Coast to Coast Ltd t/a Bayleys Havelock North - Complaint No C08075 [2015] NZREAA 354 (14 December 2015)

Last Updated: 8 October 2016

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

And

In the Matter of Complaint No: C08075

In the Matter of The Licensee

Licence Number: XXXXXXXX

Coast to Coast Ltd t/a Bayleys Havelock North

Licence Number: 10053759

Decision of Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on order and

Decision to take no further action

Dated this 14th day of December 2015

Complaints Assessment Committee:

CAC 405

Chairperson: Graham Rossiter Deputy Chairperson: Jane Parker Panel Member: Geoff Warren

Complaints Assessment Committee

Decision finding unsatisfactory conduct asking for submissions on orders and

Decision to take no further action

1. The Complaint

1.1.

1.2.

1.3.

On 29 April 2015 the Real Estate Agents Authority (the Authority) received a complaint against the Licensee from the Complainant.

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

The complaint relates to a property (the Property).

1.4.

1.5.

1.6.

1.7.

1.8.

1.9.

1.10.

On 15 May 2015 the Complaints Assessment Committee 405 (the Committee) considered the complaint and decided to inquire into it.

The Committee considered that the complaint also raised issues about the above agency, Coast to Coast Ltd (trading as Bayleys Real Estate) (the Agency), and on 15 May 2015 the Committee decided pursuant to s78(b) of the Act to inquire into them.

The details of the complaint are that the Trust, of which the Complainant is a trustee, in September 2014, contacted the Licensee and expressed on behalf of the Trust an interest in purchasing the Property. The Trust was the successful bidder for the Property at an auction that was held on 19 September.

On 25 September 2014, the Licensee told the Complainant that the Trust would need to obtain a valuation of the Property, because the Complainant’s brother worked for the Agency as a salesperson. This advice or ‘information’ from the Licensee was based on the Agency’s understanding of the requirements of sections 134-137 of the Act. The Complainant arranged for a valuation to be carried out but also took legal advice with respect to what he had been told by the Licensee.

The Complainant was advised by his lawyer that a valuation was not required by the Act and so cancelled the valuation that had been arranged. The lawyer acting for the Complainant conveyed his view of the legal position to the manager of the Agency. The manager of the Agency reiterated the Agency’s view that a valuation was required, and furthermore, that it was the Agency’s policy that the purchaser of a property in a situation such as this should pay for any valuation. The Complainant’s lawyer advised the Agency that the Complainant would not be paying for any valuation; the Agency could arrange a valuation if it wished but would, as far as the Complainant was concerned, have to pay for it.

The Complainant says that on 29 September 2014, he was told by the Licensee and the manager of the Agency that if he did not obtain a valuation by 3 October 2014, the sale would be cancelled and the Property sold to the under-bidder. On the same date, the Complainant’s lawyer contacted the vendor’s lawyer who agreed that no valuation was required. The vendor’s lawyer also advised that the sale would be proceeding. It would not be cancelled.

On 3 October 2014, the Agency obtained a registered valuation of the Property for what it termed “administration purposes.” Settlement of the sale of the Property took place on 16

October 2014.

1.11.

1.12.

1.13.

2.

The Complainant and his Trust subsequently commenced proceedings against both Licensees in the Disputes Tribunal. The Disputes Tribunal found that if a valuation was required in these circumstances, the Agency (and the second respondent in the Tribunal) had no legal power to transfer responsibility for payment of the independent valuation to a purchaser. In paragraph 9 of its decision, the Tribunal said: “ The advice given by [the Agency] was both wrong in law and fact and extremely likely to mislead or deceive as per the [Fair Trading Act 1986]. It may well be [the Agency’s] policy but as it has no legal standing it is not enforceable. [The Agency] cannot enforce its policy on others and expect them to pay for it.” The Tribunal ordered the Agency to pay the applicants the sum of $632.50 with respect to the legal costs incurred by the Trust, as purchaser, as a result of the issues arising regarding the purported requirement for a valuation.

The Licensee and Agency responded to the complaint against them. Their side of the matter is set out in a comprehensive submission from their lawyer, addressed to the Authority investigator, and dated 18 June 2015. That submission addresses the chronology of the matter from the Licensees’ point of view. The Agency believed that because a brother of the Complainant was employed by that company as a salesperson, a valuation was required. The Licensees say that they “exercised due skill and care” in this matter. The Agency “was careful to reiterate to the Complainants multiple times that an independent valuation was legally required. [The Agency] advised [the Complainants] multiple times why it was required - it pointed out the risk that the vendors could cancel the contract if it was not obtained.”

The Licensees’ lawyer further submits, on his clients’ behalf, that their actions “demonstrate sound knowledge of the (Real Estate Agents) Act and an understanding of its application in the context of the sale of the Property in question.”

What we decided

2.1.

2.2.

2.3.

3.

On 9 October 2015 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

The Committee found the Agency has engaged in unsatisfactory conduct under section 89(2)(b) of the Act and with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, Rules 5.1 and 9.2.

The Committee has decided to take no further action on the complaint against the Licensee. This decision was made under section 89(2)(c) of the Act.

Our reasons for the decision

3.1.

3.2.

The focus of this complaint is on the position taken by the Agency and the actions of both Licensees with respect to their perception or understanding that a valuation was required of the subject Property, and more particularly, their insistence that not only was a valuation necessary but that the cost of that should be met by the purchaser-Complainant and his Trust. The issues arising call for an examination of sections 134, 135, and 137 of the Act.

Further to the above paragraph, the Committee is required to consider whether the actions of the two Licensees, as they relate to the issue of a valuation and the cost of that, involved unsatisfactory conduct on their part for the purposes of s72 of the Act. In this regard, the

Committee has in mind the possible application of Rule 5.1 (as to skill, care, and competence) and Rule 9.2, which is to the effect that a licensee must not engage in any conduct that would put a customer, amongst others, under undue or unfair pressure.

3.3.

3.4.

3.5.

3.6.

3.7.

3.8.

3.9.

Sections 134, 135, and 137 of the Act provide for a range of ‘consumer’ protections for the vendor clients of real estate agents in the circumstances provided for; including where there is a relationship between someone acquiring an interest in a property and a licensee “carrying out work in respect of a transaction.” The consent of the vendor must be obtained to the licensee carrying out that work. That consent is effective only where the vendor is provided by the agent with a valuation, and absent a proper consent, the vendor has the right to cancel a contract. With respect to the last mentioned point, we make the somewhat trite observation that the right to cancel is that of the vendor and no-one else. This right, like any other, may be waived, or to make the same point slightly differently, it would be certainly open to a vendor to make it clear to a purchaser that the right to cancel, even if held, would not be exercised. [This appears to be precisely what happened in this case].

The relative statutory provisions are, possibly, somewhat esoteric and not free from difficulty with respect to their interpretation and application. In this particular case, there is a submission from the Complainant’s lawyer that the requirements of these provisions were not even triggered because there was not actually here a “related person of a licensee” situation.

The submission from the Complainant’s lawyer arguably has reasonably strong probative force. The listing agent for the subject Property was the Licensee. It was only the Licensee and the branch manager of the Agency i.e. the Licensee’s Agency, who had any involvement in the carrying out of real estate agency work for this transaction. No trustee of the purchaser-Trust is in any way related to the Licensee. As stated above, the Complainant’s brother is employed by the Agency as a salesperson. The Complainant’s brother undertook no work in relation to this transaction. The Committee is inclined, based on the information before it, to agree with the submissions from the Complainant’s lawyer. However, the Committee is not required to express a final view on this issue in order to determine the complaint.

However, that is not enough in itself to mean that the Complainant’s brother was a ‘related person’ for the purposes of the Act. There is nothing in these provisions that says that their application is or will be triggered by the fact that a purchaser ’s brother is employed by the agency involved in the transaction.

The Committee readily acknowledges that the question addressed in the above paragraph is open to debate. There may well be arguments on the other side of the matter. What is not, however, in any way even potentially arguable, is the point that if a valuation is required that it is to be arranged at the cost of the licensee. This is absolutely clear from the wording of s135(1). That provision states: “For the purposes of s134(3), the licensee must give the [vendor] client a valuation made at the licensee’s expense.” The language of the foregoing is not at all ambiguous.

It is in this regard that the Licensees have a problem. The Committee has no difficulty with the Licensees expressing a view and conveying a certain position with respect to the application of sections 134, 135, and 137 of the Act. If, therefore, an individual licensee or agency wish to err on the side of caution, arrange a valuation, and make that available to a vendor-client, that is entirely their prerogative. It would then be open to the vendor to do what s/he wishes - or not - with any such document. There cannot, however, be an insistence that the purchaser of the property in question meet the cost of any valuation.

In this case, the Licensee and the manager of the Agency did insist that a) a valuation be

obtained and b) that the purchaser Trust pay for that. We are told that over a 24 hour period, the Complainant was contacted at least three times by someone from the Agency as to whether he (the Complainant) had arranged a valuation. The Complainant’s lawyer attempted (it would appear more than once) to reason with the manager of the Agency. He was told, initially at least, that the Act required a valuation at the purchaser’s cost. When the actual legal position was pointed out, he was then informed that it was the Agency’s “policy” that a valuation be obtained at the expense of a purchaser - or at any rate someone other than the Agency.

3.10.

3.11.

4.

It is at this point that, in our view, a line was crossed. The Licensees, in particular, the Agency, were adopting and asserting a position that was untenable and fundamentally inconsistent with the clear wording of their governing legislation. It is not open to a real estate agent to have and purport to apply a “policy” which is contrary to the provisions of the Real Estate Agents Act. The Licensees in this matter did manifestly attempt to apply pressure to the Complainant for the purpose of protecting their own economic self-interest; that is avoiding the cost of a valuation, assuming, hypothetically, that such was required. The way in which they did that was incompatible with the obligation of care, skill, and competence owed to the Complainant, which amongst other things, self-evidently means a) ensuring that they are, themselves, sufficiently informed about the Act, b) not misleading customers about the Act and its effects, and c) not following policies and practices at variance with the legislation.

In our view, what the Licensees did (subject to what is below) constituted unsatisfactory conduct. This complaint was, initially at least, against the Licensee only. This Committee, for reasons that would now be apparent, considered there was an arguable case against her agency, and initiated of our own motion an “allegation” pursuant to s78(b) of the Act. Although the Licensee was closely involved in the events and actions that gave rise to this complaint, we would, nevertheless, have to say that the degree of her involvement was, in a practical sense, outweighed by that of the Agency (more particularly its branch manager). Secondly, it is clear that the Licensee was merely acting on and giving effect to the policies and directions of her principal. In colloquial terms, she was simply “following orders.” Although it might be said therefore, that there was, technically at least, unsatisfactory conduct on her part, the Committee concludes that on balance, it would in these particular and unusual circumstances be contrary to the equity and justice of the matter to make an adverse finding against the Licensee. We will not be doing so. A finding is made against the Agency, Coast to Coast Ltd.

Request for submissions on orders

The Agency

4.1.

4.2.

4.3.

5.

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.

The Complainant is to file submissions (if any) on what orders should be made no later than 10 working days from the date of the issue. These submissions, if any, will then be provided to the Agency, with a timeframe for filing final submissions.

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

What happens next

5.1.

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

Your right to appeal

The Licensee

5.2.

5.3.

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. Refer to Appendix section 111.

For further information on filing an appeal, read Guide to Filing an Appeal at Mi ni stry of J usti ce -
Tri bunal s ( ww w. justi ce. g ov t. nz/ tri bunal s ) .

The Agency

5.4.

5.5.

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

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: 14 December 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.

(2) 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.

Section 134 Contracts for acquisition by licensee or related person may be cancelled

(1) No licensee may, without the consent of the client for whom he or she carries out real estate agency work in respect of a transaction, directly or indirectly, whether by himself or herself or through any partner, sub-agent, or nominee, acquire the land or business to which the transaction relates or any legal or beneficial interest in that land or business.

(2) No licensee may, without the consent of the client, carry out or continue to carry out any agency work in respect of a transaction if the licensee knows or should know that the transaction will, or is likely to, result in a person related to the licensee acquiring the land or business to which the transaction relates or any legal or beneficial interest in that land or business.

(3) The client’s consent is effective only if— (a) given in the prescribed form; and

(b) the client is provided with a valuation in accordance with section 135. (4) The client may cancel any contract—

(a) made in contravention of subsection (1); or

(b) brought about by agency work carried out in contravention of subsection (2).

(5) No commission is payable in respect of any contract of the kind described in subsection

(4), regardless of whether the client cancels the contract.

(6) The client may recover any commission paid in respect of any contract of the kind described in subsection (4) as a debt.

(7) For the purposes of this section, a person who is the client of an agent in respect of a transaction is also the client of any branch manager or salesperson whose work enables the agent to carry out real estate agency work for that client.

(8) This section and section 135 have effect despite any provision to the contrary in any agreement.

Section 135 Client to be provided with valuation

(1) For the purposes of section 134(3), the licensee must give the client a valuation made at the licensee’s expense.

(2) The valuation must have been made by—

(a) an independent registered valuer; or

(b) in the case of a business, by an independent qualified statutory accountant

(within the meaning of section 5(1) of the Financial Reporting Act 2013). (3) The licensee must give the client the valuation either—

(a) before seeking the consent of the client; or

(b) with the agreement of the client, within 14 days after obtaining that consent.

(4) Every consent given under section 134 without the valuation being supplied to the client in accordance with subsection (3) is ineffective.

(5) Any contract to which the client is a party and to which the consent relates is voidable at the option of the client if—

(a) the client gives his or her consent in accordance with subsection (3)(b); and

(b) the valuation, when supplied, is greater than the valuation specified in the prescribed form of consent as the provisional valuation.

Section 137 Meaning of licensee and person related to licensee in sections 134 to 136

(1) In sections 134 to 136, licensee includes, in the case of an agent that is a company, every officer and shareholder of the company.

(2) For the purposes of sections 134 to 136, a person is related to a licensee if the person

is—

(a) a partner of the licensee under a partnership agreement: (b) an employee of the licensee:

(c) a branch manager or salesperson engaged by the licensee: (d) the licensee’s spouse or civil union partner:

(e) the licensee’s de facto partner:

(f) a child, grandchild, brother, sister, nephew, or niece of the licensee or of any person referred to in paragraphs (d) or (e):

(g) any other child who is being, or is to be, cared for on a continuous basis by the licensee or any person referred to in paragraph (d) or (e):

(h) a grandparent, parent, uncle, or aunt of the licensee or of any person referred to in paragraph (d) or (e):

(i) an entity that has an interest in the licensee or an entity in which the licensee has an interest (except where either interest is in quoted financial products within the meaning given for those terms in section 6(1) of the Financial Markets Conduct Act 2013).

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.

Rule 9 Client and customer care

General

Rule 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.

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