Complaint No CB7022828 [2013] NZREAA 55 (21 March 2013)

Last Updated: 2 March 2014

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

And

In the Matter of Complaint No: CB7022828 and CB7023089 and CB7023197

In the Matter of

Licensee 1
Licence Number: XXXXXXXX

Licensee 2
Licence Number: XXXXXXXX

Licensee 3
Licence Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 21st day of March 2013

Complaints Assessment Committee: CAC20004

Chairperson: Paul Morten

Panel Member: David Russell

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Complainants have complained to the Real Estate Agents Authority (the Authority) about the conduct of four licensees (Licensee 1, Licensee 2, Licensee 3, and Licensee 4). In this decision, we deal with complaints against the first three of those licensees.

1.2 For the reasons which follow, we dismiss those complaints, which we consider the complainants have failed to prove.

1.3 The complaint arises out of a sale by auction of the Complainants’ Property on 16 October

2011.

1.4 Licensee 2 was the listing agent for the Property. He is a licensed agent. He is employed by

Agency-Branch 1.

1.5 Licensee 1 was the auctioneer at the auction. He is also a licensed agent. He is employed by

Agency-Branch 2.

1.6 Licensee 3 was the branch manager of Agency-Branch 1. He is also a licensed agent.

1.7 The bid at auction was won by the Bidder, a licensed branch manager employed by Agency 2. He did not declare he was bidding on behalf of a buyer, the Purchaser. He refused to sign the sale and purchase agreement. He said there was a dispute about the settlement date.

1.8 Post-auction, on 4 November 2011, the Complainants entered into a sale and purchase agreement for the Property which included a deferred settlement date of 1 March 2012.

1.9 On 10 November 2011, Agency 3 introduced a potential buyer, who completed a backup agreement for purchase of the Property, conditional upon the sale to the Purchaser not proceeding. Settlement was to be 1 March 2012.

1.10 Prior to settlement by the Purchaser, she entered into an agreement to sell the Property to the buyer Agency 3 had introduced to the Complainants (whose contract had been cancelled upon confirmation of the sale to the Purchaser).

1.11 We assume there were back to back settlements on 1 March 2012, with Agency 3’s buyer ending up with the Property.

1.12 The Complainants’ complaint against Licensee 1 is that he failed at auction to establish who the purchaser was; and accepted bids from the Bidder even though the Bidder would not declare his status as a bidder at the auction. The Complainants refer to the listing authority contract, which states that the auction process “finds a cash buyer with no conditions”. They complain that the auction process has not led to a cash buyer with no conditions, contrary to the representation in the authority contract.

1.13 The complaint against Licensee 2 is that he took leave and travelled overseas while post-auction negotiations and discussions occurred.

1.14 The complaint against Licensee 3 is that, as the manager of the Agency-Branch 1, he failed to contact the Complainants or properly manage the process while Licensee 2 was on leave.

1.15 The Complainants refer to section 1.1 of the Code of Practice, which provides that when conduct in the sale of property by auction, members shall not engage in any conduct which is misleading or deceptive or likely to mislead or deceive, a principal which applies prior to, at and after auction. They assert, generally, that some member or members must have misled them, the auctioneer, other agents, and the public in attendance due to their conduct.

1.16 The Complainants state that the combined actions of the four licensees have meant they have suffered direct costs of $62,864.81; and indirect and exemplary damages of $100,000.

1.17 They want to recover the direct costs they have incurred; they want exemplary damages (the Committee notes that the Committee has no jurisdiction to award exemplary damages); they want a written apology; and they ask the Authority to take steps to ensure no repeat of what happened to them should happen to future purchases.

2. Material Facts

2.1 Licensee 1 was the auctioneer charged with conducting the option of the Property. He, Licensee

3, and Licensee 2 organised the auction, which took place on site.

2.2 Licensee 2 was the listing agent for the Property. He had talked to 4 parties (including the Purchaser), before the auction, about the possibility of an extended settlement period, should they be the successful bidders at auction. He obtained a signed auction side agreement from two of those parties.

2.3 Neither the Bidder nor the Purchaser signed a side agreement extending the settlement period.

The Purchaser says that Licensee 2 told her that if she did, she would get a settlement date extension to 1 May 2012. She says that it was only after the auction that Licensee 2 told her the agreement extension needed to be in writing.

2.4 Licensee 2 says that the Purchaser said she would “think about it” and get back to him regarding the extended settlement date. He says that if the Purchaser had turned up to the auction, he would not have let her bid without informing her she was not entitled to the extended settlement date, unless it was in writing.

2.5 The Complainants met with L i c e n s e e 2 30 minutes or so before the auction. The Purchaser had previously expressed an interest in the property. He reported to them that he had no side agreement with her about an extended date of settlement.

2.6 Before the auction began, the Complainants say that Licensee 1 set out the terms of auction in a professional manner.

2.7 The Complainants assert that Licensee 1 advised that no telephone bids were being taken.

Licensee 1 says that he confirmed that Agency 1 were not aware of any agents bidding on behalf of clients personally or by phone; and that there were no Agency 1 agents bidding on behalf clients.

2.8 There were three bidders at the auction. Bidding progressed until the bids reached $3.22 million. At that point, Licensee 1 paused the auction, and had a discussion with the Complainants.

2.9 Licensee 1 confirmed that the current highest bid ($3.22 million) was with the Bidder. The bid was below reserve. He confirmed it was a cash bid, with a six week settlement period.

2.10 After a discussion with a friend, the Complainants lowered their reserve, and put the Property on the market.

2.11 During the course of the auction, and during the pause, the Complainants say that the Bidder conducted a conversation by mobile with an unidentified third party. L i c e n s e e 1 asked who he was speaking to. The Bidder did not reply.

2.12 The Bidder remained the highest bidder and became the appointed purchaser. He then advised that he was acting for the Purchaser, and wanted a longer settlement than the terms and conditions of auction allowed. Licensee 1 told him that the terms of sale did not allow for a deferred settlement. He had bid on the terms of sale. The Bidder refused to sign the contract.

2.13 The Complainants accept that Licensee 1 was not aware that the Bidder was acting for another party until he requested the Bidder to sign the contract.

2.14 Licensee 1 discussed matters with the Complainants. He said he would take the contract documents away, and try to get them signed.

2.15 Licensee 1 met t h e B i d d e r , who refused to sign the contract, and reiterated that the purchaser was the Purchaser.

2.16 Licensee 1 discussed the matters with the Complainants. He advised that he had power, as auctioneer, to sign the documents on behalf of the Bidder. The Complainants took advice from the solicitors. He advised that the Bidder was the buyer. Licensee 1 then signed the contract on behalf of the Bidder, and delivered it to him at the offices of Agency 2. Apparently, the contract was returned, unsigned, to Licensee 1.

2.17 In due course, the Complainants reluctantly entered into a sale and purchase agreement with the

Purchaser, with a deferred settlement of 1 March 2011.

2.18 10 days after the auction, Licensee 2 left for a pre-arranged holiday.

2.19 When the Bidder refused to sign the sale and purchase agreement at auction, Licensee 3 says that Licensee 1 was the company representative chosen to be responsible for liaising with the Complainants. The matter became a complicated and difficult legal issue, which he considered was best dealt with by the Complainants, and their solicitors, and the Purchaser, and their respective solicitors.

2.20 It was Licensee 1 who liaised with the Complainants and their solicitors, he says every two days or so. Licensee 1 says there was no need for Licensee 3 to become involved; he had nothing to add and the matter was in the hands of lawyers.

2.21 For his part, Licensee 3 records that Licensee 2’s holiday had been pre-booked some 10 days after the auction. Given that Licensee 1 was the company representative responsible for discussing matters with the Complainants, he considered there was no need for Licensee 2 to cancel his holiday; and no benefit would have been gained by it.

3. Relevant Provisions

3.1 Section 72 of the Act provides as follows:

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.

3.2 Section 50 of the Act provides: 50

50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure—

(a) that the work is performed competently; and

(b) that the work complies with the requirements of this Act.

3.3 Relevant rules in the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2009 (the

Client Care Rules) are as follows:

5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

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

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

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

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.

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.

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

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.

4. Discussion

4.1 We deal first with the complaint about Licensee 1.

4.2 The complaint about Licensee 1’s conduct at the auction:

4.3 At the start of the auction, Licensee 1 made the audience aware of the terms of auction.

4.4 Clause 3.3 (2) of the particulars and conditions of sale of real estate by auction provided that where the purchaser executed the agreement with provision for a nominee, or as agent for an undisclosed principal, or on behalf of the company to be formed, the purchaser shall at all times remain liable for obligations on the part of the purchaser.

4.5 There is a factual dispute between the Complainants and Licensee 1 about what Licensee 1 said about agents bidding on behalf of clients.

4.6 Licensee 1 states that he asked the crowd whether there were any agents bidding on behalf of clients. He asked Licensee 2 the same question. Licensee 2 replied “not to his knowledge”.

4.7 The Complainants accept that Licensee 1 did not become aware of that the Bidder was purporting to bid on behalf of the Purchaser until the conclusion of the auction.

4.8 Licensee 1 says he did not state that there would be no telephone bids or bidders at the auction, as the C omplainants assert. What he did confirm was that Agency 1 were not aware of any agents bidding on behalf of clients personally or by phone; and (which is different) that there were no Agency 1 agents bidding on behalf of clients.

4.9 As Licensee 1 says, some clients simply do not want their identities to become known. They are entitled to bid through agents. The auction terms implicitly permit that. Had the Complainants wanted a term of the auction to be that only principals could bid, that would have needed to have been made explicit in the auction documentation. It wasn’t.

4.10 Under the auction terms, an auctioneer has the ability to refuse a bid. He was not instructed to decline a bid from the Bidder.

4.11 Licensee 1 says that he had to deal with the Bidder as if he were the buyer. He says the Bidder would not let him speak to the person he was speaking to on the phone; and would not tell him the name of the person on the phone.

4.12 He makes the valid point that when the Complainants instructed Licensee 1 to declare the property “on the market”, they were fully aware the Bidder was bidding, that he was the highest bidder, and that he was talking to someone on the phone for whom he may have been bidding.

4.13 He states that he asked the Complainant, before walking out to re-start the auction, whether the Complainant wanted them to change the rules and tell everybody that bids were now only being accepted in the auction on a “30 day” basis. The Complainant said “no”, and told Licensee 1 just to see how it went.

4.14 Licensee 1 does not accept the Complainant’s statement in paragraph 19 of his notice of concern that “he put the house on the market, confirming the settlement date”.

4.15 After the pause in bidding at the auction, he told the Bidder that the bidding was with him. He knew that the Bidder was a licensee. He considered the Bidder had a good understanding of auction rules and process.

4.16 It is difficult to see what more Licensee 1 could have done in those circumstances.

4.17 The Complainants assert that “someone” must have engaged in misleading or deceptive conduct which misled the vendor or, the auctioneer, other agents and the public in attendance at the auction. The Committee is left with the feeling that the thrust of the complaint by the Complainants is directed against the Bidder; but that the Complainants felt it would be appropriate to lodge a complaint against all the licensees involved in the sale.

4.18 We can understand the Complainants’ view that it would be appropriate for the whole matter to be investigated by the Committee. But it is for a Complainant to establish a breach of section 72 or section 73 of the Act. A generic complaint, without facts to establish unsatisfactory conduct by individual licensees, is not enough.

4.19 The Committee has carefully considered section 72 of the Act, and the relevant Client Care

Rules. We cannot identify a breach. The complaint against Licensee 1 is therefore dismissed.

4.20 The complaint against Licensee 2 and Licensee 3:

4.21 It is convenient to deal with these two complaints together. The Complainants’ concerns are set out in paragraphs 17 of their list of key concerns. They say Licensee 2 took leave to travel overseas while the post-auction discussions were occurring. The Complainants assert that Licensee 3, the Manager of the Agency-Branch 1, failed to contact them or manage the process while Licensee 2 was on leave; failed to ensure his agent was handling the process correctly; and failed to ensure the Complainants as customers were being properly represented in accordance with the applicable code of practice and good professional standards.

4.22 On 19 October 2011, he met Licensee 1 at the Agency-Branch 1 office, where Licensee 1 signed the auction agreement on behalf of the Bidder. He tried to hand the contract to the Bidder, but the Bidder refused to accept it. He delivered the contract to Agency 2’s office.

4.23 Licensee 2 says that in the period shortly after the auction, he was in contact with the Purchaser.

She confirmed he offered her an extended settlement but that she advised she would think about it. He forwarded that email to the Complainants’ solicitors. He says that he received several text messages from her, and telephone calls, one of which asked whether he could get her out of the agreement. He says that she explained that she hadn’t wanted it known that she was a bidder at the auction because that would have put her under pressure to sell her existing property, perhaps at a discounted price.

4.24 Licensee 2 says that he was on holiday between 26 October and 4 November 2011, on a pre- arranged trip which he had booked in mid July 2011.

4.25 Before he left, he says he had phone conversations and meetings with the Complainants, but there was little he could do to help. He tried to set up a meeting between the Purchaser and Licensee 1. Ultimately, the Purchaser’s lawyer instructed him he should not attempt to communicate with her directly, but should only communicate through her lawyer.

4.26 Licensee 2 says that it became increasingly clear that the problem was now a legal one, in the hands of respective solicitors.

4.27 During the period he was on holiday, Licensee 2 says that he checked the emails regularly in case further assistance was required. He was contacted by the Complainants' solicitor to provide an electronic copy of the particulars and conditions for the auction, and he says he responded within minutes of that request.

4.28 Shortly after he arrived back in New Zealand on 4 November 2012, he contacted the Complainants to find out whether there had been any developments, and was told that the Complainants’ solicitors advice (which was originally that the Bidder was the purchaser) had changed, and that they were proceeding to settle with her on that an “extended settlement” basis, at a slightly higher price.

4.29 He denies any misleading or deceptive conduct, and says he has been open and transparent in his dealings with all persons involved.

4.30 He says that he listed the Property on 8 September 2011, and identified three potential cash buyers. The Property had been for sale since some time in 2008. He does not consider that these are the actions of an incompetent real estate agent.

4.31 He does not accept that he had an insufficient knowledge of the situation, or followed or utilised procedures that failed to protect the Complainants from misleading and deceptive bidders.

4.32 He says that had he felt his presence, during the period he was on holiday, would have made any difference to the outcome, then he would have remained in New Zealand.

4.33 For his part, Licensee 3 considers that he was proactive in his duties as a manager. He says he was in constant communication with Licensee 2, who he describes as a very experienced professional salesperson dealing with the Property. He says that Licensee 1, a company director, and the auctioneer involved was the appropriate person to represent the company and deal directly with the Complainants.

4.34 He says that Licensee 2 and Licensee 1 regularly communicated with the Complainants and/or their solicitors after the auction.

4.35 He says that it was clear to the Complainants that Licensee 1 was dealing with the issue as the company’s representative, rather than Licensee 3.

4.36 He confirms that Licensee 2 was told by one lawyer to cease communicating with his client.

Licensee 3 did not consider it appropriate to talk with any of the parties while legal discussions were under way following the auction.

4.37 He confirms that Licensee 2 was on holiday 10 days after the auction, and that while Licensee 2 was away, he was in communication and closely monitored progress.

4.38 He says that he had meetings with Licensee 2, and that all information that was being discussed between the Complainants and Licensee 1 was being passed on to Licensee 2 and Licensee 3.

4.39 The Committee has considered the Complainants’ concerns. It appears that Licensee 1 and

Licensee 2 did as much as they could, post-auction, to facilitate execution of the sale and purchase

agreement. At the end of the day, it appears that the Complainants had accepted advice from their own solicitors that the best way forward was to enter into an agreement with the Purchaser, on an extended settlement date basis.

4.40 Given that the Bidder refused to sign the contract; and that the Purchaser’s solicitors said all further communications had to come through her, with the result that progress of the matter fell into the hands of the parties’ respective solicitors, the Committee cannot see what else Licensee 3 or Licensee 2 could have done to bring about a settlement.

4.41 The Committee does not accept misleading or deceptive conduct by either Licensee 3 or Licensee

2. Licensee 2 did what he could to facilitate an agreement; and there was nothing inappropriate about his taking a pre-booked holiday. Licensee 1, a company director, was representing the company’s interests, and liaising with the Complainants and their solicitors as required. Licensee 2 was readily available to provide further information, as necessary.

4.42 In those circumstances, the Committee does not accept any failure by Licensee 3 to properly supervise and manage licensees.

4.43 The complaints are therefore dismissed.

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 against any of the named licensees.

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

Paul Morten

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 21 March 2013