Korff - Complaint No CB6888962 [2014] NZREAA 43 (13 January 2014)

Last Updated: 16 October 2014

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

And

In the Matter of Complaint No: CB6888962

In the Matter of Sarah Korff

Licence Number: 10032907

Decision of Complaints Assessment Committee

Dated this 13th day of January 2014

Complaints Assessment Committee: CAC20004

Chairperson: Paul Morten Deputy Chairperson: Michael Vallant Panel Member: David Russell

Complaints Assessment Committee

Decision on Orders

1. Background

1.1 In our decision in September 2013 we found Licensee, Sarah Korff, guilty of unsatisfactory conduct.

1.2 The Complainant noticed white marks on block work in the garage of the property she was inspecting. The Licensee recommended that the Complainant commission a Building report. The Complaint Assessment Committee’s (the Committee) view was that the utmost duty of good faith imposed on agents meant that the Licensee had an obligation to go back to the Vendors and ask them whether there were weathertightness issues in the garage. Had she done so, she could have reported back to the Complainant either that there were issues or that she had raised the subject with the Vendors, who had assured her there were no weathertightness issues. Because she failed to take those prudent steps, the Committee found that the Licensee’s conduct was unsatisfactory.

1.3 We have received submissions from the Complainant and detailed submissions on penalty from the

Licensee’s Solicitors.

2. Relevant Provisions

2.1 Having made a finding of unsatisfactory conduct against Sarah Korff the Committee must now decide what orders, if any, should be made under section 93 of the Real Estate Agents Act (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.

3. Discussion

3.1 The Complainant seeks an order reprimanding the Licensee, an apology and financial relief (in respect of reinstatement of the deck, sealing of the basement wall and general waterproofing).

3.2 She says that work to date, excluding her own labour, has cost $30,000; that all her retirement savings have been spent; that the water problem is still not resolved; she has no money to complete the necessary work and she is not in a position to sell her house “as is.”

3.3 In addition, she seeks reimbursement for the costs and expenses she has incurred in respect of the inquiry and investigation. She advises that her Solicitors’ costs come to $2,800.

3.4 She has not supplied any documentation supporting her claim for financial relief or in relation to her claim for reimbursement of Solicitors’ costs.

3.5 The Licensee submits that the Licensee’s conduct does not warrant a censure. That is because the Vendors warranted that they had disclosed all relevant issues when the Licensee took the listing. The Vendors failed to disclose any issues with the garage. In addition, they say the Licensee recommended the Complainant seek a pre-purchase building inspection report if she was not certain about any aspect of the building.

3.6 While all of that is true, it rather misses the point that the Complainant specifically raised a potential weathertightness issue in her conversation with the Licensee. We know that the first time it rained heavily after settlement the garage was flooded. We infer that the Vendors knew that there were issues with the garage. At the heart of our finding is the failure by the Licensee to go back to the Vendors, once the issue was squarely raised by the Complainant.

3.7 Putting to one side the fact that there is a factual dispute between the Complainant and the Licensee as to how that particular conversation developed, we consider that this conduct, in those circumstances, warrants an order under section 93(1)(a) of the Act. Accordingly, we make an order censuring the Licensee.

3.8 As to the Complainant’s request for an apology, the Complainant says that the request is tagged to an allegation that the Licensee apologise for her dishonesty during the investigation. The Licensee says that we have not found that she has been dishonest. Therefore the Licensee argues that an apology for dishonesty is not warranted.

3.9 The Committee agrees that we have not found any dishonesty on the part of the Licensee.

Nevertheless, it is still open to us to order that the Licensee apologise. Unfortunately, we have limited faith in the value of ordering such apologies, particularly where - as here - a Licensee does not consider there is any merit in an apology. In the circumstances, we do not order the Licensee to apologise.

3.10 The Licensee submits that this is not an appropriate case to order education or training. We agree.

3.11 The Licensee submits there is no basis in this case to order a reduction, cancellation or refund of fees. We agree.

3.12 The Licensee submits that there is no jurisdiction under section 93(1)(f) to order the Licensee to rectify the property defects that the Complainant has discovered since settlement. We agree that the leading case on this subsection is Quin v Real Estate Agents Authority [2013] NZAR 38 and that this is not a case where we have jurisdiction to order relief. Even if we did - which we do not accept

- the Complainant has failed to provide any evidence of the costs she has incurred. In addition, the Complainant seeks relief for matters which go beyond the rectification of the garage. Issues, for instance, with the defective deck are outside the conduct for which we have found the Licensee guilty.

3.13 At this point, we digress a moment to discuss in general terms the penalty function available in disciplinary proceedings such as this.

3.14 The Committee, when determining whether or not to make an order under Section 93(1), must have regard to the functions which the imposition of a penalty serves in professional disciplinary proceedings:

a) Promoting and protecting the interests of consumers and the public generally

3.15 Section 3(1) of the Act sets out the purpose of the legislation. The principal purpose of the Act is "to promote and protect the interests of consumers in respect of transactions that relate to real estate and to promote public confidence in the performance of real estate agency work." One of the ways in which the Act states it achieves this purpose is by providing accountability through an independent, transparent and effective disciplinary process (Section 3(2)).

b) Maintenance of professional standards

3.16 This function has been recognised in professional disciplinary proceedings involving other professions (for example, in medical disciplinary proceedings: Taylor v The General Medical Council (1990) 2 A11 ER 263; and in disciplinary proceedings involving Valuers: Dentice v The Valuers Registration Board [1992] 1 NZLR 720).

3.17 Although in respect of different professions the nature of the unprofessional or incompetent conduct which will attract disciplinary charges is variously described, there is a common thread of scope and purpose. Such provisions exist to enforce a high standard of propriety and professional conduct; to ensure that no person unfitted because of his or her conduct should be allowed to practise the profession in question; to protect both the public and the profession itself against persons unfit to practise; and to enable the profession or calling, as a body, to ensure that the conduct of members conforms to the standards generally expected of them.

3.18 In the Committee's view this function is also applicable in the disciplinary processes under the Real

Estate Agents Act 2008. c) Punishment

3.19 The Committee accepts that a penalty in a professional discipline case is primarily about the maintenance of standards and the protection of the public. However in the Committee's view there is also an element of punishment - indicated by the power the Committee has to impose a fine (Section 93(1)(g); or make an order of censure (Section 93(1)(a)). The element of punishment has been discussed in the context of other professional disciplinary proceedings (see Patel v Dentists Disciplinary Tribunal (High Court, Auckland, CIV 2007-404-1818 Lang J 13 August 2007).

3.20 At paragraph [27]-[28], the judge said:

“Such penalties may be appropriate because disciplinary proceedings inevitably involve issues of deterrence. They are designed in part to deter both the offender and others in the profession from offending in a like manner in the future. I therefore propose to proceed on the basis that, although the protection of the public is a very important consideration, nevertheless the issues of punishment and deterrence must also be taken into account in selecting the appropriate penalty to be imposed...”

d) Where appropriate, rehabilitation of the professional must be considered

3.21 The Committee regards its power to make an order requiring a Licensee to undergo training or education as indicative of this function applying in the context of professional disciplinary processes under the Act.

3.22 The Committee acknowledges that when making an order under Section 93, the order/s made must be proportionate to the offending and to the range of available orders.

3.23 In respect of any potential fine, the Licensee’s Solicitors submit that her conduct is at the “low-end” of unsatisfactory conduct. They repeat that when the Complainant raised a question about the marks on the garage walls, the Licensee recommended a pre-purchase inspection. They repeat that the Licensee relied entirely on representations by the Purchasers that there were no issues with the building that they had not disclosed. They say, in effect, that even if she had referred the matter back to the Vendors, we can only speculate on what information would have been provided.

3.24 The Committee agrees that the circumstances of this case are unusual. At paragraph 4.3 of our decision we recorded that we found the case a difficult one. The Complainant was sensitive to weathertightness issues, had limited savings, and did not want to go near a house that might be leaking yet she identified something which may have indicated water ingress. Though a Building report was recommended, she did not take up that opportunity. At least to some extent, she must take responsibility for that. Those are matters that go directly to mitigation of any order for relief that the Committee might otherwise be able to make.

3.25 The issue here is whether this is an appropriate case to order the payment of a fine, as a deterrent to both the Licensee and others in the profession from offending in a like manner in the future.

3.26 Although the Act has been in force for quite some time, it is the Committee’s view that the real estate industry has still not fully got to grips with the duty of utmost good faith that the Disciplinary Tribunal has said the Act now imposes upon Licensees, and how it should respond to issues such as watertightness. We perceive that there is still a persistent belief in some members of the industry that the suggestion a client take professional building advice is equivalent to a bullet-proof vest. It isn’t.

3.27 The Committee considers that a fine is appropriate in this case. The maximum fine a committee can impose is $10,000 on an individual. We note the Tribunal decision in Quin v Real Estate Agents Authority and others [2012] NZREADT 13, where the Tribunal imposed a $7,000 fine on a Licensee who misrepresented boundary lines. In Complaints Assessment Committee v Whiteford [2011] NZREADT 16, the Tribunal imposed a $4,000 fine on a Licensee with limited financial resources who had failed to disclose he would benefit financially from the sale of the property (as the sole director and shareholder of the Vendor company). Contrast, for instance, at the lower end of the scale, a fine of $2,200 imposed by the Tribunal in Summit Real Estate Ltd v the Real Estate Agents Authority and another [2011] NZREADT 38, where a Licensee had inserted a clause into a residential tenancy agreement purporting to entitle the Licensee to commission if the property was ultimately sold to a tenant or an associated person. We note this committee's decision in CB5695967; CB5696372;

CB5696246; CB575522 where we took as a starting point a fine of $7,000 where Licensees had (innocently) misrepresented an apartment as just great for Investors, when in fact it had a restricted ninety-day occupation condition on it. We discounted that to $6,000 to take account of conduct by the Purchaser. We imposed a fine of $5,000 on the agency. The Tribunal reduced the Licensees’ fine to $1,000 and the agency fine to $3,500: see [2013] NZREADT 102: Davis & Shin & Barfoot & Thompson v Real Estate Agents Authority.

3.28 Taking everything into account, we consider a fine of $1,500 would be appropriate. That must be paid within 20 working days of the date of this decision.

4. Decision

4.1 The Committee has determined the following:

a) that the Licensee is censured;

b) that the Licensee is fined $1,500. This amount is to be paid to the Authority within 20 working days of the date of this decision.

5. Publication

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

Section 84(2) gives the Committee discretion to direct such publication of its decisions as it considers necessary or desirable in the public interest.

5.2 Publication gives effect to the purposes of the Act set out in section 3. The Act is designed to promote and protect consumers' interests, and to promote public confidence in the performance of real estate agency work. Those purposes are achieved by regulation; raising industry standards; and providing accountability through a disciplinary process that is independent, transparent, and effective.

5.3 The Committee regards publication of this decision as desirable, because it will help achieve those stated purposes. It is in the public interest that the decision be published.

5.4 The Committee directs publication of its decision, but omitting the names and identifying details of the Complainant (including the address of the property), and any third parties in the publication of its decision. The name of the Licensee and the Company she works for should be published.

5.5 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.

6. Right of Appeal

6.1 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.

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

6.3 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: 13 January 2014