Henaghan - Complaint No CB7042691 [2013] NZREAA 344 (26 April 2013)

Last Updated: 17 November 2014

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

And

In the Matter of Complaint No: CB7042691 (1) Complaint No: CB7042736 (2)

In the Matter of Damien Henaghan (1)

License Number: 10005679

Grant Henderson (2)

License Number: 10010094

Decision of Complaints Assessment Committee

Dated this 26th day of April 2013

Complaints Assessment Committee: CAC20002

Chairperson: Patrick Waite Deputy Chairperson: Deirdre McNabb Panel Member: Barrie Barnes

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1 The Complainant has complained to the Real Estate Agents Authority (the Authority) about the conduct of Mr. Damien Henaghan (Licensee One) and Mr. Grant Henderson (Licensee Two). Both Licensees are licensed under the Real Estate Agents Act 2008 (the Act). Both Licensees hold a salespersons license. At the time of the alleged conduct both Licensees worked for Cooper and Co Limited trading as Harcourt Milford (the Agency).

1.2. The Complainant retained the Agency as his real estate agent when listing his property (the Property) for sale by auction. Mr. Damien Henaghan was the listing agent and Mr. Grant Henderson was his sales manager.

1.3. The complaint concerns the conduct of the Licensees on 1 August 2011, the day a pre-auction offer was received. That pre-auction offer was open until midnight 2 August 2011. The Licensees declared a multi offer and the prospective purchaser withdrew her offer. The Property sold at auction on 7

August 2011 (the scheduled auction date) for less than the pre-auction offer. The Complainant

stated in his complaint “Harcourts prevented us from signing a pre-auction offer and required us to enter a multi-party offer which resulted in the purchaser with the pre-auction offer withdrawing. As a result we incurred a $50,000 loss plus interest of $18,646.”

1.4. The Authority referred the complaint to the Complaints Assessment Committee (the Committee).

Pursuant to section 79(1) of the Act, the Committee considered the complaint on 18 September

2012 and made a decision to inquire into it.

1.5. The Committee invited the Licensees to provide a response to the complaint which was received from Licensee One on 8 October 2012 and from Licensee Two on 15 October 2012. Further information was provided to the Authority’s Investigator in telephone conversations with Licensee One on 18 March 2013 and with Licensee Two on 4 March 2013.

1.6. The Complainant was interviewed by telephone on 25 February 2013 by the Authority’s investigator.

1.7. A full disclosure of all documents relevant to this investigation has taken place and comment has been sought from all parties relating to the issues under enquiry.

1.8. Having satisfied itself that it had completed its inquiry into the complaint, the matter was considered by the Committee on 26 March 2013.

1.9. The hearing was conducted on the papers pursuant to section 90(2) of the Act and the Committee made its determination on the basis of the written material before it.

2. Material Facts

2.1. The Complainant listed his Property with Harcourts Real Estate on 10 July 2011 with an auction set for Sunday 7th August 2011 unless sold prior. A marketing plan was agreed for the period 15th to 30th July comprising of paper advertisements, flyers and three open homes culminating in an auction .

2.2. On 27 July 2011 Ms. W first viewed the Property with selling agent, Ms. X and registered for the

auction.

2.3. Ms. M attended an open home on 31 July 2011 and in conversation with the Complainant is reported by the Complainant to have told him that she was interested but was not prepared to go to auction. Ms. M returned the next day for a second viewing with a building inspector. That day Ms. M completed a written offer in the form of an unconditional sale and purchase agreement for a purchase price of $2.1m. Later this price was verbally increased to $2.25m with settlement in 14 days. This offer was initialed by Ms. M on 1 August 2011 who referred Licensee One to her accountant for the deposit. Later that day a letter of intent was received from Ms. M’s accountant regarding the offer to purchase for $2.25m with the following conditions:

• Ms. M’s offer to purchase the Property for $2.25m will remain open until midnight tomorrow 2 August 2011

• The offer will be withdrawn after that and she will not be able to attend the auction.

2.4. Licensee One was advised by the Complainant that he had requested that he have until 7pm to make his decision on the offer from Ms. M and he requested a 10% deposit be paid by 5 pm on 3

August if Ms. M’s offer was accepted.

2.5. Recognising that Ms. W had already registered an interest in attending the auction and therefore that there could be another potential buyer, Licensee Two proposed to the Complainant that the Property be withdrawn from auction due to an unconditional offer being presented. Licensee Two took this step after consultation with Mr. N the then auction manager and one of the directors of the Agency. They agreed that all interested parties would be given until 6pm on 2 August 2011 to present an unconditional offer. The Complainant confirmed the plan which was outlined in an email from Licensee Two to the Complainant on 2 August 2011 by return email that day and instructed Harcourts to act accordingly including adding a clause “subject to a 10% bank cleared cheque by

5pm 3 August 2011.

2.6. At 2.03pm Ms. M withdrew her offer through her accountant in the belief that the auction was being brought forward to 6pm on 2 August. Her offer was expressly made on the basis that, if the auction was brought forward prior to midnight 2 August 2011, her offer was withdrawn. It seems that she felt pressured and didn’t wish to rush.

2.7. The Property was passed in at the auction on 7 August but was sold later that day to Ms. W for

$2.2m

3. Relevant Provisions

3.1. The Committee examined the information supplied by the Complainants in their written complaint to determine whether section 72 or section 73 of the Real Estate Agents Act 2008 (the Act) applied i.e. was there evidence which would indicate that the Licensee could be considered guilty of unsatisfactory conduct (section 72) or misconduct ( section 73).

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 of 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 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. Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009

Rule 5.1 A Licensee must exercise skill, care, competence and diligence at all times when carrying out real estate work

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 9.2 A licensee must not engage in any conduct that would put a client under undue or unfair pressure.

4. Discussion

4.1. The issue is: Did the Licensees fail to present a pre-auction offer to the Complainant and prevent him from signing it?

4.2. Licensee One has confirmed that he had prepared an offer from Ms. M on 31 July 2011 and that this signed offer was presented to the Complainant at his home later that day. The offer was insufficient and this was relayed to Ms. M by phone who then increased her offer verbally to $2.25m. This was verbally relayed to the Complainant who advised that it was still insufficient.

4.3. Ms. M visited Harcourts office the next day and initialed the increase to $2.25m. When Licensee One asked for a deposit she advised that he would need to deal with her accountant. A letter from Ms. M’s accountant was received confirming the unconditional offer of $2.25m and advising that it was available until midnight 2 August and that Ms. M was not able to attend the auction. At this point Licensee One involved Mr. Grant Henderson (Licensee Two).

4.4. Licensee One believes that he and Licensee Two made the Complainant aware of the $2.25m offer

but has no recollection of a face to face meeting with the Complainant to present the offer. He

doesn’t accept the accusation that he would have prevented the Complainant signing it.

4.5. The Complainant stated in an interview with the Authority that whilst the offer was made over the telephone including moving up from $2.1m to $2.25m the offer from Ms. M was not put in front of him despite asking for it so he could sign it. The Complainant confirmed that Licensee One certainly visited but without the signed offer. Instead he was told that it was a multi offer situation as Ms. X also had a buyer. The Complainant alleges that Licensee One told him at that meeting that they had the signed offer but can’t do it as “Licensee Ms. X has kicked up a big stink at the office.” “Ms. X had said that if they didn’t go to auction she will sue.” The Complainant stated that he was happy to sell pre-auction but he wanted assurance that Ms. M was genuine.

4.6. In an interview Licensee Two states that the Complainant told him “Ms. X’s buyer has told me she has $2.3m to spend. Go and get more.” However neither the Complainant, Ms. X nor her buyer Ms. W recalls making such a statement.

4.7. The Committee noted that the Licensees believed that they were acting in the Complainant’s best interest by introducing a multi offer process resulting in interested parties being invited to present an unconditional offer for the Property by 6pm on 2 August 2011. Nevertheless the reality was that in this situation the use of the term multi offer was incorrect. The term multi offer implies that there are signed offers from more than one buyer at the same point in time. Further a multi offer requires a procedure whereby all parties, vendor and buyers, sign off on how a multi offer situation will be handled, addressing the rights and obligations of all parties that enter into that multi offer situation.

4.8. In the circumstances of this complaint the Committee considers that there was interest in the Property by more than one party but those circumstances did not give rise to a multi offer situation. There was only one signed offer from Ms M. Interest had been expressed by another potential buyer, Ms. W and that interest was recorded by way of registration for the auction. Registration for an auction does not place any obligations on a buyer to buy or in fact even attend an auction.

4.9. The Committee noted that multi interest in a property creates far less certainty of a sale being achieved for the vendor than exists when there is a multi offer. This difference in circumstances needed to be clearly conveyed to the Complainant given that the only signed offer, that of Ms. M, had a deadline for acceptance, Ms. M was not going to attend the auction and Ms. W had only registered for the auction as an interested party.

4.10. In fact the unconditional offer that had been received from Ms. M was subsequently withdrawn as it appears she believed that an auction was going to be brought forward to that afternoon and she felt pressured. As a result the Complainant lost the opportunity to sign acceptance of the offer from Ms. M and subsequently sold the Property at a price $50,000 lower than Ms. M’s unconditional offer.

4.11. It would appear that whilst the Complainant was kept informed little consultation was made with him to ensure (a) that he fully understood the risks of changing the marketing course that had been embarked upon in the manner proposed. This included the fact that Ms. M had already signaled that her offer would expire at a certain time if not accepted and that she would not attend an auction which should have alerted the Licensees to the risk of her “walking away”, and (b) there is no evidence that his instructions were sought as to how he wanted to proceed with either the existing offer (which he clearly intended to accept) and the possibility of another offer coming in from Ms. W through Licensee Ms. X which in fact didn’t occur. Whilst Ms. W did eventually purchase the Property she had already indicated that she was not interested in making an offer before the auction.

4.12. The Committee is of the view that Mr. Damien Henaghan and Mr. Grant Henderson by representing to the Complainant that it was now a ‘multi offer’ situation have led him to believe that by doing so he would have the option of more than one offer. In reality there was only one signed offer and another party who had clearly stated that she would not be making an offer prior to the auction. The Committee is of the view that the plan which was developed by the Licensees to seek offers by

6pm on 2 August 2011 was (a) not clearly understood by the Complainant i.e. there is no evidence to show that the potential consequences of this approach were clearly explained to the Complainant, (b) the Complainant was not advised by the Licensees to seek advice from his solicitor i.e. Mr. B has confirmed that he was not consulted before or during the signing of the agreement by the Complainant or Harcourts, and (c) the Complainant is quite clear that the signed offer from Ms. M was ‘not put in front of him’, could be considered negligent in their duty to their client.

4.13. The Committee has concluded that both Licensees have breached 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.

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)(b) of the Act that it has been proved, on the balance of probabilities, that both Mr. Damien Henaghan and Mr. Grant Henderson 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 section 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 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 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 Licensees 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 Licensees 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 Licensees, 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. 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 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.

8.3. 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

Patrick Waite

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 26th April 2013