Complaint No CB5558664 [2012] NZREAA 241 (2 October 2012)

Last Updated: 13 January 2014

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

And

In the Matter of Complaint No: CB5558664 and CB5550734 and CB5550995 and

CB5832029

In the Matter of Licensee 1 and Licensee 2 and Warren Eade and Licensee 3

License Number: XXXXXXXX and XXXXXXXX and 10011350 and

XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 2nd day of October 2012

Complaints Assessment Committee: CAC20006

Chairperson: Ann Skelton Deputy Chairperson: Paul Biddington Panel Member: Peter McDermott

Complaints Assessment Committee

Decision finding Unsatisfactory Conduct on Issue 11

Decision finding No Further Action on all other Issues

1. The Complaint

1.1. The Complainants have complained to the Real Estate Agents Authority (the Authority) about the conduct of Licensee 1, 2, 3 and Warren Eade. Licensee 1, 2 and 3, are licensed under the Real Estate Agents Act 2008 (the Act) and both Licensee 2 and 3 hold a salesperson license. Licensee 1 holds an agent’s license. All three Licensees work for the Agency. Warren Eade holds a salesperson’s license and works for Allan Thomas Priest Ltd trading as Waiheke Real Estate. A further complaint was received about the sale of the same property from another Complainant against Licensee 2 and another licensee. This complaint is dealt with separately under CB6503951.

1.2. The complaints relate to the sale of two properties owned by the Complainants. The Complainants allege that all Licensees failed to represent their best interests in the sale of their properties. The full details of the complaints are detailed below.

1.3. The complaint was received by the Authority on 20 July 2011 and referred to a Complaints Assessment Committee (the Committee). The Committee initially considered the complaint relating to Licensee 1 and 2 and Warren Eade on 3 August 2012 and made a decision pursuant to section 79(1) of the Act to inquire into the complaint. On 9 January 2012 the Complainants added Licensee 3 to their complaint. On 12 January 2012 a further related complaint was received by the Authority from another complainant regarding the conduct of Licensee 2 in relation to the same real estate transaction and she indicated to the Authority that she was happy for her complaint to be dealt with as part of this complaint. After an extensive investigation, the Committee considered further evidence gathered in relation to all complaints and licensees on 26 March 2012 and again, after further investigation, on 18 June 2012.

2. Material Facts

2.1 The Complainants were joint directors and shareholders of the Company. On 28 August 2008 the

Company entered into a sole agency agreement for the two properties. This agreement expired on

31 November 2008 and thereafter became a general agency agreement. The First and Second Complainants allege that they verbally cancelled this general agency agreement in December 2008. Warren Eade stated that the Company records showed that the property was formally withdrawn from these listings on 10 September 2009.

2.2 In July 2009 the Complainants allege a woman expressed an interest to them about buying or leasing a business that was operated out of the property one, and that she apparently advised all real estate offices in the area of her desire to buy or lease the business on the island. The First Complainant was concerned that this interest was never shared with them and a potential sale of the café was lost or at least not pursued.

2.3 The Complainants separated in October 2009 and Complainant 1 reverted to using her maiden name.

2.4 On 18 January 2010 registered valuers, provided the Complainants with a valuation for the Property

2 of $1,100,000. A further valuation was provided on 19 January 2010 for Property 2 for an amount of $1,450,000.

2.5 In March 2010 the Complainants asked the Agency, Waiheke Real Estate and another agency to provide proposals and appraisals for the sale of their two properties. The Agency appraisal was dated 23 March 2010.

2.6 On 30 April 2010 the Company signed sole agency agreements for both properties with the Agency with Licensee 2 as the listing agent. The sole agency agreements expired on 20 July 2010 and thereafter became general agency agreements.

2.7 The Complainants stated that on 30 April 2010 they offered to provide both valuations of the properties to Licensee 2 in order for him to have an informed idea of what the properties were worth. Licensee 2, who stated that he did not want to be swayed by a valuation as it may influence him in trying to get a sale prior to auction, declined this.

2.8 Part of Property 1 housed a café, which was owned and operated by an external company. The joint directors and shareholders of this company were the First and Second Complainants. Licensee 2 confirmed that no separate agency agreement was signed with the Complainant’s company and Licensee 2 stated that he was unaware that the café was owned by a different entity at the time of listing at Property 1. On 14 May 2010 the Complainants provided a cash flow report regarding the café that showed the owner as their company. Licensee 2 stated that this was the first he knew of this arrangement. On 14 June 2010 the First Complainant confirmed in an email to Licensee 2 that the Complainant’s company owns the café and that she and the Second Complainant are directors of that company.

2.9 According to Licensee 2 it was agreed with the Complainants prior to auction at Property 1 would be marketed to sell as one entity rather than try and sell the café separately. The First Complainant submitted that this was not her recollection and her understanding was that if someone was interested in buying just the café then that option should be explored. There was some evidence submitted to the Committee by both the Second Complainant and Licensee 2 that the Second Complainant had no interest in continuing to operate the business and that his intention was to close the business shortly after the auction. The desire to have the entire property sold was confirmed in an email dated 28 April 2010 from the Second Complainant’s solicitor to the First Complainant’s solicitor.

2.10 The First Complainant left for Europe on 22 June 2010 and in her absence her solicitor, and her brother as power of attorney, represented her interests. The Second Complainant had his solicitor represent him.

2.11 The auction date was 23 June 2010. The reserve set for the auction by the Complainants for

Property 1 was $1,300,000 and the top bid at auction was $1,010,000. The reserve set for Property

2 was $900,000 and $250,000 for the café, and the top combined bid at auction was $805,000. Both properties were passed in. The Second Complainant and the First Complainant’s representatives were both present at the auction and are adamant that the only bids were vendor bids from the auctioneer. Warren Eade confirmed that he attended the auction and unsuccessfully bid for Property 2. Records of bids recorded by the auctioneer or assistant were provided to the Committee.

2.12 On 28 June 2010 a sale and purchase agreement was signed between the Company and “Mr A and/or nominee” for the land and buildings at Property 1 for $1,105,000. Throughout the marketing and auction period, Mr A had indicated to Licensee 3 that he only wanted the building and not the café business but it had been made clear to him post-auction that the vendor was adamant that only a deal including both would be considered. Settlement date was 30 August 2010. This sale was finalised on 31 August 2010 and the property was later registered in the name “ABC Limited”. ABC Ltd was registered on 14 July 2010 and the two directors are Mr A and Warren Eade. Both are also shareholders of ABC Ltd. Licensee 2 received the listing fee on the sale of Property 1 and Licensee 3 was the selling agent for this transaction and received the sales commission as Mr A was her customer. Mr A was never listed in the vendor reports from Licensee 2 as an “Enquiry”. Both Licensee 2 and 3 work for the Agency. Warren Eade works for Waiheke Real Estate.

2.13 Also on 28 June 2010 a sale and purchase agreement was signed between the Complainant’s

Company and “Mr A and/or nominee” for the café at a price of $150,000. Settlement date was also

30 August 2010. This sale finalised also.

2.14 As an additional issue in relation to the Property 1, the First Complainant stated that her instructions to her solicitor and brother were that she wanted $1.3 million total for buildings and business ($1,150,000 for the building and $150,000 for the café). The First Complainant has suggested that there was a transposing of numbers in writing up the sale and purchase agreement that was not picked up by those who were meant to represent her interests and as a result the combined sale price was $1,255,000 rather than $1.3 million.

2.15 On 5 July 2010 a conditional sale and purchase agreement was signed between the Company and the Trust for Property 2 for $900,000 through the Agency. The directors and shareholders of the Trust were Mr and Mrs V. The offer eventually fell through due to the Trust not meeting the finance condition in the agreement. During the due diligence phase, Mr V had some drawings done of a possible development of the site at Property 2 that included twin retail and two townhouses. These drawings were later shown to another prospective purchaser, by Licensee 1 and 2 on or about 4

August 2010 when she indicated an interest in the property. There is evidence from the other prospective purchaser that during this meeting she indicated that she wanted to make an offer for Property 2 of $950,000 but did not make the offer until the following day via a phone call to Licensee 2. According to Licensee 1 and 2, the prospective purchaser never made such an offer through them nor viewed the property with them. Licensee 2 if she had made such an offer, his evidence was that they would have used it as a back-up offer to the Trust offer as it was higher than the auction reserve and the Agency would also have received a commission on the sale if it went unconditional.

2.16 There is also an allegation from the Complainants that Licensee 1 knew Mr V personally and was involved with this offer to ensure a development that suited the Agency went ahead on this site. Licensee 1 confirmed that she knew Mr V as he owned a property directly behind the Agency’s office in the area, but refutes the suggestion that he was a well-known close friend of hers. Licensee

1 refutes any allegation of collusion in relation to his offer. In relation to the plans that were drawn up for Mr V, Licensee 1 denies the allegation that the plans were in fact drawn up for her purposes but that she took the plans to show the other prospective purchaser in order for her to see what could be done on the site. Furthermore, Licensee 1 states that at that stage there was some talk of the Agency being a potential tenant in any development, although this never eventuated to anything. Licensee 1 refutes the allegation that she was vetting potential purchasers of the property but does not refute the contention that she did discuss tenancy options with Mr V.

2.17 On 1 July 2010 a sale and purchase agreement was signed between “Mr A and/or nominee” and “Ms A & Mr N and/or nominee” for the café at a price of $155,000. Licensee 2 was the selling agent on this transaction. This purchase finalised.

2.18 On or about 4 August 2010 the Trust requested an extension of time to fulfill its due diligence on

Property 2. This was refused by the Second Complainant and at this point he suggested to Licensee

2 that he will himself purchase the First Complainant’s share of the property instead. This possibility was later confirmed in an email from the First Complainant to Licensee 2 dated 14

September 2010.

2.19 The listing for Property 2 was removed from the Agency’s system on 6 August 2010 once the Second Complainant confirmed that he had bought/or was going to buy the property from the Company. It also appears from the information before the Committee that this sale never went through.

2.20 Licensee 1 is the principal of the Agency, where Licensee 2 and 3 also work. Licensee 1 was interested in relocating the Agency to Property 2. Licensee 1 was not actively involved in the sale of Property 1. In late September/early October 2010, Licensee 1 discussed the possibility of a joint venture with the Second Complainant to develop Property 2. Licensee 2 states that he was not present at this meeting and the Second Complainant submits that Licensee 2 was present. According to Licensee 1, the Second Complainant stated that he may be interested and on that basis Licensee 1 had her accountant draw up a proposal for the Second Complainant to consider. Licensee

1 stated that she did not hear from the Second Complainant again until just before Christmas 2010 when he phoned her to say that the First Complainant had broken into his home and taken some things including the proposal document to develop Property 2. The Second Complainant submitted that he did not phone Licensee 1, rather, she phoned him. The Second Complainant also informed Licensee 1 that he was not in a position to consider the proposal, as he had not finalised some matrimonial property issues with the First Complainant. The First Complainant states that she was never aware of this possibility of a joint venture. No formal offer was put together from these parties.

2.21 On 11 October 2010 the prospective purchaser made an offer of $990,000 to purchase Property 2 through Warren Eade and Waiheke Real Estate, with the Company as the vendor. This offer was not counter-signed by the First and Second Complainants or in fact opened.

2.22 On 23 October 2010 the prospective purchaser signed a sale and purchase agreement with ABC Ltd for the land and buildings at Property 1 at a price of $1,400,000. The sale was by way of private treaty and the settlement date was 13 December 2010. Warren Eade handled the sale and received a commission. This purchase went through.

2.23 Warren Eade and Mr A confirmed that between them purchasing Property 1 and on-selling it to the prospective purchaser; they completed renovations including sound proofing, new ceilings, repairs and maintenance. Further, they submitted that they had also secured two long term tenants – a 12 year lease for the café and a one year fixed lease for the other building on the property. Warren Eade submitted that this increased the value of the property considerably. The First Complainant disputes this and provided an email from one of the tenants to state that some sound-proofing was done and a new door hung for sound-proofing also but very little else changed. The First Complainant also submitted that the prospective purchaser had told her that she was happy with the price she paid for Property 1 and believed the additional tenancies added value to the property.

2.24 The First Complainant returned from overseas and the First and Second Complainants subsequently reconciled their relationship some time in 2011. They currently live at Property 2.

2.25 On 12 December 2010 the First Complainant spoke to Ms C, another licensee with the Agency, who informed her that some prospective purchasers for Property 1 had lost interest when it was on the market because of the alleged boundary encroachment issue with the eaves on the building of Property 1. The First Complainant stated that this was the first she knew of this. The First Complainant also submitted that the Agency fabricated this encroachment issue and that it was Mr V and Licensee 1 that started this lie. The First Complainant also referred to the fact that when ABC Ltd on-sold the property to the prospective purchaser the eaves issue was not included as part of the additional conditions in the sale and purchase agreement.

2.26 A statement was provided to the Committee from Mr H of XYZ Ltd that confirmed that he was asked to go to Property 2 the day before the auction of the property, and meet with a client of his, plus Ms C, to inspect the property. Some title information and an aerial photo were provided with boundary lines overlaid. Mr H’s evidence was that he noticed that the soffit of the neighbouring property looked like it was over the boundary line of Property 2 and pointed this out to Ms C and his client. This information then went back to the offices of the Agency and Licensee 2 then contacted the First Complainant’s solicitor with a suggested clause to be read out at auction. A clause was agreed and read out the next day at auction to cover the possibility of an encroachment.

2.27 On 23 February 2011 the prospective purchaser raised with the Complainants the possibility that the sale price for the sale of Property 2 to “Mr A and/or nominee” may have been an incorrect amount and that there was a possibility that the numbers were transposed and this was not picked up by the Licensees or the solicitors. The First Complainant then emailed this issue to Licensee 2.

3. Relevant Provisions

3.1 A complaint can only be made in relation to alleged unsatisfactory conduct (section 72 of the Act)

or alleged misconduct (section 73 of the Act). Section 72 of the Act provides:

72 Unsatisfactory conduct

For the purposes of this Act, a licensee is guilty of unsatisfactory conduct if the licensee carries out real estate agency work that –

(a) falls short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee; or

(b) contravenes a provision of this Act or of any regulations or rules made under this Act; or

(c) is incompetent or negligent; or

(d) would reasonably be regarded by agents of good standing as being unacceptable. Section 73 of the Act provides:

73 Misconduct

For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct –

(a) would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or

(b) constitutes seriously incompetent or seriously negligent real estate agency work; or

(c) consists of a willful or reckless contravention of—

(i) this Act; or

(ii) other Acts that apply to the conduct of licensees; or

(iii) regulations or rules made under this Act; or

(d) constitutes an offence for which the licensee has been convicted, being an offence that

reflects adversely on the licensee’s fitness to be a licensee.

3.2 The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (the Rules) set out the standard of conduct and client care that agents, branch managers or salespersons (licensees) are required to meet when carrying out real estate agency work and dealing with clients. Whilst these rules are not meant to be an exhaustive list, they set minimum standards that licensees must observe and a reference point for discipline.

3.3 In relation to this complaint the following Rules may apply:

Rule 6.1 – An agent must comply with the fiduciary obligations to his or her client arising as an agent.

Rule 6.2 – A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

Rule 6.3 – A licensee must not engage in any conduct likely to bring the industry into disrepute.

Rule 6.4 – A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or fairness be provided to a customer or client.

Rule 9.1 – A licensee must act in the best interests of a client and act in accordance with the client’s

instructions unless to do so would be contrary to law.

Rule 9.4 – A licensee must communicate regularly and in a timely manner and keep the client well informed of matters relevant to the client’s interest.

Rule 9.13 – A licensee must submit to the client all offers concerning the sale, purchase, or other disposal of any land or business, provided that such offers are in writing.

Rule 9.15 – Unless authorised by a client, through an agency agreement, a licensee must not offer or market any land or business, including by putting details on any website or by placing a sign on the property.

Rule 9.23 – A licensee must not use information that is confidential to a client, for the benefit of any other person or of the licensee.

4. Discussion

Issue 1

Insufficient or unsatisfactory communications

4.1 The First and Second Complainants allege that the Agency, Licensee 1 and 2’s communications with them were unsatisfactory or insufficient. The Complainants allege that the Agency and Licensee 1

took advantage of the fact the First and Second Complainants were separated and failed to keep both parties adequately informed about the progress of the sale of the properties. Some of this complaint relates to Licensee 2 also.

4.2 In reply, Licensee 1 and 2 state that due to the acrimonious relationship split of the Complainants, communications with the two parties was difficult. Furthermore, Licensee 2 submitted that the First Complainant left unexpectedly for Europe on 22 June 2010, the day before the auction, leaving her brother with power of attorney. Licensee 2 stated that this put enormous strain on him to try and maintain contact with the First Complainant. Licensee 2 said that it was very difficult to communicate regularly with the First Complainant and therefore he copied the First Complainant’s solicitor into all communications post-auction. He also confirmed that the vendor reports were emailed to the Complainants regularly prior to the auction. Licensee 1 stated that she was not directly involved in selling the properties and therefore had no regular communication with the Complainants.

4.3 The Committee does not find any compelling evidence to support the contention that the Agency, Licensee 1 or 2 failed to fulfill their obligations to communicate with their clients. The Committee finds Licensee 2 did all he could in the difficult circumstances.

Issue 2

Licensee 2 refused to view valuations

4.4 The Complainants assert Licensee 2 did not act in their best interests by refusing to view valuations they had commissioned on the properties. Licensee 2 stated that he did not want to colour his thinking on the value of the property because it will only sell for what a buyer is prepared to pay in any event. Whilst the Committee accepts that there is some merit in that line of thinking, the Committee does not see any harm in the licensee viewing these documents and would suggest that such information only serves to create a fuller picture of the property’s value. Having said that, the Committee does not see that a failure to view these valuations amounts to a breach.

4.5 The Committee does not find that Licensee 2 breached his obligations to act in the best interests of a client by not viewing these valuations

Issue 3

Licensee 2 did not follow up prospective purchaser for Lure Café

4.6 The Complainants’ essential complaint in this regard is that they may have achieved a higher total sale price of Property 1 if the café had been sold as a separate entity, rather than selling the land, buildings and business together. The Complainants believe that a potential purchaser was well- known to Licensee 2 prior to the auction and he failed to pursue them, and the sale of the café separately, as a possibility. The Complainants also allege that Warren Eade colluded in this approach as it helped him further his plan of buying Property 1. The First Complainant also asserts that Licensee 3 misrepresented to the purchaser that the Complainants wanted to sell land, buildings and business as one.

4.7 Licensee 2 acknowledges that he has known Ms A personally for many years and was aware that she was, and had been for some time, looking for a business to buy in the area. However, against that, Licensee 2 states that just prior to the auction the Second Complainant “emphatically” wanted the building and café sold as one package after the auction and that was ultimately achieved and accepted by both Complainants. The Committee notes that the café was on-sold to Ms A by ABC

Ltd for the same price ($150,000) plus a nominal commission ($5,000) to the Agency. According to Licensee 3, Mr A was not keen to buy the buildings and business as one package so that was why she and Licensee 2 worked quickly to on-sell the café.

4.8 The Committee accepts that leading up to the auction the marketing instructions were to offer the café business firstly to anyone purchasing the building. The Committee also accepts that in hindsight the Complainants may believe that if the café had been sold and a lease in place prior to the sale of the land and buildings, they may have achieved a higher price. However, the Committee relies on the facts that show the unsuccessful auction was on 23 June 2010 and by 28 June 2010 a sale and purchase agreement was finalised for the sale of the entire property at Property 1. The Committee also prefers the evidence of Licensee 2 and the Second Complainant that confirms that post-auction, with the First Complainant out of the country and the Second Complainant wanting out of the business, the marketing and sales instructions were to sell the property as one whole. Further, the First Complainant, through her brother as power of attorney, and the Second Complainant accepted the sale on that basis and the sale finalised.

4.9 On that basis, the Committee does not find any breach of the obligations owed to the Complainants in relation to this part of the complaint.

Issue 4

Licensee 1 and 2 failed to present an offer from the prospective purchaser on Property 2

4.10 There is conflicting evidence on this point. The Committee prefers the logic and consistency of the Licensee 1 and 2’s evidence on this matter. It is unclear to the Committee whether the prospectibe purchaser wanted to make an offer or indeed verbally tried to make an offer of $950,000 through the Agency. The licensees dispute this. The Committee accepts that the prospective purchaser did make an offer of $950,000 for Property 2 through Waiheke Real Estate on 11 October 2010 which was not accepted by the Complainants.

4.11 It appears to the Committee from the chronology that by the time the prospective purchaser says she intimated that she wanted to make an offer (after the licensees attended her home to meet with her on or about 4 August 2010) it was clear to Licensee 2 that the Trust offer was not going to go unconditional (3 August 2010) and by that stage the Second Complainant had not only refused an extension of time for the Trust but had indicated that he wanted to buy the First Complainant out of the property (email from solicitor dated 4 August 2010) and withdraw the listing (via solicitor on 6 August 2010). The prospective purchaser detailed recollection of making an offer was vague. Further, Licensee 2 evidence was that had an offer been made at an appropriate time it was in their best interests to try and complete a sale and receive a commission. The Committee prefers this line of reasoning.

4.12 The Committee does not find a breach of any obligations in relation to this part of the complaint.

Issue 5

Di d not fol l ow the C om pl ai nants’ i nstructi ons re sal e pri ce for Property 1

4.13 The Complainants allege that Property 1 was undersold by $45,000 contrary to their clear instructions to obtain a combined total of $1.3 million and that the sale and purchase agreement has been altered without the appropriate signatures. Mr P, as power of attorney, signed the agreement on behalf of the First Complainant and her solicitor also viewed the agreement.

4.14 The Complainants state that communication regarding price stopped after the Complainants agreed to accept $1.3 million for café, land and buildings. The Complainants state that Licensee 2 should have crossed out Mr A’s offer of $1,105,000 and presented a counter-offer on their behalf of

$1,150,000.

4.15 On the sale and purchase agreement the figure “5” in the $1,105,000 is bolder than the other numbers and it appears to be written over the top of another number. Licensee 3 confirmed that Mr A himself wrote the number in the agreement and that any discussions regarding price expectations were between the Complainants and Licensee 2, not her. Licensee 3 also pointed out that no issue regarding the sale price was raised at the time of signing the agreement. The first time this issue was raised was in an email from the First Complainant to Licensee 2 dated 12 March 2011.

4.16 Mr A’s original post-auction offer made on 23 June 2010 was $1,050,000 plus $150,000 for the café.

The Second Complainant made it clear at that stage that he would not accept this and wanted $1.3 million all up. This was communicated to the First Complainant by email at 8.07pm that night. The following morning at 9.32am, Licensee 2 emailed the First Complainant’s solicitor... “Just spoken with the First Complaint. She too would accept $1.3m all up for café and business...”. The First Complainant confirmed that she gave those instructions to her brother also.

4.17 On 26 June 2010 Mr A made an offer for Property 1, land, buildings and business. The first iteration of the sale and purchase agreement has the sale price as $1,105,000 and Mr A initials and signature in appropriate places. The second version is unaltered but has the Second Complainant’s initials and signature. The final version of the sale and purchase agreement supplied to the Committee has the same figure with counter-signing and initialing from Mr P and the Second Complainant. The First Complainant alleges that some of the initials are not consistent and the Second Complainant had failed to initial the change at clause 5.2 of the agreement.

4.18 Further, the Complainants submitted that in emails dated 27 June 2010 to other prospective unsuccessful purchasers, Licensee 2 states that “The combined house and café at Property 1 has been sold unconditionally – $1.255m”. The Complainants state that this is the first time Licensee 2 actually discusses the figure of $1.255 million and these emails were not to them, but only discovered during the complaints process. They also state that the sale did not go unconditional til l

28 June 2010.

4.19 The Committee has reviewed this document with some care and does not find anything exceptional about this document. The Committee does not accept the Complainants’ allegation that this agreement had been altered after signing. Further, given that it is legally signed the only conclusion the Committee can reach is that the sale price of $1,105,000 plus $150,000 is valid and binding. The misunderstanding regarding the combined total sale price of the property is clearly that, but the Committee does not find any evidence to suggest the misunderstanding is the fault of Licensee 2. The Committee does not find any compelling evidence of any misrepresentation on the part of Licensee 2 or 3, nor any intention to mislead.

Issue 6

Failed to disclose Warren Eade’s involvement in the purchase of Property 1

4.20 The Complainants allege that there was an element of collusion and deceit by Licensee 1 and 2 in not disclosing Warren Eade’s involvement as a part purchaser of Property 1. They also allege that Warren Eade was obliged to disclose his financial interest in the purchase of Property 1.

4.21 Mr A confirmed in his statement to the Committee that at the time of making an offer on Property 1 he was unsure how he would structure the entity that purchased the property and therefore put “Mr A and/or nominee”. He also stated that he bid unsuccessfully at auction for the property and the subsequent post-auction offer was not only higher than his bid but also included a condition that he purchase the café. Mr A stated that because of this demand on his finances, he brought Warren Eade in as a partner and that Warren Eade’s occupation was irrelevant to that decision. The Committee does not need to make a finding on the decision to buy the property as “nominee” as this is a legal and accepted practice.

4.22 As to the disclosure obligation, the Committee finds that one did not exist between the

Complainants and Warren Eade. The listing with Waiheke Real Estate was cancelled on 10

September 2009 and Warren Eade is in no way “related to” either the listing agent or the selling agent. On that basis, Warren Eade was free to purchase this property either in his own right or as part of another entity. There was no breach by Warren Eade and it must follow, therefore, that if there was no disclosure obligation then there was no breach by the other licensees in this part of the complaint.

Issue 7

Failed to disclose to the First Complainant that Licensee 1 had proposed to enter a joint venture at Property

2

4.23 The Complainants allege that Licensee 1’s need to find new premises for her business, the Agency, resulted in the sale of their properties being compromised. The Complainants believe that Licensee

1 and 2 have colluded in some way for personal gain. They submitted that by showing the prospective purchaser the Trusts development plans they were in fact trying to vet potential purchasers and only encourage those who would work with Licensee 1 on a joint venture and at a lower price. The First Complainant also stated that the failure by Licensee 1 to disclose her joint venture business proposal put to the Second Complainant but not the First Complainant was a breach of her obligations to the Complainants.

4.24 Licensee 1 stated that she was under the impression, confirmed by the withdrawal of the listing, that the Second Complainant had purchased the First Complainant’s share of the property sometime after 6 August 2010. On that basis, she stated that she approached the Second Complainant with a joint-venture proposal – at a time that the Agency did not have a listing with the Complainants.

4.25 In response to the allegation that Licensee 1 somehow compromised a possible deal with either the Trust or the prospective purchaser, she disputes this also. Licensee 1 stated that she was not involved in the selling process – all deals and negotiations were through Licensee 2. Licensee 1 stated that she got involved solely because the Trust were trying to put a deal together and needed possible tenants signed up before the bank would lend them money. Licensee 1 said it was Licensee

2 that suggested to the Trust that the Agency might be interested as a tenant. Licensee 1 was not comfortable with the vagueness of this arrangement and did not sign up with the Trust.

4.26 The Committee finds no compelling evidence to support the complaint that Licensee 1’s potential interest in Property 2 as a business site for the Agency somehow compromised the sale price.

Issue 8

Misled bidders at auction regarding the issue of overhanging eaves

4.27 The Complainants allege that this issue of the eaves overhanging was complete fabrication (and no evidence of it can be found on the Council property file) and the result was that it scared off potential purchasers.

4.28 Evidence put before the Committee from another unsuccessful prospective purchaser, Mrs P, and her builder, Mr H of XYZ Ltd, confirm that they raised this issue with Ms C (another licensee) the day before the auction. Mr H inspected the property that day and believed that the soffit was overhanging the neighbouring property. This was relayed back to Licensee 2 who in turn drafted a “cover-all” clause to be added to the auction documents and read out at the beginning of the auction. The First Complainant’s solicitor approved this clause.

4.29 Without making any finding on the validity of the encroachment, the Committee finds that Licensee

2 acted in a prudent and reasonable manner given the late notification of a possible “defect” in the property. Given that licensees are under an obligation to disclose “known” defects to a customer, and that the wording of the clause was ... “it may show that the eaves ...overhang”, the Committee does not find any breach on this part of the complaint.

Issue 9

Warren Eade failed to cancel listings when requested to do so

4.30 The Complainants allege that Warren Eade and Waiheke Real Estate failed to cancel their listings when requested. The Complainants state that they verbally cancelled the listings in about December 2008, although had no proof of this. According to Warren Eade, the records of Waiheke Real Estate show that the listing agreements were cancelled on 10 September 2009. Warren Eade stated that the original listings were with another agent who no longer worked for Waiheke Real Estate and it may well be that the Complainants verbally cancelled the listings with that agent. There was no record to that effect.

4.31 The Committee finds no substance to this part of the complaint.

Issue 10

Licensee 2 and Warren Eade colluded by not disclosing potential purchasers for the café portion of Property

1

4.32 The Complainants allege that the Licensees had a tenant lined up to buy the café immediately after ABC Ltd bought the property and on-sold it at cost knowing that they would make $295,000 on- selling the wider property later.

4.33 Licensee 2 stated that he had no contact with Warren Eade before the auction on 23 June 2010.

Warren Eade confirms this. Warren Eade also stated that he had no knowledge of a prospective purchaser for the café until after the purchase of Property 1. Mr A stated that he understood the original arrangement was that one of the Complainants would continue to run the café and a copy of the proposed lease was provided. Mr A stated that when the issue of the inclusion of the café as a condition of buying Property 1 arose, it was unexpected and unwanted from his perspective. He also stated that the idea of a pre-planned disposal of the café does not fit with actual events. Mr A stated that he left the on-selling of the café to Licensee 3 and the Agency.

4.34 The Committee does not find any compelling evidence to support this part of the complaint. Whilst it was serendipitous that Licensee 2 had potential purchasers keen to buy the café immediately, the Committee does not find any evidence to suggest that the licensees colluded to mislead the Complainants about these buyers. Further, the Committee prefers the logic and consistency of evidence of Mr R and Warren Eade and Mr A in that the inclusion of the café was not part of their original plan or instructions. On that basis, it is difficult to find any collusion in hiding potential purchasers.

Issue 11

Warren Eade had no authority to present an offer on Property 2

4.35 The Complainants complain that Warren Eade had no authority to present an offer to the Second Complainant from the prospective purchaser in late August 2010. The Second Complainant asserts that he never opened the offer nor was it left with him because by that stage he was wary of Warren Eade due to his involvement with the purchase of Property 1.

4.36 Warren Eade responded to this and stated that he showed the prospective purchaser through Property 2 on 9 or 10 October 2010 with the Second Complainant’s knowledge and consent. There was some evidence provided to the Committee that in fact the relationship between the Second Complainant and Warren Eade was such that the Second Complainant told Warren Eade that the door was open at all times to Property 2 and he could just let himself in. An email from her to Warren Eade on 11 October 2010 advised that she wished to make a cash offer of $990,000 on Property 2. The sale and purchase agreement was drawn up and presented to the Second Complainant that day.

4.37 Warren Eade accepted that Waiheke Real Estate did not have a formal listing for Property 2 but submitted that his understanding was that the Second Complainant was happy to sign a formal agency agreement if an offer was produced. Warren Eade submitted that he left the sealed envelope with the offer in it with the Second Complainant overnight. The Committee prefers the Second Complainant’s version and accepts that the offer was never left, nor opened.

4.38 Whilst the Committee accepts that it is not unusual for a licensee to want to present an offer on a property that he/she does not have a listing for, it is contrary to the Rules to do so without first checking the status of the vendor’s current agency arrangements, signing up an agency agreement with their own company and providing a market appraisal combined with estimated costs of commission. The Committee accepts that in these circumstances it may have been that the relationship between Warren Eade and the Second Complainant at that time was such that Warren Eade was under the impression that such an agency agreement would be concluded at the presentation of the offer. However, the Committee does not find Warren Eade’s conduct in relation to this offer acceptable and finds that his conduct is in direct breach of Rule 9.15 and as such finds that his conduct is unsatisfactory in relation to this part of the complaint.

Issue 12

Licensee 3 did not disclose her involvement in the sale of Property 1 or that she received commission

4.39 The Complainants state that they had no idea of Licensee 3’s involvement in the sale of Property 1 and that she had an obligation to disclose her involvement to them.

4.40 Licensee 3 submitted that the Complainants were aware that she was a licensee with the Agency and that the Second Complainant arranged several viewings of the property prior to the auction

through the Second Complainant. In fact, the Second Complainant, she submitted, was present during two of these viewings. (The Complainants reject this and state he was only present at one). Licensee 3 also stated that she was present at the auction and was taking telephone bids for Mr A at the auction. Further, Licensee 2 submitted that it is common practice at the Agency for other agents in the company to sell others’ listings.

4.41 The Committee does not find anything misleading in the actions of Licensee 3 as the selling agent on Property 1. Further, the Committee accepts that often the listing agent may be different from the selling agent and the commission is divided accordingly. This has no impact on the total commission payable by the vendor and is in no way misleading in the absence of any financial interests. On that basis, the Committee does not find a breach in relation to this part of the complaint.

Issue 13

Licensee 3 assisted the other three licensees in obtaining Property 1 by fraudulent means and did not act in the best interests of the Complainants

4.42 The Complainants assert that Licensee 3 assisted Licensee 1, 2 and Warren Eade to obtain Property

1 by fraudulent means. This is denied by Licensee 3.

4.43 The Committee finds no substance in this complaint and finds that this is a repeat of many of the threads of allegations already discussed above.

5 Decision

5.1 The Committee met to consider the complaints and pursuant to section 79(2)(e) determined to inquire into it. Pursuant to section 80(2) the Committee has, at its discretion, decided to take no further action with regard to the complaints against Licensee 1, 2 and 3, because in the course of the investigation of the complaint, it appears to the Committee that, having regard to all the circumstances of the case, any further action is unnecessary or inappropriate.

5.2 In relation to the complaint against Warren Eade in relation to his conduct of presenting an offer from the prospective purchaser to the Second Complainant without an agency agreement in place, the Committee finds that this is a breach of Rule 9.15 of the Rules. It follows, therefore, that Warren Eade is guilty of unsatisfactory conduct pursuant to section 72(b) of the Act.

6 Orders

6.1 The Committee will conduct a separate hearing on the papers to decide what orders, if any, should be made under section 93 of the Act in relation to the conduct of Warren Eade.

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 1 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 apologise 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.

6.2 The Committee requires the investigator authorised to assist the Committee with its inquiry to obtain a record of any previous disciplinary decision in respect of Warren Eade, under either the Real Estate Agents Act 1976 or the Act, if any such decision exists, and provide it to the Committee, Warren Eade and the Complainants.

6.3 Warren Eade and the Complainants may file submissions on what orders, if any should be made.

The Complainants may file submissions within 10 working days from the date of the decision. These submissions, if any, will then be provided to Warren Eade, with a timeframe for filing final submissions.

7 Publication

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

7.2 Publication gives effect 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.

7.3 The Committee directs publication of its decision in relation to Issues 1 – 10 and 12 – 13 but omitting the names and identifying details of the Complainants (including the address of the property), the Licensees and their company, and any third parties in the publication of its decision.

7.4 The Committee directs publication of its decision in relation to Issue 11, but omitting the names and identifying details of the Complainants (including the address of the property), and any third parties in the publication of its decision. The name of the Licensee and the Company he works for should be published.

7.5 The Authority will publish the Committee’s decision after the appeal period has ended. Any application for an order preventing publication must be made to the Disciplinary Tribunal.

8 Right of Appeal

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

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

Appeal.

8.3 Further information on lodging an appeal is available by referring to the Guide to Lodging an

Appeal at www.justice.govt.nz/tribunals.

Signed

Ann Skelton

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 2 October 2012