Complaint No C05548 [2015] NZREAA 133 (27 May 2015)

Last Updated: 22 February 2016

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

And

In the Matter of Complaint No: C05548

In the Matter of Licensee One

License Number: XXXXXXXX

Licensee Two

License Number: XXXXXXXX

Decision of Complaints Assessment Committee

Finding of unsatisfactory conduct asking for submissions on orders

Dated this 27th day of May 2015

Complaints Assessment Committee: CAC 405

Chairperson: Graham Rossiter

Deputy Chairperson: Jane Parker

Panel Member: Geoff Warren

Complaints Assessment Committee

Decision finding unsatisfactory conduct and asking for submissions on orders

1. The Complaint

1.1. On 3 July 2014 the Real Estate Agents Authority (the Authority) received a complaint against

Licensee One from the Complainant.

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

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

1.4. The details of the complaint are that [we here paraphrase] Licensee One allegedly failed to exercise reasonable care, skill, and diligence in advising the Complainant as to the effect of an emailed acceptance by a prospective purchaser of the Property (owned and being sold by the Complainant) and in particular, whether that emailed “acceptance” was legally binding on the putative purchaser.

1.5. In particular, the Complainant advised that Licensee One, who was not the listing agent for the Property, presented a conditional offer of purchase. This was for the sum of $640,000.00. The offer was presented to the Complainant at a meeting on 18 April 2014, at which in attendance were the Complainant, Licensee One, and the Complainant’s listing agent, Licensee Two (see below).

1.6. At the meeting of 18 April 2014, Licensee One was in communication with the potential purchaser by telephone. The Complainant submitted a counter-offer of $650,000.00. The purchaser indicated (to Licensee One) that this figure was agreed to. His “acceptance” was conveyed by email. He was apparently not able to access a scanner or fax machine to sign and return the Sale and Purchase Agreement with an acceptance of the Complainant- vendor’s counter-offer.

1.7. There was some discussion at the meeting of 18 April 2014, of the effect of the purchaser ’s acceptance by email of the Complainant’s counter-offer. The Complainant says he was assured by Licensee One that a legally binding agreement had been formed by the emailed acceptance of the purchaser that that party “could not pull out of”.

1.8. The purchaser did, in fact, withdraw from the agreement on 24 April 2014. This was because the local council plans for the Property did not match its structure. The purchaser had been advised by his lawyer that no legally binding contract had been formed by way of the emailed “acceptance”.

1.9. The Complainant requested a remedy, being:

• Payment of legal fees and compensation for “loss of sale price”.

1.10. Licensee One responded to the complaint against her. In particular, Licensee One commented that the email response by the purchaser to the vendor’s counter-offer of $650,000.00 was to the effect that the purchaser was “happy” to accept the counter-offer and would sign the agreement (thus confirming his acceptance) the following Monday i.e. the next working day.

1.11. Licensee One says that her understanding at the time was that the email acceptance was binding. She passed this view on to the Complainant “in good faith” and she “had no intention to mislead him.” She refers to the Electronic Transactions Act 2002 as the basis of her belief and understanding that the ‘advice’ given to the Complainant was correct.

1.12. Licensee One further states that she looked to Licensee Two, also present at the meeting with the Complainant of 18 April 2014, as a “senior agent” who confirmed her understanding of the legal position. She contends that both she and the vendor looked to Licensee Two for confirmation of the legal position. More generally, Licensee One says that Licensee Two “represented” the vendor and advised his client, the Complainant, at all times. At no stage did she have any dealings with the Complainant when Licensee Two was not present.

2. What we decided

2.1. On 11 September 2014 the Complaints Assessment Committee 307 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 307 was disestablished.

2.3. The complaint was referred to Complaints Assessment Committee 405 (the Committee).

2.4. The Committee have considered the original complaint afresh and made a decision to inquire into the complaint.

2.5. The Committee considered that the complaint also raised issues about Licensee Two, and on

30 January 2015, decided to inquire into them.

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

2.7. The Committee adopted the course outlined in paragraph 2.5 above because it appeared that, if there was arguably a case of ‘unsatisfactory conduct’ on the part of Licensee One, then it equally might be the position that there had been a breach of duty by Licensee Two to his vendor (the Complainant). The Committee, therefore, initiated an ‘allegation’ about Licensee Two pursuant to s78(b) of the Act.

2.8. We note and record that Licensee Two, in his response to the allegation, emphasises that it was Licensee One’s buyer who submitted an ‘acceptance’ by e-mail that the purchaser subsequently resiled from. It was Licensee One who told the vendor-Complainant that there was a “done deal.” He disagrees with Licensee One’s contention that he is a more senior agent than her.

2.9. On 24 April 2015 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

2.10. The Committee found that both Licensees have engaged in unsatisfactory conduct under section 89(2)(b) of the Act.

3. Our reasons for the decision

3.1. Rule 5.1 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 provides that “a licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.” Both Licensees who are the subject of these complaint proceedings were subject to the obligations arising from this rule; with respect to their dealings with the Complainant arising from the purported ‘acceptance’ by the putative purchaser of his counter-offer for the Property. Licensee One presented the offer, conveyed the Complainant-vendor’s counter-offer, and crucially, assured the Complainant that there was a binding agreement as a result of the acceptance.

3.2. In the particular circumstances of this case, Licensee Two was also subject to the duties arising from Rule 5.1. He was the Complainant’s listing agent. Licensee Two was also in attendance at the meeting at which the ‘acceptance’ of the counter-offer was presented, and a party to the conversation with the vendor. The Complainant says that he does not complain about the conduct of Licensee Two. This Committee has, however, of its own initiative, initiated an allegation about Licensee Two pursuant to s78(b) of the Act. In our view, and on the basis of the evidence received following this action, that course was entirely appropriate.

3.3. The context of the duty on both Licensees, in this context, was to appropriately inform and advise the Complainant as to whether there was, as a result of the email, a binding agreement formed. Licensee One acknowledges that whatever were the specific words actually used by her, she did convey a view that there was a deal.

3.4. Licensee One now acknowledges that whatever view was conveyed to the Complainant would have been incorrect. She had nevertheless, at the time, an understanding based on the Electronic Transactions Act 2002 that an email acceptance of an offer could be legally effective. To be fair, it has to be acknowledged that this statute has complexities and is not, in its effects, free from difficulty. Given the importance of an agreement for sale and purchase of land, our view is that the purchaser’s name at the bottom of the e-mail of 18 April 2014 was not sufficient to show his intention to be bound to the content of the email; particularly as he stated that he would sign the agreement on his return. Our view may have been different if the licensee had advised the purchaser in her email to him that his acceptance of the counter-offer by email would be legally binding.

3.5. As with other issues that have exercised disciplinary fora under the Act, e.g. the checking of legal titles, real estate agents are not expected to be or have the expertise of lawyers. In this regard, lawyers might debate the meaning of the Electronic Transactions Act. However, where, as here, there is potential legal complexity, the only prudent course for a licensee, consistent with her obligations under Rule 5.1, would have been to tell the Complainant that she was ‘not sure,’ that there may be some difficulties in terms of the law, and he may wish to get some legal advice.

3.6. Licensee One did not do any of the things she arguably should have by way of, in substance, suggesting some caution on the part of the vendor. Apart from the point that (we here paraphrase) she honestly believed that the email ‘acceptance’ was legally effective and she acted in good faith in terms of whatever she said to the vendor, in this respect, Licensee One further submits that both she and the Complainant were relying on the input of Licensee Two, who was also in attendance.

3.7. Further to the above paragraph, Licensee One states that she was, at the relative meeting, introduced to the vendor by Licensee Two as the agent who would be ‘representing’ the buyer and conducting negotiations with him. As regards whatever ‘advice’ was later given in the meeting to the vendor about the email, there was an effective concurrence and (again we paraphrase) affirmation by Licensee Two. If anything, Licensee One was looking to Licensee Two for guidance, both on the basis of his role and seniority.

3.8. We do not believe that Licensee One’s comments about the role of Licensee Two involve any attempt on her part to simply shift blame. On the contrary, there does appear to be a genuine acceptance of responsibility on her part. The Committee would agree that Licensee Two had, in this situation, at least the same level of obligation to warn and caution his client as Licensee One, whose professional interaction with the Complainant was clearly limited and, indeed, minimal. Licensee Two was the listing agent and had, we accept, considerably more industry experience – notwithstanding the protestations of Licensee Two to the contrary.

3.9. As regards his own role, in this matter, Licensee Two’s evidence was by way of an interview with the Authority investigator on 11 March 2015. It was repeatedly put to Licensee Two in this interview that the Complainant was his client and it was his responsibility to make it clear whether there was or was not a binding agreement. As with other aspects of his evidence in this interview, what Licensee Two had to say on this point was problematic and unsatisfactory. In many respects, his evidence was vague and non-responsive. His recall, even with all due allowance being made for the effluxion of time, was decidedly selective. Licensee Two said more than once that there was not a ‘done deal’ until there is a signature on an agreement. If that was his view, we are left wondering why he did not tell his client that.

3.10. We note the following exchange at the end of the interview with Licensee Two: Question: Did you say to the vendor, well hang on, it’s not a done deal until it’s signed? Answer: I don’t think I said, you know, it’s definitely not a done deal until we’ve got that signature. I don’t think I did. I honestly don’t have the greatest memory but I don’t think I said that. The Committee further records the then immediate response from the investigator: Alright, that’s all I need to cover. In our concluded view, there is ample evidence to find unsatisfactory conduct on the part of Licensee Two as well as Licensee One.

4. Request for submissions on orders

4.1. 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. Refer to the Appendix of this decision.

4.2. The Complainant is to file submissions (if any) on what orders should be made within 10 working days from the date of issue of this decision. These submissions, if any, will then be provided to the Licensees, with a timeframe for filing final submissions.

4.3. The Committee requires the CAC Administrator to obtain a record of any previous disciplinary decisions in respect of the Licensees and, if any such decision exists, provide it to the Committee.

5. What happens next

5.1. The Committee will consider all submissions and issue a decision on orders.

Your right to appeal

5.2. 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.

Publication

5.3. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

Signed

Graham Rossiter

Chairperson

For Complaints Assessment Committee 405

Real Estate Agents Authority

Date: 27 May 2015

Appendix 1: Relevant provisions The Real Estate Agents Act 2008 provides: 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 78 Functions of Committees

The functions of each Committee are—

(a) to inquire into and investigate complaints made under section 74:

(b) on its own initiative, to inquire into and investigate allegations about any licensee:

(c) to promote, in appropriate cases, the resolution of complaints by negotiation, conciliation, or mediation:

(d) to make final determinations in relation to complaints, inquiries, or investigations: (e) to lay, and prosecute, charges before the Disciplinary Tribunal:

(f) in appropriate cases, to refer the complaint to another agency:

(g) to inform the complainant and the person complained about of its decision, reasons for the decision, and appeal rights:

(h) to publish its decisions.

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 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 provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012 are:

Rule 5 Standards of professional competence

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