A travel agent who defaulted on two off-the-plan Surfers Paradise apartment buys signed up in February 2008 has claimed the Property Agents Fidelity Fund should be responsible for $158k in deposits forfeited when he failed to settle.
Damien Cahill was persuaded by agent Cecil Tomkins to secure the two $468k units on level 3 of “Elston” at the corner of Hamilton Ave & Surfers Paradise Boulevard, on deposit bonds with an outlay of just $4.85k each.
At the same time his mother Sandra entered into an identical deal for two further apartments.
The contracts were due to settle in August 2009 as the GFC was yet to bottom out prices for Australian real estate, its most severe casualty being Queensland’s Gold Coast.
When he failed to settle, the developer made demand on QBE Insurance for the full 10% deposits which were eventually paid in December 2010 in an amount of $93.8k.
There was no re-sale loss, as apparently both units were able to be re-sold at a higher price.
Cahill resisted QBE’s demands for repayment because he asserted he had been “induced to request the bond on the basis of the deceptive and misleading conduct of Cecil Tomkins on behalf of the developer and QBE”.
That dispute was eventually resolved in February 2012 with Cahill agreeing to a judgment in QBE’s favour for the total of the deposits plus interest and legal costs, some $158k.
It was then that he turned his sights on the Property Agents Fund.
He alleged he had been caught up in a “scheme” orchestrated by Tomkins to present the deposit bond as a low risk means of accumulating substantial capital gains on the subsequent resale, without ever having to complete the purchase.
Tomkins arrangement with the developer entitled him to 50% of his commission once he secured a deposit or deposit bond for 10% of the purchase price.
Cahill contended the dealings with the bond – which was itself an “instrument that is intended to bind a person to purchase a proposed lot” – were contrary to the Land Sales Act in that no title had been conveyed.
The use of the bond by the agent to obtain an advance of his commission “to which he was not entitled” was likewise, he argued, a “misappropriation”.
Queensland Civil and Administrative Tribunal Member David Paratz was not convinced.
The buyer also alleged that Tomkins’s alleged assurances – that he would never have to settle and exposure was limited to the cost of the deposit bond, about 1% of the purchase price – were false and misleading contrary to Property Occupations Act s 212.
But Cahill had left un-explained why he was unable to on-sell the unit before the settlement date and thereby fulfil Tomkins’ prediction. The developer had after all apparently resold at a higher price.
More significantly, Member Paratz concluded that Cahill had not relied on the alleged representations because a letter from his accountant to QBE supporting his financial credentials and his ability to pay out the deposit bonds when required, implied that he had also sought and obtained financial advice which would have likely tempered the agent’s “puffery”.
In his view, the buyer ought to have approached the transaction with greater prudence: “if something looks too good to be true, it probably is.”
“In his evident enthusiasm to take part in this property scheme, he did not exercise basic prudence” even though “he was taken advantage of by an evidently glib and persuasive agent”.
Concluding that the claim did not fall within the scope of the Fund, the tribunal rejected all Cahill’s arguments. Mrs Sutton’s claims were likewise refused.
Tomkins did not attend to defend the allegations.