Investor Business Brokers Limited - Complaint No C09392 [2015] NZREAA 375 (22 December 2015)

Last Updated: 8 October 2016

Before the Complaints Assessment Committee

Complaint No: C09392

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

Licensee: Investor Business Brokers Limited (10018542)

Decision finding of unsatisfactory conduct - asking for submissions on

orders

22 December 2015

Members of Complaints Assessment Committee: CAC404

Chairperson: Mike Vallant

Deputy Chairperson: Sarah Eyre

Panel Member: Garry Chapman

Complaints Assessment Committee

Decision finding unsatisfactory conduct - asking for submissions on orders

1. The Complaint

1.1. On 15 July 2015 the Complainant lodged a complaint against Investor Business Brokers

Limited (the Licensee).

1.2. The Licensee is a licensed Company Agent under the Real Estate Agents Act 2008 (the Act)

and at the time of conduct was trading as Investor Business Brokers (the Agency).

1.3. The details of the complaint are that the Licensee repeatedly failed to discharge its obligations under regulation 15 of the Real Estate Agents (Audit) Regulations 2009 (the Regulations).

1.4. In particular, the Complainant advised that the Licensee repeatedly did not comply with its duties under regulation 15(3) of the Regulations, specifically to provide the Agency's auditor by 27 January and the 20th day of every other month a list of the balances and a reconciliation statement for that month. Between April 2011 and March 2015 the Licensee was late complying with this obligation 39 months out of 48 months. In July 2014, the Authority licensing unit wrote to the Agency notifying the Agency of its non-compliance with the Regulations.

1.5. The Complainant requested a remedy, being:

a) The matter be referred to a Complaints Assessment Committee.

b) The Licensee comply with its obligations under regulation 15 of the Regulations.

1.6. The Licensee responded to the complaint against them.

1.7. In particular, the Licensee acknowledged it had failed its obligations under the Regulations, apologised to the Complainant, and advised that the Agency trust account had been transferred to New Zealand Real Estate Trust, an independent escrow third party trust account provider. The Authority has received written confirmation to this effect and that the Licensee’s trust account is now closed or inactive.

2. What we decided

2.1. On 20 August 2015 the Complaints Assessment Committee (the Committee) considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

2.2. On 27 October 2015 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

2.3. 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 section 72(b) and section

72(d) of the Act, Rule 5.1 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules), and regulation 15 of the Regulations.

3. Our reasons for the decision

3.1. The Committee found, pursuant to section 72(b) of the Act, that the actions of the Licensee contravenes a provision of this Act or of any regulations or rules made under this Act, and pursuant to section 72(d) of the Act, that the actions of the Licensee would reasonably be regarded by agents of good standing as being unacceptable.

Non-compliance with the Regulations

3.2. The audit process is necessary to promote and protect the interests of consumers in real estate transactions and to promote public confidence in the performance of real estate agency work. It follows that any breach of regulation 15 by a licensee will decrease the public’s trust and confidence in the real estate industry.

3.3. The purpose of an audit of a real estate agent’s trust account is to report on whether accounting and other records relating to trust monies have been properly kept and there is no loss or deficiency of trust monies or failure to pay or account for trust monies. To be satisfied of this, the auditor must obtain sufficient audit evidence through the performance of appropriate tests of control and substantive procedures. Clearly an auditor is unable to properly perform their role if a licensee fails to provide their records in a timely manner to the auditor.

3.4. The facts of the matter are undisputed and consequently no factual questions existed for the Committee to decide. The Licensee acknowledged breaching regulation 15 of the Regulations and therefore it must mandate that the conduct of the Licensee was unsatisfactory, being a breach of section 72(b) of the Act, in that the actions of the Licensee contravened a provision of the Regulations made under the Act of which regulation 15 forms part of.

3.5. Rule 5.1 sets out that a licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work. There is no question that the Licensee’s actions at issue arose in the course of the Licensee’s real estate agency work. While the Licensee each month eventually did provide the requisite information to the Agency auditor, as recorded in paragraph 1.3, on the majority of occasions the Licensee was late in doing so. On these occasions the Licensee plainly failed to exercise skill, care, competence, and diligence at all times when carrying out real estate agency work. Accordingly, the conduct of the Licensee was unsatisfactory, being a breach of section 72(d) in that it meant that the Licensee’s actions would reasonably be regarded by agents of good standing as being unacceptable.

4. Request for submissions on orders

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

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

5. What happens next

5.1. The Committee will conduct a separate hearing on the papers to consider all submissions and issue a decision on orders if any, under section 93 of the Act. Refer to the Appendix of this decision.

Your right to appeal

5.2. The Committee considers 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

Garry Chapman

Date: 22 December 2015

Appendix: 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 provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012:

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.

Real Estate Agents (Audit) Regulations 2009

15 Duty to provide monthly list of balances and reconciliation statement

(1) Every agency must, at the end of each month, reconcile the balance of the agency's trust accounts to—

(a) the balance of the agency's cash book; and

(b) the total of the balances in the list required under subclause (3)(a).

(2) Every agency must keep the reconciliation statements prepared in accordance with subclause (1) in the agency's cash book, or in any other appropriate manner.

(3) Unless subclause (4) applies, every agency must, by 27 January and the 20th day of every other month, give to the agency's auditor—

(a) a list of the balances in each client ledger account, and of the amount of money (if any) in each trust account, as at the end of the last preceding month or balance period; and

(b) the reconciliation statement referred to in subclause (1) for that month.

(4) If there is no money in any of the agency's trust accounts at the end of any month, the agency must give to the auditor a “nil” return.