A resounding win for a sales agent in the QCAT appeal tribunal

The Queensland Civil and Administrative Appeal Tribunal (Appeal Tribunal) recently rejected a claim for $82,300 made by the seller of a property upon the fund maintained under the Agents Financial Administration Act 2014 (Qld) (Act). [1]

Carter Newell Lawyers acted on behalf of the sales agent and the agency in both the initial Queensland Civil and Administrative Tribunal (Tribunal) hearing and in the Appeal Tribunal. The Chief Executive of the Department of the Justice and Attorney-General, Office of Fair Trading (OFT), was also a respondent to the claim.

The facts

In May 2016, Ms Holgar (seller) appointed Mr Hyde of Hyde Real Estate (agent) to act on her behalf in relation to the sale of her Kenmore property (property). In July 2016, Ms Holgar appointed Mr Hyde for the second time.

Two days after the second appointment, a signed contract of sale was received from Mr Horn (buyer). The buyer paid an $80,000 deposit which was received a week later on 8 August 2016. Following the payment of the deposit, a series of events unfolded, resulting in the refund of the deposit to the buyer on 8 November 2016.

After the initial negotiations, the seller instructed her husband to advise the agent the property was 'off the market'. On 8 September 2016, the seller wrote to the agent and requested that the agent refund the deposit to the buyer because there was no legally binding agreement to purchase the property. The agent informed the seller that there was in fact a valid agreement to purchase the property and he offered to meet and discuss the situation.

On 29 September 2016, the buyer attended at the Land Registry Office in Brisbane to effect settlement of the property, but the seller did not attend. The next day, the buyer wrote to the seller attempting to affirm the initial contract.

On 5 October 2016, the buyer lodged a caveat over the title to the property, claiming to have an interest in it pursuant to the initial contract.

On 21 October 2016, the buyer wrote to the agent notifying him that the seller had authorised the release of the deposit to the buyer in her letter dated 8 September 2016, and that he authorised the agent to release the deposit to him. On 4 November 2016, the buyer wrote to the seller and noted that the seller had previously stated that no contract existed between the parties. The buyer advised that he would no longer pursue the matter and stated that the contract was at an end and he would withdraw the caveat.

On 8 November 2016, the agent refunded the deposit to the buyer. On that same day, the seller wrote to the buyer and stated that she accepted the buyer's position to affirm the contract and nominated settlement to occur on 22 November 2016. The reason for this later became clear as she had since entered into a contract to purchase another property, which was dependent on the performance of the contract for the Kenmore property.

This information was again not provided to the agent however the buyer wrote to the agent later that same day advising that she was preparing a settlement statement and asked if the agent still held the deposit.

The seller informed the agent on 10 November 2016 (after the deposit was released) that a dispute may arise between the seller and the buyer in relation to the deposit. On 22 November 2016, the buyer failed to attend the reconvened settlement date and the seller purported to terminate the contract.

The issue before the Tribunal

Sections 21, 22, and 25-28 of the Act regulate when an agent may pay an amount from a trust account. The central issue before the Tribunal at the hearing was whether the agent was aware of a dispute about the deposit. The 'threshold question' was stated as follows:

"Was there anything before the company/agent that should have put them on notice that a dispute had or may arise over who was entitled to the deposit before it was released to the buyer?."

If the threshold question could be answered in the negative, the seller's claim to the deposit would be rejected.[2]

The decision at first instance

The seller argued before the Tribunal that although the Act did not impose a positive obligation on the agent to investigate whether a dispute exists, the agent had not acted in an appropriate manner by failing to confirm her instructions before acting. The seller asked the Tribunal to infer that the agent was willfully blind to the dispute over the deposit, or to at least conclude that in the circumstances, it should have been aware that a dispute may arise.[3]

This firm, on the agent's behalf, submitted that the refund of the deposit to the buyer was made in reliance upon the written instructions received from the parties.[4] We submitted that the seller's evidence was unsatisfactory and evasive and that her position changed frequently throughout the negotiation process.[5]

The Tribunal accepted our submissions and noted it was satisfied, on the balance of probabilities, that the agent had received no indication to suggest that a dispute had or may arise in relation to the deposit. This was because the agent had no material before them to doubt the previous written authorisations from both parties when they released the deposit.[6]

The Tribunal also concluded that there was no evidence to establish that the seller notified the agent and agency of the potential for a dispute until after the deposit was released, and in those circumstances, it concluded that the deposit was released in accordance with section 22(3) of the Act.

The Tribunal held that all communications regarding the dispute over the deposit were contained between the buyer and the seller and their legal representatives - there was no communication to the agent of any dispute or potential dispute until after the deposit had been refunded to the buyer. It was also held that the agent was at all times acting under instructions from both the buyer and the seller's solicitors, neither of which were withdrawn.[7]

The Appeal Tribunal's decision

In January 2021, the seller sought leave to appeal the Tribunal's decision on the basis of errors of mixed law and fact, and errors of law.

The first ground of appeal that was argued by the seller was that it was not open to the Tribunal to conclude that the agent was unaware that a dispute had arisen or may arise over who was entitled to the deposit within the meaning of section 25(1)(b) of the Act.

The seller argued as an error of law that the Tribunal attempted to impose an onus on the seller and buyer to give notice of the disputed trust monies and that this was a narrow interpretation of the legislation that contradicts the general legislative intention of the Act.

The Appeal Tribunal considered that the Tribunal had not concluded that a party must give actual notice of dispute, but on the facts, there was nothing to indicate that the agent was aware of the dispute. The agent was not advised at any stage that the seller had raised a dispute over the deposit.

The Appeal Tribunal conceded that the Tribunal had assessed the agent's knowledge on the day the deposit was released, rather than considering the whole of the circumstances leading up to the release of the deposit. However, the Appeal Tribunal concluded that regardless of when the agent's knowledge of the dispute was assessed, the outcome would be the same in that there was no stage where the buyer or seller had made the agent aware of the dispute.

The seller also attempted to argue that the Tribunal had made an error of fact by concluding that the agent was not aware of the dispute. The Appeal Tribunal considered that on all the evidence provided, there was no indication of an error of fact. It held that the agent had demonstrated that he had received instructions from the buyer and seller to release the deposit and he acted accordingly. The Appeal Tribunal therefore dismissed the first ground of appeal.

The second ground of appeal was that the Tribunal made an error of law by failing to take into account a relevant consideration when finding that the agent was acting under instructions from both parties.

The seller argued that when she informed the agent that the contract was at an end on 8 September 2016, the agent was aware of a dispute between the parties. However, by 8 November 2016 (when the agent released the deposit), both parties had provided their clear instructions for the deposit to be released to the buyer.

The OFT, as a respondent to the claim, submitted that the agent could not oppose or act against the buyer's and seller's express written instructions at that time. The Appeal Tribunal agreed and concluded that the agent was bound to act on the clear written instructions received from both parties, in circumstances where he was unaware of a dispute between them. This ground of appeal was also rejected.

The third ground of appeal was that the Tribunal made an error of law by taking into account irrelevant considerations, including the seller's state of mind. The seller attempted to argue that the Tribunal erred by taking into account her state of mind throughout the sale and other peripheral considerations, including her opinion on the listing price, her knowledge of real estate contracts, her motivation for changing her mind about continuing the contract, and why she did not keep agents informed about dispute.

The Appeal Tribunal concluded that these matters where not taken into account by the Tribunal when reaching a decision at the first instance, but the seller's evidence was merely summarised like all other parties involved. The Appeal Tribunal found that there was no error of law and this ground of appeal also failed.

The final ground of appeal was that the Tribunal made an error of law in finding that the email dated 8 November 2016 was not read by the agent until after the deposit funds had been refunded to the buyer's bank account.

The Tribunal considered that whilst it was not clear when the email sent to the agent (received at 1:44pm on 8 November 2016) was read, it was most likely to have been read some time after the money was refunded at 2:15pm. The seller attempted to argue that these statements were contradictory and it was insufficient to prove that the email had not been read before the deposit was refunded to the buyer.

The Appeal Tribunal rejected this argument and found that there was no error of fact. This ground of appeal was also dismissed. Ultimately, therefore, the seller was unsuccessful in proving any of her grounds of appeal and the appeal was dismissed in its entirety.

Conclusion

Despite the outcome of this case, and the complete vindication of the agent's actions, this decision serves as a timely reminder to agents to stay alert for any disputes or potential disputes between sellers and buyers in relation to trust funds.

The consequences prescribed by the Act for failing to recognise a potential dispute and subsequently releasing trust monies when a dispute has arisen are significant. As a matter of prudence, agents should check that they have received the parties' written instructions before any trust monies are disbursed.

References:

[1] Holgar v Chief Executive, Department of Justice and Attorney-General & Ors [2021] QCATA 113.

[2] Holgar v Chief Executive, Department of Justice and Attorney-General & Ors [2019] QCAT [13].

[3] Ibid [49].

[4] Ibid [53].

[5] Ibid [55].

[6] Ibid [14].

[7] Ibid [25].

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