Cunningham - Complaint No C17051 [2017] NZREAA 200 (4 August 2017)

Last Updated: 21 June 2018

Before the Complaints Assessment Committee

Complaint No: C17051

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee 1: Lorraine Cunningham (10028830)

Licensee 2: Lynne Baker (10016598)

The Agency: Edge Realty Whakatane Limited t/a Edge Realty

(20039227)

Decision on Orders

4 August 2017

Members of Complaints Assessment Committee: CAC 410

Chairperson: Nigel Dunlop Deputy Chairperson: Paul Elenio Panel Member: Garry Mason

Complaints Assessment Committee

Decision on orders

1. Background

1.1. On 17 May 2017 Complaints Assessment Committee 410 (the Committee) found Lorraine Cunningham (Licensee 1), Lynne Baker (Licensee 2), and Edge Realty Whakatane Limited t/a Edge Realty (the Agency), guilty of unsatisfactory conduct under section 89(2)(b) of the Real Estate Agents Act 2008 (the Act).

1.2. Licensee 1 and Licensee 2 are employed by the Agency. Licensee 2 is Licensee 1’s supervisor.

1.3. The Agency entered into a sole agency agreement with a couple (the Vendors) after Licensee

1 had approached them uninvited, seeking a property for another couple (the Customers) to buy. The sole agency agreement was intended to apply only to a purchase by the Customers. Five days later the Vendors sold their property through a licensee from another agency (Licensee X), to purchasers other than the Customers. Thus Licensee 1 was unsuccessful in bringing about a transaction between the Vendors and the Customers.

1.4. Licensee 1 and the Agency made a report, under rule 7.1 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules), to the Real Estate Agents Authority (the Authority) about Licensee X. The Authority, however, identified concerns about Licensee 1, Licensee 2, and the Agency. The Authority referred the matter to the Committee for investigation. Licensee X was not the subject of an investigation.

1.5. The Committee consolidated the Authority’s concerns to the following:

i. Compliance with the Fair Trading Act 1986

ii. The timely provision of a comparative market appraisal to the Vendors iii. Incompleteness of the agency agreement

iv. Accuracy of advice to the Vendors about whether they could increase their asking price

during the course of negotiations

v. Accuracy of advice to the Vendors about whether other agencies could inspect the

Property during the course of the sole agency agreement vi. The adequacy of supervision of Licensee 1

1.6. The Committee found Licensee 1 guilty of unsatisfactory conduct in relation to points 1.5.(i) –

1.5.(v) above. It found Licensee 2 guilty of unsatisfactory conduct in relation to point 1.5.(vi)

above. It found the Agency guilty of unsatisfactory conduct in relation to points 1.5.(i) –

1.5.(iii) and point 1.5.(vi) above.

1.7. Licensee 1, Licensee 2, and the Agency were given the opportunity to make submissions to the Committee in relation to what orders should be made in response to the findings of unsatisfactory conduct. They availed themselves of the opportunity and sent a joint submission to the Committee.

1.8. The key submissions made in the letter are as follows:

• Licensees 1 and 2 and the Agency have hitherto unblemished records despite successfully practising real estate for many years;
  
• They have readily admitted fault, are contrite, and have altered their systems such as there will not be a recurrence of shortcomings as occurred in this case;
  

• No client or customer complained, and nor did they suffer any loss or hindrance;

• The circumstances were unusually difficult and pressured, partly because events moved quickly, and partly because two of the Vendors and Customers had strong personalities (and were both in competition for a public leadership position in the local community);

• Licensee 1 had not sought the assistance of Licensee 2 or the Agency, and so they were unaware of the challenges she was facing;

• They asked that their names not be published.

2. Orders

2.1. Having made the findings of unsatisfactory conduct, the Committee has decided to impose fines pursuant to section 93 (1)(g) of the Act, but not impose any other sanctions. It has also decided that the names of all three parties be published according to standard practice.

2.2. Specifically, the orders are as follows:

a) Licensee 1 is to pay to the Authority a fine of $2,500.00 within 21 working days of the date of notice of this decision (by no later than Monday, 4 September 2017);

b) Licensee 2 is to pay to the Authority a fine of $1,500.00 within 21 working days of the date of notice of this decision (by no later than Monday, 4 September 2017);

c) The Agency is to pay to the Authority a fine of $5,000.00 within 21 working days of the date of notice of this decision (by no later than Monday, 4 September 2017).

It is to be noted that the maximum fine that could be imposed in relation to Licensee 1 and Licensee 2 is $10,000.00. The maximum fine that could be imposed in relation to the Agency is $20,000.00.

3. Our reasons

Licensee 1

3.1. The Committee considered the following to be mitigating circumstances in relation to

Licensee 1’s conduct:

• Her long and unblemished record;

• Her ready acceptance of fault, and her contrition;

• The absence of complaint from a client or customer;

• The absence of dishonesty or recklessness.

3.2. However the Committee considered the following to be aggravating circumstances in relation

to Licensee 1’s conduct:

• The number of breaches of professional requirements, all of which served to deprive the Vendors of rights or entitlements;

• Licensee 1’s failure to seek assistance from her supervisor and keep her supervisor informed;

• The failure to realise the shortcomings until after the Authority brought the complaint against the Licensees and the Agency, despite going over the events in retrospect, which led her to submit a report about Licensee X.

Licensee 2

3.3. The Committee considered the following to be mitigating circumstances in relation to

Licensee 2’s conduct:

• Her long and unblemished record;

• Licensee 1 did not come to her for assistance;

• A reasonable expectation that Licensee 1 was coping well with the transaction, given her experience;

• The limited duration over which the events took place.

3.4. However the Committee considered the following to be aggravating circumstances in relation

to Licensee 2’s conduct:

• The failure to check Licensee 1’s work and hence detect warning signs and possible dangers, which were apparent from: the identity of the Vendors and the Customers involved, the need to comply with the “uninvited direct sale agreement” provisions of the Fair Trading Act 1986, the absence of a comparative market analysis, and the agency agreement being incomplete;

• A failure to detect that Licensee 1 was under stress when dealing with the Vendors and the Customers;

• The failure to realise the shortcomings until after the Authority brought the complaint against the Licensees and the Agency, despite considering the events in retrospect, which led Licensee 1 and the Agency to submit a report about Licensee X.

The Agency

3.5. The Committee considered the following to be mitigating circumstances in relation to the

Agency’s conduct:

• Its long and unblemished record;

• Its ready acceptance of fault;

• The absence of complaint from a client or customer;

• It making changes to its systems to prevent a recurrence of these shortcomings.

3.6. However the Committee considered the following to be aggravating circumstances in relation

to the Agency’s conduct:

• It being primarily responsible for what occurs within the agency;

• The failure to have adequate systems in place to detect warning signs and possible dangers, which were apparent from: the identity of the Vendors and the Customers involved, the need to comply with the “uninvited direct sale agreement” provisions of the Fair Trading Act 1986, the absence of a comparative market analysis, and the agency agreement being incomplete;

• A failure to detect that Licensee 1 was under stress when dealing with the Vendors and the Customers;

• A failure to ensure that Licensee 1 was being adequately supervised by Licensee 2;

• The failure to realise the shortcomings until after the Authority brought the complaint against the Licensees and the Agency, despite considering the events in retrospect, which led it and Licensee 1 to submit a report about Licensee X.

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.

Promoting and protecting the interests of consumers and the public

3.9. 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."

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)).

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 Act.

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...”

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. 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 notice of this decision (by no later than Friday, 1 September 2017) (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).

5. Publication

5.1. 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 Licensees and the Agency for which they work or worked for at the time of the conduct.

5.2. The Authority will publish the Committee’s decision after the period for filing an appeal has ended, unless the Tribunal receives an application for an order preventing publication. The Authority will not publish the Committee’s decision until the Tribunal has made a decision on the application.

5.3. 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

Date: 4 August 2017

Appendix: Relevant provisions

The Real Estate Agents Act 2008 provides:

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.

89 Power of Committee to determine complaint or allegation

(1) A Committee may make 1 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.

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.

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.