March 2025
Settlement agent ordered to repay funds as a result of claim under s.97 of the Settlement Agents Act
In February 2023, the Supreme Court ordered KDD Conveyancing Services Pty Ltd to pay $365,000 (plus interest) as a result of a claim under s.97 of the Settlement Agents Act 1981 (the Act) arising from a failed strata property deal in South Hedland. An appeal against the Supreme Court decision was dismissed by the Court of Appeal in October 2024.
Section 97 of the Act provides subrogation rights which enabled the State to take civil action against KDD Conveyancing Services, and its director Ms Dillon, in the name of Sunsie Pty Ltd, as Trustee for the Sunsie Trust, to recover funds paid from the Settlement Agents Fidelity Guarantee Account.
Sunsie Pty Ltd invested in a proposed strata development in Somerset Crescent in South Hedland in 2013, however lost its significant investment when the deal fell through. The Supreme Court found that the Strata contract and loan agreement entered into between Sunsie and the developer North West Property Investments Pty Ltd was a ‘contract of sale’ for the purposes of the Strata Titles Act 1985.
The Strata Titles Act required the deposit and all other moneys payable under the contract of sale to be held on trust until the strata plan was registered. The Supreme Court found that KDD breached this requirement by paying funds to the developer prior to the strata plan being registered by Landgate. The Supreme Court found that this was a breach of trust.
The Supreme Court ruled that the protective provisions of the Strata Titles Act applied to Sunsie’s investment and ordered the repayment of funds. These funds were paid back to the Government’s Fidelity Guarantee Account administered by Consumer Protection.
Under the Act, the Fidelity Guarantee Account is set up to compensate losses by consumers and property investors in circumstances of defalcation by licensed settlement agents or their employees.
Settlement agents’ obligations under the Act
Settlement agents are governed by the Act and the Settlement Agents Code of Conduct 2016 (the Code of Conduct) made under the Act. The Act provides for the licensing and compliance of settlement agents in Western Australia.
Commissioner for Consumer Protection Trish Blake said the Court’s ruling is the first of its kind and sets a legal precedent for future cases.
‘This is 1 of 7 Supreme Court claims relating to this settlement agent. The other 6 claims have now been settled. The outcome of the Sunsie claim is a timely reminder to all settlement agents' that they will be held accountable’ Ms Blake said.
‘Previous Consumer Protection warnings have been issued warning agents not to transfer moneys held on trust in their trust accounts to developers until the strata plan is registered. A failure to follow these warnings may be costly’.
Consumer Protection warns settlement agents:
- Do not get involved in arrangements that are primarily designed to get around the laws and regulations to protect property buyers.
- Do not use trust accounts to facilitate early release of funds to developers that would otherwise be contrary to the statutory protections.
- Do not treat the Fidelity Account as a risk-free resource to alleviate breaches of the statutory protections.
Licensed settlement agents must be aware of their obligations under the legislation that applies to their business. Ignorance is no excuse.
More information on the obligations of settlement agents in WA is available on the Consumer Protection website or enquiries can be made by email or call 1300 30 40 54.