Complaint No CB6874076 [2013] NZREAA 142 (29 July 2013)

Last Updated: 4 May 2014

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

And

In the Matter of Complaint No: CB6874076

In the Matter of Licensee 1

Licence Number: XXXXXXXX

In the Matter of Complaint No: C01524

In the Matter of Licensee 3

Licence Number: XXXXXXXX

In the Matter of Licensee 4

Licence Number: XXXXXXXX

In the Matter of Licensee 5

Licence Number: XXXXXXXX

In the Matter of Licensee 2

Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 29th day of July 2013

Complaints Assessment Committee: CAC20003

Chairperson: Alison Wallis Deputy Chairperson: Marina Neylon Panel Member: John Auld

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The original Complainant pursuant to complaint number CB6874076 was Licensee 2 against

Licensee 1. Licensee 1 is a salesperson with the Agency 1. Licensee 2 is owner of Agency 2.

1.1.1 As a result of investigations into CB6874076, the Committee instigated further investigations into Licensee 1, and Licensee 3, branch manager of Agency 2.

1.1.2 The Committee also investigated Licensee 4, principal of Agency 1, and Licensee 5, agent of Agency 1.

1.2 The property which gave rise to the complaints is known as the Property. The Vendor of the

Property was Ms G and the purchaser was Ms S.

1.3 Mr D was the listing agent for Agency 2, and is not a party to this complaint but is mentioned in the evidence.

1.4 The original complaint by Licensee 2 is that Licensee 1, as selling agent of the Property, failed to advise the Vendor of a liability to pay commission to Agency 2 arising from the fact that the Purchaser had previously been introduced to the Property by, and had made an offer to purchase the Property through them. Licensee 2 sought determination by the Committee that full commission be payable to Agency 2. As the two complaints arise from the same facts, and the evidence is so interlinked, the Committee chooses to deal with both complaints in one decision.

1.5 The issues for the Committee to decide are:

1.5.1 Whether there was a breach by any of the Agency 1 Licensees in not giving a clear warning to the Vendor of the possibility of a double commission being payable, pursuant to rules 5.1 (skill care and diligence), and 9.11 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (“Rules”). In Licensee 4’s case, an additional issue to be decided by the Committee is whether he adequately supervised Licensee 1 pursuant to Section 50 of the Real Estate Agents Act 2008 (“Act”).

1.5.2 Whether a threat was made by either Licensee 1 or Licensee 3 that if 100% commission was not paid to Agency 2, a complaint would be laid with the Authority.

2. Material Facts

2.1 On 28 October 2011 the Vendor entered into a sole agency agreement with Agency 2 for 60 days.

2.2 In December 2011, the Purchaser submitted an offer for the Property through Agency 2, but it was not accepted by the Vendor.

2.3 On 14 March 2012, the Vendor signed documentation with Agency 2 confirming renewal of the

sole agency agreement with a term through to 12 June 2012.

2.4 On 13 April 2012, the Vendor cancelled the sole agency agreement, and Mr D acknowledged this by email noting that buyers introduced by Agency 2 would still incur a commission and offering to check any names should any offers be presented. The Vendor replied to this email, confirming that she would let them know about any offers.

2.5 On 14 April, the Vendor entered into a new sole agency agreement with Agency 1.

2.6 On 16 April, Licensee 1 phoned the Purchaser (a former client) to inform her about the Property.

The Purchaser says that she advised Licensee 1 that she had put in a previous offer on the

Property through Agency 2 but that it was not accepted.

2.7 On 17 April, the Purchaser viewed the Property with Licensee 1. She then phoned him later to say that she intended offering to purchase the Property.

2.8 On 18 April, Licensee 1 discussed with Licensee 4 and 5 the situation with regard to the Property, including that the Purchaser had made a previous offer.

2.9 On 20 April, following some negotiations, an agreement was concluded between the Vendor and the Purchaser.

2.10 On 26 April, Licensee 2 wrote to the Vendor advising her of the fact that the relinquishing of the sole agency had been done on the condition that purchase by Agency 2 introduced buyer would still attract commission due to Agency 2, and suggesting that she take legal advice.

2.11 The settlement of the Property occurred on 2 May, and on 4 May Licensee 2 wrote to the Vendors solicitors requesting that payment of commission to Agency 1 be withheld on the grounds that entitlement was in dispute.

2.12 In late April 2012 there were two meetings between Agency 1 and Agency 2 Licensees discussing but not resolving the issue. One of these took place on 24 April. The details of these meetings are discussed further below.

2.13 On 15 May 2012, Licensee 2 emailed Licensee 4 to advise that Agency 2 would not participate in alternative dispute resolution in relation to the matter, and on 18 May 2012, the original complaint was lodged.

3. Relevant Provisions

3.1. The Committee has considered the provisions of the Act, set out below: Section 4: Real estate agency work or agency work—

(a) means any work done or services provided, in trade, on behalf of another person for the purpose of bringing about a transaction; and

(b) includes any work done by a branch manager or salesperson under the direction of, or on behalf of an agent to enable the agent to do the work or provide the services described in paragraph.

Section 72 of the Act which provides for “unsatisfactory conduct” and states as follows:

Section 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 (a) or (c) of the Act relating to ‘misconduct’ by a licensee without requiring the conduct

to relate to real estate agency work. These provisions provide:

Section 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.

3.2. The Committee’s attention has also been drawn to the case of Tucker/CA 20006 v Claydon and Richardson [2012] NZREADT 46 (“Tucker Decision”). In that case, the READT considered the question of liability to pay two commissions and the application of Rule 9.11. The Tribunal stated in the Tucker Decision that clients are to be warned of the risk of a double commission. The fact that a client may have been warned that there will be no risk, or the fact that two commissions were not actually charged, is irrelevant.

3.3. The Tribunal accepted submissions by counsel that a Licensee must first advise a Vendor of the risk, and then secondly tell them of the agency’s policies to minimise such a risk. The critical factor is that a Licensee must make clear to a Vendor that they could be liable to pay a double commission.

3.4. The Tucker Decision is also on point in relation to the issues surrounding the alleged threat by Agency 2 personnel to complain to the Authority if 100% commission was not paid to them. In that case, the Complainant Licensee threatened to refer the matter to the Authority if the commission dispute was not resolved to the complainant’s satisfaction.

3.5. The READT determined that as there had been a threat to complain, used as a means of resolving a commission dispute, this was an improper use of the disciplinary process. They found that the actions of the Complainant Licensee were a breach of Rule 7.3 and amounted to misconduct under s73 of the Act.

3.6. The allegations by the Committee against Agency 2 Licensees do not relate to real estate agency work pursuant to the definition in section 4 of the Act, and accordingly the Committee can only consider whether or not the conduct could potentially amount to misconduct under section 73, justifying the laying of a charge pursuant to that section with the Real Estate Agents Disciplinary Tribunal (“READT”).

4. Discussion

Agency 1 – Licensee 1

4.1. Licensee 1 was the Licensee who contacted the Purchaser to ask if she was interested in the Property. The Purchaser had dealt with him previously. He is a salesperson, and at all material times was under the supervision of Licensee 4. Both the Vendor and the Purchaser seem to have been happy with the performance of Licensee 1.

4.2. Licensee 1 was not involved in the listing of the Property, which was carried out by Licensee 5.

When Licensee 1 became aware that the Purchaser had previously submitted an offer through Agency 2, he sought advice from Licensee 4 and 5, which was the correct course of action for a salesperson in that situation, in the Committee’s view. He only proceeded to draw up the offer once confirmation had been received from his supervisors.

4.3. Licensee 1 has asserted, from his first response to the Authority that Licensee 5 advised the Vendor not that she was at risk of paying a double commission, but rather that she was not because in the event of a dispute the agencies concerned would sort it out. This conflicts somewhat with what Licensee 5 has stated, as discussed below in relation to the allegations against him.

4.4. The Committee accepts that Licensee 1 did not have any direct dealings with the Vendor. He relied upon Licensee 5 to carry out the warnings, and believed that Licensee 5 had complied with his obligations to the Vendor.

4.5. The Committee finds that Licensee 1 was not in breach of Rule 9.11. He took all steps that could reasonably have been expected of him by making Licensee 5 aware of the previous introduction of the buyer.

4.6. Accordingly, Licensee 2’s original complaint against Licensee 1 is dismissed.

Agency 1 – Licensee 5

4.7. Licensee 5 was the listing agent. As mentioned above, the obligation under Rule 9.11 arises at the time of signing the agency agreement. The Vendor, although very happy with both Licensee

1 and 5, initially stated as part of the investigation that she was not advised that she could have

to pay two commissions. Rather she seemed clear that any commission dispute would not involve her, and that it would be sorted out between the agencies.

4.8. She clearly was verbally advised (by both Agency 1 and Agency 2 Licensees) after the sale was concluded that she would not have to pay a double commission. Her understanding throughout appears to have been that she would pay one commission only.

4.9. What exactly was said at the time of signing Agency 1 agency agreement is less certain. The Vendor has stated that Licensee 5 did explain the agency agreement to her clearly and did exercise “skill, care and diligence”. She does not make clear exactly what was said.

4.10. Licensee 1 has stated in his response that he explained the potential risk of two commissions to the Vendor, but there is no independent confirmation of this, and as mentioned earlier, this is in conflict with the statement of Licensee 1 who stated that Licensee 5 “...informed her that the Buyer had previously been through the Property with Agency 2and if there was to be any commission dispute, it would be sorted between the agencies”. Although there is some lack of clarity in the Vendor’s statements, this does match with one version of the Vendor ’s statement.

4.11. At another time, she appears to allege that she was not aware of the fact that the Purchaser had previously made an offer through Agency 2. She said that she never received a copy of this offer, as due to the price it was of no interest in her. She also noted that she did not think that Licensee

5 or 1 were aware of the connection, but the Committee is satisfied that they were.

4.12. In support of Licensee 5, Licensee 4 states in his response that this was the policy of their office for a double commission warning to be given.

4.13. Agency 2 made statements to the Vendor that they would not enforce a second commission, and Licensee 5 suggests that this supports his contention that he did warn the Vendor of this possibility, but the Committee has not placed significant weight on this suggestion. It would equally be in accord with a statement being made by Licensee 5 that the matter would be sorted out in such a way that the Vendor would only ever have to pay one commission, which if proved, would be a breach of Rule 9.11.

4.14. The Committee has also taken into account the fact that no list of buyers was provided to the

Vendor by Agency 2.

4.15. The Vendor has been unable to be contacted during the second stage of the investigation to clarify.

4.16. The Committee now turns to the precedent set in the Tucker Decision. In that case, the licensee accused of breaching Rule 9.11 admitted clearly that the vendor had not been advised that two commissions could be payable, rather she admitted stating that there would be only one commission and the splitting of it would be between agencies.

4.17. The READT held, as mentioned above, that it was not sufficient to say that a double commission would not be charged. This is the second part of the test accepted by the READT, relating to the policy adopted by the agency to minimise the risk to the client. The first part of the test is to

advise the client/vendor at the time of listing, that there is a risk of double commission resulting.

4.18. The Tucker Decision is binding on the Committee, but the Committee believes that in this case, it should be distinguished on a factual basis. Licensee 5 states that he did advise the Vendor of this risk, but there is no independent corroboration of that. The Vendors evidence is rather equivocal although the Committee notes that a number of factors point to a similar statement as that made in the Tucker Decision being made here.

4.19. Although the Committee notes and accepts the two stage test in the Tucker Decision, the nature of the evidence here is unclear enough to warrant a finding of no further action against Licensee

5.

Agency 1 – Licensee 4

4.20. Licensee 4, as principal agent was involved by Licensee 1 and 5 and asked to advise and assist at the point where Licensee 1 was about to prepare the sale and purchase agreement. He advised Licensee 1 to proceed with the sale.

4.21. The allegation by the Committee in relation to Licensee 4 relates to a potential breach of Rule

9.11, as well as a failure to supervise Licensee 1.

4.22. Licensee 4 states that it is Agency 1s policy to advise clients of the potential risk of a double commission. He claims that he sought advice from the Authority and REINZ on resolution of the matter once a dispute became evident, and was advised to pursue alternative dispute resolution by both the Authority and REINZ (in accordance with REINZ member policy).

4.23. In his statement, Licensee 4 also states his opinion that Agency 2 were not entitled to commission at all. He seems to have formed this view based on a perception of lack of continuity of service with the Purchaser, and the fact that Agency 2 did not provide a list of potential introduced buyers or exclude the eventual purchaser. The Committee does not necessarily agree with the requirement for a list to be provided, and notes that the evidence indicates that this was not raised at the time of signing the agency agreement. It seems unlikely that it was a significant factor. However, Licensee 4 does seem to have taken the view that there may not have been any entitlement on the part of Agency 2. His later offers of payment of part commission appear to have been a means of achieving a quick and amicable resolution.

4.24. Licensee 4 became involved in attempting to resolve the commission dispute, and was in favour of resolution by alternative dispute resolution, although all offers were rejected by Agency 2 as discussed further below.

4.25. The Committee finds that there was no breach of Rule 9.11 by Licensee 4, whose involvement began at the time the agreement was about to be signed. As noted earlier, the obligation under Rule 9.11 arises at the time an agency agreement is signed. In addition, he has stated that office policy was to advise Vendors of the potential risk.

4.26. The Committee is also satisfied that there was appropriate supervision of Licensee 1. The investigation has not indicated any lack of supervision, and shows that Licensee 4 advised, and attempted to resolve the dispute reasonably, when it arose.

Agency 2 – Licensee 2

4.27. The Committee instigated an investigation into Licensee 2’s conduct, because of an allegation arising from the investigation on the original complaint. It was suggested that Licensee 2 threatened to make a complaint to the Authority if Agency 1 did not agree to pay 100% commission to Agency 2. If proved, this would be a breach of Rule 7.3 (abuse of the complaints process) and would warrant the laying of a charge with the READT pursuant to the authority set in the Tucker Decision.

4.28. This statement was allegedly made at one of the meetings held between Agency 1 and 2 post signing of the sale agreement. At one of these meetings, Licensee 4, 3 and Mr D were all present, and at the other only Licensee 4 and 3 were present. Licensee 2 was not present at either meeting. There were also some negotiations that took place by phone around these meetings but Licensee 2 was not directly involved in those discussions either.

4.29. Licensee 4 contends that during one of the meetings, he offered to pay one third of the commission to Agency 2. Although as noted above, he questioned their right to it at all, he decided to make the offer to achieve resolution.

4.30. Licensee 4’s evidence is that Licensee 3 said that if 100 % commission was not paid, Licensee 2 would lay a complaint with the Authority. He qualifies this by expressing the view that Licensee

3 was simply repeating or channelling Licensee 2’s edict and that he was amicable and desirous of resolving the matter.

4.31. Licensee 4 offered to resolve the matter by arbitration but Licensee 3 said that this was not accepted by Agency 2.

4.32. That Licensee 2 was making the decisions is backed up by an email dated 15 May in which he confirms that Agency 2 did not agree to mediation or arbitration, and is further confirmed by the fact that it was Licensee 2 who laid the original complaint. In that complaint, he dismisses alternative dispute resolution. No evidence has been put forward by Agency 2 as to why alternative dispute resolution was rejected.

4.33. The Committee also considered whether an email dated 16 May, from Licensee 2 to the solicitors for the Vendor amounted to a breach of Rule 7.3. In the email, the Vendors solicitors were asked to request Agency 1 to refund the commission to them (the solicitors) “pending REAA consideration of our complaint of unsatisfactory conduct against proprietor Licensee 4 and salesperson Licensee 1”.

4.34. The original complaint was dated 18 May, after this email was sent. This could be said to give weight to the view that the complaint process was being used inappropriately as a bargaining tool.

4.35. However, the Committee finds that this email statement does not amount to a breach of Rule

7.3, as it was not directly a threat and could be construed merely as an attempt to preserve

Agency 2s’ position.

4.36. The remaining issue for the Committee to decide in relation to Licensee 2 is whether he was instrumental in the making of a threat that a complaint would be lodged if 100% commission was not received.

4.37. The Committee accepts that Licensee 2 was not present at the meetings during which the threat was allegedly made. He disputes the statements made by the Agency 1s Licensees as to his improper use of the disciplinary process.

4.38. The Committee has taken into account that Licensee 2 did reject alternative dispute resolution, and has not provided any explanation as to why. Also, he did lay the complaint.

4.39. The evidence in this matter is conflicting, but taking it all into account, the Committee takes the view that although Licensee 2’s behaviour gives cause for concern, it does not meet the threshold for the laying of a charge of misconduct pursuant to s73 of the Act.

4.40. The Committee does however draw the attention of all parties to the Tucker Decision. Licensee

2’s rejection of the use of alternative dispute resolution in this matter indicates poor judgement on his part, as it would have been considered best practice to utilise alternative dispute resolution in this matter.

4.41. However, on the evidence before it, the Committee has decided against laying a charge.

Agency 2 – Licensee 3

4.42. The Committee instigated an investigation into the actions of Licensee 3 arising from his involvement in the alleged threat discussed above.

4.43. Licensee 3 was present at two meetings with Licensee 4 and is alleged by Licensee 4 to have voiced the threat, as stated above.

4.44. Licensee 3 denies making the statement at all, but admits that Licensee 2 (along with Mr D) was instrumental in the decision as to any offers or initiation of alternative dispute resolution. This is backed up by Mr D’s evidence. He further notes that there is no direct evidence that the statement was made at all, and the Committee accepts this.

4.45. The fact that dispute resolution processes were rejected and the complaint laid, are factors supporting Licensee 4’s contention. However, these facts only go to the decision whether or not to lay a charge against Licensee 2. The Committee is satisfied that Licensee 3 was not involved in those decisions.

4.46. In relation to the allegation against him, Licensee 3 highlights certain points which he believes point to the fact that no such threat was made. He alleges that Licensee 3 left both meetings under the impression that dispute resolution would be instigated by Agency 2. He also notes that there is no mention of the threat in any of the email correspondence, and believes that if such a threat had really been made it would have been referred to in the emails. The threat is not mentioned until evidence was gathered in relation to the initial complaint.

4.47. Balanced against these points, is the fact that a complaint was laid, and the timing of that complaint.

4.48. The Committee has decided that there is not sufficient evidence to lay a charge against Licensee

3 in this matter. The evidence is not clear on whether the threat was made by Licensee 3 and even it had been, it would certainly be arguable, taking into account the circumstantial evidence, that he was simply repeating the instructions of Licensee 2.

5. Decision

5.1 After conducting an inquiry into the complaint, pursuant to section 89(1) of the Real Estate Agents Act 2008 (the Act), the Committee held a hearing with regard to that complaint. In accordance with section 90(1) of the Act, the Committee conducted the hearing on the papers, and pursuant to section 90(2) the Committee’s determination was made on the basis of the written material before it.

5.2 The Committee has determined under section 89(2)(c) of the Act to take no further action with regard to the complaint or any issue involved in the complaint.

6 Publication

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

6.2 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.

6.3 The Committee directs publication of its decision, but omitting the names and identifying details of the complainant (including the address of the property), the licensee and any third parties in the publication of its decision.

6.4 The Authority will publish the Committee’s decision after the period for filing an appeal has ended unless an application for an order preventing publication has been made to the Real Estate Agents Disciplinary Tribunal (Tribunal). Such an application can only be made as part of an appeal to that Tribunal. In order to ensure publication of the decision does not take place it is important that you serve a copy of your application on the Authority. Publication of the decision will not take place until the Tribunal has made a decision on the application.

7 Right of Appeal

7.1 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.

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

7.3 Further information on filing an appeal is available by referring to the Guide to Filing an Appeal

at www.justice.govt.nz/tribunals.

Signed

Alison Wallis

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 29 July 2013