COMMISSIONER FOR CONSUMER PROTECTION and THE KING AND I PTY LTD (ACN 060968809)
[2016] WASAT 125
•20 OCTOBER 2016
COMMISSIONER FOR CONSUMER PROTECTION and THE KING AND I PTY LTD (ACN 060968809) [2016] WASAT 125
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2016] WASAT 125 | |
| REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA) | |||
| Case No: | VR:112/2014 | 14 AND 15 JUNE 2016 | |
| Coram: | JUSTICE J C CURTHOYS (PRESIDENT) MS D QUINLAN (MEMBER) MR R ADAMS (SESSIONAL MEMBER) | 20/10/16 | |
| 54 | Judgment Part: | 1 of 1 | |
| Result: | Proper cause exists for disciplinary action against Paul King Disciplinary proceedings against The King & I Pty Ltd and Colin King are dismissed Colin King's application to hold a real estate agent's licence is dismissed | ||
| B | |||
| PDF Version |
| Parties: | COMMISSIONER FOR CONSUMER PROTECTION THE KING AND I PTY LTD (ACN 060968809) COLIN MAXWELL KING PAUL ANTHONY KING |
Catchwords: | Real estate and business agent Real estate and business sales representative Jurisdiction when licence expired Agent and sales representative involved in original sale and on-sale Breach of Code of Conduct Duty to act in the best interests of principal Duty to act fairly and honestly Duty not to knowingly mislead or deceive Duty to disclose material facts Conflict of interest Inferences from proven facts |
Legislation: | Code of Conduct for Agents and Sales Representatives 1993, cl 1, cl 2, cl 5(1), cl 5(2), cl 6(2), cl 8(2), cl 10(1) Interpretation Act 1984 (WA), s 1 Property, Stock and Business Agents Act 2002 (NSW), s 52(1) Real Estate and Business Agents Act 1978 (WA), s 23(1), s 23(2)(a), s 27(1), s 30, s 31, s 31(3), s 53(2), s 101, s 102, s 103 |
Case References: | Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41 Chamberlain v The Queen [No 2] (1984) 153 CLR 521 Hinton v Commissioner for Fair Trading [2007] NSWADTAP 17 Johnson v Sheppard [2005] WASCA 13 Jones v Dunkel (1959) 101 CLR 298 Luxton v Vines (1952) 85 CLR 352 Rayney and Legal Practice Board of Western Australia [2016] WASAT 7 Real Estate and Business Agents Supervisory Board v LJW [2011] WASCA 35 Stingel v Clark (2006) 226 CLR 442 |
Orders | 1. In relation to Matter No VR 112 of 2014, proper cause exists for disciplinary action against Mr Paul King in that he breached clauses 2, 5(1), 5(2), 8(2) and 10(1) of the Code of Conduct for Agents and Sales Representatives 1993.,2. In relation to Matter No VR 112 of 2014, the disciplinary proceedings in relation to The King & I Pty Ltd and Mr Colin King are dismissed on the basis that the Tribunal has no jurisdiction.,3. In relation to Matter No 125 of 2014, Mr Colin King's application is dismissed on the basis that he is not a fit and proper person to hold a real estate agent's licence.,4. The Commissioner for Consumer Protection is to file and give written submission as to penalty and costs by 28 October 2016.,5. Mr Paul King is to file written submissions as to penalty and costs by 5 November 2016.,6. The penalty hearing is to be listed for hearing on a date to be fixed by liaising with the President's associate. |
Summary | This case concerned an application brought by the Commissioner for Consumer Affairs under the Real Estate and Business Agents Act 1978 (WA), for disciplinary action against the three respondents. There was also an application by one respondent to review the Commissioner's decision to refuse to grant him a renewal of his real estate agent's licence. The three respondents were, literally, related entities. The King & I Pty Ltd is a company controlled by Colin King. The King & I employed Colin King's son, Paul King, as a sales representative. Another son, Michael King (not a licensed real estate agent or sales representative), was involved in all of the on-sale transactions. ,The case involved the purchase and onsale of six properties. In each case, Mr Wong expressed an interest in the property after being advised of the fact that it was, or potentially was, for sale. A company of which Mark Palumbo was the sole director and shareholder then purchased the property and onsold it to a Wong Syndicate. Mr Palumbo was an associate of Michael King who was a frontman acting on Michael King's direction. There was a total markup of about $6,000,000 between the original purchase price and the subsequent onsale price. The original owners and the ultimate purchasers were not aware of the onsale. The settlement of the original sale and the on-sale occurred on the same day allowing the on-sale monies to be utilised to fund the original purchase price. ,Ultimately, the case largely turned on the proper inferences to be drawn from the facts. The Tribunal drew the more probable inference that the three respondents knew of each of the six intended on-sales at the time of the original sales being perpetrated by Michael King, through Mr Palumbo, and acted in such a way as to facilitate the on-sale. The Tribunal found that with this knowledge the respondents were in breach of the Code of Conduct for Agents and Sales Representatives 1993 in that they failed to act in the best interests of their principal, failed to act fairly and honestly, knowingly misled the original sellers, failed to disclose material facts and had a conflict of interest. ,The Tribunal found that by reason of the conduct of Paul King in breach of the Code, proper cause existed for disciplinary action. The Tribunal concluded that the only construction open on the text of the Act is that the Commissioner's claim against Colin King and The King & I must be dismissed on the ground that it was incompetent because the licence had expired. But for the Tribunal's finding that it did not have jurisdiction, the Tribunal would have found that the conduct of The King & I and Colin King was in breach of the Code and constituted proper cause for disciplinary action. The Tribunal also found that the conduct of Colin King in breach of the Code makes him not a person of good character and repute and not a fit and proper person to hold a real estate agent's licence. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL ACT : REAL ESTATE AND BUSINESS AGENTS ACT 1978 (WA) CITATION : COMMISSIONER FOR CONSUMER PROTECTION and THE KING AND I PTY LTD (ACN 060968809) [2016] WASAT 125 MEMBER : JUSTICE J C CURTHOYS (PRESIDENT)
- MS D QUINLAN (MEMBER)
MR R ADAMS (SESSIONAL MEMBER)
- VR 125 of 2014
- Applicant
AND
THE KING AND I PTY LTD (ACN 060968809)
First Respondent
COLIN MAXWELL KING
Second Respondent
PAUL ANTHONY KING
Third Respondent
Catchwords:
Real estate and business agent - Real estate and business sales representative Jurisdiction when licence expired Agent and sales representative involved in original sale and on-sale Breach of Code of Conduct - Duty to act in the best interests of principal - Duty to act fairly and honestly Duty not to knowingly mislead or deceive Duty to disclose material facts - Conflict of interest Inferences from proven facts
Legislation:
Code of Conduct for Agents and Sales Representatives 1993, cl 1, cl 2, cl 5(1), cl 5(2), cl 6(2), cl 8(2), cl 10(1)
Interpretation Act 1984 (WA), s 1
Property, Stock and Business Agents Act 2002 (NSW), s 52(1)
Real Estate and Business Agents Act 1978 (WA), s 23(1), s 23(2)(a), s 27(1), s 30, s 31, s 31(3), s 53(2), s 101, s 102, s 103
Result:
Proper cause exists for disciplinary action against Paul King
Disciplinary proceedings against The King & I Pty Ltd and Colin King are dismissed
Colin King's application to hold a real estate agent's licence is dismissed
Summary of Tribunal's decision:
This case concerned an application brought by the Commissioner for Consumer Affairs under the Real Estate and Business Agents Act 1978 (WA), for disciplinary action against the three respondents. There was also an application by one respondent to review the Commissioner's decision to refuse to grant him a renewal of his real estate agent's licence. The three respondents were, literally, related entities. The King & I Pty Ltd is a company controlled by Colin King. The King & I employed Colin King's son, Paul King, as a sales representative. Another son, Michael King (not a licensed real estate agent or sales representative), was involved in all of the on-sale transactions.
The case involved the purchase and onsale of six properties. In each case, Mr Wong expressed an interest in the property after being advised of the fact that it was, or potentially was, for sale. A company of which Mark Palumbo was the sole director and shareholder then purchased the property and onsold it to a Wong Syndicate. Mr Palumbo was an associate of Michael King who was a frontman acting on Michael King's direction. There was a total markup of about $6,000,000 between the original purchase price and the subsequent onsale price. The original owners and the ultimate purchasers were not aware of the onsale. The settlement of the original sale and the on-sale occurred on the same day allowing the on-sale monies to be utilised to fund the original purchase price.
Ultimately, the case largely turned on the proper inferences to be drawn from the facts. The Tribunal drew the more probable inference that the three respondents knew of each of the six intended on-sales at the time of the original sales being perpetrated by Michael King, through Mr Palumbo, and acted in such a way as to facilitate the on-sale. The Tribunal found that with this knowledge the respondents were in breach of the Code of Conduct for Agents and Sales Representatives 1993 in that they failed to act in the best interests of their principal, failed to act fairly and honestly, knowingly misled the original sellers, failed to disclose material facts and had a conflict of interest.
The Tribunal found that by reason of the conduct of Paul King in breach of the Code, proper cause existed for disciplinary action. The Tribunal concluded that the only construction open on the text of the Act is that the Commissioner's claim against Colin King and The King & I must be dismissed on the ground that it was incompetent because the licence had expired. But for the Tribunal's finding that it did not have jurisdiction, the Tribunal would have found that the conduct of The King & I and Colin King was in breach of the Code and constituted proper cause for disciplinary action. The Tribunal also found that the conduct of Colin King in breach of the Code makes him not a person of good character and repute and not a fit and proper person to hold a real estate agent's licence.
Category: B
Representation:
Counsel:
Applicant : Mr J Derby
First Respondent : Mr JM Healy
Second Respondent : Mr JM Healy
Third Respondent : Mr JM Healy
Solicitors:
Applicant : Department of Commerce
First Respondent : Culshaw Miller Lawyers
Second Respondent : Culshaw Miller Lawyers
Third Respondent : Culshaw Miller Lawyers
Case(s) referred to in decision(s):
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41
Chamberlain v The Queen [No 2] (1984) 153 CLR 521
Hinton v Commissioner for Fair Trading [2007] NSWADTAP 17
Johnson v Sheppard [2005] WASCA 13
Jones v Dunkel (1959) 101 CLR 298
Luxton v Vines (1952) 85 CLR 352
Rayney and Legal Practice Board of Western Australia [2016] WASAT 7
Real Estate and Business Agents Supervisory Board v LJW [2011] WASCA 35
Stingel v Clark (2006) 226 CLR 442
Introduction
1 This case concerns an application brought by the Commissioner for Consumer Affairs (the Commissioner), under the Real Estate and Business Agents Act 1978 (WA) (the Act), for disciplinary action against the three respondents. There is also an application by one of the respondents, Colin King, to review the Commissioner's decision to refuse to grant him a real estate agent's licence.
2 The King & I was granted a Real Estate and Business Agents Licence RA3965 on 27 August 1993. The King & I has not held a Real Estate and Business Agents Licence and Triennial Certificate since 27 August 2014 (Exhibit B). Colin King's licence expired on 15 April 2015. Paul King held a Certificate of Registration as a Real Estate and Business Sales Representative from 15 November 1990 to 4 September 2014 (Exhibit C).
3 The three respondents are, literally, related entities. The King & I Pty Ltd (The King & I) is a company controlled by Colin Maxwell King (Colin King). The King & I employed Colin King's son, Paul Anthony King (Paul King) as a sales representative.
4 Another son of Colin King, Michael King, was involved in all of the transactions detailed below. Michael King's company was Miscan Pty Ltd (Miscan). Michael King was not a licensed real estate agent or sales representative at the relevant times. Another of Colin King's sons, Darren King, was employed by Miscan.
5 The case involves the purchase and onsale of six properties. In each case, Khing Ping Wong (Mr Wong) expressed an interest in the property after being advised of the fact that it was, or potentially was, for sale. A company of which a Mark Palumbo was the sole director and shareholder then purchased the property and onsold it to Mr Wong and/or companies associated with him. The particular entities or persons associated with Mr Wong in the purchase of land varied from purchaser to purchaser. For convenience, they are referred to in these reasons as a Wong Syndicate or the Wong Syndicates. Nothing turns on the particular entities or persons who were associated with individual purchases.
6 Mark Palumbo was a frontman acting on Michael King's direction.
7 Between the six properties there was a combined markup of about $6,000,000 between the original purchase price and the subsequent onsale price. The original owners and the ultimate purchasers were not aware of the onsale.
8 Ultimately, this case largely turns on the proper inferences to be drawn against each of The King & I, Colin King and Paul King from facts that are largely undisputed.
The Commissioner's allegations against the respondents
9 The Commissioner has alleged in relation to the first three properties that the respondents:
1) failed to act in the best interests of their principal, the first in time seller;
2) failed to act fairly and honestly towards their principal;
3) misled or deceived their principal;
4) failed to disclose a material fact; and
5) acted in a situation of a conflict of interest.
10 The Commissioner has alleged in relation to the remaining three properties that the respondents acted unfairly and/or dishonestly.
Procedural matters
11 There are two proceedings before the Tribunal for determination.
12 In VR 112 of 2014 (the Disciplinary Proceedings), the Commissioner alleges pursuant to s 102 of the Act that there is proper cause for disciplinary action against each of The King & I, Colin King and Paul King.
13 In VR 125 of 2014 (the Review Proceedings), Colin King has applied to review the decision of the Commissioner pursuant to s 31(3) of the Act to refuse to renew his triennial certificate.
14 By order dated 11 August 2015 in the Review Proceedings, the Commissioner was ordered to file a bundle of documents other than those already filed in the Disciplinary Proceedings. The Commissioner relied upon the material filed in the Disciplinary Proceedings for the purposes of the Review Proceedings.
15 By order of the Tribunal dated 8 December 2015, the witness statements filed in the Disciplinary Proceedings were admissible in the Review Proceedings.
16 The Disciplinary Proceedings and the Review Proceedings were heard together.
Respondents' witness statements
17 On 8 December 2015, the respondents were ordered to file any witness statements on which they relied by 8 February 2016. On 8 March 2016, the time was extended to 17 May 2016. On the same date, the matter was listed for a final hearing commencing on 13 June 2016.
18 No witness statement was filed by Colin King. The witness statement of Paul King was filed on 15 June 2016, after the commencement of the hearing.
Relevant statutory provisions
Disciplinary Proceedings VR 112 of 2014
19 Section 101 of the Act provides that:
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.
20 The relevant code of conduct published pursuant to s 101 of the Act which applied to the conduct in these proceedings was the Code of Conduct for Agents and Sales Representatives 1993 (Code) (Western Australia, Government Gazette No 89 (29 June 1993)). The Code provides:
1. In this Code
'agent' means an agent or a sales representative.
'commission' includes fees charges reward or other remuneration whether monetary or otherwise.
'principal' in relation to a sales representative means the principal of the agent by whom the sales representative is employed.
'the Act'means the Real Estate and Business Agents Act 1978 as amended.
2. An agent must act in the best interests of his or her principal except where it would be unreasonable or improper to do so.
…
5. (1) An agent must act fairly and honestly.
(2) An agent must not knowingly mislead or deceive any parties in negotiations or a transaction.
…
8. (2) If an agent ascertains a fact which is material to a transaction
- in which the agent's principal is involved the agent must promptly communicate that fact to any person who may be affected by it unless it is clear that person was already aware of that fact.
…
10. (1) An agent must not accept an engagement to act, or continue
- to act, where to do so would place his or her interest in conflict with that of the principal.
In Peters v The Queen [1998] HCA 7; (1998) 192 CLR 493 the High Court considered the concept of honesty as an element of the offence of conspiracy to defraud. The Court held that dishonesty in the context of that offence involved no special use of the word 'honesty' but merely the need to find whether the conduct in question was dishonest according to the standards of ordinary, decent people. That, in my opinion, is the sense in which the word is used in this context. The question was whether the appellant's conduct breached the duty to act fairly and honestly in the sense in which that word is ordinarily used. The question therefore was whether the appellant's conduct was dishonest according to the standards of ordinary decent people. That made it necessary to identify the quality of the conduct and the knowledge, belief or intention said to render it dishonest: see Peters per Toohey and Gaudron JJ at 504 [18].
There is no reason to suppose that standards of fairness and honesty applicable to real estate agents differ in any way from those applicable in the community at large, in relation to the standards to be observed when a person is acting for another, with a duty to act in the best interests of the principal, but not in such a way as to advance those interests improperly, according to the ordinary standards of reasonable, honest people. In particular, it would be no answer to say that the person concerned, whose honesty was under consideration, did not appreciate that ordinary, decent people would view his or her conduct as dishonest: Harle v Legal Practitioners Liability Committee [2003] VSCA 133 per Chernov JA, with whom Callaway and Buchanan JJA agreed[.]
22 Guidance as to the duty to not knowingly mislead or deceive any parties is provided by the decision of the New South Wales Administrative Decisions Tribunal Appeal Panel (Tribunal Appeal Panel) in Hinton v Commissioner for Fair Trading [2007] NSWADTAP 17 (Hinton). In that case, the Tribunal Appeal Panel considered whether the failure by an agent to disclose to prospective purchasers of a house that had approximately three years previously been the site of a triple murder contravened s 52(1) of the Property, Stock and Business Agents Act 2002 (NSW), which provided:
A person who, while exercising or performing any function as a licensee or registered person, by any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the person or not) or by any concealment of a material fact (whether intended or not), induces any other person to enter into any contract or arrangement is guilty of an offence against this Act.
23 There is no relevant difference between a 'material fact' and a 'fact which is material'. In relation to whether or not a fact is material, the Tribunal Appeal Panel said in Hinton at [37]:
A fact may become 'material' within the meaning of s 52 in two ways it can become 'material' because in the particular circumstances it is known by the agent to be material to the particular consumer, even though agents and consumers may not typically regard the matter as 'material'. The other way in which it may become 'material' is by the application of an objective standard which has regard to what a reasonably informed consumer with a fair minded understanding of the real estate market, including the role of a real estate agent, would regard as 'material'.
24 Facts may become material in one of two ways: firstly, because the fact is one which the particular person has made known to the agent is of importance to that person although it may not be ordinarily regarded as important or material; or secondly, because the fact is one which, objectively, any reasonably informed, fair minded person would regard as material.
25 Section 102(1) of the Act provides:
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
(b) there is proper cause for disciplinary action, as mentioned in section 103(4), against a sales representative.
26 Section 103(2)(c)(iii) of the Act provides that there shall be proper cause for disciplinary action against an agent if the agent has acted in breach of the agents code of conduct.
27 Section 103(4)(c)(iii) of the Act provides that there shall be proper cause for disciplinary action against a sales representative if the sales representative has acted in breach of the code of conduct for sales representatives.
28 By reason of the definition of an agent in the Code, the Code is the relevant Code for both agents and sales representatives under s 103 of the Act.
Review Proceedings VR 125 of 2014
29 Section 27(1) of the Act provides:
Subject to this Act, a person, not being a body corporate, who applies to the Commissioner for a licence and pays to the Commissioner the prescribed fee for the licence shall be granted and may hold a licence if the Commissioner is satisfied that
…
(b) he is a person of good character and repute and a fit and proper person to hold a licence; and
…
(d) he understands fully the duties and obligations imposed by this Act on agents.
30 In Real Estate and Business Agents Supervisory Board v LJW[2011] WASCA 35 at [25][30], Newnes JA summarised the principles relevant to whether a person is fit and proper and of good character and repute as follows:
a) the requirements of 'fit and proper' and 'good character and repute' are not entirely discrete and they overlap to a significant degree;
b) 'fit and proper' ordinarily comprises the three characteristics of honesty, knowledge and ability;
c) an applicant must show 'sufficient moral integrity and rectitude of character as to permit him to be safely accredited to the public, without further inquiry, as a person to be entrusted with the sort of work which the licence entails';
d) 'good character' ordinarily refers to a person's moral qualities, whether known to others or not; and
e) 'repute' is the estimation in which, fairly or unfairly, a person is held by others.'
31 Section 30 of the Act provides that subject to the Act, a licence is continuous but a licence does not confer on a licensee the right to carry on business as an agent unless he holds a current triennial certificate in respect of the licence.
32 Section 31 of the Act provides that the Commissioner shall grant a certificate to carry on business for three years commencing on the date on which it is first granted and then it may be renewed for subsequent periods of three years each.
33 Section 31(3) of the Act provides that the Commissioner may refuse to renew a licensee's triennial certificate if the Commissioner is satisfied that s 27(1)(b), (c) or (d) as is relevant to the licensee does not apply, or no longer applies, in relation to the licensee.
34 A person aggrieved by a reviewable decision may apply to the Tribunal for a review of that decision (s 23(1) of the Act). A decision of the Commissioner to refuse to renew a triennial certificate is a reviewable decision (s 23(2)(a) of the Act).
Onus and standard
35 The Commissioner bears the onus of proof.
36 In Rayney and Legal Practice Board of Western Australia [2016] WASAT 7 (Rayney), the Tribunal set out the principles relating to the onus and standard of proof:
35 In Legal Profession Complaints Committee and Wells [2014] WASAT 112 at [8] and [9] the Tribunal stated:
The Committee bears the onus of proof. It is to the civil, not criminal standard but the principles of Briginshaw v Briginshaw (1938) 60 CLR 336 (Briginshaw) apply. That is, while needing to be proved only on the balance of probabilities, the nature and seriousness of the allegations are relevant to the question whether the issues are proved to the reasonable satisfaction of the Tribunal and the process by which reasonable satisfaction is attained.
By reason of the nature of the allegations, the Tribunal must feel an actual persuasion of the occurrence or existence of the relevant facts in determining whether or not the case against the practitioner is made out: Medical Board of Western Australia and Wright [2010] WASAT 48 at [31]; and see Medical Board of Western Australia and Bham [2006] WASAT 190 at [144].
(See also Rejfek v McElroy (1965) 112 CLR 517 (Reifek))
36 In Briginshaw v Briginshaw(1938) 60 CLR 336 at 362, Dixon J, as he then was, observed '[i]n such matters ''reasonable satisfaction'' should not be produced by inexact proofs, indefinite testimony or indirect inferences'.
37 The standard of proof required in a civil case where serious allegations are made was stated in Rejfek where Barwick CJ, Kitto, Taylor, Menzies and Windyer JJ observed at 521 that:
The 'clarity' of the proof required, where so serious a matter as fraud is to be found, is an acknowledgment that the degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved. …
- But the standard of proof to be applied in a case and the relationship between the degree of persuasion of the mind according to the balance of probabilities and the gravity or otherwise of the fact of whose existence the mind is to be persuaded are not to be confused.
38 In NOM v Director of Public Prosecutions (2012) 38 VR 618 at [124], the Victorian Court of Appeal stated:
… mere mechanical comparison and probabilities independent of a reasonable satisfaction will not justify a finding of fact. The fact finder must feel an actual persuasion of the occurrence or existence of the fact in issue before it can be found. Where, as in the present case, the standard of proof is to be applied to circumstantial evidence, satisfaction as to a reasonable and definite inference is required.
38 An inference can only be proved if the inference is more probable based on the evidence as found: Luxton v Vines (1952) 85 CLR 352 at 358; Chamberlain v The Queen [No 2] (1984) 153 CLR 521 at 536.
Accepted facts
39 The parties are to be commended for agreeing to most of the facts.
40 The respondents either admitted or did not dispute the facts set out in a schedule of the accepted facts which was prepared by the Commissioner and annexed to his closing submissions (see respondents' closing submissions paragraph 44). Those accepted facts have been incorporated into these reasons. Where the facts are 'Accepted facts' the notation 'AF' appears thereafter.
The onsales
41 In each of the six properties detailed below, Michael King established a company of which his acquaintance, Mr Palumbo, was the sole director and secretary for the purpose of interposing that company into the sale of rural land from the original owners to overseas investors represented by Mr Wong (AF). The companies of which Mr Palumbo was the sole director and secretary are referred to as the Palumbo companies.
42 Throughout the transactions Mr Palumbo took instructions from Michael King (AF).
43 In each case, the company controlled by Mr Palumbo:
a) entered into a contract to purchase the property from the original owners;
b) within a short period of time entered into a contract to sell the property to the overseas investors or a company controlled by them at a substantially higher price; and
c) used the deposit paid by the ultimate purchaser, or a loan from Michael King or a company controlled by Mr Wong, to pay the deposit under the contract with the original owners.
(AF)
44 Michael King told Mr Palumbo that the plan for the property deals was to purchase properties and have a long settlement time to allow him time to arrange the sale of the property so that settlement for the purchase and the sale would occur on the same day (Exhibit U paragraph 42).
45 In each case, the contract of sale with the original owners and the subsequent onsale contract were settled on the same date allowing the second purchase price to be utilised to fund the original purchase price (AF).
46 In all the properties except Property 1, the ultimate purchaser was a Wong Syndicate.
47 In relation to Property 1, the ultimate purchasers were ten individuals who purchased Property 1 jointly in their personal capacity (AF).
Summary of the six properties and associated transactions
48 A summary of the properties and the relevant transactions in table format was admitted as Exhibit W.
The respondents
49 The King & I carried on business under the name 'Colin King Real Estate' (the Business) (AF). The Business operated from 108 Avon Terrace, York.
50 Colin King held a real estate and business agent's licence that expired on or about 15 April 2014 (AF).
51 At all material times until 15 April 2014, Colin King was the licensed director of The King & I and the person in bona fidecontrol of the Business (AF). His evidence was that he worked at the office 40 hours per week (Exhibit A page 1619).
52 At all material times, Paul King was employed by the Business (AF), that is, The King & I.
The occupants of 108 Avon Terrace York
53 The King & I had three people who usually worked in the office: Colin King, Paul King and Stacey Begley. Stacey Begley worked in administration. There were also two parttime sales representatives who attended the office from time to time, neither of whom played a part in the relevant transactions (Exhibit A pages 21542157).
54 Michael King operated a separate business under the name Miscan (AF).
55 Michael King operated Miscan from the same building at 108 Avon Terrace, York from which The King & I operated and Colin King and Paul King worked (Exhibit Q paragraph 14, Exhibit U paragraph 12). Darren King used that office occasionally.
56 There is some dispute as the period during which Michael King actually used the office at 108 Avon Terrace. Colin King stated that Michael King was 'physically there' for part of 2007 and part of 2008. He said that Michael King might have popped in and out in 2008 and 2009 (Exhibit A page 2226). During 2009, Colin King described Mr Palumbo as 'just using the computer for Michael or sending stuff to Michael … he might have been responding to stuff for Michael or whatever' (Exhibit A pages 22462247).
57 Colin King observed Mr Palumbo visiting Michael King at the office. It remained the business address of Miscan throughout the relevant period. Officers of the Commissioner executed a search warrant at that office.
58 Colin King stated that Paul King often emailed Michael King a title or a fax. Paul King 'just about drove himself crazy' (Exhibit A pages 22302231).
The King & I and Mr Wong's business relationship
59 A large part of the Business involved being engaged to sell rural land. This land was often sold to overseas investors, particularly from Malaysia (AF).
60 The King & I and Colin King had an ongoing business relationship with Mr Wong who represented persons located overseas, particularly Malaysians, who were interested in purchasing rural land in Western Australia (AF).
61 Mr Wong first had business dealing with Colin King and The King & I in 2007 or 2008 (Exhibit Q paragraphs 5-11; Exhibit A page 2199).
62 After Mr Wong's first purchase involving The King & I, Colin King introduced him to his son Michael King. Thereafter, Mr Wong dealt principally with Michael King, although over the years he has dealt with all three of Colin King's sons, Michael, Paul and Darren. Mr Wong believed that Michael King was a real estate agent (Exhibit Q paragraphs 5-11).
63 The Wong Syndicates represented by Mr Wong had been involved in a lot of land purchases through The King & I, particularly around the Geraldton area, prior to the transactions in issue (Exhibit Q paragraphs 1220).
64 Mr Wong facilitated the purchase of such lands by setting up a company of which he and the overseas investors were directors. This company would be used to purchase property in Western Australia (AF). Mr Wong had set up many companies for different land purchases (Exhibit Q paragraph 21). On all occasions, Mr Wong acted for the Wong Syndicates.
65 It is more probable that the course of dealing between The King & I and Colin King, Paul King and Michael King must have instilled confidence in each of them that the Wong Syndicates were a reliable source of investment funds and that he had buyers who were interested in the purchase of rural land.
66 It is also apparent from the evidence that follows that although the respondents were never formally appointed buyers' agents for the Wong Syndicates, The King & I, through Colin King or Paul King, advised Mr Wong of the existence of suitable properties.
Property 1 Lot 5 Henry Road, Greenough
67 In 2008, the Royces owned Lot 5 Henry Road, Greenough (Property 1) (AF).
68 Mr Royce had listed the property with Landmark Realty in July 2006 for $1,500,000 (Exhibit F paragraph 6).
69 Mr Royce was approached by The King & I who offered to locate a buyer for Property 1 (AF). Mr Royce was approached in March 2008. He was unsure which of the Kings approached him but it is common ground that it was Colin King (Exhibit F paragraphs 1112).
70 Colin King approached Mr Royce because the Wong Syndicates already owned land in the area. In the course of his interview, Colin King stated that the 'Malaysians were interested in everything along the flats and they'd already bought along the flat' (Exhibit A page 2262). Lot 5 was in the area of the flats. Lot 6, which is the next purchase dealt with, was also in the area of the flats.
71 In his interview, Colin King stated that the Royce land was being bought by the Malaysians as long term investors. He stated that he believed that the company was a vehicle to buy the land. He went on to say:
… the properties that was already owned along there by this group had no sea front, had no sea views whatever, so I obviously thought this was a chance to show them, when Royce rang me, to buy something that was going to have - give them some sea views. Cos they were looking for long term development, that was my intention. That was my thought of their intention when they bought it, so they speculate, they buy and - and then obviously they become clients eventually if that's what they decide and change their mind to do.
(Exhibit A pages 22562257)
72 Later on in the interview referring to the Royce property and the onsale, Colin King stated 'there was an incentive for them (the Malaysians) to pay that price because they were joining up two other properties, to join the balance of their land' (Exhibit A pages 22582259).
73 The Tribunal finds that Colin King believed, correctly, that the Wong Syndicates did have an incentive to, and an interest in, purchasing the Royce land.
74 Colin King showed Property 1 to Mr Wong (AF). Mr Wong gave evidence that Michael King also showed him the property (Exhibit Q paragraph 40). The obvious purpose of Colin King and Michael King in showing Mr Wong the property was to interest him in causing the Wong Syndicates to buy it. The Tribunal finds that Colin King and Michael King were successful in creating an interest by the Wong Syndicates in the purchase of the Royce property. Mr Wong in fact recommended that his Malaysian investors purchase the land (Exhibit Q paragraph 42). The Tribunal finds that Colin King believed that he had a buyer, the Wong Syndicates, for the Royce land.
75 On 24 January 2008, International Land Guru Pty Ltd (ILG) was incorporated (AF). ILG was a company established by Mr Palumbo but controlled by Michael King. Colin King knew that Mr Palumbo was the sole director of ILG, at least because he caused a search of ILG to be conducted (Exhibit A pages 23002301). In his interview, Colin King stated that he repeatedly asked Michael King if he was involved with ILG (Exhibit A pages 23532354).
76 On 12 March 2008, prior to Property 1 being put on the market, $17,000.24 was deposited into Perth Settlement Lawyers trust account by Lau and others (Lau) with respect to the purchase of Property 1 (AF). Lau was a Wong Syndicate although not incorporated.
77 In the course of his interview, Colin King stated that Mr Wong said to him that he was 'not a bit interested in the land'. He claimed that Mr Wong was not interested in Lot 5 because Lot 6 (Mr Hammarquist's land, immediately adjacent) was not available. Colin King stated that Mr Wong became interested again when Lot 6 became available. However, Lot 6 did not become available until June, some three months later and well after the on-sale of Lot 5 occurred (Exhibit A page 2291, pages 22962297 and pages 2307-2309). The Tribunal finds that the issue of Lot 6 the Hammarquist land - was clearly fabricated by Colin King in an effort to explain his conduct in failing to inform the Royces of another potential buyer. The Tribunal finds that the more probable inference is that Colin King fabricated that explanation because he wished to conceal his knowledge of the intended on-sale.
78 Mr Wong's evidence was that he did not tell Michael King or Colin King that he was not interested in buying this property (T:34; 15.06.16). The Tribunal accepts this evidence from Mr Wong for the following reasons. Colin King claimed that he contacted Mr Wong once ILG had listed the property with The King & I and Mr Wong was again interested and wanted to purchase the land (Exhibit A page 2270). If Mr Wong had said he was not interested in the land there would have been no reason for Colin King to again contact Mr Wong once the land was listed for re-sale with The King & I. Alternatively, if Colin King thought that he could still get the Wong Syndicates interested in purchasing the land after the sale to ILG, there would have been no reason for him not to:
a) attempt to get them interested again before Mr Royce sold the land; and
b) advise Mr Royce to hold off on selling to ILG whilst he attempted to persuade Mr Wong to cause the Wong Syndicates to purchase the land.
79 In the course of his interview, Colin King offered no plausible explanation as to why the Wong Syndicates would lose interest in Lot 5. Colin King's various explanations were simply not credible. The Tribunal finds that the Wong Syndicates did not lose interest in Lot 5 and that they continued to have an interest in purchasing the land. The Tribunal finds that Colin King advanced the explanation that the Wong Syndicates were no longer interested in purchasing the Royce land in order to explain away why he did not inform the Royces of a potential offer.
80 Colin King's initial explanation was that he informed Mr Palumbo of the availability of the Royce land (Exhibit A page 2262, see also page 2265). Later, he suggested that Michael King might have told Mr Palumbo (Exhibit A page 2264).
81 Colin King did not know if Mr Palumbo had bought other blocks of land in the area of the Royces' property (Exhibit A page 2262). Colin King accepted that Mr Palumbo was not buying for a 20 year plan (Exhibit A page 2266). In the course of his interview, Colin King stated that 'this guy [Mark Palumbo] bought it to make money on it and these people [the Wong Syndicates] bought it because they wanted long term' (Exhibit A page 2266).
82 The Tribunal finds that Colin King did not inform the Royces that there were two potential offers for their property. The Tribunal finds that the most probable inference is that Colin King failed to do so because he did not want the Royces to be aware of the interest of a Wong Syndicate in their property (Exhibit A page 1140).
83 Throughout the course of the sale, Mr Royce dealt with Colin King, Michael King and Darren King (Exhibit F paragraph 12). Mr Royce was aware that 'the Kings' were working for overseas investors (Exhibit F paragraph 14). Colin King admitted that he probably told Mr Royce that he was acting for overseas investors (Exhibit A page 2279). Mr Royce stated that he was aware that 'the property was going to be on-sold because the Kings were working for a third party' (Exhibit F paragraph 31). Mr Royce believed that 'the Kings were working for a third party' (Exhibit G paragraph 24). In his oral evidence, Mr Royce explained that the reference to a 'third party' was a reference to the overseas investors. Mr Royce did not realise that there would be, or was, a back-to-back sale of the property (T:22-23; 14.06.16).
84 It is clear from Mr Royce's evidence that he was not using 'third party' as a legal term but that he was referring to the overseas investors that the respondents represented. Mr Royce's evidence was that 'if he was aware that the Kings were receiving $1,8000,000 for the property', while he 'would have expected them to make some money', he 'would have wanted to receive somewhere between' $1,500,000 and $1,600,000 (Exhibit F paragraph 37).
85 The only possible overseas investors interested were the Wong Syndicates. Mr Palumbo, according to Colin King, was financed by local York farmers - clearly not overseas investors. Clearly, Colin King did not inform the Royces that the sale was to a Palumbo company which was not an overseas investor.
86 On or around 17 March 2008, Colin King presented an offer from ILG to the Royces to purchase Property 1 for an unknown amount. This offer was rejected (AF).
87 The Royces counter-offered with a purchase price of $1,250,000 which was accepted (AF).
88 On 18 March 2008, the Royces appointed The King & I as exclusive agents to sell Property 1 (AF) (Exhibit A page 1429). Colin King signed the selling agency agreement on behalf of The King & I (Exhibit A page 2254).
89 On 19 March 2008, the Royces and ILG entered into a contract for the sale of Property 1 for $1,250,000 (AF) (Exhibit A page 1131). Michael King's signature appeared on the contract as a witness to Mr Palumbo's signature (Exhibit A pages 2559 and 2255).
90 The Tribunal finds that at the time the contract was entered into on 19 March 2008, Colin King was aware that the Wong Syndicates were interested in buying the Royce land. Colin King was aware that the Wong Syndicates were long term investors. He was aware of an association between Michael King and Mr Palumbo. He was aware that Mr Palumbo was a speculative purchaser. The Tribunal finds that Colin King informed Mr Palumbo or Michael King of the availability of the Royce land.
91 None of 'the Kings' told Mr Royce that any of them or their family members had any links to the purchasers - ILG (Exhibit F paragraph 25).
92 On 20 March 2008, ILG appointed The King & I as its agent to sell Property 1 (AF) (Exhibit A page 1137). The selling agency agreement was signed on behalf of The King & I by Colin King (Exhibit A page 1443).
93 On 28 March 2008 Michael King sent a fax thanking an unidentified party for:
… your instructions relating to the individual buyer names and confirmation you will be depositing $185,000 AUD into Perth Settlement Lawyers Trust Account tomorrow, Please use reference Lot 5 Geraldton on the deposit slip or fax me all deposit slips on +618 96412277 att: Mike King
(Exhibit A page 1440)
94 The fax number was that for The King & I (Exhibit A page 1411). This instruction was given nine days after the first sale.
95 On 31 March 2008, ILG and Lau entered into a contract for the sale of Property 1 for $1,845,375 (AF), (Exhibit A pages 1140-1142). The seller's signature was witnessed by Colin King (Exhibit A page 1141). The onsale occurred 12 days after the first sale.
96 In his interview, Colin King states that he sold the Royces' property to a Wong Syndicate (Exhibit A page 2253). He also stated that:
[T]he whole intention from these people buying, they were buying long term not short term. Difference is they came up with (indistinct) quick sale and they sold it and that there is a price we were able to get for it.
(Exhibit A page 2258).
97 On 21 May 2008, both sales of Property 1 were settled simultaneously (AF).
98 The purchase price paid by ILG was financed by the on-sale to Lau (AF).
99 The profit generated from the second sale, being $595,375, was divided between Michael King, a company controlled by Mr Wong and a company controlled by Michael King (AF).
100 The King & I, by Colin King and/or Paul King, acted for the Royces as sellers and for ILG as sellers (AF).
101 The King & I received commission from the Royces of $37,500. No commission was paid by ILG (AF).
102 The silence of The King & I and Colin King towards the Royces concerning another possible purchaser supports the Tribunal finding that the more probable inference is that they knew of the onsale at the time of the first transaction. This is because if they did not, it is highly likely that they would have informed Mr Royce that a second buyer had emerged and informed Mr Wong that he was at risk of being beaten to the purchase property by another buyer.
103 This inference is also supported by the fact that there is no evidence of the existence or involvement of the second potential buyer and ultimate buyer ILG before the time that it made the offer to Mr Royce. Mr Palumbo, that is ILG, never viewed the property. In contrast, Mr Wong was shown the property by both Michael King and Colin King.
104 All of the above evidence leads to the more probable inference that at the time of contacting Mr Royce, and throughout the dealing with him, both The King & I and Colin King were aware of the on-sale being perpetrated by Michael King, through Mr Palumbo, and acted in such a way as to facilitate the on-sale. The onsale was not completely coincidental.
105 Having found that Colin King and, through him, The King & I were aware of the on-sale of Property 1, it provides a basis for drawing an inference that in each of the subsequent transactions it was more probable that the King & I and Colin King were similarly aware of what was occurring. The Tribunal finds accordingly.
106 The respondents submitted that as this was the first transaction no inference can be drawn from any prior conduct. Given the evidence, there is no need to rely on any previous conduct.
Property 2 Lot 6 Henry Road, Greenough
107 In 2008, the Hammarquists owned Lot 6 Henry Road, Greenough (Property 2) (AF).
108 On 15 June 2008, the Hammarquists appointed another real estate agent to sell Property 2 at a listing price of $1,150,000(AF). The property was listed with Landmark Geraldton represented by John Drummond (Exhibit G, paragraphs 612).
109 Colin King offered Property 2 to a member of Wong's family (AF).
110 On 2 July 2008, WA Pastoral Company Pty Ltd (WAPC) was incorporated (AF). Mr Palumbo was again the sole director and shareholder. Colin King stated in his evidence that he did a company search (Exhibit A page 2321). In his interview, Colin King stated that he repeatedly asked Michael King if he was involved with WAPC (Exhibit A pages 23532354).
111 In late June 2008, Mr Hammarquist was contacted by a person from The King & I (Exhibit G paragraphs 17-20). He can no longer recall whether it was Paul King or Colin King (T:27-28; 14.06.16). The respondents state that it was Colin King who contacted Mr Hammarquist (respondents' SIFC paragraph 25). Mr Hammarquist was told by the caller that he was working for an overseas interest and represented a potential buyer at $1,125,000. Mr Hammarquist referred him to Mr Drummond (Exhibit G paragraphs 21 and 22). The 'overseas interest' can only be the Wong Syndicates. As mentioned above, Mr Palumbo was not associated with overseas interests.
112 Colin King admitted that the Malaysians were interested in Lot 6 because it enabled them to join parcels of land. In his interview Colin King stated that he was 'pretty sure that he offered it to the Malaysian buyers because it did join them before any of this happened'. He claimed that he could not get them interested at all at the lesser amount for which it was sold to WAPC (Exhibit A pages 23292330 and 2332). This claim does not sit well with the fact that the ultimate purchaser of the land was by the Wong Syndicates. In his interview, Colin King was not able to offer any explanation for his claim of an initial lack of interest by the Wong Syndicates (Exhibit A page 2332). The Tribunal finds that the more probable inference is that the Wong Syndicates continued to be interested but Colin King intentionally did not tell the Hammarquists of an alternative purchaser so that an onsale could be effected just like with Property 1.
113 Around 4 July 2008, Paul King contacted Mr Drummond and negotiated a conjunctional selling agency agreement. The King & I would receive 50% of the commission for selling Property 2 (AF).
114 On 7 July 2008, the Hammarquists and WAPC entered into a contract for the sale of Property 2 for $1,125,000 (AF) (Exhibit A pages 2590-2592). Paul King witnessed Mr Palumbo's signature on the offer and acceptance (Exhibit A page 2320).
115 On 21 July 2008, Colin King wrote to Landmark Realty requesting a variation of the contract to extend the time for inspection (Exhibit A page 1449). Two variations to this contract were negotiated that extended the settlement period (AF). On 21 July 2008, a variation of the contract was entered into (Exhibit A page 2596). Colin King witnessed Mr Palumbo's signature on the variation (Exhibit A page 2322). On 7 August 2008, a second variation was executed (Exhibit A page 2597). Michael King witnessed Mr Palumbo's signature (Exhibit A page 2323). The second variation increased the deposit to $112,500 and released that deposit to the Hammarquists.
116 The respondents submit that no adverse inference can be drawn against the respondents based on the early release of the deposit. They submit that this points to the risk being taken by the Palumbo company as purchaser. The Tribunal does not accept this submission. The Tribunal finds that the more probable inference to be drawn from the early release of the deposit is that Michael King was confident that the on-sale would proceed despite some delays in assembling the investors. Why else would the deposit be released early?
117 The Tribunal finds that WAPC must have been very confident of an onsale if it was prepared to release a deposit of $112,500 to the seller.
118 On 9 August 2008, WAPC engaged The King & I to sell Property 2 (AF) (Exhibit A page 2600). Colin King witnessed Mr Palumbo's signature on the selling agency agreement between WAPC and The King & I (Exhibit A pages 2323 and 2324).
119 A contract to sell Property 2 to Land Border International Pty Ltd (LBI), of which Mr Wong was a director, for $2,212,500 was signed between WAPC and LBI on 9 August 2008 (AF) (Exhibit A pages 25272531). Paul King was one of two witnesses (along with Michael King) of Mr Palumbo's signature on the on-sale offer and acceptance document (Exhibit A page 2327). LBI was a company in the Wong Syndicate.
120 The price differential between the two sales was $1,087,500.
121 The time period between the two sales was two months.
122 The commission paid to The King & I was $16,500 or 0.007%. Colin King was unable to explain why the commission was so low (Exhibit A pages 2324-2326).
123 Colin King denied any involvement in the sale of Lot 6 (Exhibit A pages 2328 and 2329). Yet, earlier on in the interview, he had asserted that the reason why the Malaysians became interested in Lot 5 again was because Lot 6 was available.
124 On 15 December 2008, both sales of Property 2 were settled simultaneously (AF).
125 The King & I, by Colin King and/or Paul King, acted as agent for the Hammarquists as sellers and WAPC as seller (AF).
126 The King & I received $16,500 commission from WAPC and $30,937.50 commission from the Hammarquists (AF).
127 If Mr Hammarquist had known the second sale price was in excess of $2,000,000 he would never have agreed to a $1,125.000 price. All he knew of the buyers at the time was that they were overseas investors (Exhibit G paragraphs 59 and 60). Clearly, neither Colin King nor Paul King informed the Hammarquists that the sale was to a Palumbo company which was not an overseas investor.
128 Paul King was involved in this transaction. The silence of the respondents towards the Hammarquists supports the Tribunal finding that the more probable inference is that they knew of the intended onsale at the time of the first transaction. This is because if they did not, it is highly likely that they would have informed the Hammarquists that a second buyer had emerged and informed Mr Wong that the Wong Syndicate was at risk of being beaten to the purchase property by another buyer.
129 This inference is also supported by the fact that there is no evidence of the existence or involvement of the second potential buyer and ultimate buyer WAPC before the time that it made the offer to Mr Hammarquist. Mr Palumbo, that is WAPC, never viewed the property.
130 All of the above evidence leads to the more probable inference that at the time of contacting Mr Hammarquist, and throughout the dealing with him, both Paul King and Colin King were aware of the intended on-sale being perpetrated by Michael King through Mr Palumbo, and acted in such a way as to facilitate the on-sale. The onsale was not completely coincidental.
131 Having found that Colin King, and through him The King & I and Paul King were aware of the on-sale in the sale of the property, it provides a basis for the Tribunal drawing an inference that in each of the subsequent transactions it was more probable that the King & I and Paul King and Colin King were similarly aware of what was occurring. The Tribunal draws that inference and makes such relevant findings.
Property 3 Lot 10 Brand Highway, South Greenough
132 In 2008, Le and others (Le) owned Lot 10 Brand Highway, South Greenough (Property 3) (AF).
133 No evidence was led by the Commissioner from Le.
134 On 20 January 2008, Le appointed another agent to sell Property 3 for a listing price of $1,900,000 (AF). The other agent was Barber Real Estate represented by Murray Wellington (Exhibit J paragraphs 5-11).
135 On 9 March 2009, Mr Wellington was approached by Paul King who negotiated a conjunctional selling arrangement for The King & I to receive 1% of the commission for the sale of Property 3 (AF) (T:41; 14.06.16).
136 On 8 April 2009, Le and WAPC entered into a contract for the sale of Property 3 for $1,340,000 (AF) (Exhibit A page 2541). Paul King witnessed Mr Palumbo's signature on the offer and acceptance for the first sale (Exhibit A pages 23622363).
137 On 19 May 2009, there was a variation of the contract (Exhibit A page 2543). In his interview, Colin King's explanation was that 'the Malaysians do it a tremendous amount'. It was pointed out to Colin King that the Malaysians were not involved in this sale (Exhibit A pages 23702371).
138 On 1 June 2009, WAPC appointed The King & I to sell Property 3 (AF) (Exhibit A page 2545). Paul King witnessed Mr Palumbo's signature on the selling agency agreement between WAPC and The King & I (Exhibit A page 2366).
139 On 8 June 2009, WAPC and Vintage Red Pty Ltd (Vintage), of which Mr Wong was a director, entered into a contract for the sale of Property 3 for $1,866,250 (AF) (Exhibit A page 2548). Vintage was a Wong Syndicate.
140 There was a two month gap between the first and second sales.
141 The selling fee of $20,240 was 0.01% of the sale price of the property. Colin King's explanation was that he knew that The King & I had sold it twice and that might have been taken into consideration (Exhibit A page 2370).
142 On 10 August 2009, both sales of Property 3 were settled simultaneously (AF).
143 The profit generated from the second sale, being $452,790, was divided between Michael King and a company controlled by Mr Wong (AF).
144 The King & I, by Colin King and/or Paul King, acted as agent for both Le as seller and WAPC as seller (AF).
145 Although Colin King stated in his interview that he was not involved in this sale on a day-to-day basis (Exhibit A page 2372), he knew that the deal would have happened based on his evidence in his interview as to his involvement in the agency set out below.
146 Mr Wellington was unaware of the on-sale (Wellington paragraphs 6971).
147 Based on the Tribunal's previous findings on the knowledge of Colin King, and therefore The King & I and Paul King, the Tribunal finds that the respondents were aware of the onsale. This is because if they did not, it is highly likely that they would have informed Le that a second buyer had emerged and informed Mr Wong that the Wong Syndicate was at risk of being beaten to the purchase property by another buyer.
148 This inference is also supported by the fact that there is no evidence of the existence or involvement of the second potential buyer and ultimate buyer WAPC before the time that it made the offer to Le. Mr Palumbo, that is WAPC, never viewed the property.
149 All of the above evidence leads to the Tribunal finding that the more probable inference is that at the time of contacting Le, and throughout the dealing with him, both The King & I and Colin King were aware of the on-sale being perpetrated by Michael King, through Mr Palumbo, and acted in such a way as to facilitate the on-sale. The onsale was not completely coincidental.
Property 4 Lot 733 Mundijong Road, Baldivis
150 In 2009, Mr Franck Teissier owned Lot 733 Mundijong Road, Baldivis (Property 4) (AF).
151 Mr Teissier appointed two agents, Mr Longwood and Mr Robertson, to sell Property 4 by tender (AF). Mr Longwood represented Ron Farris Real Estate and Mr Robertson represented Acton Dalkeith (Exhibit O paragraphs 4148).
152 In his interview, Colin King stated that at this time he had Malaysian buyers looking for properties that had subdivision potential. Colin King knew that this property had subdivision potential (Exhibit A pages 23942397).
153 On or around 6 August 2009, Mr Longwood was approached by Michael King who wanted information about properties for sale in the Baldivis area generally (AF).
154 On or around 7 August 2009, Mr Robertson received a call from Colin King who said he had a potential buyer (AF). Michael King made a general inquiry with Mr Longwood about the property (Exhibit P paragraphs 3840). Initial negotiations occurred with Michael King (Exhibit P paragraphs 47-60 and 73-80). He subsequently dealt with Michael King and Paul King (Exhibit P paragraphs 82-103).
155 Mr Robertson and Colin King negotiated a conjunctional arrangement whereby The King & I would receive 1% of the commission for selling Property 4.
156 On 3 October 2008, Kwinana Ranges Pty Ltd (KR) was incorporated (AF). In his interview, Colin King claimed that he conducted a company search to ascertain that Mr Palumbo was a director. There was no record of such a search on the file (Exhibit A page 2434)
157 On 18 August 2009, Mr Teissier and KR entered into a contract to sell Property 4 for $3,250,000 (AF) (Exhibit A page 412). Mr Palumbo's signature was witnessed by Paul King.
275 For each of the first three transactions, it is admitted that The King & I, through either the Colin King or Paul King, acted as agent for the first seller of the property (SIFC paragraphs 36, 52, 62; respondents' SIFC paragraphs 22, 32 and 36). They therefore had an obligation to act in the best interests of that seller.
276 The duty to act in the best interests of a seller includes an obligation to attempt through best endeavours to secure the best sale price for the property.
277 It is a breach of clause 2 of the Code for an agent or sales representative not to inform a seller of potential better offers. Even more egregiously, it is a breach of clause 2 of the Code to be aware of an intended onsale with an increased price and not to inform the seller.
278 To fail to inform the seller of a potential better offer so as to benefit a third party, particularly a related third party provides a clearer example of a breach of clause 2. In each case, the amount offered by the ultimate purchaser was clearly better. No plausible reason was advanced by the respondents as to why it would be unreasonable or improper to do so.
279 In respect of Property 1, the evidence establishes that The King & I, through Colin King, was involved in the conduct which constituted a breach of clause 2 of the Code. There is no evidence that Paul King was involved in this transaction.
280 In respect of Property 2, the evidence establishes that The King & I, through both Colin King and Paul King, was involved in the conduct which constituted a breach of clause 2 of the Code.
281 In respect of Property 3, the evidence establishes that The King & I, through both Colin King and Paul King, was involved in the conduct which constituted a breach of clause 2 of the Code.
282 The evidence establishes that Colin King had knowledge of Paul King's conduct which constitutes a breach of clause 2 of the Code.
Failing to act fairly and honestly - Properties 13
283 Ordinary, decent people would consider the conduct relating to the onsales to be dishonest and unfair. The respondents deliberately withheld from the original owners, the information that there was potentially another buyer and that this buyer was willing to pay an amount higher than the offers being presented by the respondent. That is, ordinary, decent people would undoubtedly expect that an agent with knowledge that a higher offer is, or is likely to be, attainable would disclose that offer and not actively conceal the existence of that potential buyer.
Failing to act fairly and honestly - Properties 4-6
284 To facilitate an onsale that actively concealed from the ultimate purchaser that they were buying the land at a premium from an intermediary company and not the original seller is to act unfairly and dishonestly. To know that there is another potential purchaser and to intervene to make a profit from an intermediate sale is unfair and dishonest.
285 As the Commissioner submitted, these circumstances are distinguishable from a case where an agent, whether acting as a buyer's agent or not, brings a buyer to the transaction in the knowledge that the buyer is likely to immediately on-sell but when the agent knows no more than that he will need to market the on-sale. Such a situation would involve no unfairness or dishonesty.
286 The respondents were, in conjunction with Michael King, cultivating Mr Wong and his various Wong Syndicates as potential buyers of land from land owners, not from an intermediate third party. Thus, when presenting offers to sellers from the Palumbo companies, the respondents were doing so in circumstances where they knew that this company would both immediately on-sell and had already identified the ultimate purchaser. Even if Mr Wong was aware of the onsales, it would be unfair and dishonest to the other members of the various Wong Syndicates.
287 Ordinary, decent people would consider this conduct to be both unfair and dishonest.
Misleading or deceiving - Properties 1-3
288 Clause 5(2) provides:
An agent must not knowingly mislead or deceive any parties in negotiations or a transaction.
289 By reason of their knowledge of the on-sale scheme, the respondents knew that there was another buyer (the Wong Syndicates) which was willing to pay a higher price for the land.
290 In these circumstances, the respondents, by their conduct in contacting the original owner, becoming their selling agent, saying that a buyer was available and presenting offers from the Palumbo company, led the original owner to believe that the respondents, their agents, were presenting the best offers which could be obtained or sought by the respondents as selling agent when, in fact, to the knowledge of the respondents there was another buyer who would presently or in a very short space of time be able to make an offer substantially higher than that which was being presented.
291 By this conduct, the respondents knowingly misled the sellers in the first three transactions.
Failing to disclose material facts - Properties 13
292 Clause 8(2) provides:
If an agent ascertains a fact which is material to a transaction in which the agent's principal is involved the agent must promptly communicate that fact to any person who may be affected by it, unless it is clear that person was already aware of that fact.
293 The existence of a potential buyer who is willing to offer an amount greater than is being offered by another potential buyer is a fact which any reasonably informed, fair minded person would regard as material to a transaction.
294 In relation to Properties 1-3, the respondent's principal in the first sale was the seller. The respondents were aware that there was another buyer (the Wong Syndicates) other than the buyer whose offers were being presented and knew that this other buyer would pay a higher sum for the land.
295 This was a material fact which ought to have been disclosed to the respondents' principal the original owner.
Conflict of interest - Properties 1-3
296 Clause 10(1) provides:
An agent must not accept an engagement to act, or continue to act, where to do so would place his or her interest in conflict with that of the principal.
297 The nature of the on-sale scheme was such that the respondents knew, at the time of contacting and engaging the first seller that The King & I would then become the selling agent for the property. Obviously, this would entitle The King & I to a commission from both the original seller and the onseller, the Palumbo company.
298 In the event, The King & I did not claim a commission on the first onsale (SIFC paragraph 38; respondents' SIFC paragraph 24) and claimed low commissions on the second and third onsales (SIFC paragraphs 53 and 63; respondents' SIFC paragraphs 33 and 37).
299 In his interview, Colin King was unable to explain why no commission was charged on the first on-sale (Exhibit A page 2266). He surmised that Michael King or Paul King set the low commission on the second sale (Exhibit A page 2326).
300 However, the fact that no or only low commissions were ultimately charged does not absolve the respondents of the inherent conflict of interest that exists where a seller's agent has knowledge that an onsale will occur, that the purchaser/on-seller will engage the respondents as agents for the onsale and that the ultimate purchaser is already ready and willing to purchase the land. This immediately raises the prospectof a double commission and thus places the respondents' interests in conflict with those of the seller/principal.
301 It is also a conflict of interest to act in such a situation where a benefit to a third party, particularly a related third party, could benefit an agent or sales representative.
Review proceedings
302 The breaches of the Code proved in the Disciplinary Proceedings go to the fundamental obligations of a real estate agent; fidelity to the agent's principal, acting fairly and honestly, not misleading people (especially the agent's principal) and not withholding material facts from the agent's principal.
303 These matters seriously impugn Colin King's honesty and character to the point where it would be impossible to accredit him to the public in this profession.
304 The breaches proved against The King & I and/or Paul King, demonstrate that Colin King, in his capacity as person in bona fide control of the business of The King & I, failed to properly supervise the business of The King & I to ensure that it and its agents and employees complied with the Act (Code clause 6(2)).
305 Finally, the breaches by The King & I and Colin King show that Colin King did not fully understand the duties and obligations imposed on agents by the Act. An agent with a proper understanding of his duties and obligations, especially towards his principals, would not have contemplated facilitating the operation of the onsales.
Tribunal's jurisdiction
306 As the Commissioner submitted, the starting point is that a construction that would promote the purpose or object underlying a written law is to be preferred to one that does not (s 1 of the Interpretation Act 1984 (WA)). In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41 (Alcan (NT) Alumina) at [47] (Hayne, Heydon, Crennan and Kiefel JJ), the High Court said:
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
307 Under the Act, a real estate agent licensee may cease to be licensed in one of three ways, expiry (or 'ceasing'), surrender or cancellation of the licence. The latter is not relevant in the present case.
308 Expiry and surrender of an agent's licence are dealt with in s 30 of the Act:
(1) Subject to this Act, a licence is continuous.
(2) A licence does not confer on a licensee the right to carry on business as an agent unless he holds a current triennial certificate in respect of the licence.
(2a) A licensee ceases to be licensed if the licensee
(a) does not hold a current triennial certificate in respect of the licence; and
(b) does not pay to the Commissioner in accordance with the regulations the fee prescribed for the purposes of this subsection.
(3) A person may at any time surrender a licence and any triennial certificate in respect thereof, held by him and shall do so if he ceases to have the qualifications for holding the licence.
(4) Despite the surrender by a person of a licence or triennial certificate, this Act applies, for the purpose of enabling the person to be investigated or otherwise dealt with for a matter arising before the surrender, as if the licence or certificate had not been surrendered.
309 In respect of a sales representative, the equivalent of s 30(4) is s 53(2) of the Act. However, there is no equivalent of s 30(1) in respect of a sales representative's registration.
310 Therefore, under the Act there are express provisions allowing disciplinary proceedings to be commenced or maintained against an agent who has surrendered his licence and against a sales representative who has surrendered his registration or whose registration has expired. However, there is no equivalent in respect of an agent whose licence ceases or expires under s 30(2a). As the Commissioner noted, the reason for this seems to be an oversight.
311 Section 102(6) of the Act provides:
Notwithstanding the expiry of the certificate of registration of a sales representative, an allegation under subsection (1) in respect of a sales representative may be made to the State Administrative Tribunal not later than 12 months after the day on which his certificate of registration expired and, upon consideration of the allegation, the State Administrative Tribunal may exercise the powers conferred by section 103, other than the powers of suspension or cancellation of registration.
312 However, as the High Court has stated repeatedly, it is the words of the statute which govern its interpretation: Stingel v Clark (2006) 226 CLR 442 at 458, [26]-[27]. In this instance it is clear on the face of the statute that there is a holding over of the entitlement to prosecute a former sales agent; however, no such similar holding over is included in the Act in respect to the principal or the agency once they are no longer registered.
313 There is no equivalent of s 102(6) of the Act in relation to agents. The Commissioner submits that s 102(1) of the Act must be interpreted as applying to a person who was an agent at the time of the conduct the subject of the allegations. Any other interpretation potentially produces anomalous results that cannot have been intended.
314 The failure of the legislature to appreciate the lacuna identified by the Commissioner does not compel this Tribunal reaching an interpretation of the Act which is not open on a plain reading of the text of the Act.
315 Despite the Commissioner's contentions, the policy considerations raised by the Commissioner do not override the clear words in the Act, nor do the second reading speeches propound an alternative meaning being applied to those words. It is the words of the Act which are to be construed, and the object of the Act cannot be used to 'read in' words which are not there: Alcan (NT) Alumina at [47].
316 The only construction open on the text of the Act is that the Commissioner's claim against The King & I and Colin King must be dismissed on the ground that it is incompetent because there is no equivalent to s 102(6) of the Act.
317 Section 102(6) of the Act gives the Tribunal jurisdiction in disciplinary proceedings notwithstanding the expiry of Paul King's registration because the allegations were made at a time when he was registered.
Conclusion
318 The Tribunal finds that by reason of the conduct of Paul King in breach of the Code, proper cause exists for disciplinary action against Paul King.
319 But for the Tribunal's finding that it does not have jurisdiction, the Tribunal would have found that the conduct of The King & I and Colin King is in breach of the Code constituting proper cause for disciplinary action against each of the King & I and Colin King.
320 The Tribunal finds that the conduct of Colin King in breach of the Code makes him not a person of good character and repute and not a fit and proper person to hold a real estate agents licence. Colin King's conduct demonstrates serious dishonesty towards the original owners and the ultimate purchasers.
Orders
1. In relation to Matter No VR 112 of 2014, proper cause exists for disciplinary action against Mr Paul King in that he breached clauses 2, 5(1), 5(2), 8(2) and 10(1) of the Code of Conduct for Agents and Sales Representatives 1993.
2. In relation to Matter No VR 112 of 2014, the disciplinary proceedings in relation to The King & I Pty Ltd and Mr Colin King are dismissed on the basis that the Tribunal has no jurisdiction.
3. In relation to Matter No 125 of 2014, Mr Colin King's application is dismissed on the basis that he is not a fit and proper person to hold a real estate agent's licence.
4. The Commissioner for Consumer Protection is to file and give written submission as to penalty and costs by 28 October 2016.
5. Mr Paul King is to file written submissions as to penalty and costs by 5 November 2016.
6. The penalty hearing is to be listed for hearing on a date to be fixed by liaising with the President's associate.
I certify that this and the preceding [320] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE J C CURTHOYS, PRESIDENT
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