that the two transactions involving the Oxford Street, Leederville property and the Dixon Road, Rockingham property, which were the subject of fraudulent mortgages, were of a different nature. Ms Paterson of Ideal Realty acted as the property manager for Mr Cohen in respect of both properties. Both of the properties were leased. As a result of her actions, the properties became encumbered by registered mortgages to the Uniting Church to secure $313,000 and to Newpark Nominees Pty Ltd to secure $150,000 respectively. Mr Cohen asserted that his signatures on the mortgage documents were forgeries and that he did not receive any of the funds advanced. He gave the duplicate certificates of title for both properties to Ms Paterson in order that she could prepare new lease documents. Assuming that neither of the registered mortgagees had any knowledge or notice of the alleged forgeries or the fraud of Ms Paterson, they would have obtained an indefeasible title: Frazer v Walker [1967] AC 569. Counsel accepted that it was arguable that the registration of a mortgage on the two properties by Ms Paterson in the course of Ideal Realty managing the properties and more specifically, managing the tenancies thereon, fell within the course of business of the licensee as defined, so as to constitute a "real estate transaction" for the purposes of s 4(1) as well as within the extended definition of "business" in s 4(3) of the Act.

72 In my opinion, on the basis that the leasing of real estate and the collection of rents under a lease of real estate is clearly part of the business of a real estate agent, the fraudulent registration of a mortgage upon such real estate during the managing and leasing or re-leasing of it would constitute a "defalcation by a licensee" in the course of the business of the licensee. The term "defalcation by a licensee" is defined in s 4(1) of the Act as:

"includes criminal or fraudulent conduct ... in the course of the business of the licensee and from which arises pecuniary loss or loss of property to any other person".

73 If, as in this case, the licensee is a firm or a body corporate the term "defalcation by a licensee" includes criminal or fraudulent conduct "of any one or more of the directors, officers, servants or agents of the body corporate". At all material times Ms Paterson was a servant or agent of the licensee company. This claim was dealt with in par (iv) of the Board's letter to the applicants' solicitors dated 7 September 1998. The Board did not disallow the claim, but took the view that there was "insufficient substantiation", saying that it "expected that the Fraud Squad will ultimately provide advice in this regard". It is implicit in this decision that the evidence before the Board that Mr Cohen's signature on the mortgage documents and other documents had been forged was regarded by the Board as insufficient to make a finding of forgery and that the Board wished to have the benefit of the results of a forensic investigation by the Fraud Squad.

74 None of grounds 2 to 5 of the grounds appear to apply to the two transactions involving the "fraudulent mortgages". Ground 1 alleges a denial of natural justice and ground 6 alleges a jurisdictional error of law in failing to give reasons for the decision. In the case of the fraudulent mortgages there was no refusal of the claim, the only decision made was to defer consideration of it. The order nisi is only directed to the decisions of the Board to "refuse" claims made by the applicants. In my opinion, the applicants are not entitled to any relief from this Court in respect of the claims concerning the "fraudulent mortgages".

"Further or alternatively, the Board made a jurisdictional error of law in holding that the first-named applicant's (in his capacity as trustee of the Cosmer Syndicate) claim could not be determined because it was made out of time when the evidence before the Board shows that it was plainly made within time."

76 This ground relates to the disallowance by the Board in par (ii) of the letter from the Board dated 7 September 1998 of "the claim concerning Guildford Road ... Primarily because the claim is out of time".

"A person shall not have a claim against the Fidelity Fund, unless notice of the claim is given in writing to the Board within one year after the claimant has become aware of the defalcation."

78 Section 117(1) of the Act relevantly provides that:

"The Board may receive and settle any claim against the Fidelity Fund at any time after the defalcation in respect of which the claim arose has occurred ..."

79 In par 4 of his affidavit sworn 17 September 1998 Mr Cohen refers to and exhibits a copy of a letter dated 11 November 1997 from the applicants' solicitors to the Board giving notice of his claim against the Fidelity Fund. There was enclosed with that letter a statutory declaration which exhibited two lever arch files of documents in support of his claims. The letter dated 11 November 1997 gave notice in relation to the "fraudulent mortgages" and the "fictitious mortgages", as well as a number of other business investments. Neither this letter nor the accompanying statutory declaration makes reference to the subject claims.

80 In par 9 of his affidavit sworn 17 September 1998 Mr Cohen refers to a letter from his solicitors to the Board dated 6 February 1998 by which his solicitors:

"... also notified the Board of my claim, as trustee of the Cosmer Syndicate, which the Board had not been previously notified of. I had only become aware of my claim as trustee of the Cosmer Syndicate after Mr James Ride, a solicitor I had formerly engaged, delivered documents to Solomon Brothers following a demand by Solomon Brothers. Although I am unaware of the exact date of receipt of those documents by Solomon Brothers, I informed by Solomon Brothers and do believe that they received those documents shortly after receipt by Solomon Brothers of a letter from James Ride dated 13 January 1998."

81 Details of the claim, which was for $24,193.34, were set out in the letter dated 6 February 1998. The essence of the claim was that in 1991 Ideal Realty represented by Ms Paterson was the agent of the applicant as trustee of the Cosmer Syndicate for the sale of a property at 150 Queens Road, Guildford for $240,000. It was alleged Mr Cohen was to provide $140,000 by way of vendor finance and that $110,000 was to be provided by a mortgagee on the basis that the vendor would have priority. It was alleged that Ms Paterson fraudulently instructed the vendor's solicitors to postpone the vendor's priority to the proposed mortgageee.

82 In my opinion, the alleged conduct of Ms Paterson, if proved, would constitute fraudulent conduct, and so constitute a "defalcation by a licensee" within the meaning of the Act. The difficulty which Mr Cohen has with reference to this claim is that the letter dated 6 February 1998, which gave notice of the claim, did not state when he first became aware of it. The letter was being written six to seven years after the alleged defalcation.

83 The claims lodged shortly after the Board's letter to the applicants' solicitors dated 19 February 1998, by way of the undated statutory declaration by Mr Cohen, include a statement by Mr Cohen that:

"I first became aware of the defalcation giving rise to the loss of money(s) now claimed in or about October 1997."

84 Mr Seymour dealt with this claim in his opinion as follows:

"It is alleged by Messrs Solomon Brothers that Paterson instructed Mr Ride to postpone Mr Cohen's priority behind that of the mortgagee in order to ensure that the sale proceeded (and that she received her commission). In their letter Messrs Solomon Brothers allege that Ride took instructions from Paterson despite being retained by Mr Cohen. However, I note that amongst the documentation provided is a letter, apparently signed by Mr Cohen and dated 11 October 1991, to Mr Ride agreeing to the postponement of his interest. This may be an answer on Ride's part to any allegation of negligence if it was received by Ride prior to settlement. Even if such a letter is alleged to have been forged by Paterson, it would be difficult to contend that a solicitor in Ride's position was negligent in not detecting it was a forgery. This transaction settled on 11 October 1991. I note that Messrs Solomon Brothers allege in their letter of 10 February 1998 at paragraph 3 that the 11 October 1991 letter purportedly signed by Mr Cohen was not, due to the facsimile imprint, received by Ride until 15 October 1991. I cannot discern any facsimile imprint on my copy. This particular aspect requires clarification."

85 The Board's expressed reason for rejection of the claim was that it was out of time. In the result Mr Cohen and his solicitors were not given any opportunity to deal with these matters before the claim was rejected.

"Given that this transaction involved a sale of real estate by Mr Cohen it may well have been a transaction coming under the Act. However, some further examination of the transaction, including the signature of Mr Cohen on the 11 October 1991 letter, and perhaps an interview of Mr Ride (if that is feasible), is necessary before it can be decided whether Paterson's actions constituted a "defalcation by a licensee". However, in addition it would appear that this transaction is probably well out of time in that the loss suffered by Mr Cohen would presumably have been apparent to him in 1992 (even though his statutory declaration is silent in this respect). Thus, the one year time limit imposed by section 116(2) of the Act may apply to bar the claim. (I also note that this claim is also inconsistently presented. The statutory declaration by Mr Cohen and the letters by Solomon Brothers, do not contend it to be part of the claim. However, it is formally included in the Notice of claim at tab 8)."

87 Again, the only reason for rejection communicated by the Board to the applicants' solicitors was that the claim was made out of time. No basis was set out by Mr Seymour for the presumption that the loss suffered by Mr Cohen "would presumably have been apparent to him in 1992". The circumstances were that Mr Cohen had stated that he was unaware of the circumstances giving rise to the claim until his solicitors received the relevant documents in January 1998.

88 That statement does not appear to have been challenged or disputed in any way. That being so, notice of the claim was given within one year after Mr Cohen became aware of the defalcation. However, I note that in the minutes of the Board meeting on 14 August 1998 it was recorded that Mr Seymour advised that the claim was out of time because:

"... the loss suffered by Mr Cohen was likely to have been apparent to Mr Cohen in 1992, but notification of the claim was not received by the Board until November 1997."

89 Notification of the claim was not given in November 1997 but in February 1998. What the evidence was, if any, which gave rise to the presumption and advice by Mr Seymour is not apparent from the materials before the Court. Mr Cohen's assertion that he was not aware of the alleged defalcation was not challenged by the Board, nor was he given an opportunity to give any explanation in respect of the evidence apparently relied on by Mr Seymour. These circumstances are relevant to the denial of natural justice relied upon in ground 1.

90 It was contended by counsel for the applicants, however, that the finding by the Board that notice of the claim had been given out of time was so unreasonable as to give rise to a jurisdictional error of law: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 41-42 per Mason J; Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223 at 228 per Lord Greene MR. No basis was expressed for the presumption made by Mr Seymour that the loss would "presumably have been apparent to Mr Cohen in 1992".

91 It was also submitted that the decision that the notice of claim was out of time was an arbitrary and improper exercise of power. Counsel for the applicants referred to Singh v Minister for Immigration and Ethnic Affairs (1987) 15 FCR 4 at 10 per Forster J, but that case offers no authority for the proposition. The proposition seems to involve an additional reason to say that the decision was unreasonable. While expressed as a further alternative, it was also submitted that the decision was made without any realistic consideration of the merits of the case: Khan v Minister for Immigration and Ethnic Affairs [1987] FCA 457; (1987) 14 ALD 291. The disallowance of the claim as being out of time involved the acceptance as a fact of a presumption made by counsel, apparently unsupported by any basic facts and the rejection of Mr Cohen's statutory declaration that he first became aware of the defalcation in or about October 1997. In my opinion the decision of the Board so made constituted a clear example of an arbitrary and improper exercise of power made without any realistic consideration of the merits of the case. In my opinion the decision was so unreasonable as to give rise to a jurisdictional error of law. It was an arbitrary and capricious decision. Such a decision is necessarily unreasonable: Weinberger v Inglis [1919] AC 606; R v Barnet and Comden Rent Tribunal; Ex parte Frey Investments Ltd [1972] 2 QB 342.

92 It was also submitted that, in the circumstances, the disallowance of the notice of claim as being made out of time was a decision made in breach of the requirements of s 20 of the Act. As has been seen s 20 contains the familiar provisions requiring the Board to act according to equity, good conscience, and the substantial merits of the case. In my opinion, the giving of notice of claim, the making of the claim and its consideration, admission or disallowance by the Board constitutes "proceedings before the Board" within the meaning of s 20(5) of the Act. For the reasons already expressed the disallowance of this particular claim as being out of time was made without any realistic consideration of the substantial merits of the case.

94 Ground 4 of the order nisi was that the Board made a jurisdictional error of law in refusing the applicants' claim for interest as damages made in accordance with the principles enunciated in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125.

95 On 14 August 1998 the Board declined the claim for interest on the basis that:

"... loss suffered by way of interest is not a loss for the purpose of a claim against the Fund."

Re Real Estate and Business Agents Supervisory Board; Ex Parte Cohen [1999] WASCA 47 (11 June 1999)

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Re Real Estate and Business Agents Supervisory Board; Ex Parte Cohen [1999] WASCA 47 (11 June 1999)

Legislation Cited (9)

Cases Cited (38)