Isbill - Complaint No C06253 [2015] NZREAA 131 (20 May 2015)

Last Updated: 21 February 2016

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

And

In the Matter of Complaint No: C06253

In the Matter of Stephen Isbill

License Number: 10001396

Elysium Realty Limited

License Number: 10018624

Decision of Complaints Assessment Committee

Dated this 20th day of May 2015

Complaints Assessment Committee: CAC401

Chairperson: Nigel Dunlop Deputy Chairperson: Alison Wallis Panel Member: Rex Hadley

Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on orders

1. The Complaint

1.1. On 1 October 2014 the Real Estate Agents Authority (the Authority) received a complaint against Stephen Isbill (Licensee One) from the Complainant. On 24 October 2014 a Complaints Assessment Committee decided to inquire into the complaint about Licensee One. It also decided to exercise its powers under section 78(b) to also inquire into Elysium Realty Limited t/a Harveys Te Atutu Peninsula (Licensee Two) in relation to the matters raised in the complaint.

1.2. Licensee One is a licensed salesperson under the Real Estate Agents Act 2008 (the Act) and, at the time of the conduct, was engaged by Licensee Two.

1.3. Licensee Two is a licensed company agent under the Act, and at the time of the conduct engaged Licensee One. Licensee Two is a member of the Harveys Real Estate Group (Harveys).

1.4. The complaint relates to a property (the Property).

1.5. The Complainant alleges that Licensee One, having become aware that the Property contained asbestos, had a duty to disclose that to the purchaser of the Property, but failed to do so.

1.6. The Complainant was not the purchaser, but an unsuccessful purchaser of the Property. Her offer had been conditional upon testing not revealing the presence of asbestos. The vendor subsequently received and accepted an unconditional offer. The following day the Complainant received the report which she had ordered. It revealed the presence of asbestos. The vendor had not disclosed the presence of asbestos, and may not have known about it.

1.7. On receipt of the report, the Complainant immediately advised Licensee One and supplied him with a copy. She urged him to inform the successful purchaser. Both Licensee One and Licensee Two took advice as to whether in the circumstances they had an obligation to inform the successful purchasers of the presence of asbestos. The limited advice which they received suggested that they did not have such an obligation, and so neither informed the successful purchaser. The agreement for sale and purchase refers to settlement taking place on 26

September 2014. On 28 September the Complainant herself informed the purchaser of the Property, of the presence of asbestos. The Complainant says that the purchaser was “shocked” to receive this information. The Complainant made the complaint on 1 October.

1.8. The Complainant requested “That [Licensee One] is put on notice that this conduct [of non-

disclosure] is unacceptable.”

Responses

1.9. Licensee One responded to the complaint against him. He said that when the Complainant told him about the asbestos he sought the advice of his licensed supervising agent (the Supervisor). This agent told the investigator that he is the non-selling business owner of a team of 14. He in other words speaks for Licensee Two. His actions may be deemed to be those of Licensee Two.

1.10. On being approached by Licensee One, the Supervisor being uncertain as to whether to advise disclosure contacted the head office of Harveys for advice. Head office in turn suggested that the Supervisor contact Harvey’s lawyer for advice. The Supervisor did this but the legal advice was not forthcoming, due to the lawyer undergoing an operation and then forgetting to give the advice. Meanwhile, the Supervisor discussed the matter with two licensed agents who “agreed with my initial thoughts which were to take no further action as the successful contract was unconditional, and [that] the most risk of exposure being that of jeopardising an unconditional contract for our vendors.” The Supervisor then went overseas, during which time the contract settled. The Supervisor also considered that it was of some relevance that the successful purchasers had chosen not to obtain their own building report about the Property.

1.11. Licensee One told the investigator that “I feel that the Complainant may be disgruntled and upset that she missed out on purchasing the Property and this may be where her complaint stems from.” He said, “I feel the Complainant made a special trip to the Property [when she advised the purchasers of the asbestos] in an attempt to involve the new purchasers and myself in some form of dispute.” He was critical of the Complainant allegedly taking a sample of cladding from the Property for testing without permission. He said that subsequent to the complaint having been made he spoke to one of the purchasers about the complaint, and that she “advised that she was not concerned at all and told me please don’t worry about it.”

2. What we decided

2.1. On 24 October 2014 Complaints Assessment Committee 303 considered the complaint and decided to inquire into it under section 78(a) of the Real Estate Agents Act 2008 (the Act).

2.2. On 3 December 2014 Complaints Assessment Committee 303 was disestablished.

2.3. The complaint was referred to Complaints Assessment Committee 401 (the Committee).

2.4. The Committee have considered the original complaint afresh and made a decision to inquire into the complaint including the conduct of Licensee Two.

2.5. On 15 April 2015 the Committee had a hearing on the papers and considered all the information that had been gathered during the inquiry.

Licensee One

2.6. The Committee found the Licensee has engaged in unsatisfactory conduct under section

89(2)(b) of the Act. The decision was also made with reference to rule 6.4 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012. Rule 6.4 provides that “A licensee must not....withhold information that should by law or in fairness be provided to a customer client.” The Committee found that this rule had been breached. It follows that there was unsatisfactory conduct because section 72(b) of the Act defines unsatisfactory conduct as, amongst other things, a contravention of a provision of the Rules. The Committee decided however not to make any orders under section 93.

Licensee Two

2.7. The Committee similarly found that Licensee Two had engaged in unsatisfactory conduct, for essentially the same reasons as apply to Licensee One. It was seized of the same information as Licensee One. It could have made disclosure itself, but failed to do so. The Committee decided however not to make any orders under section 93.

3. Our reasons for the decision

3.1. Asbestos is widely known as a dangerous material. Its presence in a house is a matter about which most, if not all, purchasers would want to be aware. Licensee Two implicitly acknowledged this when the Supervisor, on its behalf, stated that his initial thoughts were to the effect that disclosure of the asbestos might jeopardise the sale. The asbestos issue only has the potential to jeopardise a sale because it is important. Rule 6.4 imposes an obligation to disclose matters which are important.

3.2. The duty to disclose can continue or arise after an agreement has become unconditional, and possibly even after settlement has occurred. Examples of NZ Real Estate Agents Disciplinary Tribunal decisions where the duty has been considered when contracts have become unconditional are Darling v REAA & Penrose [2014] NZREADT 46 & 63 and Henton v REAA & Wallace & Barfoot and Thompson [2014] NZREADT 2. The commencement and duration of the duty is not dependent on whether or not a contract is unconditional, but on whether or not a licensee is carrying out real estate agency work and dealing with clients. This is apparent from rule 3.2 which provides that the Rules set out standards which licensees are required to meet when carrying out real estate agency work and dealing with clients. Most certainly, when Licensee One and Licensee Two became aware of the presence of asbestos in the Property, they were still undertaking real estate work for the purchaser.

3.3. Licensee One and Licensee Two should therefore have made disclosure to the purchaser of the Property, of the presence of asbestos. They failed to do so in a timely fashion. The fact that they were awaiting advice as to the duty does not remove the duty. The duty arose as soon as they became aware of the asbestos report. The duty is a legal one. It cannot be considered suspended by the taking of advice, much less removed if that advice is not forthcoming. The taking of advice may however be relevant to the issue of penalty.

3.4. It is unbecoming of Licensee One to criticise the Complainant in defence of his actions.

Whether the Complainant’s behaviour can be justifiably criticised is entirely irrelevant to whether or not the duty to disclose existed. Again, the reason for that is that the duty is embodied in the law, to which the Complainant’s conduct has no bearing. For the same reason, the fact that the purchasers chose not to obtain a pre-purchase building report of their own is irrelevant.

3.5. The Committee decided that despite the breaches referred to above, it would make no orders under section 93. That section is expressed in permissive rather than mandatory terms. It provides that if a Committee makes a determination of unsatisfactory conduct it may make one of the orders referred to. In other words, the Committee is not obliged to make orders following determinations of unsatisfactory conduct, although would normally do so. It takes account of the principles referred to below.

3.6. The reasons that the Committee is not making any orders under section 93 are:

(a) The Complaint was unaffected by the conduct found to be unsatisfactory; it related to a property in which she had no financial or legal interest;

(b) The party who might have been affected by the conduct, namely the purchaser of the Property, did not raise a complaint against the Licensees because she was apparently unconcerned about the non-disclosure;

(c) This was an unusual situation in which the disclosure issue only arose after the sale agreement had become unconditional;

(d) The Licensees sought both internal and external legal advice on the issue; (e) This decision is to be published with the names of the Licensee included.

Principles considered

3.7. When determining whether or not to make an order under Section 93(1), the Committee has also had regard to the functions which the imposition of a penalty usually must serve in professional disciplinary proceedings.

a. promoting and protecting the interests of consumers and the public generally (section

3(1))

b. maintaining professional standards c. punishing offences

d. rehabilitating the professional.

3.8. 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.

a. Promoting and protecting the interests of consumers and the public

3.9. Section 3(1) of the REAA 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."

3.10. 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. Maintaining professional standards

3.11. 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).

3.12. Although different professions use different descriptions, of the nature of the unprofessional or incompetent conduct that will attract disciplinary charges, there is a common thread of scope and purpose. The aim is to enforce a high standard of propriety and professional conduct. Professions seek to:

• make sure that no person unfitted because of his or her conduct is allowed to practise the profession in question

• protect both the public and the profession itself against persons unfit to practice

• enable the profession or calling, as a body, to ensure that the conduct of members conforms to the standards generally expected of them.
  

3.13. In the Committee's view, maintaining professional standards is also a function of the disciplinary processes under the Real Estate Agents Act 2008.

c. Punishment

3.14. The Committee accepts that a penalty in a professional discipline case is primarily about maintaining standards and protecting 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).

3.15. 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

3.16. The Committee regards its power to make an order requiring a Licensee to undergo training or education (Section 93(1)(d)) as indicating that rehabilitation is a function of professional disciplinary processes under the Act.

4. What happens next

Your right to appeal

4.1. If you are affected by this decision of the Committee, you may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal) within 20 working days after the date of this decision. Your appeal must include a copy of this decision and any other information you wish the Tribunal to consider in relation to the appeal (Section 111).

4.2. For further information on filing an appeal, read Guide to Filing an Appeal at Ministry of

Justice-Tribunals (www.justice.govt.nz/tribunals).

Publication

4.3. The Committee directs publication of its decision. The decision will be published without the names or identifying details of the Complainant (including the address of the Property), and any third parties. The decision will state the name of the Licensee and the Agency they work for or worked for at the time of the conduct.

4.4. Publishing the Committee’s decision supports the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee also considers that publishing this decision helps to set standards and that is in the public interest.

Signed

Nigel Dunlop

Chairperson

For Complaints Assessment Committee 401

Real Estate Agents Authority

Date: 20 May 2015

Appendix 1: Relevant provisions

The Real Estate Agents Act 2008 provides:

Section 89 Power of Committee to determine complaint or allegation

(1) A Committee may make one or more of the determinations described in subsection (2) after both inquiring into a complaint or allegation and conducting a hearing with regard to that complaint or allegation.

(2) The determinations that the Committee may make are as follows:

(a) a determination that the complaint or allegation be considered by the

Disciplinary Tribunal:

(b) a determination that it has been proved, on the balance of probabilities, that the licensee has engaged in unsatisfactory conduct:

(c) a determination that the Committee take no further action with regard to the complaint or allegation or any issue involved in the complaint or allegation.

(3) Nothing in this section limits the power of the Committee to make, at any time, a decision under section 80 with regard to a complaint.

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 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.

Section 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.

Section 111 Appeal to Tribunal against determination by Committee

(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 the notice given under section 81 or 94.

(2) The appeal is by way of written notice to the Tribunal of the appellant's intention to appeal, accompanied by—

(a) a copy of the notice given to the person under section 81 or 94; and

(b) any other information that the appellant wishes the Tribunal to consider in relation to the appeal.

(3) The appeal is by way of rehearing.

(4) After considering the appeal, the Tribunal may confirm, reverse, or modify the determination of the Committee.

(5) If the Tribunal reverses or modifies a determination of the Committee, it may exercise any of the powers that the Committee could have exercised.

The relevant provision from the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012 is:

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