Real Estate and Business Agents Supervisory Board and McManus & Ors - [2008] WASAT 56

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: VOCATIONAL REGULATION

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

CITATION: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD and McMANUS & ORS [2008] WASAT 56

MEMBER: JUDGE J ECKERT (DEPUTY PRESIDENT)
DR D NEWMAN (SENIOR SESSIONAL MEMBER)
MR P DRUITT (SESSIONAL MEMBER)

DELIVERED : 10 MARCH 2008

FILE NO/S: VR 42 of 2007

BETWEEN: REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD
Applicant
AND
JOHN PATRICK McMANUS
First Respondent
SHELLEY ANNE BARBER
Second Respondent

Catchwords:

Licence lending Supervision Branch office Registered office Income stream Sale of business Relevant intention

Legislation:

Real Estate and Business Agents Act 1978 (WA), s 26, s 37, s 38, s 39, s 41, s 102, s 103, s 104
Stamp Act 1921 (WA), s 32, s 75, Schedule 2 Item 6, Schedule 2 Item 13
State Administrative Tribunal Act 2004 (WA), s 32

Result:

There is proper cause for disciplinary action against both respondents

Category: B

Representation:

Counsel:

Applicant:     Mr S O'Sullivan with Ms J King
First Respondent           :     Mr D Marsh with Mr J Bishop
Second Respondent       :     Mr D Marsh with Mr J Bishop

Solicitors:

Applicant:     Real Estate and Business Agents Supervisory Board
First Respondent           :     Hotchkin Hanley
Second Respondent       :     Hotchkin Hanley

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

Briginshaw v Briginshaw (1938) 60 CLR 336
Cranley v Medical Board of Western Australia (unreported, Supreme Court, WA, Ipp J, No 1211 of 1990, 21 December 1990)
Legal Practitioners Complaints Committee and Penkin [2006] WASAT 62
Settlement Agents Supervisory Board and Paradis [2006] WASAT 292

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The Real Estate and Business Agents Supervisory Board sought orders from the Tribunal that there was cause for disciplinary action against Mr John McManus and Ms Shelley Barber, on the grounds that they were involved in a "licence lending arrangement". The Board also alleged that relevant notices were not properly displayed at the registered office of the business McManus Hospitality. The Board made various other allegations which because of the findings of the Tribunal fell away.
Mr McManus had been a licensed real estate agent for over 31 years. Ms Barber had been a registered sales representative under the Real Estate and Business Agents Act 1978 (WA) since 1983. They were both very experienced in their relevant fields.
McManus Hospitality conducted a real estate business and rental business at Geographe Bay Holiday Park, Busselton. The registered office was Mr McManus's home in Perth. The trust accounts and the auditors were located in Busselton. Ms Barber did everything necessary for the conduct of the businesses at Geographe Bay. She sent some offers and acceptances, other documentation and monthly trust account reconciliations to Mr McManus for him to sign. He maintained the business name McManus Hospitality, paid for the audits of the real estate business trust account and kept his real estate licence current. Mr McManus and Ms Barber claimed that Ms Barber was an employee of Mr McManus.
In December 1998, Mr McManus and Ms Barber and her husband entered into an agreement whereby the Barbers paid Mr McManus $80 000. The agreement was set out on a standard agreement for sale and purchase of business form. Mr McManus and Ms Barber alleged that the payment of $80 000 was for advanced payment of the income stream from the two businesses for a period of eight years. The Board alleged the agreement was a sale of business. The Tribunal found that it was clear on the evidence surrounding the agreement and the conduct of Mr McManus and Ms Barber that the agreement was a sale of the business.
The Tribunal did not accept Mr McManus' or Ms Barber's evidence. There was no evidence that Ms Barber was an employee. In fact despite the consistent evidence of the respondents that she was an employee, Mr McManus did not pay any salary, workers compensation, PAYG deductions, superannuation or other benefit of employment at any time for Ms Barber. The Tribunal was asked to believe that neither Mr McManus nor Ms Barber, experienced businesspeople, addressed at any time how the $80 000 would be dealt with for taxation purposes.
The Tribunal found, on the evidence that it accepted, that this was a classic situation of a licensee lending his licence to an unlicensed sales representatives so that she could carry on the business. The work that Mr McManus did with respect to the real estate business was the absolute minimum necessary to maintain his licence. In all other respects, Ms Barber was the operator of the real estate business.
Accordingly, the Tribunal found there was cause for disciplinary action against both Mr McManus and Ms Barber.

Allegations by the Board

By application to this Tribunal lodged 15 March 2007, the Real Estate and Business Agents Supervisory Board (Board) seeks disciplinary orders against John Patrick McManus as the first respondent (Mr McManus) and Shelley Anne Barber as the second respondent (Ms Barber). Those orders are sought by the Board pursuant to s 103 of the Real Estate and Business Agents Act 1978 (WA) (Act).
The Board asks the Tribunal to find that there is cause for disciplinary action against Mr McManus pursuant to s 103(2)(c)(ii) and s 103(2)(c)(iii) of the Act and against Ms Barber pursuant to s 103(4)(c)(ii) of the Act. Specifically, the Board alleges against Mr McManus that he:
(a)Permitted or held himself out as being willing to permit another person to use his licence or triennial certificate, contrary to s 39(3) of the Act (allegation 1);
(b)Has not exhibited a notice in a prominent place or at all at his registered office, contrary to s 41(1) of the Act (allegation 2);
(c) Has not registered the premises of Geographe Bay Holiday Park Busselton (Geographe Bay) as a branch office, contrary to s 37 of the Act, nor had it endorsed on his triennial certificate, contrary to s 38 of the Act (allegation 3); and
(d)Has failed to manage the business conducted at Geographe Bay full‑time, carry out the principal managerial duties or frequently attend at those premises, contrary to s 132 and cl 6 of the Code of Conduct for agents and sales representatives (Code) (allegation 4).
The Board alleges against Ms Barber that she carried on business as a real estate agent or alternatively held herself out as a real estate agent without being licensed under the Act or holding a triennial certificate contrary to s 26 of the Act (allegation 5).

Background

This matter was heard on 28 May 2007. The Board called a DOCEP inspector, Mr Arnold, and Mr McManus and Ms Barber gave evidence and were cross‑examined. All witnesses had previously filed witness statements.
Oral closing submissions were made by counsel on 29 May 2007. We adjourned to consider our decision with a view to delivering an ex tempore decision and reasons. However, prior to that consideration commencing, it became apparent that one of the panel, Ms Newman, is a deputy member of the Board. We immediately raised this with the parties. Subsequently, on instruction from his clients, counsel for Mr McManus and Ms Barber advised the Tribunal that it was acceptable to them that we proceed to make a decision with the Tribunal as originally constituted by the President, which included Ms Newman.
We then reserved our decision.

Relevant legislation

Allegation 1 against Mr McManus relies on s 39(3) of the Act which is as follows:
"A licensee shall not in any way permit, or hold himself out as being willing to permit, another person to use the licence or a triennial certificate of the licensee."
Allegation 2 contends that Mr McManus breached s 41(1) of the Act which provides:
"A licensee shall exhibit, and keep exhibited, in a prominent place at his registered office, and at every branch office of his business, so as to be easily read by persons entering therein ‑
(a)a notice of his name, and of the fact that he is a licensed real estate and business agent, together with the name, style, title, or designation under which he carries on business as a real estate agent or a business agent, or both, if that business is, or those businesses are, not carried on in his own name; and
(b)in the case of a branch office, a notice of the name of the manager and the address of the registered office of the licensee."
Allegation 3 alleges breaches by Mr McManus of s 37 and s 38 of the Act, both of which are set out below.

"37. Branch office of licensee
(1)A licensee shall register any branch office of his business by giving written notice of the situation of the office to the Registrar on or before the day on which he commences to carry on business at that branch office.
Penalty: $1 000.
(2)A licensee shall nominate, and have at all times in his service at a registered branch office, as manager of that office, another licensee who is the holder of a current triennial certificate.
Penalty: $1 000.
(3)The manager shall not be a licensee nominated as manager by any other licensee or in respect of any other office, and shall not carry on business as an agent on his own account.
[Section 37 amended by No. 43 of 1994 s. 11.]

38.Triennial certificate to show place of business etc.
(1)Each place of business of a licensee and the name of the other licensee who is manager of that place and any changes thereto shall be endorsed on the triennial certificate of the first mentioned licensee.
(2)The place of business of a branch office shall be endorsed on the triennial certificate of the licensee who is manager of that office."

Allegation 4 relies on s 132 of the Act and cl 6 of the Code, the relevant parts of which are in the following terms:
"132.Unlicensed assistants to be supervised etc.
The work of unlicensed persons engaged in assisting in the conduct of the business of a licensee shall be constantly supervised and controlled by a licensee, and for that purpose ‑
(a)where the licensee of the business involved is not a firm or a body corporate ‑
(i)the licensee shall give substantial time and attention to the business and shall ensure that the managers of all branch offices of the business respectively give substantial time and attention to the business of the respective branch offices; and
(ii)the manager of a branch office of the business shall give substantial time and attention to the business at that office;"
"6(1)An agent must properly supervise the agency business carried on by the agent and take reasonable steps to ensure that sales representatives and other employees of the agency business comply with the provisions of the Act, this Code of Conduct and other relevant statutes, rules and regulations where applicable to them.
…
(4)If a sales representative fails to comply with the provisions of the Act, this Code of Conduct or any other relevant statutes, rules or regulations where applicable then for the purposes of sections 6(1), 6(2), 6(3) of this Code the agent or the person in bona fide control of the agency business shall have the onus of proving that he or she complied with the requirements of those sections.
(5)An agent who personally carries on an agency business, the person in bona fide control of the agency business carried on by a corporation and the person in bona fide control of the agency business carried on by a firm must –
(a) personally manage the agency business full time;
(b)carry out the principal managerial duties of the agency business, and
(c)frequently attend at the offices at which the agency business is conducted. "
With respect to allegation 5 against Ms Barber, the Board alleges a breach of s 26 of the Act. That section provides:
"26. Real estate and business agents to be licensed
On and after the appointed day 3 a person shall not carry on business, or by any means hold himself or itself out, as a real estate agent, or a business agent, or both a real estate agent and a business agent, unless he or it is licensed as such under this Act and holds a current triennial certificate in respect of the licence.
Penalty: $20 000."
It is also relevant to consider the sections under which the Board alleges that there is proper cause for disciplinary action. With respect to Mr McManus those sections are s 103(2)(c)(ii) and s 103(2)(c)(iii) which are as follows:
"103.Disciplinary action, grounds for and forms of
…
(2)There shall be proper cause for disciplinary action against an agent if ‑
…
(c)the agent is acting or has acted in breach of ‑
…
(ii) the requirements of this Act; or
(iii) the agents code of conduct;
…"
With respect to Ms Barber, the Board alleges there is proper cause for disciplinary action pursuant to s 103(4)(c)(ii) of the Act which is in the following terms:

"103.Disciplinary action, grounds for and forms of
…
(4)There shall be proper cause for disciplinary action against a sales representative if ‑
…
(c)the sales representative is acting or has acted in breach of ‑

…
(ii) the requirements of this Act; …"

What must the Board prove?

The Board must prove on the balance of probabilities that Mr McManus and Ms Barber breached the Act as alleged by it in its Statement of Issues, Facts and Contentions and in its application to the Tribunal.
The standard to be applied by the Tribunal in testing the evidence before us is as set out in Briginshaw v Briginshaw (1938) 60 CLR 336. Although neither party made submissions with respect to this issue, we applied the test in Briginshaw when weighing the evidence and have therefore acted with caution in reaching conclusions or drawing inferences from surrounding evidence. The allegations in these proceedings, if proved, could result in permanent damage to the respondents' future. On that basis, the Tribunal must feel an "actual persuasion" of the occurrence or existence of the relevant facts before making findings against the person whom the allegation of professional misconduct has been made. See Settlement Agents Supervisory Board and Paradis [2006] WASAT 292 and Legal Practitioners Complaints Committee and Penkin [2006] WASAT 62.
With respect to an allegation of a breach of r 6(1) of the Code, if there is a breach of the Act or Code by an employee of the agent, it bears the onus of satisfying the Tribunal that it complied with r 6(1).

The facts

The relevant period, with respect to these proceedings generally, is December 1998 to December 2006. With respect to allegation 2, the relevant date is 18 October 2005.
Mr McManus is a licensed real estate agent and holds a triennial certificate and did so during the relevant period. He has been a licensed real estate agent for over 31 years.
Ms Barber is a registered sales representative under the Act and has been a registered sales representative since 28 November 1983.
At all relevant times, the registered office of the real estate business known as "McManus Hospitality" was at No 14 Doune Place, Willetton (registered office) which was Mr McManus' residence. At no time during the relevant period did Mr McManus seek to change that address, and at no time did he register a branch office at Geographe Bay.
At all relevant times, Mr McManus was the registered proprietor of the business name McManus Hospitality.
In 1993, Mr McManus took over the "real estate business operating from" ([6] McManus witness statement) Geographe Bay. He says there was no goodwill attached to the business and he paid nothing for it. He was to earn commissions from sales and manage the real estate business.
Geographe Bay is essentially a caravan park in which each individual site is a strata titled property suitable for short-stay and overnight accommodation. Each site is separately owned. The strata company appointed McManus Hospitality to manage the rental of the sites. Some of the owners arrange with McManus Hospitality to rent their sites out for short-term or overnight accommodation (rental business). The rental business is not of the kind usually associated with a rental business or a rent roll in a real estate agency business. It is short-term holiday accommodation. There were no lease agreements and any advertising was paid for out of a pool paid to the rental business trust account by the strata title owners.
When Mr McManus took over the management of Geographe Bay, Ms Barber and her husband Mr Glenn Barber, were the caretakers responsible for the cleaning and gardening of Geographe Bay. Ms Barber was responsible for the rental business and she also sold any strata sites that a unit holder wished to sell (the real estate business), she says, under the real estate licence of the former owner of the business at Geographe Bay. This arrangement continued after Mr McManus took over Geographe Bay. He says Ms Barber and Mr Barber, at that point, became his employees. Up until 2006, Ms Barber and Mr Barber were paid by the strata company for the caretaking and management of Geographe Bay. Up until 1998 they were employed by McManus Hospitality, and of relevance to these proceedings in particular, Ms Barber was employed by McManus Hospitality to operate the real estate business and the rental business. She was responsible for the day‑to‑day running of the real estate and rental businesses. Mr McManus repeatedly referred to Ms Barber "operating" those businesses at Geographe Bay.
Ms Barber viewed Mr McManus as her boss. She says she sent offers and acceptances (usually immediately after an offer was made), monthly trust account reconciliations for the rental business and the real estate business and other documentation to Mr McManus. She says in her evidence that sometimes she sent it after the transaction was finalised. Mr McManus says Ms Barber always sent offers and acceptances immediately after they were signed. Mr McManus also gave evidence that he authorised the payment of a range of disbursements relating to the businesses at Geographe Bay, even though Ms Barber was liable for those payments. Mr McManus says he maintained a comprehensive set of files for the business and that we had the files for the real estate business before us.
There is conflict in the evidence as to whether, during this period leading up to December 1998, the real estate business commissions were paid on a 70/30, 60/40 or 50/50 basis, with Ms Barber taking the greater share. The rental business commission paid by owners was 15% of rental income. Mr McManus received 5% of that 15% and Ms Barber received the remaining 10% out of which she paid all expenses associated with the rental business.
On 7 December 1998, an agreement was entered into between Mr McManus as vendor and Mr and Ms Barber as trustee for the G & S Barber Family Trust as purchaser (agreement). The agreement was in the standard form agreement to purchase a business. Mr McManus says it was on this form because that was all he understood, in the sense that the contracts he was used to dealing with were offers and acceptance forms and the standard form agreement to purchase a business. He says he copied this agreement and the annexure to it from a hotel sale he had brokered quite some years earlier.
The agreement on its face is an agreement to purchase a business. It purports to sell the "goodwill - real estate - rental and sales" of Geographe Bay. The purchase price is $80 000. Possession is to be on completion of stock‑take on 8 December 1998. Annexure A was incorporated into the agreement. That annexure has the following terms:
"THE VENDOR IS JOHN PATRICK MCMANUS OF 14 DOUNE [STREET,] WILLETTON W.A.
THE PURCHASERS ARE GLENN ALWYN AND SHELLEY ANN[E] BARBER AS TRUSTEE FOR THE G& S BARBER FAMILY TRUST.
VENDOR TO MAINTAIN AND KEEP CURRENT AT ALL TIMES THE TRIENNIAL CERTIFICATE IN THE NAME OF MCMANUS HOSPITALITY AND TO BE HELD IN TRUST FOR S & G BARBER AS TRUSTEES FOR S & G BARBER FAMILY TRUST.
THE VENDOR HIS SUCCESSORS OR EXECUTORS TO PROVIDE A LICENCE CURRENTLY HELD BY THE VENDOR FOR A TERM OF EIGHT YEARS FROM COMMENCEMENT.
THE VENDOR AS OF SETTLEMENT WAIVERS ANY RIGHT TO FUTURE INCOME OR CAPITAL GAINS FROM THE BUSINESS. SUCH INCOME OR CAPITAL GAIN REMAIN AN ASSET FOR G & S BARBER AS TRUSTEE FOR G & S BARBER FAMILY TRUST.
THE VENDOR TO MAINTAIN REGISTRATION OF MCMANUS HOSPITALITY AND PARKHOME REALTY FOR THE TERM OF EIGHT YEARS.
ANY EXTENSION TO THE TERM (EIGHT YEARS) WILL BE BY MUTUAL AGREEMENT OF THE PARTIES.. [sic]
THE PURCHASER TO CONDUCT THE BUSINESS IN ACCORDANCE WITH THE REGULATIONS OF THE REAL ESTATE AND BUSINESS AGENTS ACT.
THE PURCHASER TO MAINTAIN THE TRUST ACCOUNT IN ACCORDANCE WITH THE REGULATIONS OF THE REAL ESTATE AND BUSINESS AGENTS ACT.
THE PURCHASER TO ABIDE BY THE CODE OF CONDUCT AND RULES OF PRACTICE AS SET OUT BY THE REAL ESTATE INSTITUE [sic] OF W.A.
THE BUSINESS IS DESCRIBED AS MCMANUS HOSPITALITY, PARKHOME REALTY WITH SALES AND MANAGEMENT CONDUCTED AT GEOGRAPHE BAY HOLIDAY PARK, BUSSELTON W.A."

The Barbers and Mr McManus initialled deletions of Pty Ltd from the references to the Barbers' names as trustee in two of the clauses in Annexure A. The agreement was signed by Mr McManus, Mr Barber and Ms Barber and witnessed by Mrs McManus.
It is on the nature of the agreement that the evidence differed markedly. The Board says we should read the agreement for what it is. In particular, it is stamped as a contract for the purchase and sale of a business under the Stamp Act 1921 (WA) (Stamp Act).
Mr McManus and Ms Barber say that the agreement is merely the sale of an income stream. Mr McManus needed $80 000 to finalise a settlement on another transaction. He was not able to obtain that from his bank and he had not attempted to quickly mortgage the income stream with his bank. He estimated he had received $10 000 a year from the rental business at Geographe Bay and on that basis he says the contract was for eight years of income stream. Neither Mr McManus nor Ms Barber could give any indication of what it was intended would happen at the end of the eight‑year period.
Mr and Ms Barber had to borrow the $80 000 from their bank. Ms Barber says she took the agreement to the bank and arranged to borrow the money. Mr McManus says the agreement was drawn up after the Barbers had first gone to the bank. Ms Barber seemed to know very little about the agreement and what its terms meant. She says annexure A was added by Mr McManus. He gave evidence that some of the clauses in annexure A were added at the insistence of Mr Barber. Mr Barber was not called as a witness. Mr McManus was therefore aware that the Barbers had to borrow $80 000 which was quite a substantial sum of money for them at that time which he concedes.
The Barbers used their home as security for the borrowing of $80 000. That amount was then paid to Mr McManus.
After the agreement was entered into and the $80 000 paid to Mr McManus, Ms Barber retained all of the commissions from the rental business and the real estate business. None was paid to Mr McManus. Ms Barber continued to pay from the commission from the rental business the cost of cleaners, temporary staff, insurance on the office, workers compensation for the cleaners, superannuation for the cleaners, monthly rental on the office, power usage, telephone usage and the total set‑up of the office in the empty storeroom at Geographe Bay. She prepared the BAS statements and paid the GST (for both businesses). She had been paying those amounts out of her commission prior to the agreement and continued to do so after it.
After the agreement was entered into, Ms Barber continued to pay the outgoings for the real estate business. However, Mr McManus arranged for the annual audit of the real estate business trust account and the rental business required under the Act and paid the auditor's fees. Mr McManus also signed off on the monthly trust account reconciliations for the real estate businesses. Both the money from the rental business and the real estate business were paid into the separate trust accounts in the name of McManus Realty, both of which were held in Busselton. The auditor was also based in Busselton.
Between 1996 and 2006, there were 100 sales of sites at Geographe Bay. Ms Barber advises she had to advertise on roughly four occasions. Generally, the transactions were straightforward and she found purchasers from a list of interested people that she kept who were usually people who had stayed overnight at Geographe Bay.
Mr McManus and Ms Barber say that Mr McManus attended Geographe Bay each four to six weeks and there were telephone calls as necessary, primarily if a problem arose. When Ms Barber was initially interviewed in 2005 at Geographe Bay by two of the Board's inspectors, she advised that Mr McManus visited every four months. She denies she said this.
The Barbers and Mr McManus were and are longstanding friends.
Mr McManus' daughter has a masters degree in accounting and looks after all of the bookwork for the family businesses. She prepares all books and papers for the accountant who then forwards them to the taxation office.
At no time did Mr McManus pay superannuation contributions for Ms Barber as required by law, make PAYG tax payments in respect of her income as required, insure her for workers compensation claims, claim any tax deduction in respect of her employment or pay her a salary. During his years as a real estate agent, Mr McManus has employed over 120 people ([43] Mr McManus witness statement). Ms Barber is aware of the obligations as an employer reflected by the fact that she pays for superannuation and workers compensation for cleaning staff.
At all times, Ms Barber pays all of the outgoings of both businesses and signs the trust cheques although Mr McManus is also a signatory to the trust account subsequent to the agreement. She also receives all of the profits.

The witnesses

Mr Arnold

Mr Arnold is an inspector with DOCEP and the Board and was a witness who gave evidence about doing his job. His evidence was credible and its relevance lay in whether or not there was a notice at the registered office when he visited it. Mr Arnold did not go inside the registered office to see if a notice was displayed inside. He only looked at the outside. Mr Arnold visited Geographe Bay and interviewed Ms Barber. He did that with another inspector, Mr Higgins.
We have no reason to doubt Mr Arnold's evidence.

Ms Barber

Ms Barber gave evidence that she left McManus Hospitality in December 2006 and she continues in the same job running the rental business and the real estate business under Harcourt Realty of Busselton. She and her husband are no longer the caretakers of Geographe Bay and they now live on a separate property.
With respect to the agreement, Ms Barber's evidence was that she saw the payment of the $80 000 as a way to keep her job. She loved Geographe Bay as did her husband, and they wanted to stay there. She never worked out if they got a good deal in paying $80 000, although she did do some quick mental maths in the witness box.
Ms Barber has been a real estate representative for many years. She has efficiently run the real estate business and the rental business. That is not an easy task. It has required her to be efficient and very well organised. It has required her to have bookkeeping and accounting knowledge. And yet in her evidence she could not display any real understanding of what the agreement meant.
We have great difficulty with her evidence. For such a competent, organised person we cannot accept that she did not understand what the agreement meant or that her expressed naiveté is credible. This in our view taints her evidence. Although she conceded that she knew she was signing an agreement to purchase the business, it is difficult to understand that she would have at no stage questioned what was happening when she was mortgaging her house for $80 000. Whether or not she left that to her husband we cannot speculate.
We cannot accept that she believed she was an employee and yet received none of the benefits from her employer that would be usual in a contract of employment situation. Everything that she did seems to have reflected that she thought she owned the business but that she needed Mr McManus' licence to operate it. On many occasions, she referred to using Mr McManus' licence (see [T:45], [T:47], [T:49], [T:54] and [T:59]). At [T:51]; her counsel sought to clarify what she meant in re-examination but her response merely compounded the issue. This we believe reflected her understanding of what was actually occurring at Geographe Bay.
A lot of the evidence was that the clauses in annexure A were included to give the Barbers security, and yet she could not explain how it gave them security.
Ms Barber does all the bookwork for the businesses and for her family ([T:46]) yet had no idea of the taxation implications of the payment of the $80 000 or of the entering into the agreement ([T:45]).
We do not accept her explanations as to what she thought annexure A meant. We do accept, however, that she seemed to be somewhat impressed with Mr McManus despite their long friendship and was under his influence and accepted him as somebody who was acting on all occasions in her best interests.

Mr McManus

Mr McManus was under some pressure in cross‑examination and his evidence was often inconsistent and evasive. For an experienced businessman and a real estate licensee of such longstanding he displayed no understanding of the taxation implications of entering into the agreement and receipt of the $80 000. He could not recall. His excuses as to why not were feeble.
For a man who has employed over 120 people in a real estate business, he did not properly treat, at any stage, Ms Barber as an employee, although consistently throughout his evidence he said she was an employee. His words were entirely inconsistent with his actions. He says that at no stage did he even discuss with his accountant daughter whether Ms Barber was to be treated in the books as an employee and his daughter never questioned him as to why Ms Barber was not treated as an employee in the usual way.
Mr McManus' evidence was that the real estate business and rental business were operated from Geographe Bay but he says that does not mean it was a branch office. He says that because of the nature of the transactions and because of Ms Barber's experience and ability he did not need to closely supervise her. He was somewhat inconsistent on how much time he put into the business. However, he seemed to be of the view that it was one to two hours a month but more in summer, with six weekly or so visits.
Mr McManus never really fully explained what annexure A to the agreement meant. When cross‑examined about the restraint of trade clause he said that it was to protect the Barbers. It did not mean that he would not come down and compete with himself, this being the conclusion if he had sold merely an income stream and not the business. He says it was to protect the Barbers in that he would not do anything that would hurt the income stream and damage how much they would earn from both of the businesses.
With respect to why he included that the licence was to be held in trust he could not give any proper explanation ([T:76]) except to say that it was by way of comfort. He must have known, as a real estate licensee of longstanding, that this was totally meaningless and a total impossibility.
Mr McManus admitted that executors could not have a licence and could not explain why that clause was in annexure A except to say that it related to a liquor licence and was from a sale of hotel annexure. His explanation was again that this was just a comfort for the Barbers, put in at the request of Mr Barber, but he admitted ([T:74]) that an executor could not hold a real estate licence and that in fact it was a useless clause.
Mr McManus emphasised in his evidence and cross‑examination that he was familiar with offers and acceptance forms and sale of business agreements and rather than "go to a lawyer and pay $10 000" he filled out a standard form sale agreement. He said he thinks like a real estate agent. But this transaction, if it was a sale of an income stream, is something very different and it is somewhat difficult to see why a man of his commercial experience, would not have sought some external advice with respect to the agreement or at least advised the Barbers, who he conceded trust him implicitly, to seek some independent advice on it.
Whilst we can see that some of the clauses in annexure A would reflect what would be in the sale of a hotel agreement, that argument merely enforces that this was the sale of a business rather than the sale of an income stream. A man with Mr McManus' commercial experience would have known that this was a completely different transaction and that this could have easily been reflected on the form by saying that what is sold is the income stream rather than the goodwill of the business.
Mr O'Sullivan, counsel for the Board, submitted that Mr McManus was ultimately dishonest and deceitful in his dealings with the Barbers with respect to the $80 000 and the agreement. It was unenforceable.
Mr McManus was insistent that he did not know how the $80 000 had been treated by his daughter for taxation purposes. His daughter was not called as a witness. This amount would have been a large amount of money if it were treated as income or as capital and depending on how it was treated would have quite different tax effects. We do not accept that he did not know that there would be taxation implications with respect to the payment.
We therefore find that Mr McManus was not a credible witness for a businessman and licensee of his experience, who emphasised repeatedly that $80 000 was a very large amount of money in 1998, particularly for the Barbers. We cannot accept that he was totally ignorant of how it was treated and that it was never discussed. His evidence was sometimes evasive and often self‑serving. We do not accept his evidence with respect to critical issues.

The submissions

The Board submits that the agreement was a contract of sale and that Mr McManus was licence lending to enable Ms Barber to run the real estate business.
Mr McManus and Ms Barber submit that the agreement constituted a sale of the income stream and that the evidence shows this to be the case.
The parties say that it is important for us to decide which it is, although in his closing submissions, Mr O'Sullivan says ultimately whether it was the sale of an income stream or an agreement to sell the business, the evidence both documentary and oral shows there was licence lending and that Mr McManus and Ms Barber have breached the Act and Code as alleged by the Board.
Mr Marsh, on behalf of Mr McManus and Ms Barber, counselled the Tribunal to focus on the Statement of Issues, Facts and Contentions and the particulars set out there and that the Board is limited to alleging those matters set out there. He points out that the respondents' Statements of Issues, Facts and Contentions were limited to responding to the Board's statement. He says the Board's statement was limited to matters relating to the agreement and that we should ignore any evidence with respect to how the $80 000 payment was treated for taxation purposes and Ms Barber's status as an employee. However, witness statements of Ms Barber and Mr McManus each state, as they affirmed in oral evidence, that Ms Barber was an employee.
Mr Marsh relies on Cranley v Medical Board of Western Australia (unreported, Supreme Court, WA, Ipp J, No 1211 of 1990, 21 December 1990) as being the authority that as a question of procedural fairness we must ignore that evidence and rely only on matters set out and particularised in the Statement of Issues, Facts and Contentions.
In response, Mr O'Sullivan, whilst pointing out that this Tribunal is not a court of pleading asserted that we must look at the interaction of s 32 of the State Administrative Tribunal Act 2004 (WA), Cranley and the evidence before us and test the fairness of how we treat the allegations and the evidence as part of the "cathedral of fairness".
Mr O'Sullivan goes on to submit that counsel for Ms Barber and Mr McManus is confusing particularisation and evidence. Mr O'Sullivan points out that the Tribunal can hear evidence surrounding the relevant period and in particular at the time of the agreement, evidence of what occurred before the agreement and evidence of what occurred after the agreement. This is because the agreement is central to the Statement of Issues, Facts and Contentions. Mr O'Sullivan says that it is then a matter of evidence to look into what the agreement was and that the Board is entitled to bring the evidence surrounding the agreement, and that the Tribunal looks at the evidence to see if it agrees with the Board's view of what it says the agreement is and how it leads to licence lending. Mr O'Sullivan says that the evidence with respect to tax and employment is merely conduct post the agreement and that it forms part of the matrix of evidence to assist the Tribunal to ascertain what the agreement is and whether it is an income stream as postulated by Ms Barber and Mr McManus. It is therefore a matter of evidence: did the parties, after the agreement, behave consistently or inconsistently with the agreement as they say it should be read?
We accept Mr O'Sullivan's submissions that the evidence with respect to the treatment of the $80 000 for taxation purposes and the employment of Ms Barber is merely evidence that leads to and surrounds the issue of what is the nature of the agreement, which both parties say is an issue central to these proceedings, and also as to whether there was licence lending and using by Mr McManus and Ms Barber.

Intention

Mr McManus and Ms Barber, by their counsel, point out that s 26 and s 39 of the Act both require active intention. Mr Marsh contends that there was no intent in these proceedings to breach s 26 or s 39 because Mr McManus and Ms Barber just did what they had always done. He says that the agreement marked a transition in the relationship but on the other hand the relationship remained the same. The only transition was that now Ms Barber received all of the income and Mr McManus received none.
Mr Marsh tells us, as did Mr McManus and Ms Barber in their witness statements and cross‑examination, that they just continued the relationship that had been occurring prior to Mr McManus taking over the business at Geographe Bay. They wanted to ensure that everything remained the same and the agreement reflects that.
Mr Marsh also points out that the Board was always aware that the trust account was based in Busselton and that Ms Barber operated the real estate business and the rental business from Busselton whilst Mr McManus administered, managed and oversaw it from the registered office. The respondents say that they were always transparent about the arrangement and that the Board could have at any time taken action if there was a problem with the arrangement. Mr Marsh pointed to the evidence of Mr McManus that the auditors had also never pointed out a problem with the arrangements and that when McManus Hospitality changed auditors the new auditor conceded that it was a unique situation.
Mr Marsh, whilst highlighting the wording of the sections that require intention, did not specify to the Tribunal what the intention needed to relate to.
On the other hand, Mr O'Sullivan addressed the issue of what has to be intended. He submitted that the relevance of the state of the law and ignorance of it is not an excuse for the behaviour. With respect to s 39, Mr O'Sullivan submits on behalf of the Board that the intention that is required is to do the act that causes the permitting. He says that this was the intent: to allow Ms Barber to act as she did, which was acting in breach of the Act pursuant to the agreement. Mr O'Sullivan says we must then infer that intent because it was always clear that Mr McManus intended to enter into the agreement. Mr O'Sullivan then says that the surrounding circumstances of whether the agreement was as it was intended on the face or whether it was an income stream for eight years becomes irrelevant. The intent to do the act of entering into the agreement and to allow Ms Barber to act as she was acting, which the Board submits is unlawful, amounts to licence lending and the relevant intention is fulfilled.
Further, Mr O'Sullivan on behalf of the Board says that Ms Barber's conduct clearly shows that she was carrying on the business and not just holding out that she was. She was in fact carrying on the business and her intention was always to enter into the agreement and to continue to do what she had always done, which was in the Board's opinion the carrying on of the business.
With respect to supervision and s 132 and r 6 of the Code, Mr Marsh concedes that supervision was minimal but that that was acceptable in these circumstances because of the unique nature of the real estate business, the small number of sales and the expert ability of Ms Barber. Again he points out that the Board was well aware that all of the business was done by McManus Hospitality through Ms Barber out of Geographe Bay.

Allegations 1 and 5 - Licence lending

Mr Marsh submits there was no licence lending and that the relevant sections of the Act are not breached because there is no intent.
Mr O'Sullivan says there is clear licence lending because the business was sold and all actions post the sale of the business reflected that Ms Barber was carrying on the business.
Mr O'Sullivan points out that all the contract documents for the real estate business that were before us, except for two or three, were dated after the investigation began and that these seemed to be the only documents sent to Mr McManus for his attention. Ms Barber and Mr McManus gave evidence that pre-investigation documents had been sent very regularly to Mr McManus. The only real document from that time was the marketing plan and that bears very little relevance to these proceedings.
Mr O'Sullivan says that the audit fees were paid by Mr McManus and he kept the business name current because that was what he had to do to keep the licence and that was his obligation under the agreement. On the other hand Ms Barber paid all outgoings, was responsible for the trust account, was obliged to ensure compliance with the Act and Code and received all profit. Mr O'Sullivan asserts that Ms Barber and Mr McManus stayed in touch to keep the licence and that was Mr McManus' only reason for doing so.
Therefore, under the Act she was carrying on the real estate business.

Allegation 2

Mr Marsh submits that we should accept Mr McManus' and Ms Barber's evidence that there were certificates clearly displayed on the wall of the home office inside the registered office and that the inspector never entered the premises.
Mr O'Sullivan commented that the evidence was slight but that s 41 of the Act does not specify whether the notice needs to be inside or outside of the registered office.

Allegation 3

Mr Marsh submits that the unique nature of the real estate business meant that it was not a branch office. In any event, the Board was always aware that Ms Barber was performing her role from Geographe Bay. Mr Marsh again noted that the Board knew through the audit process, the address of Geographe Bay and what was occurring there and that the trust accounts were held in Busselton, yet the Board took no action with respect to it.
Mr O'Sullivan submits that depending on what we find with respect to allegation 1, this allegation falls away. In any event, the Board submits that Ms Barber was operating a real estate office from Geographe Bay.

Allegation 4

Section 132 of the Act requires unlicensed assistants to be constantly supervised and controlled by a licensee. It also includes provision for the supervision of officers in a branch office. The parties made in effect no submissions with respect to s 132 and we make our conclusions regarding it further on.
With respect to r 6(1) of the Code, if Ms Barber has breached the Act, then Mr McManus bears the burden of showing us that he properly supervised the agency business and that he took reasonable steps to ensure that his employees comply with the provisions of the Act, the Code and other relevant statutes. We note in the agreement that the obligation to comply with the provisions of the Act and the Code that related to the real estate business was placed on Ms Barber. The evidence given by Mr McManus and Ms Barber regarding supervision has been thoroughly set out. Mr Marsh, on behalf of Ms Barber and Mr McManus conceded in his closing submissions that supervision was minimal.
Rule 6(5) of the Code requires an agent to personally manage the agency businesses full‑time, to carry out the principal managerial duties of the agency business and to frequently attend at the office at which the agency business is conducted. Separate submission were not made with respect to this rule.

The agreement

Mr Marsh says that the agreement did not change the relationship between Mr McManus and Ms Barber but it did mark a change in the way that the income was distributed, by Ms Barber paying it all in advance to Mr McManus for the next eight years. Mr Marsh submits that the agreement is probably void but strongly recommended that the Tribunal accept that what was written did not reflect the actual agreement of the parties.
In his closing submissions, Mr Marsh asked us to look beyond the written terms of the contract because in his view all the evidence points to something very different than an agreement for sale of the business.
On the other hand, Mr O'Sullivan for the Board says the agreement is clearly an agreement for sale. It is a formal document done up in a formal way with a formal annexure, formally signed and it has a formal effect. Mr O'Sullivan concludes that Ms Barber runs the real estate business as her own and that the only thing to change that is some minimal contact with Mr McManus, some material forwarded to him and him maintaining the licence and the business name. He contends that this was for the purposes of maintaining his licence and not for the purposes of the agreement. Mr O'Sullivan submits that the documents before us were nearly all post-investigation by the Board and that should lead us to the conclusion that the agreement reflected a sale of business. He says we can make that inference.

The findings

Ultimately this is a case about licence lending. It is not a case of the interpretation of a written agreement. In our view, whether the agreement reflects the sale of an income stream or the sale of the business is to some extent irrelevant. It is the conduct that surrounds it that leads to the intent relevant for a breach of s 39 or s 26 of the Act.
We are doubtful that we have been told the correct or the entire story regarding the agreement and the operation of the businesses at Geographe Bay.
The agreement, on its face, is for the sale of the business. It mentions nothing about purchasing an income stream. If it were done this way, we would need to accept that it was done out of complete ignorance by a commercially aware businessman and a very experienced and adept sales representative.
We find that the agreement was an agreement for the sale of a business. This is because all the evidence that surrounds it regarding the conduct of Mr McManus and Ms Barber inevitably leads to that conclusion.
The evidence is that nothing changed when Mr McManus took over the business at Geographe Bay. The evidence is also that nothing changed after the agreement was entered into, other than Ms Barber had paid up front, in advance, eight years' worth of commissions that Mr McManus would have received during those eight years. The evidence was a little unclear but it appears that it might well have been half of what Mr McManus would have received. Mr McManus' evidence certainly varied on that point but Ms Barber was quite clear that it would have been about $20 000 per year. Again, this might have varied depending on what the commission rate had been between the parties but that was never clear and a range of evidence was given with respect to it.
The fact that we are asked to believe that neither side gave any consideration to the taxation effects of the agreement reflecting a capital transfer rather than an income stream is incredible. Mr McManus fiercely maintained that Ms Barber was an employee, as she would need to be to avoid a licence lending charge. However she received none of the benefits of an employee: there was no salary, superannuation, workers compensation, group certificates, PAYG deductions or workers compensation.
Ms Barber essentially did everything with respect to the real estate and the rental business. She "operated" and "conducted" the real estate business for the purposes of the Act. She conducted it. She received all the money. She ran the trust accounts although she sent them up for monthly checking or signing off by Mr McManus. We do not have any evidence with respect to how much attention he paid to them.
Everything continued as it had always continued. We find that the conduct constituted a breach of the Act before Mr McManus took it over, before and after the agreement was signed. However Mr McManus never took any positive steps to query it. He just continued as it had always been because Ms Barber so loved Geographe Bay. He tells us that his motives were genuine and were based on trust between the two of them. We are asked to blame the Board for any unlawful conduct occurring, rather than to expect an experienced businessman to inquire into the legality of an operation he acquires (whether or not for payment).
There is nothing in the agreement or in the conduct between the parties that indicates to us that this was the transfer of an income stream. In fact Ms Barber did not understand what an income stream was in her cross‑examination.
The face of the agreement clearly relates to the transfer of a business. The clauses in annexure A, whilst unenforceable, clearly do not envisage a transfer of an income stream.
We therefore find that the agreement was in the nature of the sale of a business. Indeed it has been properly stamped as one for $1200, pursuant to s 75 of the Stamp Act, rather than for nominal duty under Item 13 or Item 6 of the second schedule of the Stamp Act.

Allegation 1

We find that Mr McManus has breached s 39(3) of the Act and that there is therefore cause for disciplinary action against him. We accept Mr O'Sullivan's submissions in this regard. We do not accept Mr McManus' evidence. Mr McManus, in our view, intentionally allowed Ms Barber to use his licence. He did the minimum amount necessary to maintain the licence and the business name. He received some documentation, especially after the investigation began and he organised the audit. He maintained the business name. He visited the premises, we are told, but it is a little unclear as to what was actually discussed and what he did on those visits. Mr McManus consistently said he administered the business from the registered office whilst Ms Barber operated it in Geographe Bay. That is a nonsense to separate the operation of a real estate business in such a way when no other business is carried on and the location of the operation is not a branch office. He lent his licence and he intended to do so.

Allegation 2

Section 41 in our view did not envisage that a registered office would be in a home. However, it is most likely adequate that notice not be permanently displayed on the outside of the house in a situation such as this where the business does not seek to draw passing trade. To do so may well in fact breach local authority by‑laws. On the other hand where a business is in commercial premises then the licence should exhibit in a prominent place the details required by s 41. The Act requires that notice is to be displayed so as to be easily read by persons "entering" therein. No one "entered" the registered office. The Board has not satisfied us on the balance of probabilities that Mr McManus has breached this section of the Act and we therefore dismiss allegation 2.

Allegation 3

This allegation falls away as we have found that Mr McManus sold the real estate business and rental business to Ms Barber and therefore it would have been unnecessary to register a branch office. Whether or not his residence was the appropriate registered office is another issue and is not one before us. The Board does not contest that the details required by s 41 were clearly displayed at Geographe Bay. In any event if we had not found a licence lending situation under allegation 1, we would have found that Geographe Bay operated as a branch office, despite the fact that McManus Hospitality carried out no other business.
We therefore find the alleged breaches of s 37 and s 38 of the Act fall away and are no longer relevant.

Allegation 4

Mr O'Sullivan contended in his opening that this allegation might also fall away if we find the agreement constituted a sale of the business. It is clear to us that there was inadequate supervision. Ms Barber has breached the Act and Mr McManus has not satisfied us on the balance of probabilities that there was adequate supervision. The lack of supervision is evidence leading us to the conclusion of a breach of s 26 and s 39 of the Act which results in a conclusion that Mr McManus was not operating or conducting the business. The alleged breach of r 6(1) and r 6(5) falls away. Section 132 also falls away as there was no branch office at Geographe Bay.

Allegation 5

We find that Ms Barber has breached s 26 of the Act in that she intended to carry on the business of the real estate business despite her protestations that Mr McManus was her boss and she a mere employee. There was no evidence that she was an employee and yet there was substantial evidence that she was aware of the obligations of an employer and the benefits of an employee. All of the evidence referred to with respect to allegation 1 applies here, in that Ms Barber used Mr McManus' licence. We find that the Board has proved on the balance of probabilities to the standard set out in Briginshaw that Ms Barber has breached s 26 of the Act.

Orders

We will convene to hear oral submissions with respect to penalty and costs at a mutually convenient time. We therefore make the following orders:
1.There is proper cause for disciplinary action against Mr McManus.
2.There is proper cause for disciplinary action against Ms Barber.
3.Allegation 1 is proved.
4.Allegation 2 is dismissed.
5.Allegation 3 and allegation 4 fall away.
6.Allegation 5 is proved.

I certify that this and the preceding [117] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE J ECKERT, DEPUTY PRESIDENT