Settlement Agents Supervisory Board and LJ Hooker Settlements Pty Ltd - [2008] WASAT 27

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: VOCATIONAL REGULATION

ACT: SETTLEMENT AGENTS ACT 1981 (WA)

CITATION: SETTLEMENT AGENTS SUPERVISORY BOARD and LJ HOOKER SETTLEMENTS PTY LTD [2008] WASAT 27

MEMBER: JUDGE J CHANEY (ACTING PRESIDENT)
MR M ANDERSON (SENIOR SESSIONAL MEMBER)
MS J TOOMER (SESSIONAL MEMBER)

HEARD: 17 OCTOBER 2007

DELIVERED : 8 FEBRUARY 2008

FILE NO/S: VR 38 of 2007

BETWEEN: SETTLEMENT AGENTS SUPERVISORY BOARD
Applicant
AND
LJ HOOKER SETTLEMENTS PTY LTD
Respondent

Catchwords:

Settlement agents Whether cause for disciplinary action Whether payment of reward for referral of business Unit trust structure Real estate agents issued with units Real estate agents referring business to settlement agency Settlement agency profits distribution in proportion to unit holding Whether issue of units constitutes reward for referring business Whether payments of profits constitutes reward for referring business

Legislation:

Interpretation Act 1984 (WA), s 18, s 19(1)
Real Estate Legislation Amendment Act 1995 (WA)
Settlement Agents Act 1981 (WA), s 3, s 26A, s 44(7), s 44(8)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicant: Mr S O'Sullivan
Respondent: Mr M Zilko SC with Mr E Neilsen

Solicitors:

Applicant: Julia King
Respondent: Nielsen and Co

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

Settlement Agents Supervisory Board and Strand Settlements Pty Ltd [2005] WASAT 350

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

LJ Hooker Settlements operates a business of a settlement agency utilising a unit trust structure. The holders of units in the trust are members of the LJ Hooker group of real estate agents. A proportion of the business of LJ Hooker Settlements is derived from clients who are clients of the unit holders. Each month, unit holders receive a distribution of the profit of the settlement agency in proportion to their unit holdings. The number of units held by each unit holder was allocated on the basis of an assessment made by one of the principals of LJ Hooker Settlements as to the size of the proposed unit holder's real estate business, and as the likely business that might be generated for the settlement agency. That assessment having been made, units were issued, and the unit holder enjoyed the proportionate share of the profits, regardless of the number of settlements actually referred by the unit holder's business.
Section 44(8) of the Settlement Agents Act 1981 (WA) prohibits the payment, directly or indirectly, of a reward to any person referring to a settlement agent any business involving the performance of the functions of a settlement agent. The Settlement Agents Board, who had originally been aware of, and implicitly approved, the business structure of LJ Hooker Settlements, formed the view that the issue of units to unit holders, and the payment of profits to them, constituted a breach of that section of the Act. Accordingly, it bought a number of allegations to the Tribunal that there was cause for disciplinary action against LJ Hooker Settlements by reason of those breaches.
The Tribunal reviewed the evidence as…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] WASAT 27
Decision Date: 8 FEBRUARY 2008

CaseChat Overview and Summary

In the matter of the Settlement Agents Supervisory Board and LJ Hooker Settlements Pty Ltd, the dispute revolved around whether the actions of the settlement agency constituted grounds for disciplinary action. Specifically, the Board questioned whether the payment of profits to real estate agents in proportion to their unit holdings in the agency constituted a reward for referring business to the agency, which would contravene industry regulations. The Federal Court was tasked with determining whether the issuance of units to real estate agents and the subsequent distribution of profits based on those units amounted to a reward for business referral.

The court had to address whether the unit trust structure employed by the settlement agency constituted a reward for the referral of business to the agency. This involved interpreting industry regulations and assessing whether the issuance of units to real estate agents, who then referred business to the agency, constituted a prohibited reward. Additionally, the court needed to determine whether the distribution of profits to these agents based on their unit holdings was a form of reward for the referral of business. The court considered the commercial realities of the arrangement and the intentions behind the unit trust structure.

In its decision, the court found that the issuance of units to real estate agents did not, in itself, constitute a reward for referring business to the agency. However, the distribution of profits to these agents based on their unit holdings was held to be a reward for the referral of business. The court concluded that this arrangement contravened industry regulations, thereby constituting grounds for disciplinary action against the settlement agency. The decision hinged on the commercial realities of the arrangement and the effect of the unit trust structure on business referral practices. The court's findings led to the conclusion that the agency's actions warranted disciplinary measures.

Orders