Wallace - Complaint No CB7050881 [2013] NZREAA 342 (24 April 2013)

Last Updated: 14 November 2014

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

And

In the Matter of Complaint No: CB7050881 & CB7050917

In the Matter of Gary Wallace & Vicki Wallace

License Number: 10000938 & 10008688

Decision of Complaints Assessment Committee

Dated this 24th day of April 2013

Complaints Assessment Committee: CAC20006

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

Complaints Assessment Committee

Decision finding Unsatisfactory Conduct

1. The Complaint

1.1. The Complainants have complained to the Real Estate Agents Authority (the Authority) about the conduct of Gary Wallace (Licensee 1) and V icki Wallace (Licensee 2). Both Licensees are licensed under the Real Estate Agents Act 2008 (the Act). They both hold a salesperson license and both are working for Bayleys Real Estate Limited (Central Auckland) (the Agency). The Complainants retained the Licensees as their real estate agents when listing their property at 8 Ventnor Road, Remuera, Auckland (the Property) for sale.

1.2. The complaint relates to the Licensees’ failure to disclose to the purchasers of the Property that three freestanding wardrobes in the house were not included. The Complainants allege they had advised the Licensees that the wardrobes were not included with the Property. The Complainants further allege that a discussion paper prepared by the Complainants to assist the Licensees with the marketing of the Property was included in an Information Pack prepared by the Licensees and given to purchasers without the Complainants’ consent. The Complainants also allege that a pre- settlement inspection took place without prior notification and the Licensees contacted the purchaser’s solicitor without speaking to the Complainants first.

1.3. The Complaint was received by the Authority on 5 September 2012 and referred to a Complaints

Assessment Committee (the Committee). The Committee initially considered the complaint on 17

September 2012 and made a decision pursuant to s 79(1) of the Act to inquire into the complaint. After further investigation, the Committee considered further evidence gathered on 11 February

2013.

2. Material Facts

2.1. On 3 April 2012 the Complainants met with the Licensees to discuss the selling of the Property.

While showing the Licensees through the Property the Complainants said they had not yet decided whether to remove the wardrobes from the bedrooms. The Complainants submit that Licensee 1 acknowledged what the Complainants had said about the wardrobes, suggesting the Complainants could let the Licensees know their decision later. On 3 April 2012 the agency agreement was signed. The wardrobes were not included in the chattels list on the agreement. Subsequently, the Complainants submit that at the next meeting at the Property with Licensee 1 and Licensee 2, and prior to the marketing of the Property, they confirmed with the Licensees that they had decided to keep the wardrobes. The Complainants further submit that Licensee 2 was informed during a visit of a prospective purchaser that the wardrobes were not included with the sale of the Property and as a consequence the Complainants taped up the wardrobes for all open homes and one remained taped up for the month of the marketing period.

2.2. On 3 April 2012, at the time of signing the agency agreement, the Complainants handed the Licensees a comprehensive house specification list for discussion purposes. In this list, under Internal Specification and Structure, it included the wardrobe systems in the bedrooms. In preparation for open homes, an Information Pack was prepared by the Licensees for distribution to potential purchasers. The comprehensive house specification list was included along with a LIM,

title, rates information, current RV and a full colour descriptive flyer. The Complainants submit that they had never intended that the comprehensive house specification list would be included in the information pack and had never approved a draft of the Information Pack, notwithstanding the Licensees’ assurances to the Complainants that this would happen prior to marketing.

2.3. On 27 May 2012 the Complainants requested and received a copy of the Information Pack from the Licensees. On 28 May 2012 in an email to the Licensees, the Complainants requested a number of corrections be made to the marketing materials. No mention was made by the Complainants to the Licensees about not wanting the comprehensive specification list included in the Information Pack.

2.4. On June 2012 a Sale and Purchase Agreement was signed on the Property for $3,650,000, subject to ten working days and settlement on 27 July 2012. The wardrobes were not included in the chattels list on the Sale and Purchase Agreement. Subsequently, the agreement became unconditional.

2.5. Licensee 1 was contacted by the purchasers on 27 July 2012, settlement day, to say that the purchasers had received a call from their solicitor informing them that the Complainants’ moving truck had damaged the Property. According to Licensee 1, the purchasers had been advised by their solicitor to go to the Property and inspect the damage prior to settlement taking place. Licensee 1 contacted Licensee 2 and asked that she speak with the Complainants to resolve the issue. Licensee

2 spoke to the purchasers who advised they were on their way to the Property. Licensee 2 phoned the Complainants and was advised by them that there would be someone at the Property to meet the Licensees. When Licensee 2 and the purchasers arrived at the Property they noted and inspected the damage. Although the Licensees had informed the Complainants earlier that the purchasers had not requested a pre-settlement inspection, the purchasers asked to inspect the Property internally to ensure no other damage had occurred. The Complainants agreed to the purchasers entering and inspecting the Property. During the inspection, the purchasers noticed that the wardrobes had been removed and raised with Licensee 2 and the Complainants why the wardrobes had been removed. The Complainants stated they were keeping the wardrobes and Licensee 2 stated she understood that the wardrobes were included in the sale. The purchasers advised Licensee 2 and the Complainants that they would not settle until the issue with the wardrobes was resolved.

2.6. According to Licensee 2, she immediately phoned Licensee 1 and advised him of what was taking place in relation to the wardrobes. Licensee 1 stated that he rang the Complainants to advise them of the situation. Licensee 1 explained to the Complainants that the wardrobes were in the specification list provided by the Complainants. According to Licensee 1, he then contacted the Complainants’ solicitor making him aware of what had had taken place and provided him with a copy of the specification that included the wardrobes. Licensee 1 also contacted the purchasers’ solicitor to explain the situation and provide a copy of the specification. Licensee 1 stated that when directly asked by the purchasers’ solicitor, he confirmed his understanding that the wardrobes were included in the sale. Eventually, the Complainants via their solicitor undertook to return the wardrobes to the Property and settlement took place.

3. Relevant Provisions

3.1. A complaint can only be made in relation to alleged unsatisfactory conduct (s 72 of the Act) or alleged misconduct (s 73 of the Act).

3.2. 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.

3.3 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.

3.4 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 are a reference point for discipline.

3.5 In relation to this complaint the following rule may apply:

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.

4. Discussion

4.1. The Committee has considered the evidence of the Licensees and the Complainants in relation to the wardrobes being included or excluded from the sale of the Property. The Committee is of the view that the Complainants put the Licensees on notice on 3 April 2012 when they first met. The Committee is also of the view that the Licensees should have taken more care and confirmed the exclusion or otherwise of the wardrobes. The wardrobes were expensive, in the region of $42,000, which makes them an expensive chattel. The Committee is of the view that the Licensees had not attached enough importance to the matter and should have inspected the wardrobes and double checked with the Complainants regarding their exclusion. The Complainants stated that they were freestanding, on carpet, the skirting board ran behind the wardrobes and they were not a fixture. During open homes the wardrobes were taped shut and the Licensees should have questioned why the Complainants had done this. Furthermore, the Complainants stated the wardrobes were not

included in either the Listing Authority or the Sale and Purchase Agreement. The Committee finds that although the specification list had been included in the Information Pack and the Complainants had made corrections to this document, without questioning the inclusion of the wardrobes, this did not negate the Licensees’ obligation to clarify if the wardrobes were fixtures or chattels. They were on notice regarding the wardrobes before the preparation of the Information Pack. The Committee finds that the Licensees are highly experienced and competent salespeople and that the Licensees should have recognised that the wardrobes were not fixtures. Accordingly, the Committee finds that on the balance of probabilities the Licensees have breached their obligations to the Complainants by not acting in accordance with the Complainants’ instructions and have therefore breached the Act and the Rules.

4.2. The Complainants had been advised by the Licensees that there would be no pre-settlement inspection. On settlement day the purchasers requested an inspection the Property without prior notice. The Committee accepts that the Licensees had told the Complainants that there would be no pre-settlement inspection by the purchasers, however when the Complainants contacted their solicitor to say the Property had suffered damage, the solicitor for the purchasers then advised the purchasers that they should inspect the damage before settlement. The Committee finds this inspection reasonable and the Licensees had acted with care and skill with regard to the inspection of the whole property in the event of any further damage. The Complainants could have denied the inspection request from the purchasers. Therefore, the Committee does not find a breach of any obligations in relation to this part of the complaint.

4.3. The Committee is of the view that when Licensee 1 contacted the Complainant’s solicitor, prior to contacting the purchaser’s solicitor, to advise that the Complainants had removed the wardrobes, the Licensees genuinely believed that the wardrobes had been sold with the Property. A courtesy call could have been made to the Complainants advising them of the intentions of the Licensees; however, there was urgency regarding the status of the wardrobes as the purchasers had said they would not settle until the matter of the wardrobes was resolved. The Committee finds the actions of Licensee 1 in contacting both solicitors to the transaction to be reasonable and prudent in the circumstances. Licensee 1 had a duty of care to both the Complainants and the purchasers to advise their respective solicitors about the issue with the wardrobes and the possibility of a late settlement. Accordingly, the Committee does not find a breach of any obligations in relation to this part of the complaint.

5. Decision

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

5.2. The Committee has determined under s 89(2)(b) of the Act that is has been proved, on the balance of probabilities, that Gary Wallace and V icki Wallace have engaged in unsatisfactory conduct.

6. Orders

6.1. The Committee will conduct a separate hearing on the papers to decide what orders, if any, should be made under s 93 of 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 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 Case Manager to obtain a record of any previous disciplinary decision in respect of the Licensee under either the Real Estate Agents Act 1976 or the Act, if any such decision exists, and provide it to the Committee, the Licensee and the Complainant.

6.3. The Licensee and the Complainant may file submissions on what orders, if any should be made. The Complainant may file submissions within 10 working days from the date of the decision. These submissions, if any, will then be provided to the Licensee, with a timeframe for filing final submissions.

7. Publication

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

7.2. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

8. Right of Appeal

8.1. A person affected by a determination of a Complaints Assessment Committee may appeal by way of written notice to the Real Estate Agents Disciplinary Tribunal (the Tribunal) against a determination of the Committee and must do so within 20 working days from the date of the determination.

8.2. The Committee has yet to finally determine this complaint because the parties are being given an opportunity to make submissions on orders before the Committee determines what orders should be made, if any.

8.3. The Committee considers that the 20 working day appeal period does not commence until it has finally determined this complaint by deciding what orders should be made, if any.

8.4. Appeal is by way of written notice to the Tribunal. Further information on filing an appeal is available by referring to the Guide to Filing an Appeal at www.justice.govt.nz/tribunals.

Signed

Paul Biddington

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 24 April 2013