Court of Appeal (WA)|2004-02-12|Before: Murray ACJ

Real Estate and Business Agents Supervisory Board v Cohen & Ors [2004] WASCA 19 (12 February 2004)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD -v- COHEN & ORS [2004] WASCA 19

BETWEEN : REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD

Professions and trades - Agents - Claim against Fidelity Fund for loss sustained as a result of defalcation by a real estate agent - Statutory provisions construed - Reimbursement limited to capital loss less money repaid

Real Estate and Business Agents Act , s 4, s 23, s 116, s 117

Australian Coal and Shale Employees' Federation v Commonwealth [1953] HCA 25; (1953) 94 CLR 621

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424

Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187

CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384

Computer Edge Pty Ltd v Apple Computer Inc [1984] HCA 47; (1984) 54 ALR 767

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297

Daniels Corp International Pty Ltd v Australian Competition & Consumer Commission [2002] HCA 49; (2002) 192 ALR 561

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

Eastman v Director of Public Prosecutions (ACT) (2003) 198 ALR 1

Ebner v Official Trustee of Bankruptcy [2000] HCA 63; (2000) 205 CLR 337

Electricity Commission of NSW v Lapthorne [1971] HCA 11; (1971) 124 CLR 177

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

Ex parte; Bucknell [1936] HCA 67; (1936) 56 CLR 221

Fagan v Crimes Compensation Tribunal [1982] HCA 49; (1982) 42 ALR 511

Fight Vision Pty Ltd v Onisforou (1999) 47 NSWLR 473

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

GIS Electrical Pty Ltd v Melsom [2002] WASCA 302; (2002) 43 ACSR 481

Hall v Nominal Defendant [1966] HCA 36; (1966) 117 CLR 423

Harding v Her Worship Ms B Lane SM [2001] WASCA 37

Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 197 ALR 626

Hospital Benefit Fund of Western Australia Inc v Minister for Health, Housing & Community Services [1992] FCA 599; (1992) 111 ALR 1

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

Lawal v Northern Spirit Ltd [2003] UKHL 35

Locabail (UK) Ltd v Bayfield Properties Ltd [1999] EWCA Civ 3004; [2000] QB 451

MacAlister v The Queen [1990] HCA 15; (1990) 169 CLR 324

Minister for Immigration & Multicultural Affairs v Wang (2003) 196 ALR 385

Minister for Immigration, Multicultural & Indigenous Affairs v Al Masri [2003] FCAFC 70; (2003) 197 ALR 241

Norris v Blake (No 2) (1997) 41 NSWLR 49

Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation [1948] HCA 24; (1948) 77 CLR 1

Plaintiff S157/2002 v Commonwealth of Australia (2003) 195 ALR 24

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

Public Trustee v Attorney General for the State of South Australia [2000] SASC 184; (2000) 77 SASR 192

R v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 CLR 13

R v Secretary of State for Home Department; Ex parte Simms [1999] UKHL 33; [2000] 2 AC 115

R v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 CLR 13

Randwick Municipal Council v Rutledge [1959] HCA 63; (1959) 102 CLR 54

Re Beddoe; Downes v Cottam [1893] 1 Ch 547

Re Hawkins (decd); Hawkins v Hawkins [1972] Ch 714

Re Medicaments & Related Classes of Goods (No 2) [2000] EWCA Civ 350; [2001] 1 WLR 700

Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd [2002] WASCA 231; (2000) 25 WAR 511

Re Ogilvie; Armstrong v Lillingston (1910) 11 SR (NSW) 11

Sanders v Snell (No 2) (2000) 174 ALR 53

Saraswati v The Queen [1991] HCA 21; (1991) 172 CLR 1

Schofield v Consolidated Interest Fund (1988) 49 SASR 546

Smith Newcourt Securities Ltd v Citibank NA [1996] UKHL 3; [1997] AC 254

Tait v Tatnell [2001] QCA 562

Taylor Woodrow Home Builders Pty Ltd v Chitarra & Antulov, unreported; FCt SCt of WA; Library No 940739; 20 July 1994

Wentworth Securities Ltd v Jones [1980] AC 74

Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 196 ALR 482

1 MURRAY ACJ: The facts which give rise to this appeal may be briefly stated. A Ms Paterson and the firm through which she operated, Ideal Realty, was a real estate agent licensed under the Real Estate and Business Agents Act 1978 (WA). She was engaged to manage properties owned by Mr Cohen, in one case as a trustee. The properties were mortgaged. Mr Cohen alleged that that was done without his consent, by forging his signatures on the mortgages.

2 More importantly for present purposes, it was established that Mr Cohen from time to time paid money to Ms Paterson to be invested variously for him, for him and his wife, and for his daughter, together the respondents. Ms Paterson told the respondents that she had loaned the money to applicants on the security of registered first mortgages. There were 26 such purported investments, but there were in fact no borrowers to whom loans had been made and the mortgages did not exist. They were fictitious. It appears that the money was used by Ms Paterson for her own purposes.

3 However, for a time Ms Paterson pretended to the respondents that the mortgages were in place and that moneys were being received pursuant to their terms. She accounted for these funds and paid money to the respondents accordingly. Some of the fictitious mortgages were, by that means, repaid in full. In respect of other fictitious mortgages, so-called interest payments were credited to the respondents. However, by late 1996 it appeared Ms Paterson could not keep up the pretence and the payments ceased.

4 Between 1991 and 1996, a very large sum, totalling about $2.3M, including sums said to have been rolled over from one mortgage investment into another, was invested by the respondents in loans said to have been made and said to have been secured by fictitious mortgages. The payments made by Ms Paterson over those years totalled $839,726.19, purportedly as interest. The respondents' claim is said to exceed $1.9M.

5 The respondents made a claim upon the Real Estate and Business Agents Fidelity Guarantee Fund, established under s 107 of the Act. The Fund is administered by the appellant Board, established under s 6: s 112. It was held in Re Real Estate and Business Agents Supervisory Board, Ex p Cohen [1999] WASCA 47; (1999) 21 WAR 158 at 188[122] by Malcolm CJ, with whom Pidgeon and Wallwork JJ agreed, that the Board was under a duty to determine claims made against it, according to law.

6 The purpose of the Fund is set out in s 116(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."

7 By s 116(2), strict time limits are imposed and the Board is to disallow a claim against the Fund which does not meet them. Claims against the Fund are dealt with in s 117 which, so far as material for present purposes, provides:

"(1) The Board may receive and, subject to section 116(2), settle any claim against the Fidelity Fund at any time after the defalcation in respect of which the claim arose 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."

8 By s 118, in an action brought against the Board in relation to the Fund, the Board has available to it those defences which would have been available to the defaulting licensee. By s 119, if the Board meets a claim wholly or in part out of the Fund, it is subrogated to that extent to the rights and remedies of the claimant against the licensee. Having regard to those provisions in particular, Malcolm CJ held in Ex p Cohen at 188[122] that, "Because the Fund provides indemnity for such loss, the position of the Board is analogous to that of an insurer."

9 The Board met to hear and ultimately determine the claims of the respondents for compensation out of the Fund on a total of 10 days between 13 August 1999 and 8 September 2000. It had the advantage of the assistance of counsel appointed to assist the Board and counsel appearing for the respondents. In addition, the Board had the further advantage of the judgment of the Full Court on the return of an order nisi for writs of certiorari and mandamus. It is relevant for present purposes to note that the Board had disallowed the claim in relation to the fictitious mortgages on the basis that this involved mortgage finance broking, which was not in the course of the business of a licensee under the Act.

10 Putting it briefly, the point arises out of s 116(1). The word "defalcation" is not defined in the Act, but in s 4(1) the term "defalcation by a licensee" is defined as follows:

"defalcation by a licensee" includes criminal or fraudulent conduct --

(a) of a licensee;

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

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

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

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

11 It will be seen that, for there to be a compensable defalcation, the criminal or fraudulent conduct of the licensee must be in the course of the business of the licensee. A licensee is simply a person licensed as an agent, in this case as a real estate agent. The term "real estate agent" is defined in s 4(1) in substance to mean a person whose business is to act as agent for consideration as commission, reward or remuneration "in respect of a real estate transaction". That term is also defined. I need not set out the definition here. In Ex p Cohen it was held that transactions such as these, which were for the loan of money upon the security of a mortgage, are real estate transactions. It was therefore held that the Board had erred in the basis upon which it had rejected the claims and the order nisi for certiorari was made absolute.

12 Upon the hearing then conducted by the Board, to which I have referred, it was clear beyond doubt that the licensed agent with whom the respondents had placed money for investment had been guilty of a defalcation. Her conduct was criminal and fraudulent, causing pecuniary loss directly in respect of the moneys placed with her for investment. The Board therefore received and in that sense admitted the claim against the Fund and settled it by the payment of an amount equal to the total sum of which the respondents had been defrauded, less the sum of $839,726.19, which the defaulting licensee had paid to the respondents while perpetrating the fraud, ostensibly as interest earned under the fictitious mortgages.

13 From that decision of the Board, the respondents appealed to the District Court. They exercised a power specifically provided in that regard in s 23 of the Act. The District Court allowed the appeal in two respects. The issue upon which the respondents succeeded which is presently material in the context of the proceedings before this Court is the question whether the Board erred in deducting from its final award the amounts paid to the respondents by the agent purportedly as interest on the fictitious mortgages, moneys upon which the respondents had paid income tax on the basis that they were payments of interest by borrowers to whom money had been loaned, secured by registered mortgages.

14 The District Court ordered that the award be varied by setting aside the Board's decision deducting the amount repaid from the final award to be made out of the Fund. The Court ordered the Board to pay three-quarters of the Cohens' costs of the appeal, presumably having regard to the fact that in respect of one issue out of the three presented to the Court for decision in the appeal, the respondents failed. Upon the appeal, the Board was joined as respondent upon its application. It was therefore exposed to an order for costs.

15 The judge approached the matter appreciating that the point involved the proper interpretation of s 116(1) and s 117(2). His Honour observed that the point at issue had not been the subject of the judgment of the Full Court in Ex p Cohen. His Honour concluded that although he was not directed by the statutory scheme to make an order reflecting something akin to a common law assessment of damages, he considered that the appropriate measure of the respondents' pecuniary loss was that which would apply in respect of the tort of deceit. His Honour referred to the judgment of Dixon J in Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647, 650, where it was held that:

"In an action of deceit, a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant."

16 In my opinion, while it is perfectly understandable that his Honour should take that approach, it is not that which emerges from the proper construction of the Act and his Honour fell into error in that way. In the first place, his Honour considered that the pecuniary loss of the respondents would include interest forgone, which the money would have earned upon an investment which it could be established would have been made had the money not been placed with the agent in the manner discussed above. From that pecuniary loss, in his Honour's view, would be deducted the notional income tax that would have been payable in respect of the return upon the investments that would have been made. Having regard to that reasoning, his Honour expressed his conclusion succinctly at [2002] WADC 174 [34] as follows:

"1. The Board erred in its interpretation of s 117(2) of the Act. In effect, the Board deducted the $839,726.19 in purported interest payments from the total amount to be reimbursed pursuant to s 116(1) rather than from the total amount of the appellants' "loss".

2. The "loss" which s 117(2) refers to is the same as the "pecuniary loss or loss of property" referred to in s 116(1).

3. In the circumstances of the present case, the "pecuniary loss" suffered by the appellants included not only the capital sums lost but also any interest payments (net of income tax) which they can prove they would have received if they had not been fraudulently induced to part with their money.

4. The appellants' "pecuniary loss" does not include the interest payments that they would have received if the fictitious mortgage agreements they entered into had been genuine.

5. In respect of each of the fictitious mortgage transactions, the appellants are not entitled to recover from the Fidelity Fund an amount greater than either of the following:

(a) the capital sum misappropriated by Ms Paterson and which they had paid to her for the purposes of the proposed mortgage loan (this being the limitation on reimbursement imposed by s 116(1)), or

(b) the balance of their pecuniary loss after deducting from their total pecuniary loss (ascertained as above) the total purported interest payments received by them in respect of that transaction (this being the limitation imposed by s 117(2))."

17 It is not abundantly clear to me that his Honour found that the total sum paid by the agent to the respondents, purportedly as interest upon the investments made, was not to be deducted. I think it may be that in paragraph 1 of his Honour's conclusions he is expressing the view that the error made was that the deduction was made from the wrong base figure as representing a pecuniary loss. In that regard reference may be made to paragraph 4 of his Honour's conclusions.

18 But on the other hand paragraph 5(a) would appear to express the view that there should be no deduction from the capital provided by the respondents to the agent which she misappropriated. However, paragraph 5(b) expresses the view that the pecuniary loss claimable from the Fund would be the total capital sum placed with the agent, together with the interest net of tax which would have been earned had that sum been placed by the respondents in some other form of investment genuinely returning a profit by way of interest to the respondents, less the purported interest payments, perhaps again net of tax, which was in fact paid by the agent to the respondents.

19 It is from that decision that the present appeal is brought by the Board on the following grounds:

"1. The learned Judge on appeal erred in law and in fact in not finding that the material defalcation, pursuant to s 116(1) of the Real Estate and Business Agents Act 1978 (the 'Act'), was the theft of the moneys paid to the defalcator, Bridget Paterson ('Paterson'), by the Respondents as capital for investments.

2. The learned Judge on appeal erred in law in finding that the amount that the Respondents were entitled to recover from the Real Estate and Business Agents Fidelity Guarantee Fund (the 'Fidelity Fund'), pursuant to s 116(1) of the Act could include a component for interest, however, calculated, that the Respondents could prove the Respondents would have received if the Respondents had not been fraudulently induced to part with their money, less notional income tax that would have been payable on those interest payments.

3. The learned Judge on appeal erred in law in failing to find that the amount that the Respondents were entitled to recover from the Fidelity Fund, pursuant to s 116(1) of the Act:

(a) was limited to the amount stolen by Paterson; and

(b) must, pursuant to s 117(2) of the Act, be reduced by the amounts paid to the Respondents by Paterson as interest on the fictitious mortgages.

4. The learned Judge on appeal erred in law in that he found that the Appellant had erred in deducting from the total payment to the Respondents the amounts paid to the Respondents as interest on the fictitious mortgages."

20 There is a cross-appeal to which I shall come shortly, but I should first deal with the preliminary issue raised on motion by the respondents, that the appeal should be struck out as incompetent because there is no provision for it in the Real Estate and Business Agents Act and, in any event, it is an appeal from an interlocutory judgment which would require leave.

21 As to the first point raised by the strike-out motion, the argument presented is similar to that raised in relation to the Mines Safety and Inspection Act 1994 (WA), in Farnworth v Henry Walker Contracting Pty Ltd [2003] WASCA 126; 17 June 2003. In my opinion, the reasoning of the Court in that case, leading to the conclusion that the appeal was competent, is applicable here.

22 The Real Estate and Business Agents Act, s 23, gives a right of appeal to any person aggrieved to the District Court against a decision or order of the Board. As I have said, that was the power utilised by the respondents when they appealed to the District Court. There was no contradictor or respondent initially in that appeal. As I understand it, there was no appearance at any stage by the agent or the firm, Ideal Realty. In those circumstances, it was appropriate that the Board should seek to be joined to respond to that appeal. It was joined and functioned thereafter as a party. It was ultimately made liable to pay costs. Those circumstances may be unusual and, presumably, in a case where there was, in the person of private litigants, both an appellant and a respondent to an appeal brought to the District Court under s 23, there would be no occasion to join the Board.

23 However, that having been done, the Board's capacity to appeal from the decision of the District Court must be that (if any) conferred by statute upon a party to the appeal. By the District Court of Western Australia Act 1969 (WA), s 79(1), a party to an action or matter who is dissatisfied with a final judgment of the District Court may appeal to the Full Court constituted under the Supreme Court Act 1935 (WA). If the judgment is not a final judgment, then that right of appeal may only be exercised by leave of the Supreme Court or a Judge thereof.

24 By s 6 of the District Court Act, the word "judgment" is defined to include "a judgment, order or other decision or determination of the Court". This appeal is brought against orders made by the District Court and against its decision. The proceeding in the District Court was a "matter" as defined in s 6, "a proceeding in the Court that is commenced otherwise than by writ". The right of appeal is conferred upon a party to such a proceeding. The Board was a party. In my opinion, it undoubtedly has the right of appeal, with or without leave, conferred by the District Court Act, s 79(1).

25 For the respondents, in support of their motion reliance is placed upon the reasoning of the High Court in Macleod v Australian Securities and Investment Commission [2002] HCA 37; (2002) 211 CLR 287. For the reasons given in Farnworth, particularly in the judgment of McKechnie J, to which I will not refer here, it is my opinion that Macleod has no application to this case. There is nothing in the Real Estate and Business Agents Act to indicate that it is a statute expressing completely the right of appeal from the Board and there is nothing to preclude the operation of s 79 of the District Court Act. Nor does the fact that the Board participates in appellate proceedings concerned with the interpretation of statutory provisions which it has to apply and administer give rise to any reasonable apprehension of bias in relation to proceedings before the Board in a case of this kind, which would seek to have the law declared by the District Court and by this Court in its turn, so that the proper manner of applying the material statutory provisions may be known.

26 As to the second part of the respondent's application to strike out the appeal, that the decision of the District Court is of an interlocutory character and that leave to appeal is required, the applicant moves for leave if the Court should take the view that the decision of the District Court is not a final judgment. In my opinion, it is not, because the orders made were confined to declaring the approach to the determination of the claim of the respondents which in the judgment of the District Court ought to be taken by the Board. The matter was then remitted for further determination in accordance with the reasons of the District Court. In my opinion, this is a case where a commonly accepted test as to whether an order is final or interlocutory, that the question is whether the judgment or order appealed from finally determines the rights of the parties in relation to a principal issue between them, may be applied: Hughes v Gales (1995) 14 WAR 434, 437.

27 In that case, at 439, Malcolm CJ reaffirmed the approach taken by the Court to the grant of leave to appeal in Wilson v Metaxas [1989] WAR 285, 294 and WA v Bond Corporation Holdings Ltd (1991) 5 WAR 40 at 54 - 57. In the latter case, his Honour noted that in general it was accepted that leave would not be granted unless the decision in question was shown to be wrong or attended with sufficient doubt to justify the grant of leave and that, in addition, substantial injustice would be done by leaving the decision unreversed. This was said to be a general guideline and his Honour thought that unless on the application for leave some point of special importance was involved, leave might be refused in the exercise of discretion unless the refusal of leave would leave a substantial injustice unaddressed.

28 In my opinion, this is a proper case in which to apply the general guidelines and, as will appear, I consider that the decision of the District Court is wrong in respect of matters which, in a case of this kind, have a fundamental impact upon the extent to which the claim ought to be allowed and settled by the Board. The matters at issue raise questions of general application to the Board's administration of the Act concerning the Fidelity Fund and reimbursement from it for those who suffer pecuniary loss by reason of a defalcation by a licensee. I would grant leave to appeal and turn then to address the substantive issues raised on the appeal.

29 In doing so, it is necessary to note the respondents' cross-appeal which seeks an order varying the orders made by the District Court effectively to preclude deduction from the award finally made of the sum repaid by the defaulting licensee. Again, it is convenient to set out the grounds of the cross-appeal:

"1. Part VIII of the Real Estate and Business Agents Act 1978 is remedial legislation to be given a purposive interpretation and should be, subject only to the express limitation in s. 117(3) of the Real Estate and Business Agents Act 1978 ('the Act"), interpreted to provide for the respondents (appellants) to be fully compensated for their pecuniary loss suffered due to the defalcations of Ms B Paterson and/or Ideal Realty Pty Ltd. Further, the order of the appellant at first instance was inconsistent with the Part VIII of the Act as the order of the appellant failed to provide for the respondents (appellants) to be reimbursed for their pecuniary loss suffered by the defalcations of Ms Paterson and/or Ideal Realty Pty Ltd, being the whole of the sum stolen from the respondents (appellants) by Ms Paterson and/or Ideal Realty Pty Ltd and the respondents (appellants) have not received a benefit from any other source in reduction of that pecuniary loss.

2. Alternatively:

2.1 Because interest is not charged on the Fidelity Fund by reason of s.117 (3) of the Act and the respondents (appellants) are therefore not entitled to recover interest, even interest as damages:

2.1.1 the question of interest which might have been earned on an alternative investment is irrelevant; the only issue in light of the uncontested defalcations was whether any part of the principal amounts paid as fictitious loans had been repaid;

2.1.2 alternatively, the contingency that interest might have been earned on an alternative investment at a rate less that the total amount paid to and received by the respondents (appellants) as interest on the fictitious loans was not a matter which the respondents (appellants) were required to negative to establish their claim on the Fidelity Fund. It is analogous to a contingency in a loss of chance claim to be negatived by a defendant - and, here, a matter for the appellant (respondent) to find only after affording procedural fairness concerning the issue to the respondents (appellants). As that contingency was not contended for before the appellant (respondent) or before his Honour on appeal, his Honour should not have ordered a further hearing to inquire into the possible existence of the contingency;

2.2 Accordingly, his Honour should have ordered payment of the loss of the respondents (appellants) in full in the sum of $839, 726.19"

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

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

32 But there are important words of limitation contained in the statute. By s 116(1), the reimbursement may be "only to the extent of the

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

33 There is a further limitation upon the capacity to recover from the fund. It emerges from s 117(2), to which I have previously referred. All payments made by the defaulting licensee to the claimant and money otherwise recoverable "in reduction of his loss" is to be deducted from the amount which the claimant may recover from the Fidelity Fund. In my opinion, it is only necessary to conclude that a payment received by the claimant is related to and is properly to be regarded as being in reduction of the loss sustained to make it necessary to deduct the sum from the loss claimed.

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

36 WHEELER J: I have read in draft the reasons for decision of Murray J, with which I agree I would allow the appeal and dismiss the cross-appeal.

Safety and Inspection Act 1994

Court of Western Australia Act 1969

Estate and Business Agents Act 1978

Real Estate and Business Agents Supervisory Board v Cohen & Ors [2004] WASCA 19

At a glance

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Decision date

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Judgment (110 paragraphs)

Real Estate and Business Agents Supervisory Board v Cohen & Ors [2004] WASCA 19 (12 February 2004)

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Legislation Cited (4)

Cases Cited (43)