Kumandan v Real Estate Agents Authority [2012] NZHC 3555 (19 December 2012)

Last Updated: 30 January 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-2194

CIV-2012-404-3909 [2012] NZHC 3555

IN THE MATTER OF an appeal against a decision of the Real Estate Agents Disciplinary Tribunal pursuant to s 116 of the Real Estate Agents Act 2008

BETWEEN DELAWER HOOSAIN KUMANDAN Appellant

AND REAL ESTATE AGENTS AUTHORITY Respondent

Hearing: 15 November 2012

Counsel: D H Kumandan in Person

L J Clancy for Respondent

Judgment: 19 December 2012

_{JUDGMENT OF KATZ J}

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment

with a delivery time of 4.30 p.m. on 19 December 2012.

_{Solicitors: Crown Solicitor, Auckland – [e-mail]}

_{Copy to: D H Kumandan, Auckland – [e-mail]}

KUMANDAN V REAL ESTATE AGENTS AUTHORITY HC AK CIV-2012-404-2194 [19 December 2012]

Introduction

[1] The appellant, Mr Delawer Hoosain Kumandan, was a licensed real estate salesperson. In April 2012 the Real Estate Agents Disciplinary Tribunal (“Tribunal”) found him guilty of one charge of misconduct under s 73 of the Real Estate Agents Act 2008 (“2008 Act”).

[2] The Tribunal found that on or about 18 August 2009 Mr Kumandan created a false document, being a form confirming that settlement had occurred in relation to a property sale. It was found that Mr Kumandan had forged a solicitor’s signature on that document, by physically cutting and pasting a copy of the signature from another document. Mr Kumandan appears to have received no direct financial benefit from the forgery, as the relevant property sale had previously been declared unconditional and commission had accordingly already been paid. However, the forgery did enable the file to be closed.

[3] There was a subsequent hearing before the Tribunal to determine an appropriate penalty. In a decision dated 12 June 2012 the Tribunal cancelled Mr Kumandan’s salesperson’s licence, with the order coming into effect 28 days after the date of the decision.

[4] Mr Kumandan appeals against both the misconduct finding and the penalty decision. The key issues on appeal are:

(a) Did the Tribunal err in finding, as a matter of fact, that Mr Kumandan was responsible for forging a solicitor’s signature on (at least) one of two “confirmation of settlement” documents?

(b) Did the Complaints Assessment Committee (“Committee”) of the respondent, the Real Estate Agents Authority (“Authority”) err by failing to call a particular witness at the Tribunal hearing who, Mr Kumandan argued, may have been able to give evidence that would have exonerated Mr Kumandan?

(c) What is the correct approach to the imposition of a penalty under the

2008 Act, in circumstances where the relevant misconduct occurred prior to the 2008 Act coming into force?

Did the Tribunal err in finding the charge of misconduct proved?

Approach on appeal

[5] In Austin Nichols & Co Inc v Stichting Lodestar,1 the Supreme Court confirmed that, on a general appeal, the appellate court has the responsibility of arriving at its own assessment of the merits of the case. Nevertheless, in cases involving an assessment of credibility of witnesses (as in the present case) the advantage of the first instance court in hearing directly from the witnesses remains a matter properly to be taken into account by the appellate court.2

[6] The issue is whether the Tribunal was correct in finding it proved, on the balance of probabilities, that Mr Kumandan was the person responsible for the forgery of one or both of the forms.

The evidence before the Tribunal

[7] In May 2009, Great North Road Investments (NZ) Limited (“Great North Road Investments”) listed a property at 3207 Great North Road (“the Property”) for sale with Harcourts. Mr Kumandan was retained as salesperson for the Property by Mr Prasad, a director of Great North Road Investments. The agreed commission was

$12,000.

[8] By a sale and purchase agreement dated 10 June 2009, Desray Riedel agreed to purchase the Property for $580,000. Mr Kumandan is recorded on the agreement

_{as the salesperson on the transaction.}

1 _{Austin, Nichols & Co Inc v Stichting Lodestar [2008] NZSC 103; [2008] 2 NZLR 141.}

2 Dr G v Director of Proceedings HC Auckland CIV-2009-404-951, 13 October 2009 at [9].

[9] By a subsequent sale and purchase agreement dated 22 June 2009, Ms Riedel agreed to on-sell the Property to Govindarajaloo Muthaiya Chetty or nominee for the same price. The settlement and possession date was recorded as 31 July 2009. Mr Kumandan was also recorded on that agreement as the salesperson acting.

[10] A deposit of $12,000 was payable under the 22 June 2009 agreement “upon acceptance” and a deposit, also of $12,000, was payable under the 10 June 2009 agreement “on contract becoming unconditional”. Both deposits were paid to Harcourts’ trust account. Mr Kumandan received his share of the commission for listing and selling the Property, prior to the creation of the false document.

[11] Ms Sylvia Whitney, who was then the administrator at Harcourts, gave evidence before the Tribunal (and was cross-examined by Mr Kumandan). Her evidence, in summary, was as follows.

[12] After the 31 July 2009 settlement date had passed, Ms Whitney began to chase up Mr Vijay Naidu of Newton Law, the solicitor acting for all parties on the two transactions. She wanted written confirmation that the transactions had settled and that the keys might be released. She faxed two “confirmation of settlement” documents (“Settlement Forms”) to Mr Naidu and asked him to sign and return them.

[13] Ms Whitney did not hear back from Mr Naidu. She therefore asked Mr Kumandan to follow up with him about the Settlement Forms. She said that Mr Kumandan subsequently returned the two Settlement Forms to her, signed “V Naidu”, and both dated 18 August 2009. The returned forms were copies, not originals.

[14] The day Mr Kumandan returned the Settlement Forms to Ms Whitney, or sometime the next day, she went to the photocopier and discovered one of the Settlement Forms on the table next to the photocopier. Stuck onto the document with a piece of sellotape was a smaller cut-out piece of paper with the date, name and signature of V Naidu on it. She showed this to Ms Christine Fowler (Harcourts sales manager) and two other staff, including Ms Sherie Bird. Ms Fowler and Ms

Bird both gave evidence confirming that Ms Whitney had shown them the “cut and paste” document.

[15] Later in August, Ms Whitney received a fax relating to the Property from Mr Anthony Ram, a barrister. He claimed that the agreement was never going to settle and the vendor had been “misled, deceived and misrepresented” by Harcourts. Ms Whitney took this letter to Mr David Clifton, a director of Harcourts and also told him about the document she had found by the photocopier.

[16] Mr Clifton then commenced inquiries into the matter. He and Mr Graham Viall, another Harcourts director, met with Mr Kumandan in late August 2009. Mr Viall’s evidence was that at the meeting, Mr Kumandan initially denied forging the document. Mr Clifton then went out of the room, at which point Mr Kumandan nodded his head and accepted that he had forged the documents, saying he had to do it as he had been unable to do real estate business with New Zealanders and had to do complicated business dealings with other recent New Zealand immigrants.

[17] Mr Clifton’s evidence was that when he re-entered the room, it appeared that Mr Kumandan had been crying. Mr Viall told him that Mr Kumandan had admitted the forgery. Mr Kumandan acknowledged the forgery by nodding his head. He offered to have the complaint letter from Mr Ram withdrawn immediately. Subsequently, a letter was received from Great North Road Investments to the effect that no money was claimed from Harcourts.

[18] Mr Kumandan’s contract of employment was terminated on 2 September

2009.

[19] Ms Fowler gave evidence to the Tribunal during which she said that Mr Kumandan had said to her, after his dismissal, that “it had just been one silly mistake”. The Tribunal took this as being a reference to the creation of the false document, although Mr Kumandan’s explanation was that the silly mistake he was referring to was the complaint letter from Mr Ram to Harcourts (i.e. it was Mr Ram’s silly mistake”, rather than Mr Kumandan’s).

[20] The evidence of the Authority’s investigator, Chris Delaney, was that he had made inquiries of Mr Naidu, the solicitor for all the parties on the two transactions. Mr Naidu sent an email to him stating that:

When the sales had fallen I recall Delawar visited my office once, asked me to sign a few forms to say that the agreements must come to an end so that Harcourts can close their files. The forms seem to be in my signature and my writing. Delaware must have slipped the wrong forms (Harcourts pre- printed) to me which I may have signed in error thinking I was signing to confirm that the sales had fallen. I thought at all material times Harcourts were aware that the sales did not proceed. I hope this clarifies the issue.

[21] The Tribunal also heard evidence from a handwriting expert, Linda Morrell. She analysed both of the Settlement Forms. She found that the relevant parts of the documents were identical. In her view the relevant portion of the 3 August 2009 document was most likely to have been a manipulation by way of “cut and paste” of the comparable part of the 18 August 2009 document.

[22] Mr Kumandan gave evidence before the Tribunal. He denied that he had created the false document or provided it to Ms Whitney. He also denied acknowledging any wrongdoing to Mr Viall or Mr Clifton.

[23] Mr Kumandan strenuously denied any involvement and advanced an alternative theory as to who may have created the false document. He said it was probable that Harcourt’s administrator, Ms Whitney, had done it. He alleged that Ms Whitney would have had the necessary motive as, at the relevant time, she was struggling with her administrative duties and was under pressure to perform. She needed the completed Settlement Forms to close the files relating to the Property.

[24] Mr Kumandan challenged Ms Whitney’s version of events in his cross- examination of her. He put it to her that she had created the false document herself, to cover up her own shortcomings. She denied this. She also denied his suggestion that it had not really been her who had found the cut and paste document.

[25] Given Mr Kumandan’s denial of having altered the relevant form, there is no evidence as to precisely what his motive for doing so may have been. He had already received commission in relation to both sales, which were unconditional.

Accordingly, whether the sales had actually settled or not could not impact on whether commission was payable. There was no evidence of direct financial benefit to Mr Kumandan arising out of the forgery, or loss to any other party.

[26] However, the transactions in question did have some unusual features, including:

(a) The deletion of cl 9.4 of the original agreement. This was a clause that gave the vendor remedies to cancel or sue if the agreement did not settle.

(b) The contemporaneous nature of the on-sale at the same price.

(c) Both agreements provided for an identical deposit (one on acceptance and one on declaration the agreement was unconditional).

(d) The same firm of solicitors acted for all three parties on the sale and on-sale, but steps were taken to disguise that fact and give the appearance on the face of the documents that two separate solicitors (or firms of solicitors) were involved.3

[27] There was also evidence before the Tribunal that the first agreement was used by the vendor (without reference to the on-sale) to try and halt mortgagee sale proceedings in relation to the Property. However Mr Kumandan strenuously denied any knowledge or involvement in any scheme to mislead Great North Investment’s bankers. The charges against him did not allege any such involvement. Rather, the misconduct charge found proved against Mr Kumandan related solely to the forgery

_{of Mr Naidu’s signature on at least one of the Settlement Forms. I consider below}

3 The solicitor for the vendor is shown on the first agreement as “Poonam Agaval” at Box 27-353, Auckland. The purchaser’s solicitor was shown as Newton Law (Mr Naidu), 666 Dominion Road, Mt Eden. The Tribunal’s decision notes that in fact Ms Agaval was a legal executive in the office of Newton Law and it is Newton Law’s box number shown next to her name as solicitor for the vendor. The physical address, rather than the box number, is given for the purchaser’s solicitor. A similar notation is written on the second agreement, although Ms Agaval acts for the purchaser and Mr Naidu for the vendor. Mr Naidu was the only qualified lawyer at Newton Law.

whether the Tribunal was justified in finding that charge proven, on the basis of the evidence outlined above.

Did the Tribunal reach a decision open to it on the evidence before it?

[28] The Tribunal was faced with direct conflicts in evidence between Mr Kumandan on the one hand, and Ms Whitney, Mr Viall and Mr Clifton on the other. The Tribunal preferred the evidence of Ms Whitney, Mr Viall and Mr Clifton.

[29] It accepted the evidence of Ms Whitney (which was supported by evidence from Ms Fowler and Ms Bird) that she had found the cut and paste document and bought it to other staff members’ attention. The Tribunal observed that such an action that would not have benefited her, had she been the person responsible for the forgery.

[30] The Tribunal also accepted the evidence of Mr Viall and Mr Clifton, who were convinced that Mr Kumandan had accepted responsibility for the forgery at the meeting in August.

[31] Having considered the documentary evidence and the evidence of each witness, the Tribunal concluded that there was sufficient evidence to link the creation of the false document to Mr Kumandan, on the balance of probabilities.

[32] On appeal Mr Kumandan argued that the Tribunal erred in preferring the evidence of the other witnesses to him. He noted that he is not a native English speaker and also that he was extremely stressed during the hearing. This may have led the Tribunal to the (erroneous) view that his evidence lacked credibility and resulted in them preferring the evidence of the other witnesses over his evidence.

[33] Obviously an appellate court does not have the benefit of seeing the witnesses give evidence and assessing their demeanour. I note however from the transcript of evidence that Mr Kumandan’s English appeared to be very fluent (as it was in this Court). His cross-examination of Ms Whitney was detailed and competent, which is perhaps not surprising, as Mr Kumandan apparently trained as a

lawyer in South Africa. There is no evidence to support the view that the Tribunal would have been influenced in any way by the fact that Mr Kumandan is a non- native English speaker.

[34] Regarding Mr Kumandan’s stress levels, I have no doubt that appearing before the Tribunal was an extremely stressful experience, as no doubt it is for any professional who appears before a disciplinary tribunal. There is no evidence to suggest however that the Tribunal drew an adverse inference from this or that it was a factor in its credibility assessment.

[35] Mr Kumandan also submitted that the Tribunal did not properly turn its mind to the alternative possibility, namely that Ms Whitney had forged the document. However this theory was squarely before the Tribunal and was put to Ms Whitney on cross-examination. Ultimately the Tribunal did not accept it.

[36] It was open to the Tribunal to accept the evidence of Ms Whitney that she had asked Mr Kumandan to have the Settlement Forms signed and he had handed signed copies (albeit photocopies rather than originals) back to her. Similarly, Ms Whitney’s evidence that she had found the false document by the photocopier was credible and supported by other witnesses. As the Tribunal noted, if she had been the one responsible for forging the document, it would be surprising for her to then draw attention to it in the manner the Tribunal accepted that she did.

[37] The Tribunal was also well placed to assess the reliability and credibility of the evidence given by Mr Vial, Mr Clifton and Ms Fowler as to Mr Kumandan having accepted responsibility for the false document in August 2009. Such evidence weighs heavily against Mr Kumandan.

[38] I find that there was ample evidence before the Tribunal to establish, on the balance of probabilities, that Mr Kumandan was responsible for forging one or other of the Settlement Forms and that, in doing so, his conduct amounted to misconduct under s 73(a) of the 2008 Act.

Failure to call Mr Vermeulen as a witness

[39] Mr Kumandan submitted that he was prejudiced by the failure of the

Committee to call another Harcourt’s employee, Mr Carl Vermeulen, as a witness.

[40] The Authority’s investigator, Mr Chris Delaney, made a file note of a conversation he had with a Mr Vermeulen as part of his investigation. That file note was disclosed to Mr Kumandan at the latest by 7 December 2011, when full disclosure of relevant documents was provided to him. This was two months prior to the hearing, which began on 8 February 2012.

[41] Mr Kumandan asserts that based on this file note, the Committee should have called Mr Vermeulen as a witness. The Committee was, however, under no duty to do so. If Mr Kumandan believed Mr Vermeulen could give evidence helpful to his defence, he could have sought a witness summons under schedule 1 cl 6 of the 2008

Act.

[42] Unfortunately Mr Kumandan did not seek such a witness summons until partway through the hearing. It appears the reason for this may have been, at least in part, that he did not review all of the disclosure documents provided to him until the weekend before the hearing.

[43] When Mr Kumandan raised the issue with the Tribunal, counsel for the Committee consented to the Tribunal receiving the file note in evidence (notwithstanding that Mr Vermeulen had not been called as a witness) and accepted that Mr Delaney could be cross-examined as to the contents of the note.

[44] Under s 105 of the 2008 Act, the Tribunal may regulate its procedure as it thinks fit, subject to the rules of natural justice and the provisions of the Act. I find that it was open to the Tribunal to refuse to delay the hearing in order to have a witness summons served on Mr Vermeulen, given that the issue was not raised by Mr Kumandan prior to the hearing.

[45] The respondent submitted that, in any event, Mr Vermeulen’s absence as a witness did not prejudice Mr Kumandan. Based on the file note the evidence Mr Vermeulen could have given appeared to be “neutral” and would not have materially assisted either the Committee or Mr Kumandan. There is considerable force in this submission.

Penalty

[46] The Tribunal issued a separate decision in relation to penalty. The key issue on appeal is whether the Tribunal took the correct approach to the imposition of a penalty under the 2008 Act, given that the relevant misconduct occurred prior to the

2008 Act coming into force.

[47] Mr Kumandan argued that the abolition of the Real Estate Agent’s Act 1976 (“1976 Act”) left limited remedies available to the Tribunal. The maximum penalty, he submitted, was a $750 fine.

The Real Estate Agents Act 1976

[48] Prior to the enactment of the 2008 Act the real estate industry was governed by the 1976 Act. Under the 1976 Act, real estate agents had to be licensed. Salespeople such as Mr Kumundan (who work under the supervision of a licensed agent) had to hold certificates of approval.

[49] The Real Estate Institute of New Zealand could apply under the 1976 Act to the Real Estate Licensing Board to have a real estate agent’s licence cancelled or suspended under s 94 on a wide range of grounds, including that the agent had been convicted of a crime of dishonesty; had been declared bankrupt; had gone into receivership or liquidation (if a company); had been found guilty of misconduct and it was in the public interest to cancel the licence; was of such character that it was in the public interest to cancel the licence; or had not been in effective control of the place of business and it was in the public interest to cancel the licence.

[50] The grounds for cancelling or suspending a salesperson’s certificate of approval were much more limited. They were set out in s 99 of the 1976 Act, which provided as follows:

99 Board may cancel certificate of approval or suspend salesman

(1) On application made to the Board in that behalf by the Institute, the Disciplinary Committee or by any other person with leave of the Board, the Board may cancel the certificate of approval issued in respect of any person or may suspend that person for such period not exceeding 3 years as the Board thinks fit on the ground—

(a) That since the issue of the certificate of approval the person has been convicted of any crime involving dishonesty; or

(b) That the person has been, or has been shown to the satisfaction of the Board to be, of such a character that it is, in the opinion of the Board, in the public interest that the certificate of approval be cancelled or that person be suspended.

[51] A comprehensive review of the 1976 Act was undertaken prior to the enactment of the 2008 Act, commencing with a Ministry of Justice Discussion Paper in August 2003.4 That Discussion Paper observed that:5

The grounds for disciplining salespeople are more limited than for real estate agents. Mostly there are good reasons for this. For example, a salesperson’s financial stability isn’t relevant to doing the job and salespeople don’t have to supervise others.

However, one difference seems to have important consequences. While the Licensing Board can cancel a licence because of an agent’s misconduct or character, it can only cancel a certificate because a salesperson’s character means it’s in the public interest to do so.

The Licensing Board can only consider a salesperson’s behaviour, therefore, if it reflects on their character. This implies that it’s harder to cancel a certificate than a licence – there would probably have to be very serious misconduct indeed, or a continued patter of misconduct, before behaviour reflects on someone’s character.

Because most people deal with salespeople rather than real estate agents, it’s arguable that the Licensing Board should also be able to cancel certificates because of a salesperson’s misconduct.

4. Renovating the Real Estate Agents Act: Reasonable offers considered, Ministry of Justice (A Public Discussion Paper, August 2003).

5 At 62.

[52] Ultimately the new legislation, embodied in the 2008 Act, addressed this concern. It removed the distinction that had existed between agents and salespeople in relation to the imposition of penalties. Under the 2008 Act a licensee includes “an agent or a branch manager or a salesperson.” In the disciplinary context no distinction is drawn between these three different roles. In particular, the criteria for cancellation or suspension of a licence are the same for each. If the Tribunal is satisfied that misconduct in terms of the 2008 Act has been proved (on the balance of probabilities) it may cancel a licensee’s licence, or suspend it for a period not exceeding 24 months.

The transitional provision – s 172 of the 2008 Act

[53] Section 172 of the 2008 Act is the transitional provision that forms the bridge between the 1976 Act and the 2008 Act. It sets out the correct approach to complaints which relate to conduct which occurred prior to the 2008 Act coming into force (on 17 November 2009). It provides as follows:

172 Allegations about conduct before commencement of this section.

(1) A Complaints Assessment Committee may consider a complaint, and the Tribunal may hear a charge, against a licensee or a former licensee in respect of conduct alleged to have occurred before the commencement of this section but only if the Committee or the Tribunal is satisfied that,–

(a) at the time of the occurrence of the conduct, the licensee or former licensee was licensed or approved under the Real Estate Agents Act 1976 and could have been complained about or charged under that Act in respect of that conduct; and

(b) the licensee or former licensee has not been dealt with under the Real Estate Agents Act 1976 in respect of that conduct.

(2) If, after investigating a complaint or hearing a charge of the kind referred to in subsection (1), the Committee or the Tribunal finds the licensee or former licensee guilty of unsatisfactory conduct or misconduct in respect of conduct that occurred before the commencement of this section, the Committee or the Tribunal may not make, in respect of that person and in respect of that conduct, any order in the nature of a penalty that could not have been made against the person at the time when the conduct occurred.

[54] The Tribunal’s approach to the interpretation of s 172 in this case was as follows:

[9] Mr Kumandan’s conduct was conduct which occurred before the Real Estate Agents Act came into force on 17 November 2009. The Tribunal has jurisdiction to consider charges before this date. There is a three-step process to be undertaken under s 172. The first question is whether or not the conduct could have been complained about or a charge laid under the Real Estate Agents act 1976, if so, has the agent been guilty of misconduct or unsatisfactory conduct under the 2008 Act? If the answer to this question is “yes” then a penalty may be imposed under the 2008 Act provided that it may only be a penalty which could have been imposed under the 1976

Act.

[10] Under s 99 of the 1976 Act a salesperson found guilty of the equivalent of misconduct could have his or her certificate cancelled, or suspended and could face a fine of not exceeding $750. Under this Act the Board could only cancel or suspend if they were satisfied that the agent was of such character that it was in the public interest to do so. In Dodd [2011] NZREADT 01 at [90] the Tribunal held that a finding of this is not a necessary step for the Tribunal. We agree. The purpose of the Act is in part to promote the public confidence in the real estate industry. An interpretation of s 172 that assists this purpose may be used by the Tribunal. We find that the words of s 172 which provide that the “tribunal may make ... any order in the nature of a penalty that could not have been made when the conduct occurred means that only orders which could have been made under the 1976 Act can be imposed. An order for suspension or cancellation could have been made – but the 1976 Act imposed another inquiry (as to character) on the Board before it could impose the penalties. The Tribunal find that this additional inquiry is not required under s 172.

[55] Mr Clancy, for the respondent, submitted that the Tribunal’s interpretation of s 172 was correct. He noted that its approach was consistent with the Tribunal’s previous decisions in Complaints Assessment Committee v Dodd6 and Real Estate Agents Authority v Brooker.7

[56] The Tribunal adopted a “three step” approach to the interpretation of s 172, as

_{set out at [9] of its decision, namely:}

6 Complaints Assessment Committee v Dodd [2011] NZREADT 01. See also Mathews v

_{Complaints Assessment Committee (CAC 10062) [2011] NZREADT 22 at [2]- [5].}

7 Real Estate Agents Authority v Brooker [2012] NZREADT 31 at [8]- [9].

(a) Could the conduct have been complained about or charged under the

1976 Act?

(b) If so does the conduct amount to misconduct or unsatisfactory conduct under the 2008 Act?

(c) If so, any penalty available under the 2008 Act may be imposed, provided that it may only be a penalty which could have been imposed under the 1976 Act.

[57] The first two steps are uncontroversial and are satisfied on the facts of this case. However, in its application of the third step, the Tribunal effectively interpreted s 172 as having retrospective effect. On the Tribunal’s interpretation, it was entitled to impose the penalty that was appropriate for the relevant misconduct under the 2008 Act, rather than the penalty that would have been imposed in respect of that particular conduct under the 1976 Act. The only qualification was that the specific type of penalty imposed had to be one which existed under the 1976 Act.

[58] If the Tribunal had considered the penalty which would have been appropriate and permissible in relation to the relevant conduct under the 1976 Act, it would necessarily have had to consider whether the character test in s 99 of the 1976

Act had been met.

Presumption against retrospectivity

[59] The Tribunal’s preferred interpretation of s 172 was premised on the basis that the purpose of the 2008 Act is:

in part to promote the public confidence in the real estate industry. An interpretation of s 172 that assists this purpose may be used by the Tribunal.

While it is clearly correct that the 2008 Act was intended to promote public confidence in the real estate industry, this cannot justify holding salespeople to the higher standards in the 2008 Act in respect of conduct occurring prior to its enactment, unless such retrospective effect is clearly intended by Parliament.

[60] It is well established that a non-retrospective interpretation of legislation should be adopted wherever possible, both from a rights-based perspective8 and taking into account the general presumption against retrospective legislation set out in s 7 of the Interpretation Act 1999.9 Retrospective effect will only be given to legislation when it is clear that this was the intention of Parliament, by express words or necessary implication.

[61] Where there are two reasonably possible interpretations of a transitional provision, one which has retrospective effect and the other which does not, the non- retrospective interpretation should be preferred. Further, even where a statute is clearly intended to be retrospective to some extent, it should not to be construed as having a greater retrospective effect than its language renders necessary to achieve the legislative purpose.10

The correct interpretation of s 172

[62] In this case s 172(2) relevantly provides that:

If, after ... hearing a charge ... the Tribunal finds [Mr Kumundan] guilty of

... misconduct in respect of conduct that occurred before [17 November

2009] ... the Tribunal may not make, in respect of [Mr Kumundan] ... and in respect of that conduct, any order in the nature of a penalty that could not

have been made against [Mr Kumundan] at the time when the conduct

occurred [i.e. August 2009].

[63] The issue that arises is whether the requirement that the Tribunal not make an “order in the nature of a penalty” that could not have been made “at the time when the conduct occurred” refers only to the actual types of penalty that could have been imposed under the 1976 Act, or also requires consideration of the threshold tests applicable to each type of penalty under the 1976 Act. There are two possible

_answers:

8 _{New Zealand Bill of Rights Act 1990, s 26(1).}

9 _{Interpretation Act 1999, s 7.}

10 Alofa v Department of Labour [1980] 1 NZLR 139 at 143 and Mason v Borough of Pukekohe

[1923] NZLR 521.

(a) The limitation on the orders to those available under the 1976 Act restricts only the type of penalty, as the threshold test is not part of the “order in the nature of a penalty”.

(b) The limitation extends to the threshold test that had to be passed under the 1976 Act before imposing a penalty of that particular type, as the tests and penalties are not logically severable. Mr Kumandan’s certificate could have only been cancelled under the 1976 Act if his conduct demonstrated bad character under s 99; and the jurisdiction to cancel his licence under the 2008 Act is similarly circumscribed.

[64] The Tribunal adopted the former interpretation. Although s 172 could have been more clearly drafted, in my view (and with respect to the Tribunal) the wording of the section supports the latter interpretation. At the very least, the section is ambiguous. Given the ambiguity, the latter interpretation must be preferred as it is the interpretation which is consistent with the presumption against retrospectivity. Clear words are required in order to interpret a section as having retrospective effect. No such clear intention is apparent on the face of s 172.

[65] Accordingly, s 172 requires the following approach in relation to conduct by a licensee which occurred prior to the enactment of the 2008 Act:

(a) Could the conduct have been complained about or a charge laid under the 1976 Act?

(b) Has the licensee been guilty of misconduct or unsatisfactory conduct under the 2008 Act?

(c) If the answers to both (a) and (b) are “yes” then a penalty may be imposed under the 2008 Act. However it may only be a penalty which could have been imposed in relation to that particular conduct under the 1976 Act. This requires the Tribunal to consider s 99 of the

1976 Act in this case, before a penalty of cancellation or suspension of

Mr Kumundan’s licence can be imposed.

Section 99 of the 1976 Act

[66] Under the 1976 Act it was necessary to consider the character test under s 99 before a salesperson’s licence could be cancelled. Although that will no longer be the case for conduct that has occurred after 17 November 2009, it remains the case for conduct which pre-dated the coming into force of the new Act.

[67] Under s 99(1)(b) of the 1976 Act, the Board could cancel the certificate issued in favour of a salesperson if that person “has been, or has been shown ... to be, of such a character that it is ... in the public interest that the certificate of approval be cancelled”.

[68] The leading authority on the correct approach to s 99(1)(b) is Sime v Real Estate Institute of New Zealand,11 which adopted a two-step enquiry into (1) the salesperson’s character, including his personal traits, reputation and any aspects of his behaviour that reflect on his honesty and integrity; and (2) whether the salesperson’s character is such that suspension or cancellation is in the public interest.

[69] Sime involved a salesperson who, having ascertained that a property had changed hands at an undervalue, took no steps to protect the vendors in a situation where he knew or ought to have known that the position could be remedied and his failure to act followed from his view that he had no duty to the vendors. The Licensing Board considered that his attitude was “unbecoming of any person engaged in real estate activity” and that he had breached the standards required (though much of the blame rested with his employer). The Board imposed a penalty of $500. This decision was appealed to the Administrative Division of the High Court, where Tompkins J considered the meaning of the provision at length.

[70] Tompkins J first sought to isolate the purpose of the reference to “character” by deduction from the other provisions in the 1976 Act. His Honour inferred from the inclusion of “dishonesty” in s 99(1)(a) that “character” refers to “his personal

_{qualities, his individual traits, his reputation and aspects of his behaviour that reflect}

11 Sime v Real Estate Institute of New Zealand HC Auckland M73/86, 19 August 1986.

on his honesty and integrity.” He noted that before issuing a certificate to a salesperson, the Board must be satisfied under s 46 that “having regard to the character and general knowledge of the person ... he is a fit and proper person to be employed as a salesman”. Thus, the bad character required under s 99(1)(b) must mean “something other than whether he is a fit and proper person to be employed as a salesman”.

[71] His Honour referred to Owens & Ors v Australian Building Construction Employees & Builders Labourers Federation,12 and R v Vallett13 in support of a wide definition of “bad character” that included disposition and reputation. In terms of the level of bad character required, his Honour considered that this character is:

something of a more serious kind than professional misconduct, or breach of the duties imposed under the Act [which are dealt with under s 102], although conduct that reflected adversely on a person’s character might also amount to professional misconduct or a breach of those duties.

[72] The second aspect of the s 99 enquiry is that it must be in the public interest that the certificate be cancelled or the salesperson suspended:

[t]he adverse qualities in his character relied on must be measured against the public interest in his continuing or not continuing as a salesman. Traits such as dishonesty or gross incompetence may be within this category. Less culpable characteristics may well not.

[73] Tompkins J considered that the Board’s finding that the appellant’s attitude was “unbecoming” was significantly less than holding that “he was of such a character that in the public interest his certificate should be cancelled or he suspended.” Putting the conduct at its highest, his Honour considered that the Board’s finding was that the appellant was guilty of professional misconduct, which did not justify the Board holding that the ground in s 99(1)(b) had been established.

_{His Honour therefore allowed the appeal.}

12 Owens & Ors v Australian Building Construction Employees & Builders Labourers Federation

_{(1979) 19 ALR 569.}

13 R v Vallett [1951] 1 All ER 231.

[74] I have found that the Tribunal misdirected itself as to the correct interpretation of s 172. As a result it erred by, in effect, imposing a penalty on Mr Kumandan that was appropriate under the more stringent provisions of the 2008 Act, but which may or may not have been appropriate if the character test in s 99(1)(b) of the 1976 Act had been taken into account.

[75] If the Tribunal had applied the interpretation of s 172 that I have outlined above it may have reached a different view as to the appropriate penalty in this case. It is therefore appropriate to allow Mr Kumundan’s appeal in relation to penalty. However in my view the issue of an appropriate penalty on the facts of this case, taking into account the requirements of s 99(1)(b) of the 1976 Act (as interpreted in Sime) is best reconsidered by the Tribunal, given its expertise and specialist nature.

[76] I accordingly remit the matter back to the Tribunal to reconsider the issue of penalty afresh, in light of the matters set out in this judgment, including in particular the correct interpretation of s 172 of the 2008 Act.

Result

[77] Mr Kumandan’s appeal against the Tribunal’s decision dated 5 April 2012 finding the charge of misconduct under s 73(b) of the 2008 Act to be established is dismissed.

[78] Mr Kumandan’s appeal against the Tribunal’s Penalty Decision dated 12 June

2012 is allowed. The issue of penalty is remitted back to the Tribunal, to be determined in light of the interpretation of s 172 of the 1976 Act set out in this judgment.

Katz J