Kim - Complaint No CA5188998 [2012] NZREAA 181 (19 July 2012)

Last Updated: 11 January 2014

In the Matter of Part 4 of the Real Estate Agents Act 2008

And

In the Matter of Complaint No: CA5188998

In the Matter of Kyung (Solomon) K im

License Number: 10004738

Decision of Complaints Assessment Committee

Dated this 19th day of July 2012

Complaints Assessment Committee: CAC10072

Chairperson: Michael Vallant

Deputy Chairperson: Sue Matehaere-Patten

Panel Member: Joan Harnett-Kindley

Complaints Assessment Committee

Decision on Orders

1. Background

1.1. The Complaints Assessment Committee (the Committee), as a result of its decision issued on the

26th day of March 2012, has found Kyung (Solomon) Kim (the Licensee) guilty of unsatisfactory

conduct.

1.2. The Committee has now received submissions on behalf of both the Licensee and the Complainant.

2. Relevant Provisions

2.1. Having made a finding of unsatisfactory conduct against the Licensee, the Committee must now decide what orders, if any, should be made under section 93 of the Real Estate Agents Act 2008 (the Act).

Section 93 provides:

93 Power of Committee to make orders

(1) If a Committee makes a determination under section 89(2)(b), the Committee may do one or more of the following:

(a) make an order censuring or reprimanding the licensee;

(b) order that all or some of the terms of an agreed settlement between the licensee and the complainant are to have effect, by consent, as all or part of a final determination of the complaint;

(c) order that the licensee apologies to the complainant; (d) order that the licensee undergo training or education;

(e) order the licensee to reduce, cancel, or refund fees charged for work where that

work is the subject of the complaint; (f) order the licensee:

(i) to rectify, at his or her or its own expense, any error or omission; or

(ii) where it is not practicable to rectify the error or omission, to take steps to provide, at his or her or its own expense, relief, in whole or in part, from the consequences of the error or omission;

(g) order the licensee to pay to the Authority a fine not exceeding $10,000 in the case of an individual or $20,000 in the case of a company;

(h) order the licensee, or the agent for whom the person complained about works, to make his or her business available for inspection or take advice in relation to management from persons specified in the order;

(i) order the licensee to pay the complainant any costs or expenses incurred in respect of the inquiry, investigation, or hearing by the Committee.

(2) An order under this section may be made on and subject to any terms and conditions that the Committee thinks fit.

2.2. The following further sections are relevant to this matter, namely:

2.2.1. Section 172 of the Real Estate Agents Act 2008 provides:

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 Tribunal finds the licensee or former licensee guilty of unsatisfactory conduct or of 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 that person at the time when the conduct occurred.

2.2.2. Section 99(4) of the Real Estate Agents Act 1976 provides:

99 Board may cancel certificate of approval or suspend salesman

(4) The Board may, in addition to or instead of cancelling a certificate of approval or suspending the holder under this section, impose a monetary penalty upon the holder not exceeding $750.

2.2.3. Section 105(b) of the Real Estate Agents Act 1976 provides:

105 Board or Disciplinary Committee may award costs

After hearing any complaint under this Part of this Act the Board or the Disciplinary

Committee may make such order as to costs as it thinks fit, including—

(b) An order that the licensee or officer of the company or salesperson or branch manager concerned pay to the Institute such sum as the Board or Committee

thinks fit in respect of the costs and expenses of and incidental to the inquiry or any preliminary investigation conducted by the Institute.

3. Discussion

3.1. Counsel, on behalf of the Complainant, has made submissions seeking the following orders:

3.1.1. The Licensee refunds the commission of $75,000.00.

3.1.2. The Licensee pays interest on the commission.

3.1.3. The Licensee pay costs to the Complainant of $10,000.00.

3.2. Counsel for the Licensee has made submissions summarised as follows:

3.2.1. That as the factual situation arose before the Act came into force, the penalty is governed by the Real Estate Agents Act 1976 (the 1976 Act).

3.2.2. That the Licensee's breach of section 63 of the 1976 Act was a technical breach, made as a result of an honest and genuine mistake.

3.2.3. That section 63 is not relevant as the Complainant was already fully aware of the reasons why the original purchaser did not complete the contract and nominated the Licensee.

3.2.4. That the Committee has no jurisdiction to order a refund of the commission under section

63 the 1976 Act.

3.2.5. That the Licensee is not required to repay the commission because, at the time the contract was signed, the Licensee was not a party to the contract.

3.3. As stated in the Committee's original decision, the maximum penalty that can be imposed on the Licensee in this matter is $750.00. The other orders than could be made are cost orders and suspension of licence.

3.4. Costs can only be imposed however in respect to the cost and expenses incurred by the Complainant arising out of the enquiry or investigation. In short therefore, the cost orders sought by the Complainant’s Counsel cannot be made.

3.5. Further the Committee is of the view that this is not a proper case where an order for costs should be made, particularly in view of the fact that the Complainant has not co-operated with the Committee in providing information that has been requested.

3.6. In view of the findings made by the Committee in paragraphs 3.3 – 3.5 above, it follows that the Committee accepts the submission made by the Licensee’s Counsel that the Committee has no power to order refund of the commission paid pursuant to section 63. The Committee erred when it directed the Licensee to refund the commission in its earlier decision.

3.7. Counsel for the Licensee makes a further submission that the Licensee is not liable to repay the commission as he was not a party to the contract when it was first signed. The Committee’s view as stated in its earlier decision however is, that this is not correct. As stated in its earlier decision, when the Licensee accepted the nomination with the purchaser this created a new contract and triggered the requirements under section 63, which all parties acknowledge the Licensee failed to follow.

3.8. The Committee further noted that all too often Licensee’s attempt to use the penalty procedure to challenge the earlier findings of the Committee for unsatisfactory conduct. Should the Licensee be unhappy with the Committee’s decision of unsatisfactory conduct, their remedy is to appeal rather than use the penalty procedure as a means to attempt to challenge the Committee finding unsatisfactory conduct. Accordingly, the Licensee is bound by the Committee finding that he has breached section 63 of the 1976 Act.

3.9. Counsel also submits that, at the time the Licensee became involved the contract, it was an unconditional contract and that the Complainant was well aware of what was going on and it would not have affected the outcome in any way. The Committee disagrees. Had the provisions of section

63 being followed, it may well have brought to light the GST issue, which could then have been resolved at that time using the Complainant’s right to void the contract.

3.10. Notwithstanding Counsel’s submissions, there is no discretion under section 63 if the procedure has not been followed.

'No commission shall be payable in respect of any such contract .... and shall be recoverable

by the principal as a debt'.

3.11. The Committee in its earlier decision made its position abundantly clear that the commission must be repaid and is disappointed that the Licensee has not done so. Should the Licensee not repay the commission as he is obliged to do so, it may well be a matter that the Complainant considers making a further complaint to the Real Estate Agents Authority.

3.12. As the Committee has previously stated, there is a conflict between the parties as to what wording was to be drafted into the second agreement. The Complainant states that he instructed the Licensee to prepare a mirror of the first agreement which was prepared by another licensee. The Licensee states that he was shown a completely different agreement which was prepared on a GST inclusive basis. Whatever the factual situation, the Licensee was well aware that this was a commercial property and GST was payable on the first agreement. Therefore it follows that the second agreement should have been prepared on a plus GST basis. If it had been prepared on a plus GST basis the Complainant would have either obtained the GST from the purchaser or the transaction could have been treated as zero rated and no GST would have been payable.

3.13. By making the contract GST inclusive if it was not treated as zero rated, the Complainant was always going to have to have to pay GST to the IRD whether or not the purchaser claimed the GST from the IRD.

3.14. The Licensee purports to be an experienced real estate agent and as such should have been well aware of the implications of the GST in a transaction such as this. If it was the Complainant who wanted the contract to be prepared on a GST inclusive basis, the Licensee should have pointed out the problem and recommended he obtain some professional advice. Clearly, this did not happen. Further, from the letter now provided by the Licensees accountant and produced by Counsel, it is clear that the Licensee did not appreciate the GST consequences when preparing the contract.

3.15. Accordingly, the Committee takes the view that having now had the benefit of the letter from the Licensee’s accountant, the Licensee had no understanding of the GST implications relating to the second contract. The Licensees failure to appreciate the GST consequences resulting in a GST liability to the compliant of $143,000 which should never have arisen. Therefore responsibility for the GST debacle that arose out this transaction, must to some extent, lie with the Licensee.

4. Decision

4.1. As set out above, the maximum fine we can impose upon the Licensee is $750.00 and for the reasons set out above we do so.

4.2. The Licensee is to pay the fine of $750.00 to the Real Estate Agents Authority within 30 days of the date of this order.

5. Publication

5.1. One of the Committee’s functions pursuant to section 78(h) of the Act is to publish its decisions.

5.2. Publication gives effect to the purpose of the Act of ensuring that the disciplinary process remains transparent, independent and effective. The Committee also regards publication of this decision as desirable for the purposes of setting standards and that it is in the public interest that the decision be published.

5.3. The Committee directs publication of its decision, but omitting the names and identifying details of the complainant (including the address of the property) and any third parties, in the publication of its decision. The name of the Licensee and the Company they work for should be published.

5.4. The Authority will publish the Committee’s decision after the period for filing an appeal has ended.

Any application for an order preventing publication must be made to the Real Estate Agents’

Disciplinary Tribunal (the Tribunal).

6. Right of Appeal

6.1. A person affected by a determination of a Committee may appeal to the Tribunal against a determination of the Committee within 20 working days after the date of this notice.

6.2. Appeal is by way of written notice to the Tribunal. You should include a copy of this Notice with your Appeal.

6.3. Further information on filing an appeal is available by referring to the Guide to Filing an Appeal at www.justice.govt.nz/tribunals.

Signed

Michael Vallant

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 19 July 2012