You should have laughed at him and said you can't arrest me for that. And if he did, he'd look stupid when he got back to the station. Cops will always demand you to stop filming, but they have no right to take your phone/camera/recording device unless it has potential information on it that will help them with a case (in a situation like this, they generally just ask you nicely for the footage), or footage that might interfere with a case, etc. I have a Triple J (popular radio station in NSW); radio recording of this guy who works for a human rights association, some shit like that... and he stated that Police are only allowed to confiscate your device on the reasons I listed above. I am talking about NSW here but I'm pretty confident that the same rules would apply for WA.
@OP: It's a good thing you continued to be polite even though he was a dick. I suggest you continue doing this as one smartass comment and they'll get you for everything. =[