COMMISSIONER FOR CONSUMER PROTECTION and CHESSON - [2014] WASAT 128

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

ACT: SETTLEMENT AGENTS ACT 1981 (WA)

CITATION: COMMISSIONER FOR CONSUMER PROTECTION and CHESSON [2014] WASAT 128

MEMBER: MR M SPILLANE (SENIOR MEMBER)
MS C WINSOR (SESSIONAL MEMBER)
MS K KEMP (SESSIONAL MEMBER)

HEARD: 19 MAY 2014 - FINAL SUBMISSIONS RECEIVED 4 JUNE 2014

DELIVERED : 30 SEPTEMBER 2014

FILE NO/S: VR 160 of 2013

BETWEEN: COMMISSIONER FOR CONSUMER PROTECTION
Applicant
AND
SYDNEY JAMES CHESSON
Respondent

Catchwords:

Vocational regulation - Real estate agent - Disciplinary action - Trust account - Penalty - Costs

Legislation:

Legal Practitioners (Magistrates Court) (Civil) Determination 2012 (WA)
Settlement Agents (Remuneration) Notice 2013
Settlement Agents (Remuneration) Notices 2008, Pt III, Sch 1
Settlement Agents Act 1981 (WA), s 3, s 4(1), s 9, s 26, s 27, s 31, s 46, s 47, s 48, s 49, s 49(1), s 51(6), s 83, s 84, s 84(1)(a), s 84(2), Sch 2, cl 1
State Administrative Tribunal Act 2004 (WA), s 87

Result:

Tribunal found proper cause for disciplinary action
Respondent cautioned
Respondent ordered to pay applicant's costs

Summary of Tribunal's decision:

The Commissioner for Consumer Protection brought an application before the Tribunal alleging that there was proper cause for disciplinary action against Mr Sydney James Chesson on the basis that he had used his settlement agent's trust account in breach of s 49(1) of the Settlement Agents Act 1981 (WA).
The allegations against Mr Chesson did not involve any allegation of impropriety or misappropriation of funds, but rather that Mr Chesson had not maintained his trust account exclusively for the purposes of the Act as required by s 49.
Following a hearing, the Tribunal found that Mr Chesson had used his trust account in breach of s 49(1) of the Settlement Agents Act 1981 and that there was proper cause for disciplinary action pursuant to s 83 of the Settlement Agents Act 1981.
Mr Chesson was cautioned and ordered to pay the Commissioner's costs in the sum of $8,828.38.

Category: B

Representation:

Counsel:

Applicant: Mr J Derby
Respondent: Ms A Skinner

Solicitors:

Applicant: Department of Commerce
Respondent: Austasia Legal

Case(s) referred to in decision(s):

AB and State of Western Australia & Anor [2011] HCA 42
Commissioner for Consumer Protection and Hawaii Pty Ltd & Anor [2008] WASAT 22 (S)
Commissioner for Consumer Protection and Samykannu Pty Ltd [2013] WASAT 129 (S)
Medical Board of Western Australia and Roberman [2005] WASAT 118
Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361

REASONS FOR DECISION OF THE TRIBUNAL:

Background

This matter relates to an allegation by the Commissioner for Consumer Protection (applicant) pursuant to s 83 of the Settlement Agents Act 1981 (WA) (Act), that there is proper cause for disciplinary action against Mr Sydney James Chesson (respondent/Mr Chesson).
It is common cause that at all material times Mr Chesson:
(a)held a real estate and business settlement agents licence pursuant to s 27 of the Act;
(b)held a triennial certificate pursuant to s 31 of the Act;
(c)carried on business as a real estate and business settlement agent under the name Master Settlements at 105 St Georges Terrace, Perth; and
(d)operated a trust account with the National Australia Bank under the name of Sydney James Chesson, trading as Master Settlements SA Trust Account TC 390 (Master Settlements Trust Account).
Paragraph 5.1 of the respondent's statement of issues facts and contentions stated:
The Respondent was engaged by Terrence and Donna Walsh ('Mr and Mrs Walsh') in or about 2007 to perform various works including, but not limited to consulting services related to business transactions in respect to a number of corporate and business entities including the negotiating of settlements of large business disputes with building investors, business partners and subcontractors[.]
At paragraphs 15 through to 20 of Mr Chesson's witness statement, dated 9 April 2014, under the heading 'Mandurah Apartment Block Dispute', Mr Chesson set out the circumstances relating to various payments relating to Mr and Mrs Walsh in the course of the business relationship between them, and stated:
15.A dispute arose between Mr Walsh and Staker Nominees in respect to the apartment block which Mr Walsh was building in Mandurah.
16.The dispute was resolved by way of a cheque made payable to Mr Walsh trading as TA Walsh Builder in the sum of $33,000.00.
17.Mr Walsh owed Balustrading WA Pty Ltd payment for work that had been completed in respect to balustrading and pool fencing work at the apartment block.
18.Mr Walsh also owed monies to other entities in respect of the apartment block including for work carried out on the electrically operated gate to the driveway of the property by ABA Gates.
19.On 8 October 2009 I received an email from Donna Walsh on behalf of herself and Mr Walsh and the Walsh entities. That email directed me to:
19.1'Place the cheque into a trust account';
19.2'Sort the mess out with Balustrading WA'; and
19.3'Credit the balance to the account we owe you'.
20.I caused the cheque to be deposited into my Settlement Agent[']s Trust Account on 9 October 2009. That is the only trust account I have personal control over.
As to what then happened to those funds, the respondent explained at paragraph 21:
21.The following payments were made in and out of the Trust Account on the instructions of Mr Walsh:
21.1Two payments of $482.00 to ASIC on 15 October 2009;
21.2A payment of $11,000.00 to AustAsia Real Estate Pty Ltd on 13 October 2009;
21.3A payment of $227.00 to ASIC on 15 October 2009;
21.4A payment of $128.00 to the District Court on 27 October 2009;
21.5A payment of $440.00 from the Trust Account to AustAsia Real Estate Pty Ltd on 27 October 2009;
21.6A payment of $11,000.00 from A & N Enterprises (WA) Pty Ltd to the Trust Account in payment to Mr and Mrs Walsh for building services;
21.7A payment of $22,000.00 from the Trust Account to Mr and Mrs Walsh on 23 December 2009;
21.8An internet transfer of $2,339.98 from the Trust Account to ABA Gates on 27 January 2010;
21.9A payment of $5000.00 from the Trust Account John Carello on 26 February 2010;
21.10A payment of $1375.00 from the Trust Account to Mr and Mrs Walsh on 7 May 2010;
21.11A payment of $300.00 from Master Settlements to City of Mandurah on 3 June 2010; and
21.12A payment of $182.02 from Master Settlements Trust Account to ASIC on 9 August 2010.
The respondent then contended at paragraph 22 of his statement of evidence:
The funds were properly paid into and out of the Trust Account on the instructions of Mr Walsh.
In the proceedings, the central allegation made by the applicant was that in respect of the transactions outlined above, the respondent being a licensed settlement agent, used his settlement agent's trust account for the receipt and distribution of Mr and Mrs Walsh's funds for a purpose other than to complete a settlement transaction, thus failing to maintain the trust account exclusively for the purposes of the Act as required by s 49(1).

Issue

Did the respondent fail to maintain a trust account exclusively for the purposes of the Act contrary to s 49(1) of that Act?

Evidence

The evidence was largely agreed and at the hearing on 19 May 2014, the Tribunal had before it a large number of documents including, the parties' statement of issues, facts and contentions, various uncontested witness statements together with both parties' bundles of documents.
Three individuals were called to give evidence. Mr and Mrs Walsh, the parties who engaged the respondent to act on their behalf, and the respondent himself, each of whom had filed a statement of evidence on which they were crossexamined.
It was clear from the evidence that the principal facts as outlined above were not in issue, nor was the business relationship between the parties. What the matter essentially came down to, was the conduct of the respondent in respect of his trust account and whether his actions were contrary to s 49(1) of the Act.

Applicant's submissions

In closing, counsel for the applicant stated:
The first issue is whether the respondent utilised his settlement agents trust account for a purpose other than receiving moneys in respect of a settlement of a real estate or business transaction to be effected or arranged. … (T:74; 19.05.14)
It's no part of the applicant's case that there was impropriety … (T:75; 19.05.14)
Again, it's from the applicant's perspective, agreed that the respondent distributed the relevant amount in accordance with instructions received from Mr and Mrs Walsh or entities associated with them until that amount was, in its entirety, disbursed. In the applicant's submission, it's established clearly by the evidence of Mrs Walsh that the relevant amount was not paid to the respondent for or in respect of the settlement of any real estate or business transaction. (T:76-77; 19.05.14)
There was no suggestion that he was acting as a real estate agent in these matters. (T:78; 19.05.14)
To the extent that it is relevant, none of those payments related to the settlement arranged or to be affected …
... [T]he focus of the applicant's case here is the money received at the point that it was received, whether it was relating to the arrangement of effecting of the settlement transaction, because if it did not then the account wasn't maintained exclusively for the purposes of the Act. … (T:79; 19.05.14)
… What section 49 deals with is the requirement for a settlement agent to have established one or more trust accounts .. 'maintained exclusively for the purposes of the Act' …
So in essence the prohibition is by a negative. You keep it for one purpose and one purpose only and therefore by implication all other purposes are prohibited. In that respect obviously then the purposes of the Act become critical. … (T:80; 19.05.14)
… The phrase 'maintained exclusively for the purposes of the Act' means that the trust account established and held under that section must only be used for the purpose of depositing moneys received in respect of settlements to be arranged or effected, or that have been arranged or effected.
… the legislative intent behind trust accounting provisions is always to separate moneys held by a licensee, in the course of that person's business, on behalf of another, separately from the general funds and moneys of the business. But that must always be within the context of what's being licensed and regulated by the Act which establishes the trust accounting regime. (T:82; 19.05.14)
It follows, then, logically that … if you accept money other than in respect of a settlement to be arranged or effected, and you deposit it into the trust account maintained for the purposes of the Act, then you have used your trust account otherwise than for the purposes of the Act. It has not been maintained exclusively for the purposes of the Act because another purpose has intervened, that is, other business undertaken.
…
That provides a proper course for disciplinary action as set out in section 84, subsection (2), paragraph (c), subparagraph (ii) … (T:89; 19.05.14)

Respondent's submissions

In closing, counsel for the respondent submitted:
The respondent's position is quite simply, and I will go into this very briefly, that they disagree with the applicant's narrow interpretation of the Act and, in particular, of section 49(1) of the Act. The respondent's opinion is that the purpose of the Act is as stated at the preamble:
An act to make provisions with respect to the licensing, regulation and supervision of settlement agents and for related purposes. (T:93; 19.05.14)
There is no dispute as to the fact that Mr Chesson was at all material times the licensee of Master Settlements, and that he held an account in that name. The only issue now, goes as to the interpretation of the alleged breaching of section 49(1) …
The respondent held a trust account for the purposes of the Act, and acted only in accordance with his clients' express direction in relation to the moneys that came into the trust account.
… That is the only trust account he has in his name. (T:94; 19.05.14)
…
The statement of issues, facts and contentions filed by the applicant again refers to these transactions and alleges that by reason of these transactions, the respondent breached section 49(1) of the Act.
Now, this is where our interpretation and the legal basis, we say, differs:
Section 49(1) provides that every licensee shall maintain one or more trust accounts, and these are designated or evidenced as such in the prescribed manner and maintained exclusively for the purposes of the Act.
We do not dispute that. We dispute the interpretation of 'purposes of the Act'. It then goes on to the second paragraph, which then talks about settlement moneys coming in. So it says that the licensee in the second part of that of [section] 49(1):
The licensee shall, as soon as practicable, pay to the credit of that account all the moneys received by him on behalf of any other person in respect to settlements to be arranged or affected.
I think that's where we need to pause it. They're not talking about moneys that are specifically related to settlement transactions. It's moneys that come in from the settlement [that] must be paid into this trust account, not that the trust account can solely be used for the purposes of the settlement transaction:
The applicant alleges that the respondent breached this section because of the transactions made, that they were not payments to either arrange or affect the completion of a real estate transaction or a business transaction within the meaning of the Act.
We say that there is no breach, because the moneys that came in were not the result of a real estate or business transaction and were not the result of a settlement. There is no breach of section 49(1). Those moneys that entered into the trust account had nothing to do with the settlement transaction, and on that basis there is no breach. We say that the applicant's narrow interpretation of section 49(1) of the Act, in this event that this section imposes an obligation to maintain a trust account for the purposes of the Act, exclusively for the purposes of the Act and not exclusively for the purposes of a real estate or business transaction.
There is a clear break between the first part of section 49(1) and the second part of section 49(1). Firstly, that they must maintain a trust account and that that is to be maintained exclusively for the purposes of the Act. Then it goes on to say 'with an authorised financial institution'. And then the second part relates to money from a settlement transaction and that must, as soon as practicable, be paid into the credit of that account. That is the intention of that section. (T:9697; 19.05.14)
…
That's where we bring in the purposes to an Act to make provision with respect to the licensing and regulations. So anything that a settlement agent would do, which any jobs tasked, including stamping, title searches, anything that a settlement agent is authorised and should be conducting in their daytoday business is the purposes of the Act and that the Act then regulates and supervises those tasks or those jobs, or it's at least encompassed and covered under related purposes. Because section 49(1) doesn't relate solely to settlement transactions. (T:98; 19.05.14)
In an exchange with the Tribunal, counsel for the respondent stated:
Well, I suppose even the argument is those moneys, if they weren't paid for the purposes of a transaction being a settlement they're not there isn't a need for them to be anyway, because they were deposited into the account with nothing to do not related to a settlement being a property transaction.
TRIBUNAL:… So the argument is
COUNSEL:It's a separate
TRIBUNAL:… if they're deposited into the trust account for an unrelated a transaction unrelated to a settlement, they can be paid out of the trust account for another purpose unrelated.
COUNSEL:Yes. As long as there is instructions from the client to do so. (T:99; 19.05.14)
…
COUNSEL:… I suppose the point that I'm making is that a settlement a trust account, rather, is not to be held exclusively for the purposes of a settlement transaction, being the sale of real estate or commercial property. A trust account, as long as it's held by the licensee and under instructions from their clients, can be used for any of those purposes and is regularly done so by many settlement agencies[.] (T:100; 19.05.14)

Consideration

As outlined above, both Mr and Mrs Walsh filed written statements of evidence and also gave oral evidence at the hearing on 19 May 2014. Both stated unequivocally that although Mr Chesson did act for them in various business transactions, a role could best be described as 'a business consultant', they denied that they had requested, or appointed Mr Chesson to act as a settlement agent on their behalf, or on behalf of any of their business entities.
Mr and Mrs Walsh's clear reasons for this was that Mrs Walsh herself was a licensed settlement agent, as was her mother and a number of other close relatives, and in such circumstances they would not need, nor indeed would they contemplate appointing, a separate settlement agent to do any of their settlement agent work and so incur unnecessary additional costs.
Although not stated in his written statement of evidence, Mr Chesson, when giving oral evidence before the Tribunal, did attempt to suggest that at a particular point in his relationship with Mr and Mrs Walsh, he understood he was retained in respect of the settlement of a unit in Ormsby Terrace in Mandurah.
However, that statement was in clear contradiction to the respondent's comments in letters to the applicant both on 16 September 2011 and 11 January 2012.
In a letter of 16 September 2011, the respondent stated:
Master [S]ettlements has not carried out any property settlements on behalf of Mr Terrence Walsh of 147 Walter Road Dianella or of any other address.
1.1Mr Walsh's address as far as we are aware is 23 Chatham Road, Woodbridge WA 6056 and was previously 33 Ragamuffin Point, Halls Head. The Halls Head property remains registered in the name of Terrence Allden Walsh.
1.2Mr Walsh and Mrs Walsh have a number of entities that they use to conduct their businesses including Health Resorts of Australasia Pty Ltd, Myra Pty Ltd and Terrence Constructions Pty Ltd. Health Resorts of Australasia Pty Ltd was placed into [sic][.]
1.3The writer carried out a large range of work at the direction of Mr Walsh including negotiating settlements of business disputes with building investors, subcontractors, business partners and a range of other parties as a result of the financial crisis faced by Mr Walsh and his related entities.
1.4Mr and Mrs Walsh and their related companies have been under extreme financial stress since late 2007. Health Resorts of Australasia Pty Ltd appointed John Carrello as receiver in February 2008.
1.5The work involved a number of activities and meetings including attending at building sites, meetings with various debtors and creditors, business partners and meetings with John Carrello.
…
In a letter of 11 January 2012 in answer to the following question from an officer of the applicant:
Please clarify whether the moneys paid into the trust account of Master Settlements were moneys in respect to the settlement of real estate or business transactions[?]
the respondent wrote at paragraphs 1.1 to 1.3:
1.1Master '[S]ettlements has not carried out any real estate of business settlements on behalf of Mr Terrence Allden Walsh or any of his related entities that he uses to conduct his business including Health Resorts of Australasia Pty Ltd, Myra Pty Ltd, Terrence Constructions Pty Ltd, Super Walsh Pty Ltd, Mandurah Beach Developments Pty Ltd and Murray Brook Developments.
1.2The writer carried out a large range of work at the direction of Mr Walsh including negotiating settlement of business disputes with building investors, subcontractors, business partners and a range of other parties as a result of the financial crisis faced by Mr Walsh and his related entities.
1.3None of the activities I carried out on behalf of Mr Walsh or his related entities would fit the description of either a 'real estate transaction' or a 'business transaction' as defined in the Settlement Agent's [sic] Act 1981.

Based on those clear statements, and all of the evidence before it, the Tribunal is satisfied that the respondent was not appointed nor was he acting as a settlement agent on behalf of Mr and Mrs Walsh, or any entity controlled by them, and the Tribunal does not accept that Mr Chesson was at any time retained in respect of the settlement of a unit at Ormsby Terrace, Mandurah.
During the hearing, the Tribunal specifically requested the respondent to identify any of the relevant payments out of the trust account outlined earlier which were or could be related to the settlement of a unit at Ormsby Terrace, Mandurah, and none were identified.
The Tribunal is, however, satisfied that the respondent carried out a number of business related activities, such as negotiations and representations on various occasions on behalf of Mr and Mrs Walsh.
The applicant's principal contention is that the respondent failed to maintain the Master Settlements Trust Account, which was his personal responsibility, in a manner that was 'exclusively for the purposes of the Act' as required by s 49(1) of the Act, submitting that it was the intention of Parliament that settlement agents maintain trust accounts as an exclusive vehicle for settlement transactions only.
The applicant further contended that any use of the Master Settlements Trust Account, other than for arranging or effecting completion of a settlement of a real estate or business transaction, is a use that is not contemplated by the Act and is contrary to the purposes of the Act.
As can be seen from the respondent's submissions outlined earlier, he clearly disagrees with those contentions. At paragraphs 4.2.1 and 4.2.2 of an email of 8 May 2012 to Mr Zoran Coseski, a member of the investigating team at the compliance branch of the Consumer Protection Division of the Department of Commerce, under the heading 'Paid moneys into the master settlements true [sic] account which were not intended for settlement purposes', the respondent stated:
4.2.1With respect, I disagree with you that the interoperation should be that only monies intended for settlements should be paid into the settlement trust account. The purposes spelt out in Section 49(1) of the Act states that the trust account must be '… maintained exclusively for the purposes of this Act …'.
4.2.2It has never been postulated to my knowledge that settlement agents cannot charge for activities other than settlements. There does not appear to me to be any limit on the activities that a settlement agent could engage in (other than legal work) and charge $205.00. There does not appear to me to be any limit that would apply to a settlement agent receiving monies and paying them out (as instructed) to settle the debts incurred by a person who is involved in or contemplating being involved in a property settlement or activities related thereto. Settlement agents are (or should be) experienced in negotiating, receiving, paying and accounting for monies.
It should be said that the applicant is not contending that the respondent could not or should not have engaged in the business activities on behalf of Mr and Mrs Walsh in the way that he did, or that as a settlement agent, he could not charge for activities other than settlements.
The sole issue relates to the receipt of monies and what monies may be put into a trust account which is to be maintained 'exclusively for the purposes of the Act'.
To determine what the correct position is one must turn to the provisions of the Act.
Section 49(1) states:
Every licensee who holds a current triennial certificate shall maintain one or more trust accounts, designated or evidenced as such in the prescribed manner and maintained exclusively for the purposes of this Act, 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 settlements to be arranged or effected, or arranged or effected, by the settlement agent.
The applicant contends that the transactions particularised earlier were in connection with general services provided to Mr and Mrs Walsh and did not concern the 'arranging or effecting of the completion of a real estate or business transaction settlement' and, as confirmed by the respondent at paragraph 1.3 of the letter of 11 January 2012 set out above, the respondent agreed with that contention.
Furthermore, the Tribunal has already found that the respondent was not acting as a settlement agent in his dealings with Mr and Mrs Walsh.
Section 26 of the Act requires a person who wishes to carry on business as a real estate settlement agent, or a business settlement agent, to be licensed.
'Licensee' is defined in s 3 as 'a person licensed under this Act'.
A 'real estate settlement agent' is defined in s 3 as:
[A]ny person who arranges or effects the settlement of a real estate transaction for reward or who, whether for reward or otherwise, carries on business arranging or effecting settlements of real estate transactions and whether or not that business is carried on in conjunction with or as part of or associated with any other profession, trade, occupation or employment, but does not include the exceptions specified in section 4(1)[.]
For present purposes the reference to s 4(1) is not relevant.
The definition of 'business settlement agent' is set out in similar terms to that of real estate settlement agent, but covers business transactions rather than real estate transactions.
It is clear, therefore, that a licensed 'real estate settlement agent' is a person who arranges or effects the 'settlement' of a real estate transaction.
'Settlement' is defined in s 3 as meaning:
[T]he completion of a real estate transaction or a business transaction (as the case may be) by payment of the balance of purchase price in respect to such real estate transaction or business transaction[.]
Section 46 and s 47 of the Act set out the functions of real estate settlement agents and business settlement agents.
Section 46(1) states:
Subject to subsection (2), a licensee who holds a real estate settlement agent’s licence and a current triennial certificate may arrange or effect a settlement of any real estate transaction that is in respect of land under the Transfer of Land Act 1893 or the Land Administration Act 1997.
For present purposes s 46(2) of the Act is not relevant.
Section 46(4) states:
In arranging or effecting a settlement referred to in subsection (1) a licensee may perform the functions set forth in clause 1(1) of Schedule 2 but in performing any or all of those functions a licensee shall not give or attempt to give advice on a matter of law.
Clause 1 of Sch 2 under the heading 'Real Estate Settlement Agent' referred to in that subsection states:
A licensee who holds a real estate settlement agent’s licence and a current triennial certificate may perform the following functions
(a)searching land titles and dealings in the records of the Western Australian Land Information Authority established by the Land Information Authority Act 2006 section 5 (the Authority) and searching for caveats against any of those dealings;
(b)searching and inquiring at other Government offices and at the offices of statutory authorities and local governments, and obtaining certificates therefrom, in respect of records, plans and policies and making inquiries with respect to adjustment of rates, taxes and other outgoings of a periodical nature in respect of the real estate the subject of the transaction involved in a settlement;
(c)preparing a settlement statement and an authority for the payment or receipt of moneys in respect of the transaction involved in a settlement;
(d)arranging the payment of duty imposed under the Duties Act 2008, and any other imposts or fees on documents in respect of the real estate transaction;
(e)arranging and attending on settlement, including exchanging documents and receiving and disbursing moneys to effect the settlement;
(f)lodging documents in respect of the real estate transaction with the Authority or other Government offices or the offices of statutory authorities for registration;
(g)uplifting such documents from the Authority or other Government offices or the offices of statutory authorities;
(h)completing powers of attorney in such form and subject to such conditions as are prescribed;
(i)subject to any conditions imposed by the code of conduct, drawing or preparing and arranging the execution of the documents set forth in subclause (2);
(j)reporting on the progress of the settlement to the party to the transaction by whom the licensee was appointed to arrange or effect the settlement.
Section 47 of the Act deals with identical matters, but in respect of business settlement agents and their functions.
Section 48 defines 'trust account' as meaning:
[A]ccounts relating to moneys received or held by a settlement agent for or on behalf of any other person in respect of settlements to be arranged or effected, or arranged or effected, by the settlement agent.
The short title of the Act states that it is:
An Act to make provision with respect to the licensing, regulation, and supervision of settlement agents, and for related purposes.
It is clear from the provisions of s 46(1) and s 46(4) that all of the functions in respect of which a settlement agent is licensed are related to the arranging or effecting of a 'settlement'.
Furthermore, it is clear that the licensing, regulation and supervision provisions set out in the Act are all connected with the arranging and effecting of settlements by settlement agents and not in respect of any other business settlement agents might undertake.
As set out above, 'settlement' is defined as the completion of a real estate transaction or business transaction (as the case may be) by payment of the balance of the purchase price in respect of such a real estate transaction or business transaction and s 49 states that as soon as practicable, all monies received in respect of 'settlements' be paid into the trust account 'maintained exclusively for the purposes of the Act'.
A settlement agent is 'licensed' to do specific work or business under the Act and it is that work or business that is regulated and to which the provisions of the Act apply.
It is important for the reasons of transparency and the regulation of the Act that the trust account maintained for the purposes of s 49 is maintained 'exclusively' or solely for the purposes required under the Act and is unpolluted by money from other sources.
This is particularly so in view of the audit requirements of the Act which require the auditor to report to the Commissioner any irregularities discovered in the trust account (s 51(6)).
The High Court in AB and State of Western Australia & Anor [2011] HCA 42 at [10] recently confirmed:
What is comprehended by [a legislative provision] falls to be determined by construing its terms in the context of the [legislation] as a whole and by reference to its evident purposes [Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69]; [1998] HCA 28]. In Commissioner for Railways (NSW) v Agalianos [(1955) 92 CLR 390 at 397; [1955] HCA 27], Dixon CJ referred to the importance of the context, general purpose, policy and fairness of a statutory provision, as guides to its meaning. The modern approach to statutory interpretation uses 'context' in its widest sense, to include the existing state of the law and the mischief to which the legislation is addressed [CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2]. Judicial decisions which preceded the [legislation] may be relevant in this sense, but the task remains one of the construction of the [legislation].
Looking at the purpose of the Act which is to make provision with respect to licensing, regulation and supervision of settlement agents and the requirements of the Act as a whole, including the requirement for a trust account to be maintained 'exclusively' for the purposes of the Act, it is the Tribunal's view that, only monies received by a settlement agent for or on behalf of a person, in respect of settlements to be arranged or effected by the settlement agent, may be paid to the credit of the trust account maintained pursuant to s 49.
Other monies received by a settlement agent in connection with, or associated with other business activities that are not regulated by the Act and which are not directly related to the 'settlement' of a business transaction or a real estate transaction to be arranged or effected by the settlement agent, may not be lodged to the trust account which is maintained 'exclusively' for the purposes of the Act.
That is so, even if the person (as in this case) requests the settlement agent to lodge those monies to 'a trust account' and the only trust account the settlement agent has is the one they have set up for the purposes of s 49 of the Act.
It is of course open to a settlement agent to open other accounts to receive such monies.
The fact that a settlement agent may carry out services other than that of a real estate settlement agent or a business settlement agent, is evident from the wording of the Settlement Agents (Remuneration) Notice 2008.
Part III of Sch 1 of the Settlement Agents (Remuneration) Notice 2008 under the heading 'Services Provided Outside of a Real Estate Settlement' states:
For services provided other than for a real estate settlement, settlement agents may charge a maximum rate of up to $250 per hour (GST inclusive) for those services.
A similar statement was contained at paragraph 2 under Schedule 2 for business settlements.
Although the Settlement Agents (Remuneration) Notice 2008 was revoked by the Settlement Agents (Remuneration) Notice 2013 gazetted on 17 September 2013, the amended wording of Item 3 of Sch 1 which states 'any service other than a service referred to in items 1 and 2' (which specifically relate to real estate settlements) clearly recognises that a settlement agent may charge for services or activities other than real estate settlements.
However, the question in the present case is not what services a settlement agent may perform outside of a real estate transaction or a business transaction as defined, but whether any money the settlement agent may receive in connection with such services may be placed in the trust account maintained exclusively for the purposes of s 49.
As stated, in the Tribunal's view, the answer to that question is 'no'. Monies that are received for such services may not be placed in the settlement agent's trust account which has been set up under s 49 exclusively for the purposes of the Act.

Conclusion

In the circumstances, the respondent paid monies to the credit of his trust account, which was to be maintained exclusively for the purposes of the Act. However, those monies were not received for the respondent's work as a settlement agent, as licensed under the Act, in that the money was not directly related to the settlement of a real estate transaction or a business transaction to be arranged or effected by the respondent as a settlement agent as defined under the Act. The respondent therefore failed to maintain his trust account exclusively for the purposes of the Act contrary to s 49(1).
As a consequence, the respondent acted in breach of the requirements of the Act and pursuant to s 84(2), the Tribunal is satisfied that proper cause exists for disciplinary action.

Penalty

Section 84(1) of the Act states:
If, in a proceeding commenced by an allegation under section 83 the State Administrative Tribunal is satisfied that proper cause exists for disciplinary action, the State Administrative Tribunal may do any one or more of the following things
(a)reprimand or caution the settlement agent;
(b)impose a fine not exceeding $10 000 on him;
(c)suspend or cancel his licence and any triennial certificate in respect thereof and, in addition, disqualify him either temporarily or permanently, or until the fulfilment of any condition which may be imposed by the State Administrative Tribunal or until the further order of the State Administrative Tribunal, from holding a licence or triennial certificate, or both.
The applicant submitted that:
It's not the applicant's position that a suspension or cancellation is warranted and in the event that these allegations are proved. The applicant submits … that the appropriate disposition is to reprimand or caution Mr Chesson and to impose a fine which the respondent says should be in the order of $4,000. (T:89; 19.05.14)
The applicant recognised that the purpose of this type of proceeding was not to punish the licensee and stated:
… [I]t goes without saying that the provisions regulating moneys received on trust and held and disbursed on trust are extremely important in the context of this licensing regime.
It's a significant responsibility to hold money on behalf of another person. Settlement agents work in an area where it is potentially significant sums of money or significant issues involved for clients, being the purpose or sale of real estate or businesses. So we're dealing with a contravention, if proved, of serious and important parts of the Act. The applicant, of course, accepts that what occurred in this case could not be described as the most serious example of a contravention of the trust accounting provisions, and we're not talking about fraudulent or deliberate misappropriate of funds by Mr Chesson.
… It's accepted for the purposes of these proceedings that the money was deposited and then disbursed in accordance with their instructions [referring to the respondent's clients] in the context of an ongoing business relationship, but that relationship was outside of Mr Chesson's business as a settlement agent, so from the applicant's perspective those moneys never should have been deposited into his account.
…
The more the business becomes intermingled, the grater the chance that there will be discrepancies arise in the trust account which might cause innocent consumers loss. In that context there needs to be a penalty which sends a message to other settlement agents that trust accounting requirements under the Act are extremely important.
… The applicant says that that message which ultimately provides for the protection of clients of settlement agents and the maintenance of proper standards in the industry will be facilitated by the issuing of a caution and a fine as the penalty in these proceedings. (T:9091; 19.05.14)
The respondent, on the other hand, submitted:
… [I]f it is found that there is proper caused for disciplinary action against Mr Chesson, and we would say on the basis that there has been no impropriety, there has been no fraudulent act Mr Chesson hasn't used these funds for his own benefit or gain. These funds were used at the sole direction of what he was instructed to do with those funds. …
So there has been no impropriety, and we say that there should be no penalty at all imposed on Mr Chesson. If the [T]ribunal was to find that there should be some penalty, then we would say a reprimand or caution would be the most that should be issued, and that no financial penalty or fine should be imposed[.] (T:102; 19.05.14)

Consideration of penalty

As stated above, the Tribunal is satisfied that the respondent used his trust account in breach of s 49(1) of the Act and that proper cause exists for disciplinary action.
It is acknowledged that there was no financial impropriety on behalf of the respondent. Rather, the offending conduct constituted allowing monies that were not connected to effecting or arranging a settlement, as is required by s 49 of the Act, to be paid into and out of his trust account which must be maintained exclusively for the purposes of the Act.

The principles to be applied when determining the appropriate penalty in disciplinary proceedings are well established and were applied in the context of disciplinary action against a settlement agent in Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361, where at [25] Buss JA stated as follows:
The character and purpose of disciplinary proceedings against a member of a profession have been examined on numerous occasions. The object of those proceedings is the protection of the public and the maintenance of proper professional standards. The maintenance of proper professional standards is conducive to the protection of the public. Disciplinary proceedings are not designed to punish the person who is disciplined. See, for example, Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279 at 286; Clyne v New South Wales Bar Association (1961) 104 CLR 186 at 201202; New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183184; Re a Barrister and Solicitor;Ex parte AttorneyGeneral for the Commonwealth (1972) 20 FLR 234 at 244; Re a Barrister and Solicitor (1979) 40 FLR 1 at 2425; Re a Practitioner; Ex parte The Legal Practitioners Disciplinary Tribunal [2001] WASCA 204 at [6][7].
At [30] his Honour went on to say that it is necessary to evaluate and give weight to a variety of considerations, including:
•the seriousness of the conduct giving rise to the allegations;
•the Respondent's explanation of the conduct;
•the maintenance of proper standards and public confidence;
•the necessity for general deterrence; and
•any personal matters of a mitigatory nature.
In the present circumstances, although the respondent did use the trust account in a manner that was in breach of the Act, he did so believing at all times that he was entitled to do so, and it was the only trust account he operated when requested to lodge monies to it by the client.
It is clear that the respondent has always been of the belief that he was entitled to act as he did and it may well be that other settlement agents have also mistakenly done so from time to time.
However, in the Tribunal's view, the Act is clear. If a settlement agent receives monies which they are not entitled to lodge to their trust account, but which is to be kept exclusively for the purposes of the Act, then they may have to consider what arrangements they need to put in place to ensure they are not in breach of the Act.
In the circumstances of the present case, as no defalcation has occurred and no intention to improperly deal with clients' monies was in the mind of the respondent at any time, but merely an incorrect understanding of the requirements of s 49, a penalty at the lower end of the scale is appropriate, and the Tribunal will caution Mr Chesson pursuant to s 84(1)(a) of the Act.

Costs

Both parties filed written submissions in respect of costs which the Tribunal has taken into account.
As stated by the Tribunal in Medical Board of Western Australia and Roberman [2005] WASAT 118 (Roberman) at [30]:
Where a regulatory authority successfully brings a complaint of conduct which if proved justifies disciplinary action by the Tribunal, there will usually be a strong case for the exercise of that discretion in favour of the regulatory body. That is because such bodies perform a function which promotes the public interest, and usually with limited resources. The financial burden of bringing disciplinary action if the body had no capacity to recover some or all of its costs may be such as to provide a disincentive to bring disciplinary action, or when brought, to ensure that the allegations against the practitioner concerned are properly and thoroughly presented. It is in the public interest that such bodies have an expectation that, if the allegations are made out, the offending professional will meet or at least contribute to the costs incurred in bringing the application. It is of course a matter of discretion to be exercised in the circumstances of each case.
In Commissioner for Consumer Protection and Samykannu Pty Ltd [2013] WASAT 129 (S) the Tribunal applied those principles in a matter involving a real estate agent and the Tribunal believes that the principles set out in Roberman are applicable to the present matter.
This matter went all the way to a final hearing and the applicant has been successful in proving the allegation it brought against the respondent with all of the contested evidence going to that issue. In the Tribunal's view therefore, based on the facts of the case and the principles set out in Roberman, this is an appropriate case where the applicant should be awarded its costs.
The applicant claims the sum of $8,828.38, and attached to its submissions a bill of costs, a copy of which will be annexed to these reasons as Annexure 1.
The Tribunal considers that the costs set out in the applicant's bill of costs totalling $8,828.38 are reasonable in that the rates claimed are those which apply under the Legal Practitioners (Magistrates Court) (Civil) Determination 2012 (WA) which this Tribunal in Commissioner for Consumer Protection and Hawaii Pty Ltd & Anor[2008] WASAT 22 (S) found was an appropriate scale to adopt.
Costs will therefore be awarded to the applicant in the sum of $8,828.38.

Orders

1.Pursuant to s 84(1)(a) of the Settlement Agents Act 1981 (WA) the respondent is cautioned.
2.The respondent is ordered to pay the applicant's costs in the sum of $8,828.38 within 30 days of the date of this order.

I certify that this and the preceding [86] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR M SPILLANE, SENIOR MEMBER

ANNEXURE 1

Applicant's bill of costs

Date	Person	Description	Time (hours)	Amount
Various	KN	Drafting application	2	$748.00
03/09/2013	KN	Attend directions hearing	1	$374.00
Various	KN	Drafting statement of Issues, Facts and Contentions and compiling Applicant's Bundle of Documents	4	$1,496.00
08/10/2013	KL	Attend directions hearing	1	$275.00
12/12/2013	KN	Prepare for and attend mediation	4	$1,496.00
14/01/2014	KN	Attend directions hearing	1	$374.00
19/05/2014	JD	Prepare for and attend final hearing	10	$3,740.00
Sub total	$8,503.00
DISBURSEMENTS
23/08/2013	Service fee	$325.38
TOTAL	$8,828.38

KN, Senior Practitioner    ($374 per hour)
KL, Junior Practitioner     ($275 per hour)
JD, Senior Practitioner     ($374 per hour)