Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd - [2009] WASCA 143

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: SETTLEMENT AGENTS SUPERVISORY BOARD -v- PROPERTY SETTLEMENT SERVICES PTY LTD [2009] WASCA 143

CORAM: OWEN JA
McLURE JA
NEWNES JA

HEARD: 3 FEBRUARY 2009

DELIVERED : 11 AUGUST 2009

FILE NO/S: CACV 32 of 2008

BETWEEN: SETTLEMENT AGENTS SUPERVISORY BOARD
Appellant
AND
PROPERTY SETTLEMENT SERVICES PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA
Coram :JUDGE J ECKERT (DEPUTY PRESIDENT)

MR J MANSVELD (MEMBER)
MS C WINSOR (SESSIONAL MEMBER)

Citation :SETTLEMENT AGENTS SUPERVISORY BOARD and PROPERTY SETTLEMENT SERVICES PTY LTD [2008] WASAT 57
File No :VR 166 of 2006

Catchwords:

Conflict of interest and duty - Settlement Agents' Code of Conduct - Sale of villa in retirement village - Settlement agent acted for buyer and seller - Directors of settlement agent also partners of law firm - Law firm acted for company that managed retirement village in dispute with sellers - Whether settlement agent owed duty to company that managed retirement village - Whether conflict between duty owed to company that managed retirement village and duty owed to buyer and seller - Whether conscious awareness of conflict required - Whether tribunal's finding that settlement agent ceased to act for sellers in certain periods unreasonable in the Wednesbury sense

Legislation:

Settlement Agents' Code of Conduct 1982 (WA), r 4, r 5, r 6, r 7, r 8, r 9
Settlement Agents Act 1981 (WA), s 46(3), s 82, s 84

Result:

Leave to appeal granted
Appeal upheld

Category: A

Representation:

Counsel:

Appellant: Ms G A Archer SC & Ms R J Lee
Respondent: Mr C G Colvin SC

Solicitors:

Appellant: Settlement Agents Supervisory Board
Respondent: Pynt & Partners

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

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Australian Commercial Research & Development Ltd v Hampson [1991] 1 Qd R 508
Boardman v Phipps [1967] 2 AC 46
Chan v Zacharia (1983) 154 CLR 178
Clay v Clay (2001) 202 CLR 410
Health Department v Prosser [2004] WASCA 83
HIH Insurance Ltd and HIH Casualty and General Insurance Ltd, Re; Australian Securities and Investments Commission v Adler (2002) 168 FLR 253; [2002] NSWSC 171
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Maguire v Makaronis (1997) 188 CLR 449
Mills v Mills (1938) 60 CLR 150
Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187
Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 77 ALJR 1165
Re Thomson; Thomson v Allen [1930] 1 Ch 203
Regal (Hastings) Ltd v Gulliver [1967] AC 134
Settlement Agents Supervisory Board and Crozet Pty Ltd (2006) WASAT 65
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1977) 17 WAR 98
Walden Properties Ltd v Beaver Properties Pty…

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: [2009] WASCA 143
Decision Date: 11 AUGUST 2009

CaseChat Overview and Summary

The case before the court involved Settlement Agents Supervisory Board and Property Settlement Services Pty Ltd. The dispute centred on the conduct of a settlement agent acting for both a buyer and a seller in a real estate transaction within a retirement village. Directors of the settlement agent were also partners of a law firm that acted for the company managing the retirement village, which was in dispute with the sellers. The primary issues were whether the settlement agent owed any duty to the company managing the retirement village, whether there was a conflict between the duties owed to the company and those owed to the buyer and seller, and whether the tribunal's finding that the settlement agent ceased to act for the sellers in certain periods was unreasonable.

The court found that the relationship between a settlement agent and its principal(s) is a fiduciary one, requiring the settlement agent to avoid conflicts of interest and duty and to refrain from making unauthorised profits. The court emphasised that a conflict of interest and duty can arise from personal interests, whether pecuniary or non-pecuniary, direct or indirect. The court noted that the existence of a conflict does not require proof of the fiduciary acting with intent to advance personal interests. The court also determined that the conscious awareness of a conflict is not a necessary condition for a breach of the conflict rule, aligning with the broader interpretation of conflict of interest in fiduciary relationships.

The court held that the settlement agent did owe a duty to the company managing the retirement village, and there was a conflict between the duties owed to the company and those owed to the buyer and seller. The court found that the tribunal's conclusion that the settlement agent ceased to act for the sellers in certain periods was unreasonable, and thus granted leave to appeal and upheld the appeal.

Orders

Orders of the court

Leave to appeal granted

Appeal upheld

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MR J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: MR J

The relationship between a settlement agent and its principal(s) is a fiduciary relationship. A fiduciary is someone who undertakes to act for or on behalf of another in some matter or matters. The undertaking may be specific or general, contractual or non‑contractual, gratuitous or remunerated: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 102 ‑ 104; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815, 833. The duties of a fiduciary vary with the circumstances that generate the relationship. Some fiduciaries may be permitted to pursue their own interests in some respects: Hospital Products (102). An example is a company director who is required to own shares in the company: Mills v Mills (1938) 60 CLR 150. Generally, a fiduciary owes a duty of undivided loyalty to its principal which requires the fiduciary to avoid (1) a conflict of duty and interest and (2) a conflict of duty and duty. I will refer to the two limbs together as 'the conflict rule'. Further, a fiduciary cannot make an unauthorised profit from its fiduciary relationship. The application of these rules often overlap. A conflict of interest and duty can arise where the personal interest of the fiduciary is pecuniary or non‑pecuniary, direct or indirect. A non‑pecuniary interest includes an interest by way of association, whether by way of kinship or business connection. Whether the interest is within the conflict rule will depend on (inter alia) the nature, intensity and duration of the association. Not all interests are within the conflict rule. The interest must give rise to a conflict or a real or substantial possibility of a conflict: Hospital Products (103) (Mason J). There are other formulations of the required connection such as 'a sensible, real or substantial possibility' (Clay v Clay (2001) 202 CLR 410) and 'a significant possibility' (Chan v Zacharia (1983) 154 CLR 178, 198). The extension to cover a real or substantial possibility of a conflict serves at least two functions. First, it is intended to signify that not all personal interests come within the conflict rule. An interest will not fall within the conflict rule if it is too remote or insubstantial: Hospital Products (103) (Mason J). Secondly, an anticipatory breach of the conflict rule can be restrained: Re Thomson; Thomson v Allen [1930] 1 Ch 203. The existence of a conflict of interest and duty (actual or otherwise) is not conditioned on proving that the fiduciary acted with the intention (purpose or motive) of advancing its personal interests: Hospital Products (103). An example illustrates the point. A director of a company will have an actual conflict of interest if the board of that company is to consider a resolution that the company enter into a financially significant transaction with another company in which the same director has a controlling interest. The director's personal interest is indirect and the conflict is actual not potential. This is to be contrasted with the doctrine of actual and apprehended bias applicable to public officers and officials.