COMMISSIONER FOR CONSUMER PROTECTION and SAMYKANNU PTY LTD

[2013] WASAT 129

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   VOCATIONAL REGULATION

ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)

CITATION:   COMMISSIONER FOR CONSUMER PROTECTION and SAMYKANNU PTY LTD [2013] WASAT 129

MEMBER:   JUDGE T SHARP (DEPUTY PRESIDENT)

MR T CAREY (MEMBER)
MR G POTTER (SENIOR SESSIONAL MEMBER)

HEARD:   22 AND 24 MAY 2013

DELIVERED          :   14 AUGUST 2013

FILE NO/S:   VR 89 of 2012

BETWEEN:   COMMISSIONER FOR CONSUMER PROTECTION

Applicant

AND

SAMYKANNU PTY LTD
First respondent

JOHN SAMYKANNU
Second respondent

Catchwords:

Real estate agents - Code of Conduct for agents - Skill, care and diligence - Failure to maintain a level of knowledge - Failure to take instructions - Failure to confirm identity of persons providing instructions

Legislation:

Real Estate and Business Agents Act 1978 (WA), s 27, s 29, s 31, s 101 Pt VII, s 102(1), s 103

Result:

The Tribunal is satisfied that proper cause exists for disciplinary action

Summary of Tribunal's decision:

The Commissioner of Consumer Protection alleged to the Tribunal that there is proper cause for disciplinary action against the Respondents.  The Respondents were the selling agents of a residential property owned by two people who were living and working overseas.  The property was rented under a management arrangement between the Respondents and the owners.

The Respondents took instructions to sell that property from persons they believed to be the owners.  It transpired that the true owners were unaware of the sale until they returned to Australia and asked to visit the property.

The Commissioner said that the Respondents had breached Article 7 of the Code of Conduct for Agents and Sales Representatives 1993 which required agents to exercise skill, care and diligence.  The alleged breaches of the Code were:

a)  failing to maintain a level of knowledge of developments in the real estate industry so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas;

b)  failing to obtain the instructions of one of the property owners in relation to the sale of the property prior to negotiating its sale; and

c)  failing to confirm the identity of the person or persons purporting to provide instructions in relation to the sale of the property.

The Tribunal considered the Commissioner's allegations and was satisfied, on the first but not the second and third grounds referred to above, that proper cause exists for disciplinary action against the Respondents.

Category:    B

Representation:

Counsel:

Applicant:     Mr G Cobby

First respondent            :     Ms C Thompson

Second respondent        :     Ms C Thompson

Solicitors:

Applicant:     Department of Commerce

First respondent            :     Nielsen and Co

Second respondent        :     Nielsen and Co

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

Eade v Vogiazopoulos [1999] 3 VR 889

Gransha Pty Ltd & Ors v Bourke [2002] WADC 30

Johnson v Sheppard [2005] WASCA 13

Paridis v Settlement Agents Supervisory Board [2007] WASCA 97

Wyong Shire Council v Shirt (1980) 146 CLR 40

REASONS FOR DECISION OF THE TRIBUNAL: 

Introduction

1. The applicant in this matter is the Commissioner for Consumer Protection (Commissioner).  The Commissioner has alleged to the Tribunal that there is proper cause for disciplinary action against the first respondent, Samykannu Pty Ltd trading as LJ Hooker Mirrabooka (Company) and the second respondent, Mr John Samykannu, the sole director of the Company (Mr Samykannu).

2. A reference to 'Respondents' in these reasons is a reference to both the Company and Mr Samykannu.

3. The background to this matter is that in September 2010 a property in Karrinyup was sold on the instructions of a person who, it was subsequently discovered, was not the owner of that property.  There was also an attempted sale of a second property.  The true owner of those properties was overseas at the time.  This event became known as and is referred to in these reasons as the Karrinyup Fraud (Karrinyup Fraud).

4. In 2011, the Company and Mr Samykannu received instructions from a person they believed to be one of the owners, to sell a residential property in Ballajura (Property).  It transpired that the instructions in fact came from a third party who has not to date been identified.  The result was that the property was sold without the consent and knowledge of the owners and the sale proceeds were paid out to someone other than the owners.

5. We will set out the Commissioner's allegations against the Respondents in detail later in these reasons.  However, amongst other things, the Commissioner alleges that both the Company and Mr Samykannu failed to exercise skill, care and diligence by not taking any or adequate steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas.

The hearing

1. The hearing of this matter took place on 22 and 24 May 2013.  At the hearing, the applicant tendered a book of documents (Commissioner's Book) but restricted the documents tendered to those documents appearing at pages 1 ­ 87 inclusive and pages 100 ­ 120 inclusive.  A number of witnesses gave evidence and we will refer to that evidence later in these reasons.  Some of those witnesses were cross­examined.

2. The Respondents also tendered certain documents during the course of the proceeding, and again we will refer to these later in these reasons.

3. Counsel for the Respondents filed a response to the Commissioner's allegations but neither the Company nor Mr Samykannu gave evidence at the hearing.

The facts

1. The background facts in this matter are largely agreed between the parties.

2. The Company carries on a real estate agency business under the name LJ Hooker Mirrabooka. The Company holds a real estate and business agent licence granted under s 29 of the Real Estate and Business Agents Act 1978 (WA) (Act) and holds a triennial certificate granted under s 31 of the Act which was current at all relevant times.

3. Mr Samykannu also holds a real estate and business agent licence granted under s 27 of the Act and holds a triennial certificate under s 31 of the Act which was current at all relevant times.

4. Mr Samykannu is the sole director of the Company and is the person in control of the Company.

5. On 24 July 1997, two persons, a married couple to whom we will refer in these reasons as, respectively, the First Property Owner and the Second Property Owner, (collectively, the Property Owners) became the registered proprietors as joint tenants of a residential property in Ballajura (Property).  Neither the Company nor Mr Samykannu had any involvement in that transaction.

6. In or around November 2006, the Property Owners moved to Lagos, Nigeria and in December 2007 they signed an 'Exclusive Authority to Act as Managing Agent for Residential Premises' in favour of the Company to manage the Property (Property Management Agreement).

7. In the Property Management Agreement, under the 'Name and Address of Owner' column, the Property Owners provided a postal address in Lahore, Pakistan, being the postal address of the Second Property Owner's brother.  The Property Management Agreement also provided the Second Property Owner's brother's two telephone numbers together with the First Property Owner's two private email addresses.  We will refer to these email addresses as, respectively, the Hotmail address and the Yahoo address.

8. The Property Management Agreement stipulated that the rent from the Property was to be paid into a specified ANZ bank account in the joint names of the Property Owners.

9. Finally, the Property Management Agreement provided that the Company was to be paid a management fee of 9.35% of the gross amount collected annually by the Company on behalf of the Property Owners.

10. The Property Owners expressly advised Mr Samykannu that they could not be contacted by telephone and that the only way to contact them would be through the Second Property Owner's brother or by email.

11. On 23 September 2008, the Property was leased for a fixed term of six months and thereafter by periodic tenancy and a residential tenancy agreement was entered into to this effect (Tenancy Agreement).

12. For the duration of the Tenancy Agreement, the Company provided monthly statements to the Property Owners by email to the Hotmail address.

13. On 10 September 2010, the Commissioner sent an 'e bulletin' by email to all Western Australian real estate agents recorded on the former Real Estate and Business Agents Supervisory Board's (Board) record keeping database, including the Company, concerning the fraudulent sale of a residential property while the owner was overseas.

14. Between 13 September 2010 and February 2011, the Department of Commerce (Department), the Real Estate Institute of Western Australia (REIWA) and the Board variously made the following publications, releases and presentations:

    a)on 13 September 2010, the Department published a media statement on its website titled 'Home sale mystery prompts real estate agent alert';

    b)on 13 September 2010, REIWA published a media release on its website concerning the Karrinyup Fraud;

    c)on 15 September 2010, REIWA included an article titled 'Property scam warning to REIWA members' in its regular weekly 'e newsletter' sent to its members;

    d)on 20 September 2010, the Board sent a further 'e bulletin' to real estate agents in Western Australia titled 'Updated scam warning' which contained further information relating to the Karrinyup Fraud;

    e)on 21 September 2010, the Department published a media statement on its website relating to the Karrinyup Fraud titled 'Intensive joint investigation into real estate scams';

    f)in September 2010, the Board posted the 'Summer 2010 REBA News' newsletter to real estate agents (including the Company) and sales representatives, which contained an article titled 'Urgent Scam Warning' concerning the Karrinyup Fraud; and

    g)during November 2010 and February 2011, REIWA advertised to its members (including the Company) and hosted 12 presentations by the Western Australian police titled 'Identity Fraud Property Scams ­ Are your clients at risk?'

15. It should be noted that, while the Company and Mr Samykannu accept that certain publications were made, Mr Samykannu denies seeing any such publications or hearing any media reports.  We will revert to this issue later in these reasons.

16. On 17 February 2011, Mr Samykannu received a telephone call from a person identifying himself as, and whom Mr Samykannu believed was, the First Property Owner.  This call was from a telephone number which was not one of the numbers previously provided to the Company by the First Property Owner.  The caller advised Mr Samykannu that he was contemplating selling the Property.  On the same date, Mr Samykannu received an email from an email address which was neither the Hotmail nor the Yahoo addresses previously provided by the Property Owners, but was signed with the First Property Owner's name.  This email requested that a copy of the Tenancy Agreement be emailed urgently to that same email address (new email address).

17. The Company's receptionist and a business systems operator, Ms Margarita Foscolos (Ms Foscolos), sent a copy of the Tenancy Agreement to the new email address as requested.  Mr Samykannu, again on the same date, then received another telephone call from a person he believed to be the First Property Owner, requesting a selling agency agreement form be sent to him by email.  On 18 February 2011, Mr Samykannu instructed Ms Foscolos to send the selling agency agreement to the new email address.

18. Then on 20 February 2011, Mr Samykannu received an email in the name of the First Property Owner from the new email address, requesting that the Property be placed on the market.

19. On 21 and 22 February 2011, Ms Foscolos sent three separate emails to the new email address attaching a selling agency agreement and requesting that the First Property Owner 'get yourself and your wife to sign and put full names and send back as soon as possible'.

20. On 24 February 2011, the Company received an email in the name of the First Property Owner, again from the new email address, attaching the selling agency agreement.  This agreement was purportedly signed by the First Property Owner but not the Second Property Owner.  Also attached to the email was a one page copy of the First Property Owner's Australian passport and a two page, incomplete, Seller's Disclosure Statement.  On the same day, Mr Samykannu received a further telephone call from the person he believed to be the First Property Owner, who asked if the signed copy of the selling agency agreement had been received.  During this conversation, Mr Samykannu informed the caller that the selling agency agreement had been received but that the Second Property Owner was also required to sign this document.  On 25 February 2011, a further email copy, from the new email address, was received by the Company, on this occasion appearing to be signed by both the First Property Owner and the Second Property Owner.  However, in the Second Property Owner's signature her first name was spelt 'Fauzei', whereas it is spelt 'Fauzie' on the Property Management Agreement.

21. Between 25 February 2011 and 14 March 2011, the Property was marketed and an offer was received for the Property for a price of $400,000.  Mr Samykannu telephoned a person he believed to be the First Property Owner, on the new telephone number, advising him of the offer.  The response was that 'it was a bit low' and on or around 14 March 2011 the offer for the Property was increased to $410,000.  Mr Samykannu informed the person he believed to be the First Property Owner, by telephone on the new telephone number, and advised him of this increase.  That person told Mr Samykannu that the offer was now acceptable.

22. On 14 March 2011, Ms Foscolos sent by email to the new email address a contract for sale of land or strata title by offer and acceptance in respect of the Property (Contract) duly signed by the purchaser.  On 15 March 2011, the Contract was returned by email from the new email address to the Company, purportedly signed by both the First Property Owner and the Second Property Owner.

23. On 16 and 17 February 2011, Ms Foscolos sent an email to the new email address, requesting a postal address.  On 18 March 2011, the Company received an email from the new email address, addressed to 'Margarita and John' stating:

    … if you have to send any original document to me please it must be by FEDEX courier company for that is the only reliable means for me to get it. my current address is 4 st finbarrs college road, akoka, yaba, lagos, Nigeria … .  (Commissioner's Book, page 69).

24. On 18 April 2011, the sale and purchase of the Property was settled through the services of LJ Hooker Settlements.  Ownership was transferred to the purchaser.

25. On 1 August 2011, the Property Owners returned to Perth from Nigeria.  On 5 August 2011, they attended the Company's office and asked Mr Samykannu if they could see the Property.  Mr Samykannu told them that the Property had been sold and that the new owner had moved in.

The Commissioner's allegations

1. The Commissioner alleges that there is proper cause for disciplinary action against the Company and against Mr Samykannu under s 103(2)(c)(iii) of the Act in that:

   1.Contrary to Article 7 of the Code of Conduct for Agents and Sales Representatives 1993 (Code) made under s 101 of the Act the Company failed to exercise skill, care and diligence in failing to:

   a)take any or any adequate steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas;

   b)take any steps to obtain the instructions of the Second Property Owner in relation to the sale of the Property prior to negotiating the sale of the Property; and/or

   c)take any or any adequate steps to confirm the identity of the person or persons purporting to provide instructions to the Respondents in relation to the sale of the Property.

   2.Contrary to Article 7 of the Code, Mr Samykannu failed to exercise skill, care and diligence in failing to:

   a)take any or any adequate steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas;

   b)take any steps to obtain the instructions of the Second Property Owner in relation to the sale of the Property prior to negotiating the sale of the Property; and/or

   c)take any or any adequate steps to confirm the identity of the person or persons purporting to provide instructions to the Respondents in relation to the sale of the Property.

Statutory regime

1. Section 101 of the Act is as follows:

   Codes of conduct

   The Commissioner may from time to time prescribe, and publish in the manner prescribed by the regulations ­ 

   (a)a code of conduct for agents; and

   (b)a code of conduct for sales representatives.

2. Section 102(1) relevantly provides:

   Disciplinary action by SAT, alleging cause for

   (1)The Commissioner may allege to the State Administrative Tribunal that ­ 

   (a)there is proper cause for disciplinary action, as mentioned in section 103(2), against an agent; or

   …

3. Section 103(1)(a), (b), and (c) of the Act relevantly provides:

   Disciplinary action, SAT’s powers as to

   (1)If, in a proceeding commenced by an allegation under section 102(1) against an agent, 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 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, from holding a licence or triennial certificate, or both;

   …

4. It is agreed that both the Company and Mr Samykannu are agents for all relevant purposes.

5. Section 103(2) of the Act provides:

   There shall be proper cause for disciplinary action against an agent if ­ 

   (a)the agent improperly obtained a licence or triennial certificate; or

   (b)the agent, or any person acting with the authority or upon the instructions of the agent has in the course of any dealings with a party, or a prospective party, to a transaction, been guilty of conduct that constitutes a breach of any law other than this Act and that prejudices or may prejudice any rights or interests of the party, or prospective party to the transaction; or

   (c)the agent is acting or has acted in breach of ­ 

   (i)a special condition of his licence or triennial certificate; or

   (ii)the requirements of this Act; or

   (iii)the agents code of conduct;

   or

   (d)any other cause exists that, in the opinion of the State Administrative Tribunal, renders the agent unfit to hold a licence.

6. Article 7 of the Code provides as follows:

   An agent must exercise skill, care and diligence.

The Commissioner's contentions

1. The Commissioner says that Article 7 of the Code requires an agent to exercise powers and discharge duties with that degree of care and diligence that is reasonably necessary for the proper performance of the duties of an agent.

2. In determining what is reasonably necessary, the Commissioner says that the Tribunal must consider 'the magnitude of the risk and degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities [the agent] may have'; Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47.

1. The Commissioner says that an agent is obliged, by virtue of Article 7 of the Code, to take steps so as to be aware of developments in the industry so as to possess that level of knowledge which is to be expected of a reasonably competent agent.

2. Accordingly, in the Commissioner's submission, the Respondents breached the obligation to exercise 'care, skill and diligence' imposed by Article 7 of the Code in failing to be aware of the risk of fraud and the steps recommended to reduce that risk. The Commissioner submits that the Respondents breached that obligation by failing to have any adequate regard to the numerous communications from the Board and REIWA and the media publications concerning the risk of the fraudulent sale of property owned by persons resident overseas.

3. The Commissioner goes on to say that, further, an agent is required to ensure that he has the authority of both registered proprietors to offer for sale a property held in joint names, even where the joint owners are husband and wife; Eade v Vogiazopoulos [1999] 3 VR 889. The Commissioner says that Mr Samykannu did nothing to obtain instructions from the Second Property Owner regarding the sale of the Property or to confirm that the instructions provided to the Company regarding the sale of the Property were made with her knowledge and consent. The Respondents therefore both failed to exercise skill, care and diligence in acting upon the authority to sell the Property bearing the forged signature of the Second Property Owner, having made no enquiry of her whatsoever.

4. Finally, the Commissioner says that the Respondents failed to confirm the authenticity of each of the new telephone number, email and postal addresses by means of the telephone numbers and email addresses specified in the Property Management Agreement.  This was in circumstances where:

   a)    they should have been aware of the risks of fraudulent dealings with property;

   b)    they had taken no steps to verify that the Second Property Owner had agreed to the sale of the Property;

   c)    the Company continued to provide reports to the Property Owners regarding its management of the Property by means of the email address specified in the Property Management Agreement, throughout the period when the Property was being marketed for sale.

5. The Commissioner concludes that the Tribunal should be satisfied that there is proper cause for disciplinary action in respect of both of the Respondents, pursuant to s 103(2)(c)(iii) of the Act.

The Respondents' response

1. The Respondents, through counsel, say that the Commissioner's application is misconceived and should be dismissed.

2. The Respondents say that the starting point in reaching this conclusion is a true understanding of the nature and extent of the relationship between the Respondents and the Property Owners.  The Respondents say that it is only in the context of that relationship that the Respondents have an obligation under the Code.

3. The Respondents point out that the Company was the agent for the Property Owners only under the Property Management Agreement, which is an agreement to manage the Property and is limited by its terms.  They say that the Property Owners were not the principal and the Company was not their agent in respect of the sale of the Property.  There was no contract between the Property Owners and the Company for the sale of the Property.

4. The Respondents say that the common law does not impose a general duty to exercise skill, care and diligence to the public at large and that where there is a contractual relationship, the duty is framed and owed within the context of that contract. The Respondents say that the Commissioner is wrong in principle to say that the duty imposed by the Code should extend beyond what the common law imposes. The Respondents contend that the 'duty' under Article 7 to exercise skill, care and diligence must be owed to a particular person and cannot be a 'mandatory standard' owed to the world at large. The Respondents say that if Article 7 of the Code was intended to displace the common law duty of care arising within the confines of a contractual relationship then this would need to be clear from the terms of the Act or the Code. The Respondents consider that there was no such clear intention.

5. The Respondents say that, in any event, Mr Samykannu had not read the various press releases and alerts because he was overseas at the time when the Karrinyup Fraud became public.

6. As to the allegation that the Respondents failed to obtain specific instructions from the Second Property Owner, the Respondents say that the First Property Owner was the person who had invariably given instructions in the past in respect of the Property.  The Respondents relied on that past practice and the fact that, before the Property could be sold and transferred, at least two documents were require to be executed by both Property Owners.

7. The Respondents also say that they did not breach their duty by failing to properly identify the Property Owners.  The Respondents sighted the First Property Owner's passport and the person giving instructions sounded to Mr Samykannu like the First Property Owner on the telephone.  The Respondents say that it was entirely reasonable in the circumstances for the Respondents to take no further steps in identifying the persons providing instructions to them.

The Tribunal's findings

1. Under s 102(1) of the Act, the Commissioner may allege to the Tribunal that there is proper cause for disciplinary action against the Respondents. If the Commissioner so satisfies the Tribunal, then the Tribunal's disciplinary powers are activated; Johnson v Sheppard [2005] WASCA 13 at [8].

2. While a breach of a provision of the Code may give rise to a civil right of action, the Code has been promulgated for the purposes of disciplinary proceedings before the Tribunal; Gransha Pty Ltd & Ors v Bourke [2002] WADC 30 at [36]. Under s 103(2)(c) of the Act, a breach of the Code is proper cause for disciplinary action.

3. Disciplinary proceedings have a dual object, 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; Paridis v Settlement Agents Supervisory Board [2007] WASCA 97 at [26].

4. We consider that the requirement under Article 7 of the Code that an agent must exercise skill, care and diligence is not for the purpose of creating a liability on the part of the agent to any particular individual. It is a requirement to meet and maintain a standard in the course of the agent's real estate business. The application of this standard is not restricted to when the agent is acting for a particular individual and is not restricted to a duty owed to that individual. The standard is one which members of the public are entitled to expect from a real estate agent. This is consistent with the public policy objectives of the Act and the Code. There is a public interest in requiring that agents meet, and maintain, a minimum standard of competence in the conduct of their business as real estate agents.

5. In this case, the allegation is that there is proper cause for disciplinary action against the Company and against Mr Samykannu because of alleged breaches by them of the Code. We will deal with each allegation in turn. It is appropriate that the allegations against the Company and the allegations against Mr Samykannu are dealt with together, because Mr Samykannu is the person, in the words of the Act, in bona fide control of the business operated by the Company.

Failure to exercise skill, care and diligence contrary to Article 7 of the Code by failing to take any or any adequate steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas

1. We accept the Commissioner's argument that an agent is obliged, by virtue of Article 7 of the Code, to take steps so as to be aware of developments in the real estate industry. Agents should reasonably be expected to be aware of these developments so as to possess that level of knowledge and skill which is to be expected of a reasonably competent agent in the ordinary or proper conduct of his or her business.

2. We consider that the Karrinyup Fraud was such a development.  It was, as we understand it, the first reported occasion when a residential property had been unwittingly sold by an agent while the true owner was overseas.  That a fraud of this kind was even possible must have given the real estate industry some considerable cause for concern, as is evidenced by the media publicity and the literature disseminated by the Board, the Commissioner and REIWA.  While we accept that there may be members of the community who were unaware of the occurrence of this event, we do not accept that real estate agents would not have taken at least some notice of this event.

3. The Commissioner alleges that the Respondents failed to maintain a level of knowledge of developments in the real estate industry so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas. If that is established, then the allegation goes on to say that this is a breach of Article 7 of the Code.

4. As counsel for the Respondents points out, there is no evidence that Mr Samykannu had seen any of the media releases, articles or emails concerning the Karrinyup Fraud.  It is not in dispute that Mr Samykannu was overseas in October 2010 and in February 2011, but the height of the media coverage of the Karrinyup Fraud was reached in September 2010, shortly after details of the Karrinyup Fraud became public.  Even if we accept that Mr Samykannu was overseas when details of the Karrinyup Fraud became public, the Tribunal would have expected someone in his office to draw the matter to his attention on his return.  More importantly, it is of concern that, on the evidence before the Tribunal, none of the Company's staff had, in any event, any knowledge of the Karrinyup Fraud, the publications distributed by the Board or REIWA or any of the publicity surrounding that event.

5. Ms Sarah Jane Barrack, a settlement agent working for LJ Hooker Settlements and the person responsible for the settlement of the sale of the property, when asked whether she was aware of 'the previous scam that had taken place', told the Tribunal that she was aware 'that there had been one, I think about a year, maybe two years before'.  She said that she did not recall much publicity about it (T:65; 22.05.13).

6. It is clear that neither the Company nor Mr Samykannu had taken notice of the warnings issued by the Commissioner or by REIWA, or any media releases of any relevance.  The public is entitled, since the Karryinup Fraud, to expect that a licensed real estate agent is aware that a fraud of the nature of the Karryinup Fraud is possible, how it was conducted and what steps can be taken to minimise the risk of it happening again.  That the Respondents had done nothing to inform themselves on these points, and take appropriate steps to minimise the risk of this occurring within their own agency, we consider is a failure on their part.  A diligent and careful agent should have adequate regard to the risk of such an event reoccurring.

7. The Tribunal concludes that the Commissioner's allegation has been made out and that there is proper cause for disciplinary action against the Company and against Mr Samykannu.

Failure to exercise skill, care and diligence contrary to Article 7 of the Code by failing to take any steps to obtain the instructions of the Second Property Owner in relation to the sale of the Property prior to negotiating the sale of the Property

1. It will be recalled that the Property Owners had engaged the Company to manage the Property in 2007, which the Company did until the Property was sold.  The First Property Owner was asked at the hearing what involvement his wife, the Second Property Owner, had with any decisions which were to be made about the Property.  He said that, although his wife attended occasionally with him at the Company's office, he was 'the main person in the house' (T:19; 22.05.13) and that 'most of the talking I will obviously do' (T:19; 22.05.13).  He said that it was he who dealt with Mr Samykannu.

2. Further, there is no evidence to suggest that the Second Property Owner ever expressed a view that she wished to be independently consulted.

3. Although the Respondents could not assume that any instructions from the First Property Owner will necessarily coincide with the wishes of the Second Property Owner, it is clear that in terms of day to day decisions about the Property, the First Property Owner was to be the point of first contact in respect of any decision to be made.

4. At some stage in the sale process, however, the Respondents were required to ensure that they had clear instructions from both Property Owners.

5. To that end, the Tribunal notes that when the selling agency agreement, signed by someone pretending to be the First Property Owner, was first received by the Respondents, Ms Foscolos quite correctly returned it to the person she believed to be the First Property Owner to have the authority signed also by the Second Property Owner.

6. The Tribunal does not consider that in the circumstances, the Respondents were obliged to have taken any further steps to obtain instructions from the Second Property Owner in relation to the sale of the Property prior to negotiating that sale.  The Respondents were entitled to rely on the signed selling agency agreement as being the instructions of the Second Property Owner to proceed.  It would be unreasonable to expect anything further, particularly in view of what may be culturally or socially sensitive issues between the First Property Owner and the Second Property Owner.

7. Further, the transfer of land, clearly showing the sale price and the name of the purchaser, was also signed by two persons believed by the Respondents to be both of the Property Owners.

8. If the Second Property Owner had any concerns about the final terms and conditions of the sale, it would have been open to the Company and to Mr Samykannu to assume that she would not sign the transfer of land.  The Tribunal therefore finds that this ground has not been made out.

Failure to exercise skill, care and diligence contrary to Article 7 of the Code by failing to take any or any adequate steps to confirm the identity of the person or persons purporting to provide instructions to the Respondents in relation to the sale of the Property

1. The actions of the Respondents in this matter need to be considered in their context.  The perpetrators of the fraud were clearly very well informed. They were even sufficiently confident in the success of their enterprise that they felt able to negotiate a higher sale price than the one first offered.  For a fraud of this nature to go undetected to the point of the final payment of the sale proceeds to the fraudsters, each participant in the sale process has to be taken in by the fraud.  That includes the estate agent who negotiates the sale, the settlement agent who settles the transaction, any mortgagee of the property who discharges a mortgage and produces the duplicate Certificate of Title at settlement and the government agency responsible for registering the transfer of the property.  If at any stage in that process, any one of those participants had questioned the identity of the 'sellers', the fraud may have been thwarted.

2. The assessment of what steps, if any, the Respondents took to identify the persons instructing the sale of the Property is clouded by Mr Samykannu's firm belief that he was speaking to and communicating with the First Property Owner, whom he knew.  The Respondents certainly took steps to verify the signature on the selling agency agreement, by asking for and receiving a copy of the First Property Owner's passport.  As will be seen, the signatures on both documents, when compared, justify a conclusion that they were signed by the same person.  The Respondents did not compare the signatures with those that appeared on the Property Management Agreement but the Tribunal considers that it would be unreasonable to expect the Respondents to do so.

3. The question is then whether those steps can be considered to be adequate.  They were obviously not adequate in the sense that they were clearly insufficient to establish that the persons instructing the Respondents were not the Property Owners.  However, the Tribunal concludes that, when the element of hindsight is removed, those steps should be regarded as adequate in the sense that the Respondents did all that would be regarded as necessary in the circumstances at the time.

4. Ms Foscolos was the officer of the Company who dealt mostly with the First Property Owner.  She had in 2011 been employed by the Company for approximately five years; (Exhibit C, page 3).  She had spoken to the First Property Owner on a number of occasions.  She also spoke to the person pretending to be the First Property Owner by telephone when he called.  The Tribunal accepts her evidence that she believed that she was dealing with the First Property Owner and that she thought she recognised his voice.  She said there was nothing different about this transaction, '[i]t felt normal'; (Exhibit C, page 8).  When asked about previous occasions when the Company had 'a client overseas wanting to sell a house', she said that there had been 'one or two' previous occasions.  In those cases, she said that the procedure was to obtain photo identification.  When queried about this, she said 'Like passport or driver's licence'.  It was unclear from her evidence what her instructions were once she received this information, but in the case of the matter under review, she said that she received a copy of the First Property Owner's passport.  She did not ask for or receive a copy of the Second Property Owner's passport.

5. Ms Foscolos also said that, even if she had been aware of the Karrinyup Fraud, she would not have expected that the Company's procedures would have been any different (Exhibit C, page 14).

6. A copy of the First Property Owner's passport was tendered in evidence (Commissioner's Book page 53), as was a copy of the signed selling agency agreement (Commissioner's Book page 57).  Whilst no expert evidence on the subject has been provided, it is the Tribunal's view that the First Property Owner's signature on his passport and the signature purporting to be that of the First Owner Property Owner on the selling agency agreement are very similar.

7. It should be said that the signatures on the passport and on the selling agent agreement are quite different from the First Property Owner's signature on the Property Management Agreement (Commissioner's Book pages 16 ­ 23).  Clearly, had those signatures been compared by the Respondents, it is likely that the Respondents would have been alerted to a potential fraud, but the Tribunal has already said that it does not consider the Respondents to be at fault on this point.

8. On balance, we consider that in the case of the first Property Owner, it was reasonable for the Respondents to rely on the similarities between the signature on the passport and the signature on the selling agency agreement without further enquiry.

9. In the case of the Second Property Owner, the signature purporting to be that of the Second Property Owner on the selling agency agreement is similar to the signature of the Second Property Owner on the Property Management Agreement.  As we have previously pointed out, her first name on the selling agency agreement appears as 'Fauzei', whereas on the Property Management Agreement her first name is spelt 'Fauzie'.  In the Tribunal's view, however, this is not a discrepancy which would be noticed other than with the benefit of hindsight.

10. The transfer of land document appears at pages 74 ­ 76 of the Commissioner's Book.  The signatures of the Property Owners appear to be the same as those on the selling agency agreement.

1. It is unclear from the First Property Owner's evidence whether Mr Samykannu knew that the Property Owners were living and working in Nigeria.  However, Mr Samykannu was certainly aware that the Property Owners were 'overseas'.  Accordingly, we do not consider that a telephone call from the First Property Owner when he was overseas would necessarily have put Mr Samykannu or any of his staff on alert that the caller may not have been the First Property Owner.  Ms Foscolos did not consider it unusual for the Property Owners to change their contact details because she knew through Mr Samykannu that the Property Owners travelled to different countries.  We do not consider her to be at fault in that regard.  Ms Sherene John, the Company's Property Manager, agreed that while the Company would 'generally prefer [the instructions] to come from the email that they first gave it to us [sic]' (Exhibit E, page 5) it was not a firm practice.  There were no other changes which might have raised suspicions on the part of either of them and we do not consider it reasonable to expect in the circumstances that the Respondents should do more.

2. The only other point of significance was the fact that the person pretending to be the First Property Owner asked for the sale proceeds to be paid, not to the ANZ Bank, but to a different bank.  However, this request was made only to the settlement agent, not to the Company.

3. At settlement of the sale, ANZ Bank provided the duplicate Certificate of Title in respect of the Property.  The ANZ Bank did not ask for any of the sale proceeds, the only money payable to it being a fee of $160 which the settlement agent had paid to the ANZ Bank about two weeks prior to settlement.  The ANZ Bank discharged its mortgage and, again, nothing untoward alerted the Company or Mr Samykannu that there may be a problem.

4. We do not consider that this ground has been made out.

Conclusion

1. The Tribunal is satisfied that proper cause exists for disciplinary action:

   a)against the Company in that contrary to Article 7 of the Code the Company failed to exercise skill, care and diligence in failing to take any steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas;

   b)against Mr Samykannu in that contrary to Article 7 of the Code Mr Samykannu failed to exercise skill, care and diligence in failing to take any steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas.

Orders

1.There is a finding that there is proper cause for disciplinary action against Samykannu Pty Ltd pursuant to s 103(2)(c)(iii) of the Real Estate and Business Agents Act 1978 (WA) in that contrary to Article 7 of the Code of Conduct for Agents and Sales Representatives 1993 Samykannu Pty Ltd failed to exercise skill, care and diligence in failing to take any steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas.

2.There is a finding that there is proper cause for disciplinary action against John Samykannu pursuant to s 103(2)(c)(iii) of the Real Estate and Business Agents Act 1978 (WA) in that contrary to Article 7 of the Code of Conduct for Agents and Sales Representatives 1993 John Samykannu failed to exercise skill, care and diligence in failing to take any steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas.

3.The Commissioner for Consumer Protection is to file and serve any submissions on penalty within 21 days of the publication of these reasons.

4.Samykannu Pty Ltd and John Samykannu are to file and serve any submissions on penalty within 21 days of the service of the submissions of the Commissioner for Consumer Protection.

5.Subject to any further order of the Tribunal, the question of penalty is to be dealt with on the papers.

I certify that this and the preceding [89] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

JUDGE T SHARP, DEPUTY PRESIDENT

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   VOCATIONAL REGULATION

ACT: REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA)

CITATION: COMMISSIONER FOR CONSUMER PROTECTION and SAMYKANNU PTY LTD [2013] WASAT 129 (S)

MEMBER:   JUDGE T SHARP (DEPUTY PRESIDENT)

MR T CAREY (MEMBER)
MR G POTTER (SENIOR SESSIONAL MEMBER)

HEARD:   DETERMINED ON THE DOCUMENTS

DELIVERED          :   6 DECEMBER 2013

FILE NO/S:   VR 89 of 2012

BETWEEN:   COMMISSIONER FOR CONSUMER PROTECTION

Applicant

AND

SAMYKANNU PTY LTD
First respondent

JOHN SAMYKANNU
Second respondent

Catchwords:

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

Legislation:

Real Estate and Business Agents Act 1978 (WA), s 103(1)
State Administrative Tribunal Act 2004 (WA), s 87, s 87(2)

Result:

Respondents reprimanded
Respondents ordered to contribute to applicant's costs

Summary of Tribunal's decision:

In a decision delivered on 14 August 2013, the Tribunal found that proper cause existed for disciplinary action against the first and second respondents.  The parties then made submissions on the appropriate penalty and whether an order for costs should be made. 

The Tribunal considered those submissions and concluded that the appropriate penalty was to reprimand both respondents.  The Tribunal also considered that the first and second respondents should contribute to the applicant's costs.

Category:    B

Representation:

Counsel:

Applicant:     Mr G Cobby

First respondent            :     Ms C Thompson

Second respondent        :     Ms C Thompson

Solicitors:

Applicant:     Department of Commerce

First respondent            :     Nielsen and Co

Second respondent        :     Nielsen and Co

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

Commissioner for Consumer Protection and Samykannu [2013] WASAT 129

Commissioner for Consumer Protection v Hawaii Pty Ltd & Anor [2008] WASAT 22 (S)

Medical Board of Western Australia and Roberman [2005] WASAT 81 (S)

Paridis v Settlement Agents Supervisory Board [2007] WASCA 97

REASONS FOR DECISION OF THE TRIBUNAL: 

Introduction

1. On 23 May 2012, the applicant (Commissioner) made an application to the Tribunal alleging that there was proper cause for disciplinary action against the first respondent (Company), and the second respondent (Mr Samykannu) (together, Respondents) under s 103(2)(c)(iii) of the Real Estate and Business Agents Act 1978 (WA) (REBA Act).

2. The Respondents were the leasing and management agents of a residential property owned by two people who were living and working overseas.  The Respondents then took instructions to sell that property from persons they believed to be those owners.  It transpired that it was not the true   owners who gave the Respondents those instructions, but instead someone pretending to be the owners.  The sale was completed and settled but the true owners were unaware of the sale until they returned to Australia and asked to visit the property.

3. This fraud had occurred in similar circumstances to an earlier fraudulent sale of real property (Karrinyup fraud).  The Karrinyup fraud was the subject of much media coverage, and had given rise to numerous alerts and warnings to the real estate profession from the industry regulator and peak industry bodies.

4. The Commissioner alleged that the Respondents had breached Article 7 of the Code of Conduct for Agents and Sales Representatives 1993 (Code), which requires agents to exercise skill, care and diligence.  The alleged breaches of the Code by the Respondents were:

   a)failing to take any or any adequate steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas;

   b)failing to take any steps to obtain the instructions of one of the property owners in relation to the sale of a property prior to negotiating its sale; and

   c)failing to take any or any adequate steps to confirm the identity of the person or persons purporting to provide instructions in relation to the sale of a property.

5. In written reasons for decision delivered on 14 August 2013 and published as Commissioner for Consumer Protection and Samykannu [2013] WASAT 129 (Samykannu), the Tribunal made findings that the first but not the second and third allegations referred to above had been made out. The Tribunal therefore concluded that proper cause existed for disciplinary action against the Respondents.

6. The parties then made written submissions to the Tribunal concerning the appropriate disciplinary outcome and the payment of costs.  This was dealt with on the documents and these are our findings and the reasons for them.

Commissioner's submissions relating to penalty

1. The Commissioner submits that the nature of the real estate industry is such that any failure to maintain the standards established by the Code can lead to catastrophic results for consumers.  The Commissioner therefore submits that the Respondents' failure to be aware of the numerous warnings issued by the industry regulator, peak industry bodies and the media in relation to a similar, previous fraud was serious conduct demonstrating a failure to implement systems to ensure the Respondents were abreast of industry developments. 

2. The Commissioner further points out that no evidence was led on the Respondents' behalf that there was any system in place for ensuring important information came to the attention of the Respondents.  The Commissioner says that the only explanation propounded for the Respondents being unaware of the previous fraud was that Mr Samykannu was overseas for some of the relevant period.  The Commissioner says that this explanation is unsatisfactory and that the inconvenience involved in having any such system in place would have been minimal.

3. The Commissioner argues that a real estate agent holds a position of trust and expertise within the community, and that agents' actions can have very significant financial implications for consumers.  Therefore, it is of importance that agents maintain a minimum level of competency so that public confidence is maintained.

4. Finally, the Commissioner submits that it is important that the Tribunal have regard to the need for general deterrence in the context of agents who fail to take reasonable steps to achieve, and maintain, the necessary level of knowledge of current issues and developments in the industry.

5. The Commissioner for those reasons submits that the appropriate penalty is a reprimand plus a significant fine, in the range of $5,000 to $7,000, for each of the Respondents.

Respondents' submissions relating to penalty

1. The Respondents accept that it is part of a professional person's obligations to keep abreast of developments and knowledge relevant to their field of endeavour.  The Respondents also accept that a reprimand is an appropriate penalty.  However, the Respondents argue that this is not a matter where in addition a fine should be imposed.  They say that this is because:

   a)the offence is not causative of any loss or damage, the loss to the home owners was caused by a third party who undertook a highly sophisticated and elaborate fraud which went undetected by the Respondents, the settlement agent, the bankers involved and Landgate;

   b)the Respondents complied with the legal requirements in place at the time in respect to identification of the vendors and obtaining instructions;

   c)in light of the totality of the facts in this case, even if the Respondents had been fully conversant with the earlier instances of fraud, the fraud itself would probably have still been committed;

   d)the offence is at the low end of the scale;

   e)neither of the Respondents has been convicted of any prior disciplinary offence; and

   f)the deterrent effect of a penalty in this case should be in the context of what the conviction was for, namely the Respondents' failure to keep themselves informed of developments in the industry.

2. In addition, the Respondents say that they have cooperated fully in the lengthy police investigation of the fraud.  Also, they have offered to assist the owners of the property the subject of the fraud in any appropriate manner in their claim for compensation.  The Respondents have also apologised to the owners and say they accept and understand the distress that the owners have suffered.

3. Furthermore, the Respondents point out that only one of the three allegations was sustained.

4. The Respondents contend that if, despite their submissions, the Tribunal regards a fine as appropriate, a global penalty against both Respondents of no more than $1,000 should be imposed.  The Respondents point out that the Commissioner conceded during the hearing that this matter was at the low end of the offending scale, yet is now seeking a penalty of 75% of the maximum in respect of each of the two Respondents.  The Respondents say that such a fine would have the effect of punishing them for something they were not convicted of, which is not the object of disciplinary proceedings.

5. They also say that a review of fines imposed by this Tribunal in disciplinary proceedings since 2009 would suggest that a more modest fine would be appropriate in this case. 

6. On the quantum of any fine to be imposed, the Respondents say specifically that it should be no more than $1,000 because:

   a)the identity of the two Respondents is, whilst legally different, practically the same, Mr Samykannu being a director and 50% shareholder of the Company (his wife being the other director and shareholder), so that to fine each would be, in effect, to fine the same person twice for the one offence;

   b)the finding against each of the Respondents is identical, which is distinguishable from those matters where a respondent has been fined separately for more than one offence;

   c)the conduct which the Respondents were convicted of, at worst, is comparable to the lowest level offences for which the Tribunal has ordered a fine in the past four years, so that a fine of $1,000 would be comparable; and

   d)neither of the Respondents has a prior conviction for a disciplinary offence.

Statutory provisions relating to penalty

1. Section 103 of the REBA Act relevantly provides:

   Disciplinary action, SAT’s powers as to

   (1)If, in a proceeding commenced by an allegation under section 102(1) against an agent, 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 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, from holding a licence or triennial certificate, or both;

   (d)     where the State Administrative Tribunal is satisfied that the agent is acting or has acted in breach of section 60(3), 61(5) or 64(4) (the subsection) ­ 

   (i)order the agent to pay to a person specified by the State Administrative Tribunal the whole or part of any commission, reward or other valuable consideration received or held in contravention of a provision referred to in the subsection;

   (ii)order that a demand by the agent in contravention of a provision referred to in the subsection for the whole or part of any commission, reward or other valuable consideration not be made, or if made, be withdrawn or varied in accordance with the order;

   (e)    where the State Administrative Tribunal is satisfied that the agent is acting or has acted in breach of section 64(1), order the agent to pay to the agent’s principal any profit that the agent has made, or is, in the opinion of the State Administrative Tribunal, likely to make from the transaction.

Principles to be applied in determining penalty

1. The principles to be applied when determining the appropriate penalty in disciplinary proceedings are well established, and are not in dispute between the parties.  These principles were applied in the context of disciplinary action against a settlement agent in Paridis v Settlement Agents Supervisory Board [2007] WASCA 97, 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 201 - 202; New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183 - 184; Re a Barrister and Solicitor; Ex parte Attorney-General for the Commonwealth (1972) 20 FLR 234 at 244; Re a Barrister and Solicitor (1979) 40 FLR 1 at 24 - 25; Re a Practitioner; Ex parte The Legal Practitioners Disciplinary Tribunal [2001] WASCA 204 at [6] - [7].

2. 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 allegation;

   •the Respondents' explanation for the conduct;

   •the maintenance of proper standards and public confidence;

   •the necessity for general deterrence; and

   •any personal matters of a mitigatory nature.

Disciplinary outcome

1. The finding made by the Tribunal against the Respondents in Samykannu was that the Respondents were guilty of failing to take steps to maintain a level of knowledge of developments in the real estate industry consistent with that of a reasonably competent real estate agent, so as to be aware of the risk of fraudulent dealings with property owned by persons resident overseas. This was contrary to Article 7 of the Code and as a result the Tribunal considered that there was proper cause for disciplinary action.

2. While any breach of the Code is a serious matter, the Tribunal agrees with the Respondents, and indeed with the Commissioner's statement during oral submissions at the hearing of the matter, that this is a breach which should be regarded as attracting a penalty at the lower end of the scale.  It must be emphasised, however, that the Tribunal would not necessarily come to the same conclusion if we were dealing with a second or subsequent finding for the same kind of breach.

3. The finding that there is proper cause for disciplinary action against the Respondents is in itself a permanent blemish on the Respondents' reputation and gives a message that the Respondents' failure is not being treated lightly.  We consider that the Respondents should be reprimanded but that in the circumstances a fine in addition is not warranted.

Costs

1. The Commissioner also seeks an order that the Respondents pay the Commissioner's costs pursuant to s 87(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act).

1. Section 87 of the SAT Act is as follows:

   Costs of parties and others

   (1)Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal.

   (2)Unless otherwise specified in the enabling Act, the Tribunal may make an order for the payment by a party of all or any of the costs of another party or of a person required to produce a document or other material on the application of the party under section 35.

   (3)The power of the Tribunal to make an order for the payment by a party of the costs of another party includes the power to make an order for the payment of an amount to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding or the matter because of which the proceeding was brought.

   (4)Without limiting anything else that may be considered in making an order for the payment by a party of the costs of another party where the matter that is the subject of the proceeding comes within the Tribunal's review jurisdiction, the Tribunal is to have regard to ­ 

   (a)whether the party (in bringing or conducting the proceeding before the decision-maker in which the decision under review was made) genuinely attempted to enable and assist the decision-maker to make a decision on its merits;

   (b)whether the party (being the decision-maker) genuinely attempted to make a decision on its merits.

   (5)The rules may deal with the effect of certain offers to settle, and responses, if any, to the offer, on the making of an order for the payment by a party of the costs of another party.

   (6)The Tribunal may order that the representative of a party, rather than the party, in the representative's own capacity compensate that or any other party for costs incurred because the representative acted in, or delayed, the proceeding in a way that resulted in unnecessary costs.

2. In Medical Board of Western Australia and Roberman [2005] WASAT 81 (S) at [30] the Tribunal held that the question of an award of costs is a matter of discretion to be exercised in the circumstances of each case, but:

   … [w]here 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.

3. The Tribunal went on to find at [31] that the partial success of a regulatory authority can justify an award of part of that authority's costs.

4. Even though the Commissioner may not have the same limitation on resources as some other vocational regulatory bodies, this principle was held to apply also to the Commissioner; Commissioner for Consumer Protection v Hawaii Pty Ltd & Anor [2008] WASAT 22 (S) at [9].

5. The Respondents accept the principles affecting the award of costs in vocational regulation matters, but submit that, in the context of the overall outcome of this matter, there ought to be no order as to costs in this matter.  The Respondents highlight the fact that the application which was originally filed with the Tribunal on 23 May 2012 initially claimed that the Respondents had breached the Code in five respects.  However, the Commissioner filed amended grounds on 7 December 2012, only alleging that the Respondents had breached the Code in three respects.  Following the hearing, only one of the three amended grounds was upheld against each Respondent.  Therefore, the Respondents submit that of the eight allegations made in the course of the proceedings against the Respondents, only one was ultimately sustained.

6. In summary, the Respondents say a number of factors are relevant to the Tribunal's determination as to costs, including:

   a)The hearing occupied only one day of evidence and half a day of submissions;

   b)The Respondents were successful in respect of the majority of the allegations;

   c)The bulk of the contested evidence went to the unsuccessful allegations;

   d)The allegation on which the Respondents were successful was first added to the application in December 2012, well after the mediation held in this matter in August 2012, and included a very substantial change in the nature of the allegations against the Respondents;

   f)The substantial changes to the grounds in December 2012 meant the Respondents incurred substantial costs in responding to the reformulated case and largely lost their costs incurred prior to December 2012, which additional and lost costs are irrecoverable; and

   g)There was no mediation sought by the Respondents after the amendments to the parties' statements of issues, facts and contentions.

7. However, the Respondents say that if a costs order is to be made, the amount ought to be fixed by the Tribunal.  This is because the Commissioner has not given any indication of the amount of costs which are sought.  Taking into account the factors listed above, the Respondents say that if any adverse costs order is to be made, it ought to be in the range of no more than one third of the costs relevant to the hearing days only, payable within 42 days.

Finding as to costs

1. The fact that the Tribunal upheld only one of the three bases on which the Commissioner alleged the Respondents had contravened Article 7 of the Code does not necessarily mean that the Tribunal should not exercise its discretion as to costs in favour of the Commissioner. The Tribunal considers that the Commissioner was acting in good faith when the complaints were brought to the Tribunal, even though the Commissioner was partially unsuccessful because of the particular facts and circumstances of the case. We believe that it was in the public interest and in the interests of the real estate industry that the extent of the duties and responsibilities of real estate agents in circumstances of this kind should be explored and ventilated.

2. The Tribunal considers that the Respondents should meet some of the Commissioner's costs in the matter, in an amount to be agreed between the parties, and failing such an agreement then in an amount to be settled by the Tribunal.

Orders

1.The first respondent and the second respondent are both reprimanded.

2.The first respondent and the second respondent are jointly to pay a part of the applicant's costs to be agreed, or if not agreed, to be settled by the Tribunal.

I certify that this and the preceding [33] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

JUDGE T SHARP, DEPUTY PRESIDENT