Complaint No C04281 [2014] NZREAA 215 (23 July 2014)

Last Updated: 1 March 2015

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

And

In the Matter of Complaint No: C04281

In the Matter of The Licensee

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Dated this 23rd day of July 2014

Complaints Assessment Committee: CAC301

Chairperson: Deirdre McNabb Deputy Chairperson: Pat Waite Panel Member: Rex Hadley

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1 The Complainant has lodged a complaint with the Authority against the Licensee. The complaint relates to the sale of the Property to the Complainant. This complaint is against the Licensee who is and was the Managing Director of the Agency at the relevant time. There is no complaint against the listing and selling agents of the Property who no longer work for the Agency.

1.2 The complaint alleges that the GST clause in the agreement for sale and purchase of the Property was crossed out after the Complainant signed the agreement. This agreement was negotiated by licensees employed by the Agency at the relevant time. The Complainant says that he was not aware of the change to the GST part of the agreement until the date of settlement. Due to pressure to settle and the proximity of Christmas, the Complainant paid additional GST of

$39,000 that he had not considered would be payable thinking that he would be able to resolve the problem at a later date. This enabled him to get possession of the Property.

1.3 The Complainant states that as the Licensee holds the ‘Agent’s Certificate’ he is responsible for the dealings of all of his salespeople. The Complainant says that he does not know who crossed out the ‘inclusive of GST’ clause next to the purchase price on the contract and changed it to

‘plus GST’. He says he did not sight or initial the change, and he was not made aware of it by the

salesperson who was dealing with the contract. Nevertheless he says that the Agency accepted the change by charging their commission based on the increased sale price.

2. Material Facts

2.1 On 18 December 2008 the Complainant signed an offer as purchaser (or nominee for the purchaser) to buy the Property. The vendor of the Property counter offered and the Complainant accepted that counter offer and initialled the agreement.

2.2 The Complainant’s solicitor advises that on 16 December 2008 he opened a file to assist the Complainant to complete the purchase of the Property. He noted that there was some urgency associated with the transaction and that settlement was too, and did, occur on 23 December

2008. This was the last business day before the Christmas holiday break. He states that he was aware there was urgency to get an agreement together and noted that such an agreement would usually be prepared by the agent.

2.3 The Complainant’s solicitor says that the Agency prepared a draft agreement and that he filled in the blanks on that agreement form at a purchase price of $300,000. The fact that the Agency provided this draft form of agreement is supported by the stylised reference to the sale by the Agency at the foot of the first page suggesting that the form had been personalised to their Agency. The solicitor states that there was no alteration to the standard GST provision in this draft agreement and therefore that it was inclusive of GST.

2.4 In fact an alteration was made to this form of agreement in draft form. Where the parties can choose whether the price is ‘Plus GST’ or ‘Inclusive of GST (if any)’ when completing the price part of the agreement, this draft shows that the words ‘Plus GST’ have been crossed out so that the ‘OR Inclusive of GST (if any)’ wording would apply to the GST treatment of the transaction.

This draft agreement is stamped ‘Copy’ and is not executed by either of the parties.

2.5 The Complainant’s solicitor states that it is not clear who prepared the agreement that was ultimately signed by the parties. That form of agreement appears not to be an Agency agreement as it does not contain the stylised reference to the Agency that was in the draft copy and it uses a different font style and size. The agreement that was ultimately signed by the parties uses a standard District Law Society agreement form and it is signed by both parties. On this agreement a typed purchase price of $300,000 is crossed out and hand written underneath that is ‘$312,000’. Where the parties can choose between ‘Plus GST (if any) or Inclusive of GST (if any)’ the words ‘’Inclusive of GST’ is crossed out so that ‘Plus GST (if any)’ applies.

2.6 Ms. W was involved in the negotiation of this agreement and she is a former employee of the Licensee. She states that the Complainant contacted her to say that he was putting an offer in on the Property. Ms. W says that she asked the Complainant what terms he wanted in the contract and was told that she was not to draw up the contract as that would be attended to by his solicitor. Ms. W states that she was told by the Complainant to wait for a call from the Complainant’s solicitor when the offer had been signed by the Complainant. Ms. W did this and duly uplifted the offer from the solicitor and gave it to Mr. B who was acting for the vendor. She states that she waited for Mr. B to present the offer to the vendor as she was leaving the country on holiday the next day and wanted to ensure that any agreement could be finalised before she went away.

2.7 Ms. W states that Mr. B came out of the vendor’s house and gave her the contract advising that the only thing that had changed was the price so the only thing the Complainant had to agree to was that change in price. Ms. W took the counter offer to the Complainant and explained that the vendor had countered back with a higher price. The Complainant signed the counter offer and initialled the price change. At this stage the contract was complete. Ms. W then gave the contract to Mr. B who offered to take a copy to both of the relevant lawyers the following morning. Ms. W states that she did not look at the GST part of the contract throughout this offer and counter offer stage of the process and she did not notice whether or not it had been crossed out during any stage of that process.

2.8 Mr. B states that he does not recall the vendor mentioning any issue with GST during the negotiation of the agreement and he is not aware when the GST inclusive part of the agreement was deleted. He says that this could have happened at any time and noted that there was a period of time when the contract had been left in the hands of both the vendor’s and the purchaser’s solicitors at the request of the parties. He cannot assist in determining when the strike out took place.

2.9 The solicitor for the vendor has advised that her file indicates that her firm simply attended to the conveyance of the Property and that there was no correspondence or discussions with the purchaser’s solicitor about GST. She states that her office received the agreement on 18

December 2013 and that her firm sent a settlement statement and GST invoice to the purchaser’s solicitor on 22 December 2013. She notes further that her file does not disclose any discussion between her firm as the vendor’s solicitor and the purchaser’s solicitor regarding GST after the settlement statement and GST invoice was sent. The purchaser’s solicitor settled based on that settlement statement and GST invoice.

2.10 The Licensee’s connection to this matter is that he is and was at the relevant time the managing director of the Agency. He took no part in the negotiation of the sale and purchase of the Property. Both agents who did that are no longer employed by the Agency.

3. Relevant Provisions

3.1 The Committee examined the information supplied by the Complainant in his written complaint and that gathered pursuant to the Authority investigation 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 wilful 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.

Section 172 Allegations about conduct before commencement of this section

(1) A Complaints Assessment Committee may consider a complaint, and the Tribunal may hear a charge, against a Licensee or a former Licensee in respect of conduct alleged to have occurred before the commencement of this section but only if the Committee or the Tribunal is satisfied that,—

(a) at the time of the occurrence of the conduct, the Licensee or former Licensee was licensed or approved under the Real Estate Agents Act 1976 and could have been complained about or charged under that Act in respect of that conduct; and

(b) the Licensee or former Licensee has not been dealt with under the Real Estate

Agents Act 1976 in respect of that conduct.

(2) If, after investigating a complaint or hearing a charge of the kind referred to in subsection (1), the Committee or Tribunal finds the Licensee or former Licensee guilty of unsatisfactory conduct or of misconduct in respect of conduct that occurred before the commencement of this section, the Committee or the Tribunal may not make, in respect

of that person and in respect of that conduct, any order in the nature of a penalty that could not have been made against that person at the time when the conduct occurred.

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

The Real Estate Agents Act (Professional Conduct and Care) Rules (the Rules) set out the standard of conduct and client care that agents, branch managers and salespersons (Licensees) are required to meet when carrying out real estate 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.

In relation to this complaint the following rules may apply:

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

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

Rule 6.4 A Licensee must not mislead a customer or client, nor provide false information or with-hold information that should by law or in fairness be provided to a customer or client.

4. Discussion

4.1 The Committee considered the material provided to it by the Complainant, the response from the Licensee and materials associated with that, and the information gathered on the investigation file.

4.2 The Committee noted that the evidence provided to date is inconclusive about when the purchase price for the Property was made to be ‘Plus GST (if any)’.

4.3 It found that the contract was likely to have been drafted by someone other than either of the agents Ms. W or Mr. B. Given that the Complainant instructed Ms. W to collect the contract from his solicitor after he had signed it, it is likely that it was drafted by his solicitor although the solicitor does not recall that fact. Neither the agent presenting the offer on behalf of the Complainant (Ms. W) nor the agent attending on the vendor (Mr. B) recalls the issue of GST being raised by either party during the price negotiation process. The solicitor acting for the vendor of the Property has no record on file of discussions about the GST component of the price.

4.4 The vendor’s solicitor’s file shows that a settlement statement and GST invoice were sent to the solicitor for the Complainant on 22 December 2008 and that settlement took place on 23

December 2008. The solicitor for the Complainant states that he spoke with the vendor’s solicitor about GST on 23 December 2008 suggesting that he doubted it was payable and the vendor may need to justify it. The vendor’s solicitor does not have a record of any such discussion on her file.

4.5 Whilst the Licensee does have a supervisory responsibility in relation to the agents who participated in concluding the agreement that is the subject of this complaint, the Committee is of the view that there is insufficient evidence to conclude that those agents are responsible for

the problem about which the Complainant now complains. Each of the parties had independent legal advice in relation to the agreement they were signing. Neither of the agents recalls the issue of GST being discussed by anyone at the time when the agreement was concluded. In addition the solicitor for the vendor does not recall or have record of a discussion about the GST treatment of the sale and the Complainant’s recollections about this point are not precise. If the agreement was altered after the fact then the Committee is unable to conclude that the alteration took place when the agents who were under the Licensee’s supervision were active in arranging the completion of the agreement.

4.6 Taking all of these factors into account, the Committee determined that the Licensee has not acted in breach of the Act or the Rules with regard the marketing of the Property.

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 to 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

Deirdre McNabb

Chairperson

Complaints Assessment Committee

Real Estate Agents Authority

Date: 23 July 2014