Complaint No C15215 [2017] NZREAA 37 (10 April 2017)

Last Updated: 13 December 2017

Before the Complaints Assessment Committee

Complaint No: C15211

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee: Linda Fitzpatrick (10012855)

The Agency: Barfoot & Thompson Limited (10018521)

Decision on Orders

10 April 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 21 February 2017 the Complaints Assessment Committee (the Committee) found Linda Fitzpatrick (the Licensee) and Barfoot & Thompson Limited (the Agency) guilty of unsatisfactory conduct under section 89(2)(b) of the Real Estate Agents Act 2008 (the Act).

1.2. The Complainant was the client of the Licensee and the Agency. He sold a residential property (the Property) through them, by auction. A deposit was paid but was not released at the end of the statutory 10-day period, being on or about 18 May 2016.

1.3. The Licensee refused to release the deposit because the purchaser’s lawyer would not sign the unconditional sale notice. Although the Licensee and the Agency were advised by the purchaser’s lawyer that there was no need for him to sign the notice, the deposit was not released until 1 July 2016.

1.4. The Licensee believed that until written notice was received from the purchaser’s lawyer, the deposit could not be disbursed. She indicated that she believed she was following standard company policy in that regard. When it was agreed by the Agency that the signed notice from the purchaser’s lawyer was not required the deposit was immediately released.

1.5. The Complainant, the Licensee, and the Agency were given the opportunity to make submissions to the Committee on orders.

1.6. The Complainant submitted that the Licensee and the Agency should be fined $5,000.00, ordered to pay $400.00 being the additional cost charged to him by his lawyer for lodging the complaint, and that he be reimbursed $299.28 for lost interest on the balance of the deposit that would have been available for the period from 18 May to 1 July, at the rate of 4.95%.

1.7. Counsel for the Licensee and Agency agreed to an order for costs associated with the additional legal fees. While the Act does not provide for compensation for “lost interest,” the Licensee and the Agency accept this claim is reasonable, and that they can make payment on either an ex gratia basis, or on the basis of an agreed settlement pursuant to section 93(1)(b) of the Act. With respect to a fine, they submit that this does not accurately reflect the level of the conduct, particularly in light of what they say is the obstructive stance taken by the purchaser’s solicitor and the diligent attempts by the Agency’s branch to obtain the agreement to release of the funds. Based on this, counsel submitted that the conduct is at the lower end of unsatisfactory conduct, and no financial penalty is necessary.

1.8. Counsel also submitted that although the Complainant has not sought an order for an apology, both the Licensee and Agency are willing to offer an unreserved apology.

2. Orders

The Licensee

2.1. Having made a finding of unsatisfactory conduct against the Licensee, the Committee decided to make the following orders pursuant to section 93 of the Act:

1. that the Licensee pay to the Authority a fine of $1,000.00 within 21 working days of the date of notice of this decision (Section 93(1)(g))
   

The Agency

2.2. Having made a finding of unsatisfactory conduct against the Agency, the Committee decided

to make the following orders pursuant to section 93 of the Act:

a) that the Agency pay to the Authority a fine of $1,000.00 within 21 working days of the date of notice of this decision (Section 93(1)(g))

b) that the Agency pay legal costs of $400.00 to the Complainant within 21 working days of the date of notice of this decision (Section 93(1)(f)(i))

c) that the agreement that the Agency pay the Complainant’s interest claim of $299.28 have effect, and that accordingly payment of $299.28 be made by the Agency to the Complainant within 21 working days of the date of notice of this decision (Section

93(1)(b)).

2.3. The Licensee and Agency have offered to apologise to the Complainant. The Committee prefers not to engage in the process of approving the terms of apology, but it expects that apologies from the Licensee and the Agency be duly tendered to the Complainant.

3. Our reasons

The Licensee

3.1. The Committee believes that regardless of what the Licensee believed was standard practice for the Agency, she had an independent duty to understand the law and to release the funds when due.

3.2. The Committee accepts that the Licensee attempted to contact the purchaser’s solicitor on many occasions but was unsuccessful in obtaining written acceptance to the release of the deposit.

3.3. The Committee considers that the Licensee should have sought authoritative advice through the Agency as soon as the purchaser’s solicitor failed to respond. The delay in seeking such advice resulted in a lengthy period before the funds were released to the Complainant.

3.4. The Committee accepts that the purchaser’s solicitor ’s stance and ongoing refusal to respond, even though the solicitor knew that the Licensee was legally obliged to release the deposit, gave rise to some doubt regarding the transaction, and so the Licensee chose to not disburse on the basis that there may have been potential issues with respect to the transaction that hadn’t been disclosed.

The Agency

3.5. The Committee acknowledges that the Agency, once informed of the issues surrounding the release, acted relatively swiftly in authorising the Licensee to release the funds.

3.6. The Committee however believes that the Agency is ultimately responsible for the actions of its agents and while it accepts that there exist policies about the release of deposits, these may have been misleading. Accordingly, the Agency should not only be fined, but meet the additional costs and interest payments.

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 then 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 (no later than Thursday, 11 May 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 Licensee 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

Garry Mason

Date: 10 April 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.

122 Duty of agent with respect to money received in course of business

(1) All money received by an agent in respect of any transaction in his or her capacity as an agent must be paid to the person lawfully entitled to that money or in accordance with that person’s directions.

(2) Despite subsection (1), if an agent is in doubt on reasonable grounds as to the person who is lawfully entitled to the money, he or she m ust take all reasonable steps to ascertain as soon as practicable the person who is entitled and may retain the money in his or her trust account until that person has been ascertained.

(3) Pending the payment of any such money, the money must be paid by the agent into a general or separate trust account at any bank carrying on business in New Zealand under the authority of any Act and may not be drawn upon except for the purpose of paying it to the person entitled or as that person may in writing direct.

(4) No money to which this section applies is available for payment of the agent’s debts, nor may it be attached or taken in execution under the order or process of any court at the instance of any of the agent’s creditors.

(5) Nothing in this section takes away or affects any just lien or claim that an agent who holds money to which this section applies has against the money.