REAL ESTATE AND BUSINESS AGENTS SUPERVISORY BOARD -v- ESPANOL HOLDINGS PTY LTD (in liq) & ANOR [2007] WASCA 67 (26 March 2007)

"In dismissing the applicants' claim, the [Board] relied upon defences available under s 118 of the Act and in particular cl 3 and cl 8 of a Deed of Release entered into by the applicants to settle an action in the Supreme Court of Western Australia.

The [Board] also relied upon evidence and factual findings made by an Inquiry conducted by the [Board] concerning inter alia, the conduct of the applicants.

The Tribunal found that the [Board] erred in applying [the] defence available under s 118 of the Act and relying on the findings of the Inquiry.

The Tribunal ordered that the claim be referred back to the [Board] for re-consideration in accordance with the Tribunal's decision."

3 The Tribunal set out, at [25] of its reasons, the issues which it considered required determination in the review:

"1) was the [Board] entitled to rely upon cl 3 and cl 8 of the Deed to dismiss the claim? (Issue 1)

1. was the [Board] entitled to rely upon the factual findings of the Inquiry Board reasons to determine the claim? (Issue 2)
2. if yes to (2), did the conduct of Ortin sever the causal connection required by s 116(1) of the Act; that is, were Espanol and Ortin precluded from being persons who suffered pecuniary loss or loss of property by reason of any defalcation by a licensee within the meaning of s 116(1) of the Act? (Issue 3)"

4 On 27 January 2007, the Tribunal made these orders:

"1. The order made by the Real Estate and Business Agents Supervisory Board on 25 July 2006 be set aside.

1. The matter be referred back to the Board for re hearing and determination in accordance with the decision of the Tribunal in relation to issues (1), (2) and (3).
2. The re hearing take place before a differently constituted Board.
3. The Tribunal will hear the parties as to the question of costs."

5 On 9 February 2007, the Board filed an appeal notice against pars 1 - 3 of the Tribunal's orders.

6 Also, on 9 February 2007, the Board filed an application in the appeal, relevantly, for an order that pars 2 and 3 of the Tribunal's orders be stayed pending the determination of the appeal. Further, on 9 February 2007 the Board filed an affidavit of Julia Lynne King, sworn 8 February 2007, in support of its application for a stay.

7 On 16 February 2007, the Court made orders, on the papers, as to the filing and service of the Board's grounds of appeal and each party's written submissions in relation to the application for a stay, and listed the application for hearing on 23 February 2007.

(a) its grounds of appeal;

(b) a further affidavit of Ms King, sworn 20 February 2007, in support of the application for a stay; and

(c) written submissions relating to the application.

9 On 21 February 2007, the respondents filed affidavits of the second respondent and Lisa Maree Back, each sworn 21 February 2007, in opposition to the Board's application for a stay. On 22 February 2007, the respondents filed written submissions relating to the application.

10 Order 59 r 9 of the Rules of the Supreme Court 1971 (WA) provides:

"(1) No order shall be made on an application in chambers unless the application was filed with a memorandum stating -

(a) that the parties have conferred to try to resolve the matters giving rise to the application; and

(b) the matters that remain in issue between the parties.

(2) The Court may waive the operation of paragraph (1) in a case of urgency or for other good reason."

11 In a circular to practitioners dated 31 January 2006, in relation to O 59 r 9, Master Sanderson stated, relevantly:

1. O 59 r 9 requires that parties confer in the sense of there being an exchange of views, whether oral or in writing, for the purpose of trying to resolve the matters in issue. Conferral is required no matter how unlikely it is that the parties will reach agreement or even narrow the issues between them.
2. Conferral must occur shortly prior to the making of an application and must relate to the application itself rather than simply to the issue that is the subject of the application. The giving of notice of an intention to make an application is not conferral.
3. Practitioners are encouraged to confer either face to face or by telephone. While an exchange of correspondence will often be part of the conferral process it will only be where face to face or telephone contact is not feasible that reliance simply upon written communication can be justified.

1. A failure to confer or a failure to file a memorandum of conferral may result in adverse costs orders being made against those parties who are at fault."

12 In Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161, Martin CJ said, at [3] - [5]:

"Before dealing with this particular case, I would also like to make some general observations about O 59 r 9. As will be abundantly apparent from any sensible reading of its terms, its clear purpose is to reduce interlocutory disputes and avoid adverse consequences of the kind to which I have just referred by requiring the representatives of the parties to confer with a view to resolving the interlocutory dispute before the Court is called upon to entertain and resolve it.

In far too many cases, the Rule is complied with in form rather than substance. That is because too often the representatives of the parties consider that the exchange of furious correspondence is an adequate substitute for meaningful conferral in relation to the substance of the interlocutory dispute. This case provides an unfortunate example of that phenomenon.

For my part, I favour an approach to the construction of the Rule which would lead to the conclusion that it has not been substantively complied with unless and until legal representatives of the parties, with authority to resolve the particular interlocutory dispute in question, have orally conferred in respect of the substantive issues that arise in relation to that dispute, either by telephone or by meeting face to face. It follows that any legal representative who declines or refuses to participate in such a process of conferral, without good cause, is at risk of being ordered to pay the costs which flow from that refusal personally. There may, of course, be cases in which a departure from this approach to the application of O 59 r 9 is justified, but, in my view, those cases will be exceptional."

13 In the present case, the Board's solicitor, Ms King, certified in the application for a stay that:

"The parties to this application have conferred about the issues giving rise to this application and have not resolved them."

14 Correspondence annexed to Ms King's affidavit sworn 20 February 2007 reveals the following:

(a) By letter dated 5 February 2007, Ms King informed the respondents' solicitors that the Board intended to appeal against the Tribunal's orders and also said, relevantly:

"As the [Board] is obliged to advise the Court whether stay proceedings will be sought, would you please advise in writing by 12 noon on Wednesday 7 February 2007 if your clients will agree to the postponement of the rehearing listed before the [Board] on 29 March 2007."

(b) By letter dated 6 February 2007, the respondents' solicitors informed Ms King, relevantly:

"You have requested that our clients agree to the re-hearing listed before the Board on 29 March 2007 being postponed (presumably until after determination of the foreshadowed appeal). In your facsimile you also foreshadow that you will make an application to the Court of Appeal for a stay of the order made by the State Administrative Tribunal ('SAT') on 12 January 2007 if our clients do not agree to the hearing listed on 29 March 2007 being postponed. Section 106 of the State Administrative Tribunal Act 2004 (the 'Act') provides that, subject to the Court of Appeal staying the operation of the SAT's order pending determination of any appeal, the lodgement of an appeal does not affect the operation of the SAT's decision. We do not consider the operation of the SAT's order will be stayed as a matter of course (as you seem to suggest it will), especially given that the foreshadowed appeal will probably not be determined prior to the complete re-hearing of our clients' claim against the fidelity guarantee fund. You have not even identified the grounds of appeal from the decision of the SAT. In these circumstances, our clients cannot properly consider the Board's request for a stay. Please identify the grounds upon which the Board intends to appeal the SAT's order. We note in that regard that section 105(2) of the Act provides that an appeal can only be brought on a question of law. Please also identify the basis on which the Board considers a stay is warranted and who on behalf of 'the Board' determined the foreshadowed appeal should be lodged.

Our clients require all issues raised in this letter above be responded to so that they can properly consider their position on whether they will consent to a stay."

(c) By letter dated 9 February 2007, Ms King sent to the respondents' solicitors "by way of service" copies of the Board's appeal notice, application for a stay and Ms King's affidavit sworn 8 February 2007. In the letter, she said, relevantly:

"Given the circumstances, and as you will see from the enclosed copy letter to the Supreme Court dated 9 February 2007, we have requested that the application in the appeal be listed before the Court as a matter of urgency. In the meantime, we would be grateful if you could indicate whether or not your clients consent to the orders sought in the application."

(d) By letter dated 9 February 2007, the respondents' solicitors wrote to Ms King, relevantly, as follows:

" ... In our facsimile of 6 February 2007 we requested you respond to each of the matters raised therein so as to properly enable our clients to consider whether to agree to an adjournment. You have not responded to each of those matters, namely:

1. the reason(s) why the Board considers a stay is warranted; and
2. who on behalf of 'the Board' determined that the foreshadowed appeal should be lodged.

Once we receive the requested response from you to our facsimile of 6 February 2007, we will inform you whether our client will agree to an adjournment of the hearing listed on 29 March 2007."

(e) By letter dated 12 February 2007, Ms King replied to the respondents' solicitors' letter dated 9 February 2007:

" ...

You have requested the following information:

1. the reasons why the Board considers a stay is warranted; and
2. who on behalf of the Board determined the foreshadowed appeal should be lodged.

In respect of point one, please see the application in an appeal and supporting affidavit in the above matter served on your office on 9 February 2007.

In respect of point two, please note that the Board itself at the Board meeting of 19 January 2007 made the decision that the above appeal should be instituted.

..."

15 Counsel for each of the parties informed me that on 29 March 2007 there will be a directions hearing before the Board in relation to the Tribunal's order that the Board re-hear and determine issues (1), (2) and (3) in accordance with the Tribunal's decision.

16 Counsel for the Board explained, in the course of his submissions, that the Board had sought a stay for these reasons:

"... the orders which were sought to be stayed were orders relating to the rehearing of the respondents' application to be compensated under the Fidelity Guarantee Fund ...

...

The difficulty in this case is that the [Board] is the body to whom the matter was sent back for rehearing, so the [Board] was in the difficult position of having orders that it rehear the matter in circumstances in which it might be seen to be cutting across those orders for it to of its own motion not list the matter pending the determination of [the application for leave to appeal to this Court]. ..."

17 The Board's counsel referred to Ms King's affidavit sworn 8 February 2007. In pars 22 to 25 of that affidavit, Ms King states:

"22. The Board is appealing the decision and orders of the Tribunal in VR 146 of 2006 delivered on 12 January 2007 on the basis that the Tribunal has made an error of law. The purpose of the Board's stay application is to prevent unnecessary costs and ensure the Fidelity Guarantee Fund is administered in accordance with the Real Estate and Business Agents Act 1978 ('the Act') while the appeal is pending.

1. The re-hearing before the Board required by order 2 and 3 of the orders of the Tribunal will involve significant expense (including legal expense) for the Board (and probably Espanol and Ms Ortin), given the nature of the claim by Espanol and Ms Ortin and the volume of evidence likely to be adduced at a full hearing of the matter.
2. Further, if Espanol and Ms Ortin are successful in their claim based on the rehearing of the issues as outlined in the Tribunal, and the Board is subsequently successful in its appeal, the Board and the Fidelity Guarantee Fund may suffer a financial loss in paying out the claim on an erroneous basis.
3. If the [sic] orders 2 and 3 of the Tribunal are not stayed and the Board is successful in this appeal, I verily believe the Board and the Fidelity Guarantee Fund may suffer serious financial loss."

18 The second respondent deposes, in her affidavit sworn 21 February 2007, to the financial circumstances of the first and second respondents. The first respondent is in liquidation and it appears that its liabilities substantially exceed its assets. In pars 10 - 12 of her affidavit, the second respondent states:

"10. I have struggled financially since the events the subject of my claim against the Fidelity Guarantee Fund occurred. I live in State Housing accommodation, for which I pay rent. I have no personal asset of any real value. I no longer have a working car and have no savings. I drive my son's car. In addition to the debts I owe creditors as a result of the events the subject of my claim against the Fidelity Guarantee Fund, I also owe my brother $42,500. My solicitors, Solomon Brothers, act for me on a contingency fees basis - i.e. I will pay their standard fees only if my Fidelity Guarantee Fund claim succeeds.

1. The litigation in which I have been involved for the past 8 years has caused me enormous stress. As is referred to above, I have endured significant financial hardship during this time and continue to struggle financially. I have suffered with depression throughout that time and the litigation and my resultant depression has placed strain on my relationships with family and friends. I therefore wish to have the Fidelity Guarantee Fund claims finalised at the earliest possible time.
2. Espanol and I are willing to proceed with our Fidelity Guarantee Fund claims pending determination of this appeal at our own risk. If before determination of this appeal the Fidelity Guarantee Fund claims are finalised in our favour, a tenable issue as to a stay will arise for the first time."

19 Ms Back deposes, in par 12 of her affidavit sworn 21 February 2007, that:

"Solomon Brothers is conducting the Fidelity Guarantee Fund claims on a no win/no fee basis. It will be paid its standard charges only if the claims succeed. Solomon Brothers is agreeable to taking the risk that, if the Fidelity Guarantee Fund claims are pursued before this appeal is determined and the appeal is allowed, Solomon Brothers will not be remunerated for pursuing the claims in the meantime."

"... on the basis of the respondents' attitude to the rehearing which was identified essentially for the first time in the affidavits filed by the respondents, I gave certain advice and received instructions that the stay application wouldn't proceed and that those instructions were given and then the matter was so advised to both the respondents and to your Honour's Associate."

It was submitted, on behalf of the Board, that the costs of the application for a stay should be reserved, alternatively that there should be no order as to costs, alternatively if the Board were to be ordered to pay the respondents' costs then the costs should be on a party and party basis (and not an indemnity basis).

21 The respondents' counsel informed me that between 12 - 21 February 2007, there was no communication between the Board's solicitors and the respondents' solicitors in relation to the application for a stay. According to counsel, it was not until 20 February 2007, when he received the Board's written submissions, that he understood the basis on which the application was made. It appears that during the afternoon of 22 February 2007 there were discussions between the solicitors for the parties and, as a result of those discussions, the Board abandoned its application.

22 Counsel for the respondents submitted that the application for a stay was brought without proper conferral. He said:

"So the position at the end of the day of the respondents is that this application should never have been brought. It was brought without proper conferral. That was at the risk of the [Board]. We couldn't properly respond because we didn't understand why the stay was being contended for, and in the circumstance they risk an adverse costs order, because the application has quite properly been withdrawn because there was no basis for it and the usual order should follow, and that's that people who makes [sic] applications that withdraw it should pay for the cost of it, and there's just no basis, no proper basis, for it to be referred, as your Honour said, and be re-agitated before a Court of Appeal, it's a discrete interlocutory application that should be dealt with today and a cost order should be made today and the sum fixed today."

It was submitted, on behalf of the respondents, that costs on an indemnity basis should be fixed in the sum of $5200.

23 I am satisfied, on the papers before me, that the Board filed and served the application for a stay without proper conferral having occurred. The solicitors for the parties had not conferred orally, either by telephone or by meeting face to face, to discuss the issues. Indeed, the application was filed before the Board had responded properly to relevant correspondence from the respondents' solicitors. If there had been a meaningful conferral then it is likely that the application would not have been brought. This is apparent from the Board's decision not to proceed with the application after affidavits and written submissions had been filed and served, and discussions had occurred. The failure to confer was not justified on the ground of urgency or for any other reason. A meaningful conferral was feasible and should have happened.

24 The issues relating to costs have been fully argued before me. Costs should not be reserved.

25 In the circumstances, the Board should be ordered to pay the respondents' costs of the application for a stay. It is appropriate to make that order for these reasons. First, the Board failed to confer, without reasonable justification, before making the application. Secondly, the certificate in the application, to the effect that the parties had conferred about the issues giving rise to the application and had not resolved them, was inaccurate. Thirdly, the respondents were required, pursuant to the orders of the Court made on 16 February 2007, to file and serve written submissions and prepare for a hearing on 23 February 2007. Fourthly, the Board decided not to proceed with its application.

26 It is not appropriate, however, to order the Board to pay indemnity costs, in that I am not satisfied that the Board's failure properly to consult arose from the pursuit of an ulterior motive or wilful disregard for the proper procedure.

27 The Board will be ordered to pay the respondents' costs of the application, on a party and party basis, in any event.