SETTLEMENT AGENTS SUPERVISORY BOARD and LJ HOOKER SETTLEMENTS PTY LTD
[2008] WASAT 27 (S)
•24 APRIL 2008
| JURISDICTION | : | STATE ADMINISTRATIVE TRIBUNAL |
| STREAM | : VOCATIONAL REGULATION | ||
| ACT |
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| CITATION |
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| MEMBER |
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| HEARD |
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| DELIVERED |
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| SUPPLEMENTARY | |||
| DECISION |
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| FILE NO/S |
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| BETWEEN |
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LJ HOOKER SETTLEMENTS PTY LTD
Respondent
Catchwords:
Costs - Professional disciplinary proceedings - Settlement agents - Whether Tribunal's jurisdiction exhausted by making of substantive orders - Principles to be applied - Whether reasonable basis for proceedings - Whether proceedings brought in good faith
[2008] WASAT 27 (S)
Legislation:
Rules of the Supreme Court 1971 (WA), O 59 r 9
Settlement Agents Act 1981 (WA), s 44
State Administrative Tribunal Act 2004 (WA), s 87(2)
Result:
The respondent's claim for costs is dismissed
Category: B
Representation:
Counsel:
| Applicant | : | Mr S O'Sullivan |
| Respondent | : | Mr E Nielsen |
Solicitors:
| Applicant | : | Julia King |
| Respondent | : | Nielsen and Co |
Case(s) referred to in decision(s):
Lakes Action Group Association (Incorporated) and Shire of Northam & Anor
[2005] WASAT 185 (S)
Lewandowski & Ors v Lovell, unreported, FCt SCt of WA, Library No 960310;
14 June 1996
Motor Vehicle Industry Board and Dawson [2006] WASAT 8
Re Sanchez and Comcare (1997) 48 ALD 785
Settlement Agents Supervisory Board and LJ Hooker Settlements Pty Ltd [2008]
WASAT 27
Settlement Agents Supervisory Board and Strand Settlements Pty Ltd [2005]
WASAT 350
Telescourt v Commonwealth (1991) 29 FCR 227
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd & Ors (2006) 33
WAR 1
[2008] WASAT 27 (S)
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
1 In February 2008, the Tribunal dismissed a number of complaints
against LJ Hooker Settlements in relation to alleged breaches of s 44 of the Settlement Agents Act 1981 (WA). Following delivery of the Tribunal's reasons for decision, LJ Hooker Settlements applied for an order that the Board pay its costs of the proceedings. LJ Hooker Settlements contended that the complaints lacked any reasonable basis, and were not brought in good faith so that circumstances existed which justified an unusual order that the regulatory body pay the costs of the unsuccessful proceedings.
2 The Board accepted that it had used the proceedings to test an
uncertain area of the law, but contended that it brought the proceedings in good faith and on the basis that it believed that the factual circumstances did give rise to a breach of the Act. It therefore contended that there was no basis to depart from the usual costs position in the Tribunal, namely that each party bears its own costs. The Tribunal expressed a degree of concern at the way in which the Board had instituted and maintained the proceedings, but did not consider that there was an absence of good faith in the Board's conduct, or that the proceedings had no reasonable prospect of success. Having reached that conclusion, the Tribunal determined that there should be no order for costs in favour of the respondent.
Introduction
3 By reasons delivered and orders made on 8 February 2008, the
Tribunal dismissed 11 allegations of breaches by LJ Hooker Settlements of s 44(8) of the Settlement Agents Act 1981 (WA) (SA Act) – see Settlement Agents Supervisory Board and LJ Hooker Settlements Pty Ltd [2008] WASAT 27 (the Tribunal's substantive reasons). In accordance with its common practice, the Tribunal posted the reasons for decision, together with an order dismissing the application, to the parties, and did not require the parties to attend for delivery of the decision.
4 Not long after delivery of the reasons, the respondent advised the
Tribunal that it wished to apply for an order that the Board pay its costs of the proceedings, and the matter was set down for an appointment for the Tribunal to hear submissions on the question of costs.
5 The respondent based its application upon the proposition that the
application lacked any reasonable basis, or was not made in good faith.
[2008] WASAT 27 (S)
The Board denied both of those assertions, and in addition submitted that, having delivered its reasons for decision and its order disposing of the application, the Tribunal's jurisdiction was exhausted so that it was no longer open for it to consider the respondent's application for costs.
Is the Tribunal's jurisdiction exhausted?
6 The question as to whether or not it is open to the Tribunal to
entertain an application for costs where it has made substantive orders disposing of the proceedings has been previously dealt with by the Tribunal in Lakes Action Group Association (Incorporated) and Shire of Northam & Anor [2005] WASAT 185 (S) at [11] - [19]. The Tribunal there made reference to the decision in Re Sanchez and Comcare (1997) 48 ALD 785 where circumstances similar to the present arose in the Administrative Appeals Tribunal. In that decision, the Senior Member referred to an earlier unreported decision of the AAT where it was said:
"We also consider that in any matters arising under this Act [being the Safety, Rehabilitation and Compensation Act 1988 (Cth)] it should be assumed that the question of costs is reserved. In order to save costs of the Tribunal and the parties, the Tribunal adopts the practice of adopting its written decisions in the absence of the parties. Thus, the parties have no opportunity at the point of delivery to make submissions as to costs. Unless the Tribunal deals with the costs question in its reasons, it should be assumed that the issue is reserved and may be raised by either party."
7 The Tribunal also concluded that the power to award costs under
s 87(2) of the State Administrative Tribunal Act 2004 (WA) is a discrete head of power which remained open to be exercised notwithstanding that a decision on the substantial merits of the case had been delivered – see Telescourt v Commonwealth (1991) 29 FCR 227 at 237; Lewandowski & Ors v Lovell, unreported, FCt SCt of WA, Library No 960310; 14 June 1996 per Murray J.
8 On the basis explained in the Lakes Action Group decision, we are of the view that it remains open for a party to seek an order for the payment of its costs, notwithstanding that substantive orders have been made in the proceedings, where the question of costs of the proceedings has not already been dealt with.
[2008] WASAT 27 (S)
Applicable principles
9 The parties agreed that the approach to be taken on the question of
costs was that explained by the President of the Tribunal in Motor Vehicle Industry Board and Dawson [2006] WASAT 8 at [44] – [48] where he said:
"Where proceedings are commenced by a vocational regulatory body (such as the Board) against a person affected by a vocational Act (such as Mr Dawson), the Tribunal will usually make an order for costs in favour of the vocational regulatory body where it is successful in obtaining an order in the proceedings. In Medical Board of Western Australia and Roberman [2005] WASAT 81 (S) at [30] the Tribunal (Judge John A Chaney SC, Deputy President, presiding member) observed in relation to s 87(2) that:
'Where a regulatory authority successfully brings a complaint of conduct which, if proved, justifies disciplinary action by the Tribunal, there will usually be a strong case for the exercise of that discretion in favour of the regulatory body. That is because such bodies perform a function which promotes the public interest, and usually with limited resources. The financial burden of bringing disciplinary action if the body had no capacity to recover some or all of its costs may be such as to provide a disincentive to bring disciplinary action, or when brought, to ensure that the allegations against the practitioner concerned are properly and thoroughly presented. It is in the public interest that such bodies have an expectation that, if the allegations are made out, the offending professional will meet or at least contribute to the costs incurred in bringing the application. The question of an award of costs is, of course, a matter of discretion to be exercised in the circumstances of each case.'
The Tribunal concurs with those observations.
In the Roberman case, however, the Medical Board of Western Australia was unsuccessful in relation to some of the allegations made against the medical practitioner. For that reason the Tribunal in its discretion considered it was appropriate that the practitioner only pay one-third of the costs of the Medical Board. In so doing the Tribunal implicitly recognised that a
[2008] WASAT 27 (S)
person affected by proceedings instituted by a vocational regulatory body should not have to bear the costs of the proceedings or contribute to the costs of those part of the proceedings which were not successfully maintained.
The decision in the Roberman case does not support the view, however, that an affected person in such proceedings is entitled to an award of costs for the portion of the proceedings in which they were successful. If this approach were to be adopted, vocational regulatory bodies may well feel inhibited in commencing proceedings that should be commenced and maintained in the public interest even though "success" cannot be guaranteed. Consequently, the Tribunal considers that, ordinarily, unless it can be demonstrated that an application made by a vocational regulatory body lacked any reasonable basis or was not made in good faith, costs should not be awarded against a vocational regulatory body simply because the application was not successful.
Of course, in every case the Tribunal retains the discretion under s 87(2) of the SAT Act to order costs in the circumstances of the case."
10 The respondent submits that either or both of the factors which may
lead to a costs order against a vocational regulatory body are present in
this case.
The background to the proceedings
The respondent contends that a number of factors demonstrate a lack of reasonable prospects of success or a lack of good faith. They are that:
• The Board's position at the hearing was contrary to the advice of its own senior counsel obtained some years ago; • It did not engage in a proper process of conferral prior to commencing proceedings; • It changed its own position on the proper construction of s 44 from that taken in earlier proceedings before the Tribunal in Settlement Agents Supervisory Board and Strand Settlements Pty Ltd [2005] WASAT 350; • It was never in the public interest to bring the proceedings.
[2008] WASAT 27 (S)
12 An affidavit was filed in support of the application for costs. It
annexed various documents. One of those was an extract from a publication by the Board entitled Settlement Agents News dated 1 March 1995. An article in that document deals with reward for referrals. It asserts that "if a licensee distributes profits according to the proportions or ratios in which unit holders or shareholders referred business … such payment would clearly be in breach of s 44(8) of the Act." It contains a "Board direction" which reads:
"Those licensees who use business structures such as unit trusts, whereby the benefit or reward payable to a person is determined according to the proportional ratio of business referred by that person will be acting in contravention of s 44(8) of the Settlement Agents Act 1981 (WA) and will therefore be liable to prosecution."
13 The institution of these proceedings was preceded by correspondence
between the Board and LJ Hooker Settlements or its solicitors. As we observed at [28] of our substantive reasons for decision, it appears that the Board's initial enquiries were sparked by its receipt of certain documents from an anonymous source. By letter dated 27 February 2006, the Board sought LJ Hooker Settlements' comments in relation to those documents. The arrangements outlined in those documents, if acted upon, would suggest a breach of s 44(8).
14 By letter dated 9 March 2006, LJ Hooker Settlements responded
explaining that the documents were "internal" and "for our budgeting purposes only" and did not relate to the actual allocation of units. The letter explained the arrangements in relation to the allotment of units broadly in accordance with what the Tribunal ultimately accepted as the arrangement.
15 In September 2006, LJ Hooker Settlements' solicitor wrote to the
Board. He advised that an opinion had been obtained from senior counsel and advised that senior counsel's view, in light of the decision of Strand Settlements, was that no breach of the Act was occurring. The letter reiterated that the documents obtained by the Board had not been acted upon and were "simply an internal document for discussion". The letter expressed the hope that the advice of senior counsel would clarify the matter sufficiently to resolve the Board's concern.
16 It is apparent that the Board did not respond, and on
9 February 2007, the solicitor again wrote to the Board. It is also apparent
[2008] WASAT 27 (S)
that the Board had continued investigation of the matter and apparently had made suggestions to Ms Hryb, the manager of LJ Hooker Settlements, to the effect that it intended to commence proceedings. The solicitor complained that the Board had not sought any clarification of the matters dealt with in his earlier letter of 12 September 2006. In the course of investigations, the Board also obtained copies of monthly statements to unit holders containing references to monthly referral targets - see [32] - [34] of our substantive reasons.
On 15 February 2007, the Board responded to the solicitor but did no more than acknowledge receipt of the correspondence. In March 2007, these proceedings were commenced. Between March and October 2007, when the matter was heard, various procedural steps were taken by the parties to prepare the matter for hearing. Further investigations were also carried out, including an interview with Ms Hryb which revealed information about cancellation of LJ Hooker Bentley's unit holding – see [36] of our substantive reasons.
18 On 7 August 2007, LJ Hooker Settlements' solicitor wrote to the
Board seeking copies of the opinions referred to in the Settlement Agents News of 1 March 1995, and of an opinion referred to in a direction of the Board made in July 2001. On 30 August 2007, the Board's solicitor replied, and declined to provide the opinions requested on the basis that legal professional privilege had not been waived and also claiming public interest immunity from disclosure, although the basis of that claim was not explained. Some further correspondence was exchanged between the parties in which they maintained their respective positions as to whether or not the opinions should be disclosed, but the respondent did not seek an order for their disclosure from the Tribunal.
Advice of senior counsel
19 It would appear from the terms of the Settlement Agents News of March 1995 that the advice obtained by the Board at that time was consistent with the position which it adopted in the Strand Settlements case, and with the construction of s 44 of the SA Act which we have adopted in our substantive reasons. We are not, however, aware of the detail of the particular advice provided. In the context of the present proceedings, we have not been called upon to determine whether or not the claim for legal professional privilege or public interest immunity was properly maintained. We proceed, therefore, on the assumption that it was.
[2008] WASAT 27 (S)
20 Whatever may have been the content of the advice to the Board in
1995, there is nothing to suggest that the Board did not genuinely consider that the view which it urged upon the Tribunal as to the proper construction of s 44(8) was correct, nor is there anything to suggest that the approach to the proper construction of the section was not in accordance with its current legal advice. The fact that the Board has instituted an appeal against the Tribunal's decision suggests the contrary.
21 In the circumstances, we do not draw the conclusion that the Board's
position in these proceedings was contrary to advice upon which it was
acting.
Conferral
22 The respondent contends that the Board has demonstrated an absence
of good faith by its failure to respond to correspondence regarding the advice obtained from LJ Hooker Settlements' senior counsel, and by its refusal to disclose its own legal advice. By way of analogy, the respondent refers to the comments of Martin CJ in Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd & Ors (2006) 33 WAR 1. The comments in the Youlden Enterprises decision, because they concerned the obligations of practitioners under O 59 r 9 of the Rules of the Supreme Court 1971 (WA) and relate to interlocutory proceedings in that Court, are of marginal relevance to the present proceedings. Having said that, however, we do consider that the approach by the Board to these proceedings has been less than ideal. It is desirable that, where appropriate, regulatory authorities engage in an open exchange of information and views before embarking on proceedings in the Tribunal.
23 It is apparent that the respondent has, from the time it initially learnt
of the Board's enquiry, provided timely and frank responses to the Board's correspondence. It has sought to pursue dialogue with the Board with a view to avoiding these proceedings. The Board, on the other hand, appears to have taken a somewhat adversarial approach in a context where the Board appears to be changing its previously published approach to the application of s 44 of the SA Act, and where it is dealing with a licensee whose business structure has been fully disclosed to the Board since it first obtained its licence. We consider that approach unfortunate, particularly where, as its counsel acknowledged, the Board used the proceedings to test an uncertain area of the law. It is reasonable to expect that a Board representing the interests of its members would adopt an open and transparent approach with those members against which it proposes to conduct a "test case".
[2008] WASAT 27 (S)
24 While we consider that the Board can be fairly criticised for its
approach, we do not consider that the Board's conduct demonstrates an absence of good faith. It cannot be said that the Board was not entitled to conduct itself in the way that it did, and the Tribunal is not privy to advice it may have received, or reasons for decisions it may have made as to the appropriate manner of conducting its investigation. It may be that there is a reasonable justification for the more adversarial approach apparently taken by the Board.
Change of position
25 In our substantive reasons, we made the observation that the position
adopted by the Board as to the proper interpretation of s 44(8) of the SA Act in these proceedings appeared different from the position which it adopted in Strand Settlements. Strand Settlements concerned a situation where the return to a unit holder was variable and depended upon the number of referrals by that unit holder from time to time. It was thus not strictly necessary to consider, in that case, whether a return based only upon the number of units held and unaffected by the number of referrals made would breach s 44(8). It is apparent that the case proceeded on the assumption that it would not, and the Tribunal made observations to that effect. It was not, however, necessary for the Board, in that case, to specifically address the question which ultimately arose in these proceedings.
26 It is apparent that the Board's position in relation to the proper
construction of s 44(8) has changed over time. That is apparent from the terms of the Settlement Agents News published in 1995, the approval of the business structure, including knowledge of the identity of unit holders, by the Board in relation to LJ Hooker Settlements, and the position apparently assumed by the Board in Strand Settlements. The Board's initial investigation in this case was prompted by the anonymous documents which suggested a return to unit holders that would change on the basis on the number of referrals by that unit holder. The "monthly targets", and the situation with LJ Hooker Bentley, which came to light during the course of the investigation, were similarly suggestive of a breach similar to that in Strand Settlements. By the time the matter came to hearing, however, the allegations were broadened to the proposition that the original issue of units, and the return based purely on the number of units held, constituted a breach of s 44(8).
27 When precisely that change in approach manifested itself is not clear.
From the Tribunal's perspective it was not until the hearing commenced
[2008] WASAT 27 (S)
that we appreciated that the Board's approach to the interpretation of s 44(8) was different from the position assumed in Strand Settlements. Given the lack of open communication by the Board with the respondent, the respondent's submission that the Board has not shown good faith in its conduct of the proceedings can be understood. As we have indicated, however, we accept that the contentions advanced by the Board at the hearing represented its genuine view as to the construction of the relevant section. Having formed a view as to that matter, we do not consider that the Board acted with an absence of good faith in pursuing that view in these proceedings. It is the proper function of the Board to pursue what it considers to be breaches of the SA Act by settlement agents. Notwithstanding that conclusion we are of the view that, where a vocational regulatory body subjects a member of the vocation concerned to the expense of an involvement in a "test case", the regulator should more openly communicate its intentions to the member and be more receptive to dialogue with the member than occurred in this case.
Public interest
28 We do not accept that it can be said that the Board's application had
no prospect of success or that there was no reasonable basis for bringing the proceedings. There is a clear tension between the object and purpose of s 44(8) as we have identified it (see [50] in our substantive reasons) and the implicit acceptance in the SA Act of real estate agents having interests in settlement agencies (see [46] - [47] of our substantive reasons). While we have rejected the arguments of the Board in relation to the proper construction of s 44(8), we did so only after careful consideration. We do not consider that the Board's arguments were without merit.
29 While we have been critical of the manner in which the Board dealt
with the respondent, we accept that the Board had proper regard to the public interest in seeking to clarify the question as to the proper construction of s 44(8) of the SA Act.
Conclusion
30 It follows that, in our view, the proceedings were not brought with a
lack of good faith, and were not without reasonable prospects of success. For the reasons explained in Motor Vehicle Industry Board and Dawson, we dismiss the application for costs.
[2008] WASAT 27 (S)
Order
The respondent's claim for costs is dismissed.
I certify that this and the preceding [30] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE J CHANEY, DEPUTY PRESIDENT
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